TMI Tax Updates - e-Newsletter
May 28, 2012

Case Laws in this Newsletter:

Income Tax Customs FEMA Service Tax Central Excise

Articles

1. SALES TAX IS TAX ON SALE OF GOODS- CANNOT BE BASED ON PRODUCTION CAPACITY?

   By: DEVKUMAR KOTHARI

2. HALL MARK – AN INTELLECTUAL PROPERTY RIGHT?

   By: DR.MARIAPPAN GOVINDARAJAN

3. GRANTING REWARD IS AN EX-GRATIA PAYMENT BUT NOT A MATTER OF RIGHT.

   By: DR.MARIAPPAN GOVINDARAJAN

4. DLF – BCCI (IPL) Sponsorship Service Tax Case Analysis

   By: CA.Ankit Gulgulia

5. SUBSIDY IS NOT INCLUDIBLE IN GROSS AMOUNT FOR PROVIDING TAXABLE SERVICES.

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. India and Netherlands sign Protocol Amending DTAC.

2. DGFT Notification to Help Areca Nut Growers.

Notifications

Customs

1. 37/2012-CUSTOMS - dated 24-5-2012 - Cus

Amendments in Various Notification in Custom.

2. 46/2012 - dated 24-5-2012 - Cus (NT)

Amends Notification No. 68/2011-Customs (N.T.) - Determines the rates of drawback in supersession of the notification No. 84/2010-Customs (N.T.), dated the 17th September, 2010.

3. 45/2012 - dated 24-5-2012 - Cus (NT)

Rate of exchange of conversion of each of the foreign currency with effect from 25th May, 2012 .

Income Tax

4. 19/2012 - dated 24-5-2012 - IT

Double taxation agreement - Agreement for avoidance of Double Taxation and Prevention of Fiscal Evasion with Foreign countries - Japan - Amendment in Notification No. GSR 101(E).Amendment in Notification No. GSR 101(E) -

5. 18/2012 - dated 23-5-2012 - IT

Income-tax (sixth Amendment) Rules, 2012 - Insertion of rule 10AB.

Circulars / Instructions / Orders

Income Tax

1. 02/2012 - dated 22-5-2012

Finance Act, 2011 - Explanatory notes to the provisions of the Finance Act, 2011.

FEMA

2. 130 - dated 25-5-2012

Deferred Payment Protocols dated April 30, 1981 and December 23, 1985 between Government of India and erstwhile USSR.

DGFT

3. 03/2012 - dated 24-5-2012

Clarification regarding standard weight and tolerance in weight of 1 bale of cotton.

Highlights / Catch Notes

Income Tax

• Business Center Receipts Classified as Income from House Property, Aligning with Shambhu Investment Precedent.

  Case-Laws - AT : Business income or house property income - Held that:- the receipts from business centre as income from house property. - decision of Shambhu Investment (2001 (3) TMI 77 (HC)) and various other decisions followed. - AT
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• Assessee denied Section 54F tax deduction; two flats leased as one unit don't qualify as single purchase.

  Case-Laws - AT : Exemption / deduction u/d 54F - assessee has purchased two separate flats under two separate agreements - Merely because the assessee has let out the two flats to one person for use as a single unit, the same, in our opinion, cannot entitle the assessee to claim benefit of deduction u/s 54F of the Act. - AT
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• High Court Rules Partnership Reconstitution Isn't a Transfer u/s 2(47) of the Income Tax Act; No Tax Implications.

  Case-Laws - HC : Reconstitution of firm - relinquishment of right and interest in the erstwhile firm - transfer u/s 2(47) - admission of the new partners - No transfer - HC
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• High Court Clarifies AO's Limited Authority u/s 143(1)(a) for Disallowances Without Supporting Proof.

  Case-Laws - HC : Power of the AO to make Adjustments u/s 143(1)(a) - If proof in support of the claim is not, furnished by an assessee, then for the lack of proof, no dis-allowance or an adjustment can be mader - HC
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• Section 40(a) TDS Disallowance Not Applicable in Charitable Trust Income Exemption Calculations u/s 11.

  Case-Laws - AT : Disallowance u/s 40(a) while computing exemption u/s 11 on account of non deduction of TDS - The exception in Section 40 is carved out, only for the purpose of Section 28 and not for computing the exemption of income of a charitable trust under Section 11. - AT
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• Deductions for Current Repairs and Construction Overhead: Revenue vs. Capital Expenditure u/s 31.

  Case-Laws - AT : Revenue or capital expenditure - current repairs u/s 31 - overhead expenditure on construction - deductionallowed - AT
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• Finance Act 2011: Amendments to Income Tax Provisions Enhance Compliance, Modify Rates, and Address International Taxation Issues.

  Circulars : Finance Act, 2011 - Explanatory notes to the provisions of the Finance Act, 2011. - Circular
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• Income-tax (Sixth Amendment) Rules, 2012 introduces Rule 10AB to update and refine existing Income Tax regulations.

  Notifications : Income-tax (sixth Amendment) Rules, 2012 - Insertion of rule 10AB. - Notification
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• Amendment to Double Taxation Agreement with Japan: Modifies Notification No. GSR 101(E) for Smoother International Tax Compliance.

  Notifications : Double taxation agreement - Agreement for avoidance of Double Taxation and Prevention of Fiscal Evasion with Foreign countries - Japan - Amendment in Notification No. GSR 101(E).Amendment in Notification No. GSR 101(E) - - Notification
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Customs

• New Customs Notification Amends Drawback Rates, Replacing Prior Rates from September 2010.

  Notifications : Amends Notification No. 68/2011-Customs (N.T.) - Determines the rates of drawback in supersession of the notification No. 84/2010-Customs (N.T.), dated the 17th September, 2010. - Notification
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• New Currency Exchange Rates for Customs and Tax Effective May 25, 2012: Key Info for Foreign Transactions.

  Notifications : Rate of exchange of conversion of each of the foreign currency with effect from 25th May, 2012 . - Notification
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FEMA

• India-USSR Deferred Payment Agreements from 1981 & 1985 Key to Bilateral Trade Under FEMA Regulations.

  Circulars : Deferred Payment Protocols dated April 30, 1981 and December 23, 1985 between Government of India and erstwhile USSR. - Circular
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Corporate Law

• Supreme Court Rules High Court Shouldn't Interfere with Trial Court's Cognizance u/ss 138 & 141 of NIA Act.

  Case-Laws - SC : Criminal complaint - sections 138 and 141 of the Negotiable Instruments Act, 1881 - cheques issued by the accused - bank directed to stop payment - The High Court should not have interfered with the cognizance of the complaints having been taken by the trial court. - SC
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Service Tax

• IPL Sponsorships Likely Exempt from Service Tax Under Current Finance Act Provisions.

  Case-Laws - AT : Activity of sponsoring the IPL - sponsorship service - Prima facie, the existing provisions of Finance Act provide an exclusion of said cricket match etc. from ambit of service tax - AT
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Central Excise

• CENVAT Credit for Inputs in Goods Destroyed by Floods Valid; No Reversal Required Per Decision.

  Case-Laws - AT : Whether CENVAT credit attributable to the inputs contained in the semi-finished and finished goods destroyed in flood was inadmissible and was required to be reversed - held no - AT
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• Petitioner Denied Cash Refund for Overpaid Export Duty; Lower Duty Paid on Domestic Products Not Required.

  Case-Laws - CGOVT : Rebate of duty paid on export goods - Petitioner paid lesser duty on domestic product and higher duty on export product which was not payable - Cash refund of excess amount denied - CGOVT
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Case Laws:

• Income Tax

• 2012 (5) TMI 421
  Transfer pricing – adjustment to ALP - travelling cost of seconded persons to AEs - Held that:- When the assessee had segregated the off-shore and on-site activities, naturally all the revenues relating to on-site activity were earned by the AEs. Hence, all costs incurred for the purposes of on-site activities should be borne by the AEs. The purposes of travel of the secondees from India to the respective locations of AEs were to render on-site services, hence TPO was justified in making adjustment to ALP for such cost incurred and not recovered by assessee from its AEs – Decided in favor of Revenue. Dis-allowance of legal fees paid to Baker & Mckinsey – expenditure incurred in connection with incorporation of the subsidiary company in Belgium – Assessee submitted that it considered it as a genuine business expenditure and had not recovered the same from the AE – Held that:- In view of the aforesaid confession, it is held that TPO rightly made adjustment, contending the same is not a business expenditure and was in the nature of international transaction and a capital expenditure of the subsidiary company off-shore, therefore to be recovered from AE – Decided in favor of Revenue. Exemption u/s 10A – Held that:- It has been decided in assessee’s own case in earlier AYs that that it is not necessary that separate books of accounts should be maintained in respect of new unit, even if, new unit is formed for the expansion of assessee’s business, the same is eligible and unit established by the side of old unit is also eligible for exemption u/s 10A – Unit-107 eligible – Decided in favor of assessee Dis-allowance of loans and advance written off – Held that:- On similar issue, Tribunal had allowed such loss as trading loss u/s 28 in AY 01-02. Same view followed – Decided in favor of assessee. Foreign taxes – dis-allowance u/s 40(a)(ii) - Held that:- Under Section 40(a)(ii), Indian Income-tax which is a tax levied on the profits and gains chargeable under the Act is not deductible. On the other hand, all other taxes levied in foreign countries whether on profits or gains or otherwise are deductible under the provisions of s. 37 and payment of such taxes does not amount to application of income – Decided in favor of assessee. Compensation received for rendering human resource support services – CIT(A) deleted the addition made - Held that:- Secondee-provider is not akin to recruitment-service provider or that ‘secondment’ is different from ‘recruitment’. There was no legal basis for the impugned upward adjustment and deletion made is upheld – Decided in favor of assessee. Income from the building owned by the appellant and leased out on rent to group concern - Revenue contending the same to be business income - Held that:- CIT(A) was justified in treating lease rental income from the building owned by the appellant and leased out on rent to a group concern as income from ‘house property’ and entitling assessee for deduction permissible u/s 24 of the Act – Decided in favor of assessee. Re-computation of Deduction u/s 80HHE - Held that:- CIT(A) rightly held for re-computation of deduction u/s 80HHE on ground that profits of new units are eligible for exemption u/s 10A, the balance 10% profits in respect of same are eligible for computation of deduction u/s 80HHE. Interest expenses on advances to the employees – TPO had worked out the upward adjustment on account of interest cost not recovered from the AEs for settling advance given to the AEs.- Held that:- TPO rightly made adjustment on ground that it has been established that the persons seconded were being sent for the benefit of AEs, the advances given to such seconded persons carried an interest cost which should have been recovered from the AEs – Decided in favor of revenue Depreciation on a building given on lease to group concern – Held that:- CIT(A) rightly dis-allowed depreciation since the same is not used for assessee’s business or profession. Also, it is undisputed that assessee had let-out sizeable portion of its premises non-temporarily – Decided against the assessee. Adjustment to ALP towards interest on excess credit period granted to AE – CIT(A) deleted the addition made - Held that: Issue is covered in favor of assessee, hence deletion made is upheld. Matter related to exclusion of exchange fluctuation gain and other income for granting exemption u/s 10A and recalculating deduction u/s 80HHE, dis-allowance u/s 14A is remitted back to the file of the AO for fresh consideration.

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• 2012 (5) TMI 420
  Addition U/S 69 - genuineness of gift - collusive transaction - Held that:- the appellants failed to discharge the primary onus and failed to establish the genuineness of the transaction and the creditworthiness of the donor to make the gift and the surrounding circumstances have rightly been noted by the Tribunal as well as the revenue authorities in reaching to the conclusion that the transaction of gift was not a genuine transaction. - Decided against the assessee

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• 2012 (5) TMI 419
  Validity of reopening - Business income or house property - income from business centre - Held that: he notice u/s 148 of the Act dtd. 23.3.2006 was served on the assessee on 24.3.2003 which is within a period of 6 years from the end of the relevant assessment year. - in view of the decision of the Hon'ble Supreme Court in the case of Rajesh Jhaveri Stock Brokers (2007 -TMI - 6563 - SUPREME Court) the reassessment proceedings initiated by the A.O. and upheld by the Ld. CIT(A) are valid Regarding business income or house property income - Held that:- the receipts from business centre as income from house property. - decision of Shambhu Investment (2001 (3) TMI 77 (HC)) and various other decisions followed.- Decided against the assessee Reimbursement of expenses - Income from House Property - the reimbursement of Telephone and electricity expenses should be excluded from the business centre receipt. - Appeal is allowed by way of direction to the A.O. to exclude an amount of Rs.3,82,700/- from the business centre receipt while calculating the business centre receipt as "income from house property" Allowance of depreciation and other expenditure - held that:- the assessee is entitled to deduction u/s 24(1) and considering the fact that part of the expenditure relating to earning of business centre income might have been included in the expenses debited, therefore, in our considered opinion, the entire expenditure cannot be allowed as deduction. Similarly, since the assessee is only partially utilizing the premises at Parel for conducting its business and also getting rental income from the said premises, therefore, in our opinion, full depreciation cannot be allowed on the Parel premises Income from financing activity - AO treated the income under the head income from other sources - held that:- assessee that the assessee in a systematic and organized manner had started the business of financing activity which is in line with one of the main objects of the Memorandum of Association and as per the resolution passed by the board of Directors. Therefore the income from financing activity, in our opinion, has to be treated as "business income".

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• 2012 (5) TMI 418
  Capital gain or business income - assessee is an individual and the sources of income are trading in shares and salary income. - held that:- the assessee was holding the shares as investment from year to year. - There was no basis for treating the assessee as a trader in shares, when his intention was to hold the shares in the Indian companies as an investment and not as stock-in-trade. - In the instant case, number of transactions is stated to be 1000 in 255 scrips while in the preceding year their number was 533 in 275 scrips. Even for frequency, it was explained by learned counsel that the assessee was mostly making the investment in B-Group scrips and to avoid risk he made investment in several scrips instead of investing in one scrip - the assessee disclosed income from capital gains/dividends in earlier years and the shares have all along been treated as investments in the books of account/balance-sheets. - Decided in favor of the assessee

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• 2012 (5) TMI 417
  Disallowance of printing and Stationery expenses of Rs. 1,00,000 - It is settled that a businessman is the best judge to take care of its own interest and to take decisions and the AO is not supposed to intervene therein nor he can replace the assessee - it is submitted that the appellant has maintained complete books of account consisting of cash book, ledger and journal. All the purchases and sales are fully vouched. The accounts are audited under s. 44AB of the Act - Held that: assessee has been able to explain the nature of expenses and also explained as to why some expenses are supported by internal vouchers - Decided in favor of the assessee Regarding interest on interest-free loans at 6 per cent instead of 12 per cent - As the assessee has incurred interest on the bank overdrafts and part of such interest-bearing funds were not utilized for business purposes therefore, the assessee was required to explain why interest may not be disallowed to the extent of interest incurred on making interest-free advances - Held that: there was. no borrowing made to meet financial requirement and on the contrary these were assessee's own funds which have been utilized even for the subjected advances - The issue stands covered by our order in the case of the assessee for earlier assessment year - Decided in favor of the assessee

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• 2012 (5) TMI 416
  Exemption / deduction u/d 54F - assessee has purchased two separate flats under two separate agreements - single unit or not - flats not adjacent to each other but are opposite to each other and are separated from each other by common passage, lobby staircase etc. - held that:- Merely because the assessee has let out the two flats to one person for use as a single unit, the same, in our opinion, cannot entitle the assessee to claim benefit of deduction u/s 54F of the Act. - exemption u/s 54F granted in respect of one flat only. Lost of sale of flat (capital loss) - allegation of sale of flat to his wife on loss deliberately to set off the long term capital gain on sale of shares and other assets. - held that:- not a single instance of sale of such property in the vicinity has been given by verifying the records of the District Sub. Registrar. - When the agreement for sale is made and the stamp duty has been paid and the loss has been claimed which has been set off against the long term capital gain, the A.O. has got every right to find out the genuineness of such sale price. - matter remanded back to the file of the A.O. with a direction to give one more opportunity to the assessee to substantiate with evidence to the satisfaction of the A.O. Set off long term loss on sale of unlisted shares against long term capital gain on sale of shares - allegation that assessee had sold the shares to his wife at a sole purpose of generating loss. - Held that: the assessee had not furnished the valuation report before the A.O. during the course of assessment proceedings, we deem it proper to restore the issue to the file of the A.O. for fresh adjudication of the issue. - when the shares are sold to his wife at a lower price and the A.O. has given an observation that the same is just to offset the gain arising to the assessee, the same in our opinion, requires thorough scrutiny at the level of the A.O. This ground by the Revenue is accordingly allowed for statistical purposes.

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• 2012 (5) TMI 415
  Interest of unsecured loans - utilization of borrowed funds - business nexus - Held that:- A.O. has wrongly considered the amounts as on 31.03.2004 for making the disallowance on the basis of the statement of affairs without examining the fund flow or the payment of interest - A.O. has not made out a proper case for disallowance under section 36(1)(iii) by examining the funds borrowed on which interest was paid and its utilization in the business on which interest was claimed - A.O. also has not considered the interest received from some of the advances in calculating the proportionate disallowance - Appeal is allowed by way of remand the matter back to the file of the A.O. by setting aside the orders to examine assessee's contentions and to obtain a fund flow statement and see whether the borrowed funds were diverted for non-business purposes

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• 2012 (5) TMI 414
  Transfer pricing - arm's length price - Order of DRP u/s 144C - selection of comparable - According to the assessee, it is a small public limited company and cannot be compared with the companies whose turnover is large - held that:- neither the assessee in its TP report nor the TPO in the TP order have spelt out the functions performed, risk borne and assets used by the assessee as well as associated enterprises. Function and risk assessment has not been performed between the assessee and the comparable companies. Any difference in the function and risk which will affect profitability ought to be identified and adjustment made to arrive at the ALP. Without analysis of the above, we are of the view that the choice of comparable companies itself would become questionable. Overall profitability cannot be taken as a yardstick but if transactions or set of transactions undertaken by the assessee and the comparable companies are substantially the same, there can be no objection to applying the overall profitability. However proper adjustments have to be made to the margin arrived at by the AO for any differences at transaction level between the transaction of the assessee and that of the comparable companies. Appeal allowed by way of remand.

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• 2012 (5) TMI 403
  Reconstitution of firm - relinquishment of right and interest in the erstwhile firm - transfer u/s 2(47) - admission of the new partners and assignment of right in the firm to the new partners out of the rights of the assessee for consideration - held that:- the firm is not taxed. It is the individual partners who are taxed. More over, in the instant case, the erstwhile partners have not retired, they also continued to be the partners along with the incoming partners. All that has happened is that the shares of the erstwhile partners are reduced. - No transfer - decided in favor of assessee. Decision in the matter of Commissioner of Income-tax v. Gurunath Talkies (2009 (7) TMI 738 (HC)) distinguished.

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• 2012 (5) TMI 397
  Power of the AO to make Adjustments u/s 143(1)(a) - held that:- Where it is evident from the return as filed, along with the documents in support thereof, that a claim of the assessee is inadmissible, only then an adjustment under the said proviso can be made. If proof in support of the claim is not, furnished by an assessee, then for the lack of proof, no dis-allowance or an adjustment can be made. The only option which is open to the Income-tax Officer, in such a case, is that he can require the assessee to furnish proof in which case he will presumably have to issue notice under section 143(2). - Decided in favor of assessee. Adjustment with reference to section 43B - retrospective amendment - it has been held by the Supreme Court that the first proviso to Section 43B has to be treated as retrospective and should be read as a part of the Act with effect from 1.4.1984 itself. The Supreme Court observed that the amendment would not serve its objective unless it is construed as retrospective. Without first proviso, and explanation 2 would not obviate the hardship of Section 43B. - Addition made u/s 143(1)(a) deleted.

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• 2012 (5) TMI 396
  Disallowance u/s 40(a) while computing exemption u/s 11 on account of non deduction of TDS - held that:- Section 40 is applicable only when deductions under Sections 30 to 38 are being made in computing the income chargeable under the head "profits and gains of business or profession" under Section 28. The exception in Section 40 is carved out, only for the purpose of Section 28 and not for computing the exemption of income of a charitable trust under Section 11. - Decided in favor of assessee.

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• 2012 (5) TMI 395
  Revenue or capital expenditure - current repairs u/s 31 - overhead expenditure on construction - held that:- total replacement of damaged machinery/ship or an asset may not constitute repair. - but substitution of old/worn out parts of a machine/building/factory etc. is an expenditure of deductible nature, meaning thereby for claiming the deduction under the provisions of this Act, no new asset should come into existence and the expenditure must have been incurred on the existing asset. - Decided in favor of assessee. Claim of bad debts - held that:- there is uncontroverted finding in the impugned order that the assessee in fact write off the bad debt in its books of accounts. - after 1.4.1989, it is not necessary for the assessee to establish that the debt in fact has become irrecoverable, it is enough if the bad debt is written off as irrecoverable in accounts of the assessee. - Decided in favor of assessee.

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• 2012 (5) TMI 394
  Trading additions - rejection of books of accounts - held that:- The first two reason recorded by the Assessing Officer by themselves do not justify rejection of the books of accounts. Low gross or net profit may be a ground or reason to conduct a detailed and thorough investigation and verification, but on stand alone basis cannot be a ground for rejecting the books. - Decided in favor of assessee.

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• 2012 (5) TMI 393
  Nature of income from share transactions - business income or capital gains - held that:- the details of share transactions holding period wise have been given by the assessee which is placed in the paper book. It is clear from these transactions that the assessee was regularly purchasing and selling shares in more than 50 scrips. Most of the shares have been sold within three months and in many cases within a month and in some cases within few days. The assessee had also done repetitive transactions in the same scrips which clearly shows trading character. The transaction run into 10 pages and are substantial - The assessee had also speculated in stocks. Considering all the factors mentioned above, it can be reasonably be concluded that the assessee was trading in stocks and was not an investor. - Decided in favor of revenue.

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• 2012 (5) TMI 392
  Penalty u/s 271(1)(c) - Exemption u/s 54 - A show cause notice was issued to the assessee after recording the satisfaction to the effect that the assessee had furnished inaccurate particulars of income/concealed its income to explain the said amount - assessee was unable to prove the authenticity of the said iqrarnama before the authorities below as the transaction was executed in cash and the assessee had failed to produce the said seller - it was held that there is nothing on record to establish that the assessee had actually taken possession of the house in question as the backside of page 7 of the paper book revealed that the possession had to be given only at the time of registration, which never took place - The genuineness of the iqrarnama was in doubt and there was no material to establish that possession of the said property was taken over by the assessee and on this point also the assessee could not be held to have fulfilled the conditions of section 54 of the Act - levy of penalty confirmed - Decided against the assessee

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• 2012 (5) TMI 391
  Revenue expenditure or capital expenditure - expenses incurred for acquiring the shares of other company treating - held that:- there was no clarity in the material facts relevant to the acquisition of shares made by the assessee in relation to which the impugned expenses were claimed to be incurred. - the assessee, therefore, was required by us to clarify the factual position. The material facts of the case relevant to the issue under consideration have not been appreciated by the authorities below in the right perspective. This might have happened because of the lack of clarity in the submissions made on behalf of the assessee and the factual position has become clear only when the factual contradictions were brought to the notice of the learned counsel for the assessee by us and explanation was sought from him to clarify the position. Claim of the assessee company needs to be examined afresh in the light of clear factual position which has now emerged at this stage. - matter remanded back to AO.

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• 2012 (5) TMI 390
  Application u/s 254(2) - It has been mentioned that the revisionary order was passed to withdraw deduction u/s 80-IB granted by the AO on export incentives received by the assessee - It is true that a subsequent decision of the jurisdictional High Court or the apex Court forms a valid basis for rectification of an order under s. 254(2) - The decision of the Supreme Court in the case of Liberty India (2009 -TMI - 34471 - SUPREME COURT) was rendered on 31st Aug., 2009, i.e., three years and five months after passing the revisionary order - Appeal is dismissed

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• 2012 (5) TMI 389
  Reassessment - Deduction u/s 10B - period of ten consecutive Assessment Years - During the course of reassessment proceedings, the validity of notice issued by the Assessing Officer u/s 148 was challenged by the assessee by raising certain objections - Held that: Tribunal vide its order dated 30.9.2011 passed in ITA No.2544/Mum/2006 has upheld the order of the learned CIT (A) for Assessment Year 2002-03 deciding the similar issue in favour of the assessee - Decided in favor of the assessee. Regarding deduction u/s 80HHC - this issue is squarely covered in favour of the Revenue and against the assessee by the decision of the Hon'ble Bombay High Court in the case of CIT vs Dresser Rand India P. Ltd (2010 -TMI - 76637 - BOMBAY HIGH COURT) wherein it was held that service charges received by the assessee which constitutes independent income has no element of export turnover and the same is consequently liable to be excluded to the extent that is stipulated in Explanation (baa) to Section 80HHC - Appeal is dismissed

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• 2012 (5) TMI 388
  Whether the Tribunal was correct in holding that when computing relief u/s 10-A the expenditure incurred by the assessee should not form part of the total turnover and as such it should be excluded from the total turnover if the same are reduced from export turnover - In the case of the CIT v. Tata Elxsi Ltd. [2011 -TMI - 210706 - KARNATAKA HIGH COURT ] wherein it was held that ITO v. Sak Soft Ltd.(2009 -TMI - 70680 - ITAT MADRAS-D), There should be uniformity in the ingredients of both the numerator and the denominator of the formula, Section 10-A is a beneficial section. It is intended to provide incentives to promote exports. If the export turnover in the numerator is to be arrived at after excluding certain expenses, the same should also be excluded in computing the export turnover as a component of total turnover in the denominator - Decided in favor of the assessee

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• Customs

• 2012 (5) TMI 413
  Revision of the value in order to arrive at the Assessable Value – Held that:- it is upto the proper officer of Customs to determine the assessable value and upto the assessee to pay up the duty thereon. This aspect of determination of assessable value and payment of duty thereon is, however, beyond the scope of the show-cause notice and hence beyond the scope of the present proceedings, case remanded to the original authority directing it to pass a speaking order in de novo adjudication of the show-cause notice, appeals are disposed of

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• 2012 (5) TMI 412
  Prayer was to enhance the quantum of penalty imposed – Held that:- Commissioner imposed a penalty of Rs. 10 lakhs under Section 114 (i) of the Act on M/s Trini Impex and a penalty of Rs. 20 lakhs under the same provision on M/s Corum Impex. Considering the value of the goods exported by these parties (Rs 2.09 crores in the case of M/s Trini Impex and Rs. 4.33 crores in respect of M/s Corum Impex), and also considering the totality of the facts and circumstances of their cases, we are of the view that the penalties imposed on these exporters by the learned Commissioner are fair and reasonable, appeals of the Revenue get dismissed

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• 2012 (5) TMI 411
  Refund claims - duty which was claimed to have been paid in excess on a Bill of Entry – Held that:- no material relating to contemporary import prices was disclosed by the original authority. The Orders-in-Assessment/Original merely state that the contemporary import price during the relevant time was verified and it was found that the prices of the goods cleared during the relevant time were at par with the loaded value. The Orders-in-Original do not reveal that the relevant records indicating contemporary import prices were supplied to the assessee, case remanded to the original authority for fresh decision on the refund claims

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• 2012 (5) TMI 386
  Import of brand new vehicle or not - exemption under notification no. 21/2002 CUS dated 1 March 2002 - held that:- Whether a vehicle is or is not new is a pure finding of fact. The facts which have been found by the Settlement Commission indicate that the car was in fact a new car which was transshipped from the manufacturer in Italy to the Ferrari dealer in the U.K. who sold the car to a dealer in the U.K. The Respondent purchased the car from the dealer in the U.K. The Settlement Commission has noted that the registration of the car in the U.K. was only to comply with the requirement of the licensing authorities in the U.K. who require registration even for the purposes of exportation. The car was not used in the U.K. The finding that the vehicle was a new motor vehicle is not perverse or contrary to the evidence. - Decided in favor of assessee.

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• 2012 (5) TMI 385
  Suspension of CHA licence - nearly three years ago contemplating inquiry against the CHA, there is no progress of inquiry against the appellant and, consequently, the appellant remains without livelihood – Held that:- appellant has not been able to carry on the business of CHA for nearly three years on account of the impugned suspension order of the Commissioner. Though an inquiry officer was appointed by the Commissioner in August 2009, it appears, he is yet to initiate action. It is also unfortunate that no post-decisional hearing was given to this party by the learned Commissioner after keeping them under ex parte suspension order for nearly three years, suspension order against the present appellant is liable to be revoked. It is ordered accordingly, appeal is allowed

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• FEMA

• 2012 (5) TMI 387
  FEMA – allegations against the respondent are that on 30-8-1996 the appellant herein had served summons on the respondent through his counsel under section 40 of the Foreign Exchange Regulation Act, 1973 ('the 'Act') requiring him to appear - summons were served at 8.35 P.M. by the appellant on the respondent who was in Jail No. 2 through his counsel who made an endorsement on the summons that the respondent would appear on 31-8-1996 at 2.00 P.M. It is alleged that the respondent neither appeared on 30-8-1996 nor on 31-8-1996, this led to filing of a complaint under section 56 of the Act against the respondent – Held that:- before a person can be held to be guilty of disobeying the summons, the summons must be served on him and he must have wilfully disobeyed the summons with a view to hamper the investigation or not to produce the document. possibility of the respondent being in Jail is reflected by the endorsement of the counsel, who mentions Jail No. 2 on his endorsement which prima facie can be taken to show that at the relevant time the respondent was in Jail. petition is dismissed

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• Service Tax

• 2012 (5) TMI 427
  Cenvat credit on GTA services - receipt or non receipt of inputs in factory premises - held that:- the adjudicating authority in the present case has come to the conclusion that the GTA service on which the cenvat credit is claimed would not be admissible, when the inputs itself were not received in the factory during the relevant period. - However, the respondent claimed that all the documents relating to transportation of the inputs to their factory were produced before the ld.Commissioner (Appeals) - matter remanded back for fresh decision.

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• 2012 (5) TMI 426
  Condonation of delay - delayed filing of an appeal before commissioner (appeals) - service tax with interest deposited during investigation - matter back to the ld. Commissioner (Appeals) to decide the application for condonation of delay without insisting any predeposit.

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• 2012 (5) TMI 425
  Whether premises which were used for both Mandap Keeper Services as well as film shooting should not be clubbed together, when the purpose of letting out the premises was different - Held that:- appellant has chosen not to adduce evidence its appeal is bound to be dismissed upholding levy of service tax holding that the appellant provided taxable service of Mandap keeper. - Demand of service tax with interest confirmed. Regarding penalty - law was in infancy stage and the appellant could not segregate its receipt under appropriate head. Further the appellant appears to have pursued charitable object in terms of the letter dated 13.12.2003 addressed to the Superintendent. appellant is a small concern and not aware of process of levy may suffer by the order of penalty passed by the appellant authority below. - Penalty waived u/s 80.

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• 2012 (5) TMI 424
  Rent-a-cab provided - rebate / exemption - - reimbursement of expenses - assessee had claimed deduction on the fuel supplied, repair and maintenance cost met as well as cost of telephone. - Those expenses were not allowed as deduction - It was stated that vehicles were provided on rental basis to NTPC, ALSTOM, BHEL, ESCORT & YAMA since 1998, without seeking registration under Service Tax Law. Ld. Adjudicating authority recorded that the bills were raised in favour of different customers and service tax was realised through account payee cheques but no such tax realised was deposited into Treasury till the date of visit by Investigation Wing, Finding no basis of law, appellant's rebate claim of 30% was disallowed by the Adjudicating Authority – Held that:- appellant was a wilful evader as per the finding of the authorities below. no paperbook filed to show an appellant's defence against liability incurred since no evidence was led before the authorities below for grant of immunity from taxation. appeal is dismissed

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• 2012 (5) TMI 423
  Waiver of pre-deposit - applicant is providing 'business auxiliary service' by selling the readymade garments on behalf of manufacturer - applicant had already paid service tax of Rs. 9,000/- on the commission received. Revenue confirmed the demand by adding amount reimbursed by the principal to the assessable value of service - On financial hardship, applicant submitted that applicant is a small assessee – Held that:- amount already deposited is sufficient for hearing. Therefore, pre-deposit of remaining amount of service tax and penalties are waived and recovery is stayed during pendency of the appeal. matter is remanded to the Commissioner(Appeals). Appeal is disposed of by way of remand.

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• 2012 (5) TMI 422
  Extended period of limitation - appellant surrendered their service tax registration as their taxable services are below Rs.4 lakhs - it was found that the appellant had wrongly availed the benefit of Notification 6/2005 and claimed exemption thereunder – Held that:- in the case of Needwise Advertising (P.) Ltd. (2010 (11) TMI 211 (Tri)) that interpretation of surrender as revealing deliberate intention not to pay service tax is not sustainable as surrender of registration to be taken as made on belief of non-requirement of such registration. Therefore, onus is on revenue to find out the cause of surrendering registration if action is not taken at the same time, the same cannot be questioned subsequently. Therefore extended period is not invocable. matter is sent back to the adjudicating authority to requantify the demand

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• 2012 (5) TMI 404
  Activity of sponsoring the IPL - sponsorship service - section 65 (99a) of Finance Act, 1994 read with sub-clause (zzzn) of section 65(105) - sponsorship is in relation to sports events - Circular Letter D.O.F. No. 334/1/2010-TRU, dt. 26.2.2010 - held that:- admittedly, sponsorship of sports event, is not covered by the definition of sponsorship appearing in the relevant provisions of the Finance Act. The adjudicating authority for arriving at finding against the appellant has simpliciter followed the Board's circular. - IPL was considered a cricket tournament, as is clearly shown in the official website of IPL and as such, has to be considered as sport event. The Commissioner, as independent quasi-judicial authority was under legal obligation, independently was required to examine the issue before him instead of following the Board's circulars. It is only in respect of those circulars which are in favour of the assessee that the departmental officer cannot take view against the same and are required to follow the said circulars in favour of the assessee. Prima facie, the existing provisions of Finance Act provide an exclusion of said cricket match etc. from ambit of service tax and legislative intent is there to amend the same so as to bring the same into service tax net. - Stay granted unconditionally.

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• 2012 (5) TMI 402
  Cenvat Credit on outward GTA – Held that:- in ABB Ltd (2011 - TMI - 203985 - KARNATAKA HIGH COURT - Service Tax) held that, till the amendment (effective from 1/4/2008) of clause (ii) of Rule 2(l) of the CCR through substitution of the word 'upto' for the word 'from', transportation charges incurred by a manufacturer for clearance of final products from the place of removal stood included in the definition of 'input service' Availment of Cenvat credit on outward transportation of goods and C&F Agent service – Held that:- in Metro Shoes Pvt. Ltd. (2008 - TMI - 4278 - CESTAT, MUMBAI - Service Tax) wherein it had been held that services rendered by various service providers like C&F agents during the course of transportation of the final products from the factory of the manufacturer to their own showrooms located at various places were 'input services' for the manufacturer as these services were used by the manufacturer, directly or indirectly, in or in relation to the clearance of the final product from the place of removal. appeals are allowed

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• 2012 (5) TMI 401
  Waiver of pre-deposit of Service Tax - Cenvat credit - applicant has contended that regarding mobile phone that it is for the official use or director of the company. Board has issued a Circular allowing the CENVAT credit on mobile phones. So far as insurance premium on vehicles is concerned the applicant has admitted that the vehicles are used for transportation of inputs and capital goods except in case of one vehicle. pre-deposit of service tax, interest and penalty is waived

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• 2012 (5) TMI 400
  Whether the assessee is entitled for input service credit on outward transportation service - Held that:- in the case of CCE&ST v. ABB Ltd. (2011 -TMI - 203985 - KARNATAKA HIGH COUR) assessee is entitled to take input service on outward transportation service. appeal filed by the Revenue is dismissed

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• 2012 (5) TMI 399
  Refund claim - Additional Commissioner stated that 'the revenue involved in this appeal is only Rs.2.6 lakhs and there is no point of law involved, therefore, it has been decided, following the guidelines issued under Office Memo No. F.No. 1/26/5-T/2008-LC dated 07.04.2008, not to make reference to the Committee of Dispute for approval as the amount involved in this case is less than Rs.5 lakhs - SDR submitted that the Revenue may be given liberty to withdraw the appeal. appeal is dismissed as withdrawn

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• 2012 (5) TMI 398
  Manpower Recruitment and Supply Agency services - non payment of service tax - extended period of limitation - suppression of facts - contention of the appellants is that, since the issue pertains to interpretation of relevant clauses of Finance Act, 1994, neither could penalty under Section 76, 77 and 78 of Finance Act, 1994 be imposed nor the extended period of limitation, for the purpose of confirming demand be invoked – Held that:- in the case of Lanxess ABS Limited (2010 - TMI - 202555 - CESTAT, AHMEDABAD - Central Excise) issue involves interpretation of relevant clauses of Finance Act, appellant cannot be held responsible for interpreting the same in such that it could be beneficial to them. no penalty under Section 78 of the Finance Act, 1994 is imposable as also extended period of limitation for the purpose of confirming demand is also not invokable. appeal filed by the appellant is allowed

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• Central Excise

• 2012 (5) TMI 410
  Availability of Cenvat Credit - Manufacturing process - Section 2(f) of central excise - fabrication of Steel Tubular Poles - process of cutting MS black pipes according to the required length, swaging of the pipes, the pipes of different diameters are then welded and then painting of the same in the steel tube section. - held that:- the processes of swaging and welding carried out by the applicant result into manufacture of tubular poles and pipes of different sizes within Section 2 (f) of CEA, 1944. - prima facie case for total waiver of pre deposit of duty and penalty.

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• 2012 (5) TMI 409
  Production based duty of excise - section 3A - held that:- law laid down by the Hon ble Supreme Court in Venus Castings case(2000 (4) TMI 37 (SC)), is fairly applicable to the facts of the case for determination of the dispute. - Their Lordship had ruled against a hybrid system of facility both under Rule 96ZP(1) and under Rule 96ZP(3) of the erstwhile Central Excise Rules, 1944, in discharging duty under Section 3A of the Central Excise Act, 1944. - matter remanded back to the lower Adjudicating Authority for determining afresh as to whether the Appellant during the relevant period, i.e.1999-2000, had exercised their option under Rule 96ZP(1) or Rule 96ZP(3) of the erstwhile Central Excise Rules, 1944 and consequently, determine their liability for the said period.

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• 2012 (5) TMI 408
  Review Order - Appeal filed against order of Commissioner dropping proceedings – Held that:- As per Section 35E of the Act, the Committee of Chief Commissioner are required to examine the legality and propriety of any such decision or order passed by the Commissioner, whereas in present case Chief Commissioners have differed on the issue of acceptance or filing appeal against the Commissioner’s order. Therefore, Review Order is not in accordance with the provisions of Section 35E of the Act. The appeal filed by the Revenue is not maintainable and the same is dismissed.

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• 2012 (5) TMI 407
  Revisions application – Cenvat credit - clearance of goods on payment of duty and receiving back of 92.748 Kgs of goods in the factory and re-credit of Cenvat of such payment - Respondents got cenvat credit of duty involved against 92.748 Kgs in terms of Rule 16(1) of the Central Excise Rules, 2002, subsequently they exported 36.3 Kgs of aforesaid goods against claim for rebate under Rule 18 of the Central Excise Rules, 2002 - paid the duty by debiting their cenvat account under Rule 16(2) of the Central Excise Rules, 2002 – Held that:- Rule 16(2), it is provided that the amount paid under this sub-section shall be allowed as CENVAT Credit as if it was a duty paid by the manufacturer, who removes the goods. So provision of 16(2) makes it clear that the amount actually paid is nothing but duty and as such payment by the Respondents should be treated as payment of duty, Respondents are eligible for rebate on payment of duty paid against export product by way of debiting of Cenvat Credit - Revision Application by revenue rejected.

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• 2012 (5) TMI 406
  Revision application - show cause notice was issued to the applicants for recovery of erroneously refund amount under rebate claim – Held that:- sanction of refund claim involves an administrative adjustment of funds disbursed as rebate for statistical purposes. Government observes that applicant cannot be penalized by ordering recovery of already sanctioned rebate claims on the grounds for a mistake committed by ACCE who sanctioned the claim without having jurisdiction. Since the payment of duty and export of goods is not in dispute, the rebate cannot be denied on merit also, show cause notice was time barred and therefore proceeding initiated under said SCN is liable to be dropped, revision application succeeds

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• 2012 (5) TMI 405
  Demand of duty – whether CENVAT credit attributable to the inputs contained in the semi-finished and finished goods destroyed in flood was inadmissible and was required to be reversed – Held that:- Asian Paints (I) Ltd. (2004 - TMI - 53041 - CESTAT, WEST ZONAL BENCH, MUMBAI) , once the inputs are issued to the manufacturing floor from the stores after receipt in the factory, further utilisation of the same cannot be normally questioned. They can be lost due to normal process of a technological loss, reversals are therefore not called for, appeal filed by the Revenue is rejected

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• 2012 (5) TMI 384
  Credit of service tax paid on different services for the purpose of paying duty in respect of various goods manufactured - held that:- In view of decision in MURUGAPPA MANAGEMENT SERVICES LTD & Others (2011 (10) TMI 501 (Tri)) and Ultratech Cement Ltd. (2010 (10) TMI 13 (HC)) while decided the issue in favor of assesse, matter remanded back for fresh decision.

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• 2012 (5) TMI 383
  Credit of service tax paid on different services for the purpose of paying duty in respect of various goods manufactured - held that:- In view of decision in MURUGAPPA MANAGEMENT SERVICES LTD & Others (2011 (10) TMI 501 (Tri)) and Ultratech Cement Ltd. (2010 (10) TMI 13 (HC)) while decided the issue in favor of assesse, matter remanded back for fresh decision.

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• 2012 (5) TMI 382
  Refund - limitation - unjust enrichment - appellant have deposited the amount under protest on differential value of the goods cleared by them to their sister unit/group companies – Held that:- duty incidence has not been passed on to their sister concern/group companies by producing relevant certificates from the Range Superintendent and from the balance sheet as the same is shown as receivable from the Government. Therefore, the appellant are able to pass the bar of unjust enrichment, on that ground also their refund claim is maintainable, appeal is allowed

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• 2012 (5) TMI 381
  Exemption Notification No. 4/97-C.E. - condition for availment of availability of this exemption is that no credit of duty paid on the chassis had been taken - appellant had received chassis on which LPG tank fabricated had been mounted and there is no dispute that no MODVAT credit of duty paid on chassis had been taken - objection of the department is that the explanation to this entry does not cover the running gear and hence the value of running gear would be includable in the assessable value of the goods - Held that:- for the purposes of exemption under this Notification, it is not correct to make distinction between chassis and running gear, when what was supplied by the assessee to the customers was chassis and the assessee had only done the body building on the chassis, therefore, the benefit of exemption under Notification No. 4/97-C.E., cannot be denied [Mukul Engineering Works (2010 (3) TMI 605 - CESTAT, MUMBAI)] appeal is allowed

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• 2012 (5) TMI 380
  Rebate of duty paid on export goods - Petitioner paid lesser duty on domestic product and higher duty on export product which was not payable - Commissioner appeal allowed refund of full amount paid - held that:- Assessee not entitled to refund thereof in cash regardless of mode of payment of said higher excise duty - He is entitled to cash refund only of the portion deposited by it by actual credit and for remaining portion, refund by way of credit is appropriate, Government set aside the impugned order-in-appeal and allows the revision application of revenue, excess amount paid being voluntary deposit with Government was rightly ordered to be returned as re-credit in the Cenvat Credit account by original authority.

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• 2012 (5) TMI 379
  Revision application - Commissioner (Appeals) has rejected the rebate claim merely because duty paying documents were not produced before him – Held that:- in case goods are cleared for export from a place other than factory or warehouse then the goods will be cleared for export under Central Excise supervision and the triplicate copy of ARE-1 will be verified for payment of duty by the Central Excise Range Supdt. in-charge of factory where goods are manufacture. No such procedure is followed in this case, duty paid character of exported goods is not proved in this case, the rebate of duty is not admissible under Rule 18 of Central Excise Rules, 2002, revision application is rejected

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