Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
May 28, 2013
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
TMI SMS
Articles
News
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Loss on account of REPO price adjustments - provision versus accrued liability - assessee company has followed the guidelines issued by the RBI - deduction allowed - AT
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FTS - TDS - It goes without saying that the nomenclature of a transaction does not change its true character. It is the real essence and character of a transaction which needs to be looked into. - AT
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In the absence of any evidence that the assessee has invested more than value declared in the registered sale deed of property purchased, the addition in this regard on the basis of Valuation Report by the DVO is not sustainable. - AT
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Interest from Oriental Bank of Commerce - co-operative bank in liquidation - no fault can be found with the order of AO to treat it as income from other sources. - AT
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Exemption under section 10(23C)(iiiac) is automatic for entities which are wholly or substantially funded by the Government - AT
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Provision made for sales tax refund at Rs. 80.99 lac. - Refund allowed Rs. 79.15 lacs - balance amount written off as bad debts - section 43B not applicable - deduction allowed - AT
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When the assessee is not permitted to collect the sales tax under the notification issued by the State Govt. the collection of sales tax as a part of dealers' price is nothing but constitutes a trading receipt. - AT
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Rental income from unsold flats shown as stock-in-trade in the books - “ should not be assessed under the head “income from business” but under the head “income from house property” - HC
Customs
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Denial of duty exemption under Notification 21/2002-Cus – As the goods imported was secondary or defective – benefit of doubt extended to assessee - exemption granted - AT
Corporate Law
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The request of the appellants for withdrawal of an offer to acquire the equity shares of SRMTL rejected by the SEBI - order of SEBI sustained - SC
Service Tax
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GTA paid the service tax himself instead of service recipient - there cannot be double taxation of same service. - Since no loss to revenue, demand set aside - AT
Central Excise
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Rejection of Refund claim - Payment under this case has not been made under protest and refund claim filed by the appellant is also delayed. - refund not allowed - AT
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Appeal against the stay order - non compliance of stay order - Instead of 60%, appellant directed to pre-deposit 4 crores within 6 weeks. - HC
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Clandestine clearance of goods – Admission made by the appellant the Director of the manufacturing unit as well as the authorised signatory of the recipient that the goods were cleared and received without payment of duty. - demand confirmed - AT
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Recovery proceedings - circular dated 1-1-2013 - power of the board (CBEC) - part of the circular sustains and part rejected - HC
Case Laws:
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Income Tax
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2013 (5) TMI 643
Society charges on premises at Mehta Mahal given on leave and license to a third party - whether allowable as a deduction while computing the income in respect of said premises - Held that:- As decided in assessee own case [2012 (7) TMI 237 - ITAT MUMBAI] wherein such charges are not allowable as a deduction while computing the income in respect of said premises. Against assessee. Generator running expenses disallowed - Held that:- Finding substance in the order of CIT(A) that the purchase of diesel from Mulund in Mumbai, particularly when the generator is installed in the godown at Bhiwandi, raises suspicion as regards genuineness of the claim of the assessee and when the most of the payments have been made in cash in respect of bills of more than Rs.20,000/-. Assessee has not been able to place on record anything to substantiate consumption of 300% more diesel in assessment year under consideration as compared to earlier year particularly when there is no addition of new generator or increase in capacity of generator in the assessment year under consideration. Thus considering the claim of the assessee in the preceding assessment year of diesel was Rs.8,29,081/-, as compared to Rs.23,04,215/-, in assessment year under consideration and even after considering increase in diesel price and also presuming that there was more use of generator it cannot exceed 300%. As assessee on its own has made disallowance of Rs.4,39,595/- out of its claim, it is fair and reasonable to restrict the disallowance to Rs.8 lakhs over and above the disallowance made by the assessee at Rs.4,39,595/-. Partly in favour of assessee. Conveyance, order booking, repairs and maintenance, staff welfare expenses and administrative charges - adhoc disallowance to the extent of 5% of expenses - Held that:- Disallowance made by CIT(A) @ 5% of the claim of assessee on account of personal expenses and leakage have been made on the basis of self made vouchers, and, therefore, same could not be verified, is reasonable and no interference is called for. Against assessee. Disallowance u/s 14A r.w. Rule 8D - Held that:- Restore this additional ground to CIT(A) with a direction to decide the same afresh by a reasoned order after giving due opportunity to the parties. In favour of assessee for statistical purposes.
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2013 (5) TMI 642
Reopening of assessment - excessive loss claimed in respect of four projects undertaken - Held that:- As decided in Asian Paints (2008 (7) TMI 237 - BOMBAY HIGH COURT) that the legislature has not conferred power on the AO to review its own order. Therefore, the power u/s 147 cannot be used to review the order when nothing new has happened and no new material has come on record. Case of Kelvinator of India Ltd (2010 (1) TMI 11 - SUPREME COURT OF INDIA) squarely apply to the facts of the present case as the AO has initiated reassessment proceedings on the same facts which were available before him at the time of making assessment u/s.143(3) and no new material has come on the basis of which it could be said that he has reason to believe that income chargeable to tax has escaped assessment on account of failure on the part of the assessee to disclose truly and fully material of facts for the assessment. Also held in the case of ICICI Securities Primary Dealership Ltd (2012 (8) TMI 754 - SUPREME COURT) that when no new fact has come to the notice of the department, the accounts had been furnished by the assessee when original assessment was completed u/s.143(3) on a mere re-look, the Officer has come to the conclusion that the income has escaped assessment, is not permissible under the proviso to section 147 which speaks about a failure on the part of the assessee to make a proper return. Thus considering the present case there was failure on the part of the AO to consider material placed before him at the time of making assessment and on a re-look to the said material, AO cannot reopen the assessment and that too after the expiry of more than four years from the end of the relevant assessment year to rectify his own mistake. Thus the initiation of reassessment proceedings by the AO is not legal in the present case & notice issued u/s.148 to initiate reassessment proceedings is not valid and same is quashed.
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2013 (5) TMI 641
Loss on account of REPO price adjustments - CIT(A) deleted the disallowance - whether the loss on outstanding REPO transactions are purely in the nature of provisions and such loss neither accrued nor crystalised during the previous year? - Held that:- Going through the guidelines issued by the RBI for uniform accounting and reverse repo transactions dated 20.3.2004 it is found that the assessee company has followed the guidelines issued by the RBI and accordingly debited the amount of Rs.109.69 lacs under the head provision for outstanding repo transaction. Thus CIT(A) has correctly appreciated the facts and has deleted the disallowance made by the AO. As DR could not point out any distinguishable features or mistake in the order of the CIT(A)ground raised by the revenue is accordingly dismissed. In favour of assessee.
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2013 (5) TMI 640
Penalty u/s. 271(1)(c) - non entitlement for exemption u/s. 10B - assessee submitted that the Chartered Accountant of the assessee company while issuing the certificate in support of the book profits u/s. 115JB erroneously deducted the exempt income u/s. 10B under bona fide belief inadvertently failed to take note of the amendment brought in the relevant provisions of I.T.Act vide Finance Act 2007 w.e.f. 01.04.2008 whereby the exempt income u/s. 10B is not permissible for deduction while computing the book profits u/s. 115JB - Held that:- It may be observed that the related amendment has been brought vide Finance Act 2007 w.e.f. 01.04.2008 and the relevant assessment year was the first year during which the said amended provisions were to be implemented. The assessee company for its tax matters relied upon its Chartered Accountant. But the Chartered Accountant inadvertently failed to take note of the amended provisions and claimed exemption u/s. 10B. In such circumstances, the present case is not a case of concealment of income or furnishing of wrong particulars of income, rather it is a case of wrong claim of exemption which was based on bona fide belief, thus this is not a fit case for levy of penalty - in favour of assessee. Penalty u/s. 221(1) r.w.s. 140A(3) - default in payment of self assessment tax - Held that:- Despite availing sufficient opportunity, the assessee in this case failed to make the payment of tax at the time of passing of penalty order of the AO. Even the assessee could not substantiate its contention of financial crunch with any supporting evidence. However, the fact which cannot be ignored is that the assessee made the entire payment of tax along with interest before preferring the penalty appeal before the CIT(A) i.e. within a very short period of 30 days. No doubt, while imposing penalty @100% on the defaulted amount the AO did not record his reasons for the same. Hence, levy of maximum penalty in this case @100% of the defaulted amount is not justifiable. But reducing the same to almost negligible amount will also be not justified in face of the statutory provisions of the Act. Thus in the interests of justice amount of penalty is reduced to 1/3rd of the amount imposed by the AO. Partly in favour of assessee.
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2013 (5) TMI 639
Exemption to interest income u/s 10(15)(iv)(h) - Revenue appeal against granting full exemption - Held that:- AO made disallowance on account of interest and operating expenses on pro-rata basis. Insofar as the disallowance of interest is concerned, it is an admitted position that the assessee's capital and free reserves are far in excess of the amount invested in securities earning interest free income. That being the position, there cannot be any disallowance on account of interest paid for making investment in such securities. Similar view has been canvassed in assessee's own case. As regards the operating expenses, the Tribunal in earlier years has directed to sustain disallowance at the rate of 2% of exempt income. In the absence of any distinguishing facts for the current year having been brought to notice, 2% of the exempt income should be disallowed u/s 14A towards operating expenses. This ground is partly allowed. Claim for loss on account of valuation of investments disallowed - Held that:- CIT(A) has decided this issue against the assessee and resultantly there was no occasion for the Revenue to challenge the same as it is simple and plain that when deduction has been allowed on account of loss arising on revaluation of investments in earlier years, the subsequent write back of the same amount cannot escape taxation. Therefore, hold that the amount is chargeable to tax. However, the A.O. is directed to ensure that the same amount is not taxed twice in the assessment for the current year. Benefit on account of unmatured forex contracts as on 31.03.2000 credited to the Profit and loss account for the year under appeal is chargeable to tax. Deduction on account of mobilization of India Millennium Deposit issued by the State Bank of India - whether be treated as fees for technical services? - A.O. held that the provisions of section 40(a)(i) read with section 195 were applicable - Held that:- It was SBI who came out with IMD issue with SBI Capital Markets Ltd. as Advisor and Lead arranger. The services rendered by the arrangers or sub-arrangers were only a small part of the management of the IMD issue. It is further significant to note that the assessee was only one of the several banks soliciting subscribers to SBI's IMD. Even within the same territory, there were several banks competing with each other to find out customers. To be more precise, in India alone there were several banks including the assessee, contesting with each other to reach the potential subscribers. Another factor which is of prime importance is that SBI reserved right to reject any application forwarded by the assessee without assigning any reason, as is evident from the brochure of IMD scheme, thus it is clear that the sub- arrangers were no where near the management of IMD issue. What to talk of managing, even the fate of the applicants sent by them was not certain as to acceptability. Under such circumstances, it cannot be said that by doing their activities, the sub-arrangers were rendering any 'managerial services' to the assessee in connection with IMD issue of SBI. They were simply acting as commission agents or brokers for which they were entitled to a particular rate of commission. The AO seems to have been swayed by the designation of 'fees' given to sub-arrangers in adopting a view that it was a fees for technical services. It goes without saying that the nomenclature of a transaction does not change its true character. It is the real essence and character of a transaction which needs to be looked into. Thus no hesitation in concluding that it was simply a commission or brokerage paid by the assessee to its sub-arrangers. The fact that it was characterized as "fees", is of no consequence. If this payment is not fees for technical services but only commission, the provisions of section 195 requiring the assessee to make deduction of tax at source before remitting or crediting the amount to the accounts of sub-arrangers, cannot apply. If no deduction of tax at source is required, obviously the provisions of section 40(a)(i) do not come into play. In favour of assessee. Unamortized part of the net expenditure - whether be ought to have been held as deductible - Held that:- The expenses in question incurred by the assessee are of the nature of the first category of the expenses incurred for issuing debentures eligible for deduction in full in the year of incurring as per the ratio decidendi of India Cements (1965 (12) TMI 22 - SUPREME Court). The authorities below have wrongly matched it with the second category by relying on the ratio decidendi of Madras Industrial (1997 (4) TMI 5 - SUPREME Court) thereby by allowing amortization over the period of deposit. The expenditure has no relation whatsoever with the life of long term deposits received by the assessee bank from SBI. As this expenditure is revenue in nature and not a deferred revenue expenditure, the same has to be allowed as deduction in entirety in the year of incurring itself without spreading it over the term of deposit. Thus the deduction should be allowed in the year under consideration. The AO is directed to ensure that no allowance of the unamoritzed expenditure is allowed in subsequent years. The ground raised by the assessee in this regard is accordingly allowed.
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2013 (5) TMI 638
Arm's length price computation - transaction in relation to call money lending based on the average yield for related and unrelated lending transactions after including transactions which were abnormal in nature - Held that:- Examining the contents of the additional evidence the evidence produced in the TP report was the data compiled by an independent auditing company but the data as produced as additional evidence is complied by a statutory and accredited body. Since even the earlier data was not used by the revenue authorities, in the interest of justice, it would be fair to both the parties if the case is restored to the AO to do de novo assessment, including assessing the HO expenses for the purposes of section 9(i)(vii). In favour of assessee for statistical purposes. Penalty u/s 271(1)(c) - CIT(A) deleted the additions - Held that:- Since the basis of levy of penalty was directly related to the addition made, which have restored to the file of the AO, consequently, the penalty proceedings also be restored to the file of the AO, who shall re determine the basis and reasons for the levy of penalty, if at all. In favour of assessee for statistical purposes.
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2013 (5) TMI 637
Addition of trading results - @10% of gross profits as against 8.03% reflected by the assessee - CIT(A) deleted the addition - Held that:- The Assessee in this case is executing small contracts. The contracts are of same nature and regular books are maintained. No specific defect has been pointed out in the books maintained. It is further noted that on similar facts, AO has not made any addition in the assessment order passed u/s. 153A for A.Y. 2001-02, 2004-05, 2005-06 & 2006-07. As such there is a clear contradiction in the approach of the AO. Furthermore, reference to net profit in the case of Vijay Kumar Kataria assessee's husband and assessee in the past is factually incorrect, as this is a case of search and assessment order was passed u/s. 153A. It is noted that no incriminating material or evidence was found or seized at the time of search and there is no reference to the same in the AO's order. Also see All Cargo Global Logistics Ltd. vs. DCIT [2012 (7) TMI 222 - ITAT MUMBAI(SB)] wherein with reference to the assessment u/s. 153A it was held that any assessment that are abated, AO retains the original jurisdiction as well as jurisdiction conferred on him u/s. 153A for which assessment shall be made for each assessment year separately. In favour of assessee. Unexplained investment in property - CIT(A) deleted the addition - Held that:- No finding by the CIT(A) as to what was the source of investment. Merely because the payment was made through the bank account, it could be presumed that the source is explained and verified. Further the investment in this case as reflected in the assessee's statement of account needs to be corroborated from the books of accounts and records maintained by the assessee. As the books of accounts and records do not corroborate the investments, the addition has been made in this case. Hence, assessee's contention that no addition can be made in the absence of any incriminating material found is not germane here. Hence, in the interest of justice, remit this issue to the file of the AO to consider the issue afresh, in light of the submissions made by the assessee. Addition made upon the valuation done by the DVO - value of the property in this case as reflected in the registered sale deed was Rs. 33,00,000/-. Reference u/s. 142A was made to the DVO who determined the value of the property at Rs. 63,74,700/- as against Rs. 33,00,000/- shown by the assessee. Hence, there was difference of Rs. 30,74,700/-. This was added to the income of the assessee. CIT (A) deleted the addition as there was no evidence of adverse material regarding payment of under hand consideration - Held that:- As no other incriminating material was found during the course of search CIT(A) is correct in this regard. Addition in this case has been made pursuant to search on the basis of Valuation Report of the DVO. It has been settled that in case of search in the absence of any incriminating material found during search, no addition can be made on the basis of Report of the DVO. See K.P. Varghese vs. ITO, Ernakulam & Anr. [1981 (9) TMI 1 - SUPREME Court],C.I.T. vs. Abhinav Kumar Mittal [2013 (1) TMI 629 - DELHI HIGH COURT], C.I.T. vs. Mahesh Kumar [2010 (8) TMI 64 - DELHI HIGH COURT]. Thus in the absence of any evidence that the assessee has invested more than value declared in the registered sale deed of property purchased, the addition in this regard on the basis of Valuation Report by the DVO is not sustainable.
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2013 (5) TMI 636
Interest from Oriental Bank of Commerce - addition as not been credited in the Profit and Loss A/c. or not offered for taxation in the subsequent year - Assessee is a co-operative bank in liquidation with no banking activities were carried - Held that:- Assessee bank is under liquidation and is maintaining its books of accounts on cash basis & submitted that it can demonstrate that the accrued interest has already been included in its Profit and Loss account & it will lead to taxing the same income twice if addition made - Assessee granted one more opportunity to prove its contention that the interest is already included in income - ground of assessee allowed for statistical purposes. Interest income of the Bank - income from other sources v/s income from business - Held that:- Considering the case of Morvi Mercantile Bank Ltd [1975 (8) TMI 31 - GUJARAT High Court] when the liquidator realised the assets and invested the money in short-term deposits pending distribution he was not embarking upon any business. The realisation and distribution of assets cannot, be said to be carrying on business. It is obligatory upon the liquidator to realise the assets and the distribute the money amongst the creditors, and if pending distribution he invested the amount, it cannot be said that he was carrying on the business of investment merely because it may be one of the objects either under the memorandum or under the statute - no fault can be found with the order of AO to treat it as income from other sources. Against assessee.
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2013 (5) TMI 635
Entitlement to exemption u/s 10(23C) (iiiac) - Programme advance received - whether be equated with the 'income' and be subjected to the provisions of sections 11, 12 and 13 of the Act - assessee is one of the Society formed by the Government of Karnataka for implementing Government of India's flagship scheme known as National Rural Health Mission (NRHM) - Held that:- It is a fact that the Karnataka State Health & Family Welfare Society and the District Health & Family Welfare Societies at the Districts level were non-profit making societies registered by the Government of Karnataka way back in 2005-06 specifically for the implementation of the Central Government sponsored programme of NRHM which had, undoubtedly, the sole objective of providing accessible, affordable health care to the rural population. It is also an un-denying fact that the purpose of establishing the State and District level health societies as per NRHM norms was to act as nodal agency for implementation of the Central Government's programme of NRHM and, thus, there can be no profit motivation. Exemption under section 10(23C)(iiiac) is automatic for entities which are wholly or substantially funded by the Government and a Notification is not issued under this section. Therefore, no specific order/Notification in this regard can be issued by the CBDT to exempt the State and District Level Societies for health and family welfare. The assessee society has since been recognized as a Government established/sponsored entity, as affirmed by the Finance Secretary, Government of India, exemption u/s 10(23C) (iiiac) is automatic for entities which were wholly or substantially funded by the Government of India or a State Government as the case may be. In essence, the assessee is entitled for exemption under section 10(23C) (iiiac) of the Act. In favour of assessee.
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2013 (5) TMI 634
Disallowance u/s 40A(2)(b) - transaction with related parties - Held that:- The average rate of purchase from specified persons is only Rs.62076.37 as against Rs.62809.90 from other persons. There is no finding given by CIT(A) that there is any defect in this contention of the assessee. He has decided the issue on the basis of month-wise details. Regarding month-wise details also, it is noted by CIT(A) that during April-May, 928.465MT was purchased by the assessee from specified persons @ Rs.62400/- per MT and during these two months, nothing was purchased form other parties, part from these two purchases in April-May, there was purchase of 64.225 MT in the month of July and 53.750 MT in Oct and both these purchases were @ Rs.63600/- per MT. Thereafter, he has noted that large quantities were purchased by the assessee form other parties @ Rs.62997 and Rs.63069 during these months i.e. July and Oct. Considering the price paid by the assessee to the related parties for purchase during July-Oct after deducting Rs.500/- per MT being the price difference received back, the price paid by the assessee is Rs.63100/- per MT to the related parties whereas price paid to others is also very close i.e. Rs.62997/- to Rs.63069/- per MT and hence, for such a small difference in price, no addition is justified because such small difference can be because of various reasons such as better quality, timely supply, extra credit period etc. In addition to this, there was purchase of 58.495 MT from related parties in the month of Jan @ Rs.63311/- MT. After deducting R.500/- per MT being rate difference received back by the assessee, the effective price comes to Rs.62811/- per MT. The purchase from others during this period was at Rs.62488/- and hence, price difference is Rs.323/- per MT. For this purchase of 58.495 MT @ Rs.323/- per MT, amount of excess price paid works out to Rs.18,894/-. Thus confirm this disallowance to this extent and the balance disallowance is deleted. This ground is partly allowed. Bad debts - Disallowance of short provision of sales tax debited to P & L A/c - whether the said amount ought to have been allowed u/s 43B on payment basis - held that:- The case of the assessee is this that at the time of closing its books of account for the assessment year 2000-01, the assessee has worked out sales tax refunds at Rs.80.99 lacs and included the same in the income on mercantile basis and the tax was paid on the same in that year. It was also submitted by the assessee before CIT(A) that the assessment of sales tax for the assessment year 2000-01 was finalized during the current year and the Sales Tax Department refunded only Rs.79.15 lacs and therefore, the same is written off in the present year. Thus this claim of the assessee is akin to claim of write off of bad debts and therefore, the same is allowable in the year of write off and this is not the case of the revenue that there is no actual write off in the present year. In favour of assessee. Disallowance of foreign travel expenditure - Held that:- As assessee could not establish that this expenditure was incurred for business purposes no reason to interfere in the order of CIT(A) in conforming disallowance - against assessee. Addition on alleged difference in balances as per the books of accounts of the appellant and the other parties - Held that:- Regarding these differences, no explanation was furnished by the assessee before the A.O but as noted by CIT(A) that assessee has filed reconciliation statement during appellate proceedings and as per the assessee, the difference arisen out of kasar and discount not accounted for by either of the parties. Thus in the interest of justice, this matter should go back to the file of the A.O. for a fresh decision after examining reconciliation statement submitted by the assessee - in favour of assessee for statistical purposes. Addition made on account of disallowance of interest payment - Held that:- The amount disallowed by the A.O. shows that the disallowance is on account of interest paid on unsecured loans and not on account of bank interest. It means, the A.O. has accepted that bank interest paid was for those funds which were used by the assessee for business purposes. Once it is accepted by the A.O. that funds borrowed from bank has been used for business purposes, the disallowance made by the A.O. should not exceed this amount of net interest debited to P & L account. The same is only Rs.1,94,263/- and hence, this disallowance cannot exceed this amount. Therefore, uphold the disallowance to this extent of Rs.1,94,263/-and decline to interfere in the order of CIT(A) for deleting the balance disallowance. This ground of the revenue is partly disallowed. Disallowance of payments of commission - CIT(A) deleted the addition - Held that:- As enough evidence has been furnished in the form of confirmation/certificate of the concerned parties regarding rendering of services by these two persons and there has not been any dispute by the revenue regarding benefits derived by the assessee company and legitimate business needs of the assessee company & CIT(A) has discussed and distinguished all the judgements relied upon by the A.O. and have also seen that none of the objections raised by the A.O. is valid and, therefore no interference is called for in the order of CIT(A) on this issue. This ground of the revenue is rejected. Disallowance of payments of rate difference - CIT(A) deleted the addition - Held that:- Even if the assessee has not made corresponding purchases then also, the assessee has to fulfill its contract regarding sale and had to bear the loss. Many a times, a businessman does not cover the sales by affecting purchases in anticipation of fall in prices but if the price goes up as against anticipation of falling in price, the assessee is caught on a wrong foot and has to bear losses because of higher purchase price but lower sale price already effected. Regarding sale at lower price, this is stated by the A.O. in his order that assessee has not filed any evidence that what he has done to effect supply of material to these two parties, but the A.O. has not doubted regarding sale of material to these two parties and failure of assessee to fulfill the sale contract and in the absence of this, the disallowance made by the A.O. is not sustainable. Therefore, decline to interfere in the order of CIT(A) on this issue also.
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2013 (5) TMI 633
Transfer pricing adjustment - apportionment of Global Cricket Council contribution in the ratio of 5.40:94.60 between LG Electronics India Pvt. Ltd. (LGEIL) and L.G. Electronics Korea (LGEK) - LGEIL is a 100% subsidiary of LGEK entered into an agreement to sponsor World Cup Cricket - Held that:- Agree with the CIT (A) that considering the sales of the entire LG group is not an appropriate basis to apportion the benefits emerging from sponsorship of the World Cup and other events to the entities of the LG Group. Considering the break-up of Global sales of the LG Group it is evident that out of LG group's global sales, only 38% pertains to cricket playing continents. The benefits of advertisement in the Cricket World Cup would accrue only to those entities of LG that have their presence in the cricket playing nations or those countries where cricket is having a substantial audience. Hence, we find that considering the sales of the entire LG group is not an appropriate basis to apportion the cost. Sale of LGEIL constitute 41.33% of total sales. LGEK and its subsidiaries incur all kinds of sponsorship expense. The expenses of such sponsorship also contribute significantly to the sales by these entities. Hence, agreeing with the CIT(A) that considering the sale data of 14 of the Cricket Playing nations LGEIL contribution is reasonable. TPO's action of apportionment of GCC contribution in the ratio of 5.40 : 94.60 between LGEIL and LGEK is not correct affirming the CIT(A)'s view that LGEIL has received commensurate befits of its 40% share contribution. Hence holding that the adjustments made by the AO /TPO on this account has rightly been deleted by the CIT(A). Provision for warranty expenses - Held that:- The issue involved in the appeal is covered by the decision of CIT vs. Vinitec Corporation Pvt. Ltd. (2005 (5) TMI 54 - DELHI High Court) - The assessee had made the provision of warranty liability having regard to the past factor of actual expenses incurred by the assessee towards warranty liability. In favour of assessee. Sales tax subsidy - capital subsidy v/s revenue in nature - Held that:- When the assessee is not permitted to collect the sales tax under the notification issued by the State Govt. the collection of sales tax as a part of dealers' price is nothing but constitutes a trading receipt. - against the assessee. Inclusion of profit of I&C Division while calculating the assessee's claim u/s. 80HHC - Held that:- There are decisions in favour of the assessee as well as against the assessee on this issue. In this view of the matter relying upon the decision of Vegetable Products (1973 (1) TMI 1 - SUPREME Court), that if two views are possible, one in favour of the assessee and one against the assessee, the view in favour of the assessee should be adopted. Hence, respectfully following the decision from the case laws of Madras Motors (2002 (3) TMI 10 - MADRAS High Court) and Rathore Brothers (2001 (10) TMI 72 - MADRAS High Court) this issue is decided in favour of the assessee.
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2013 (5) TMI 632
Rental income from unsold flats shown as stock-in-trade in the books - “Profits and gains from business and profession” v/s “income from house property” - Held that:- Issue is no longer debatable in view of the decision of CIT v Ansal Housing Finance & Leasing Co. Ltd [2012 (11) TMI 323 - DELHI HIGH COURT] subsequently, been followed in CIT v. Discovery Estates Pvt. Ltd [2013 (3) TMI 124 - DELHI HIGH COURT] wherein held that the rental income should not be assessed under the head “income from business” but under the head “income from house property”.
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Customs
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2013 (5) TMI 650
Import of second hand Digital Multifunction Print and Copying Machines - petitioners approaching the respondents seeking clearance of goods under “Free importability” - whether Used Digital multifunction Print and Copying machines will fall under “Restricted Category” - Held that:- On a perusal of the records available, this Court is of the considered view that the used Digital Multifunction Print and copying Machines, imported by the petitioners, cannot be said to fall under the category of ‘Hazardous Waste’, as per Rule 3(1)(iii) of the Hazardous Waste (Management, Handling and Transboundary Movement) Rules, 2008, read with Basel No. B1110 of part B of schedule III to the said Rules, 2008. As gathered, from the Minutes of the twenty fourth meeting of the Technical Review Committee, held at New Delhi, on 16-11-2011, that there is no specific mention about the multifunction devices in the EXIM and therefore, the import of multifunction devices need to be placed in the same category, as photocopying machines. As during the period prior to 05.06.2012, the old and used Digital Multifunction Printing and Photocopying Machines could be import without any licence. In the light of the principle enunciated in Union of India and Others v. Asian Food Industries (2006 (11) TMI 10 - SUPREME COURT OF INDIA) & Gem Granites v. Commissioner of Income Tax, T.N. (2004 (11) TMI 13 - SUPREME Court) this Court makes it clear that Notification No. 1 (RE-2012)/2009-2014, New Delhi dated the 5th June, 2012 will come into force with effect from 5th June 2012. Therefore, the reliance made on the said Notification to state that the goods imported would come under Restricted Category cannot be pressed into service in these writ petitions. In the present case, import of goods have taken place earlier i.e., before 5th June 2012. Therefore, such reliance made on the Notification will not help the Respondents in any manner to advance their case. Writ petitions are allowed with a direction to the authorities to release the goods in question which had already been inspected by the authorised engineers, on payment of the appropriate customs duty.
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2013 (5) TMI 631
CHA license – Revocation/suspension - Appellant submits that after the order of suspension, SCN dt. 6.12.2012 for revocation of licence was issued which was challenged before the Hon’ble Madras High Court in W.P. who set aside the SCN. Hence, the impugned order of Commissioner (Appeals) is liable to be set aside. Held that:- Regulation 22 (1) provides that the Commissioner of Customs shall issue a notice in writing to CHA within 90 days from the date of receipt of offence report, stating the grounds on which it is proposed to suspend or revoke the licence of CHA. It is apparent from the above judgement of the Hon’ble High Court that after the impugned order, SCN dt.6.12.2012 was issued for revocation of the licence, which was set aside by the Hon’ble High Court on the ground of limitation. Thus, the impugned order is set aside and appeal is allowed. Stay petition is disposed of.
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2013 (5) TMI 630
Denial of duty exemption under Notification 21/2002-Cus – As the goods imported was secondary or defective – import of Non-alloy steel bars / rounds / flats / squares - Held that:- The documents submitted by the importer nowhere mentions that the goods are seconds or of defective quality. No such documents have been unearthed by department either. No case is made out that the prices declared were lower as compared to prices for goods other than defective and seconds. This issue came up before Tribunal earlier also in the appellants own case wherein NML took a stand that the goods were seconds but the Tribunal took into account opinion of IIT and gave the benefit of doubt to the appellants. Thereafter also, there has been no change in the notification to clarify the position to the public at large. Against such background, we give the benefit of doubt to the appellants and hold that the goods were not seconds or defective. Thus, appeal is allowed by setting aside the impugned order and allowing the appellant to clear the goods by classifying the goods under CTI 7215 9090 and claiming exemption under Notification 21/2002-Cus at S. No. 190B.
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Corporate Laws
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2013 (5) TMI 629
Principle of natural justice - Takeover code - SRMTL - the request of the appellants for withdrawal of an offer to acquire the equity shares of Shree Ram Multi Tech Limited (SRMTL) under the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (Takeover Code/Takeover Regulation) has been rejected. Principle of natural justice - order of SEBI - held that:- it is apparent that all the necessary information was available before SEBI for taking a decision as to whether the claim of the appellants seeking exemption from the Takeover Code, or withdrawal of the Letter of Offer would fall within the purview of Regulation 27(1) (d). The purpose of granting an opportunity of hearing is to ensure fair treatment of the person or entity against whom an order is likely to be passed. - In our opinion, the appellants cannot justifiably claim that any order had been passed by SEBI that would cause adverse civil consequences, as envisaged by this Court in B. Karunakar & Ors. (1993 (10) TMI 310 - SUPREME COURT). The person challenging the order on the basis that it is causing civil consequences would have to prove the prejudice that has been caused by the non-grant of opportunity of hearing. In the present case, we must hasten to add that, in the letter dated 4th May, 2006, the appellants have not made a request for being granted an opportunity of personal hearing. Therefore, the ground with regard to the breach of rules of natural justice clearly seems to be an after thought. About takeover code - held that:- the takeover code is meant to ensure fair and equal treatment of all shareholders in relation to substantial acquisition of shares and takeovers and that the process does not take place in a clandestine manner without protecting the interest of the shareholders. It is keeping in view the aforesaid aims and objects of the takeover code that we shall have to interpret Regulations 27(1). Power of the board to allow withdrawal from the scheme - held that:- certain amount of discretion has been left with the Board to determine as to whether the circumstances fall within the realm of impossibility as visualized under sub-clause (b) and (c). In the present case, we are not satisfied that circumstances are such which would make it impossible for the acquirer to perform the public offer. The possibility that the acquirer would end-up making loses instead of generating a huge profit would not bring the situation within the realm of impossibility. Principle of ejusdem generis - held that:- The appellants wanting to withdraw the public offer merely wishes to cut its losses at the expense of the innocent shareholders, who are entitled under the Regulations to the exit option. In such circumstances, the appellants would have to buy the shares at the quoted prices of Rs.18.60 per share, placing a financial burden on the appellants. The aim of the appellants was merely to avoid such an added burden. - we are not inclined to accept the submissions of Mr. Divan that the principle of ejusdem generis is not applicable for interpreting Regulation 27(1) (d) of the Takeover Code. Regulation 24(2) mandates that the merchant banker shall furnish to the Board a due diligence certificate which shall accompany the draft letter of offer. The aforesaid regulation clearly indicates that any enquiries and any due diligence that has to be made by the acquirer have to be made prior to the public announcement. It is, therefore, not possible to accept the submission of Mr. Shyam Divan that the appellants are to be permitted to withdraw the public announcement based on the discovery of certain facts subsequent to the making of the public announcement. Regarding delay in approval - held that:- the repeated advice given by the merchant banker to enhance the issue size of the open offer and to comply with other requirements of the Takeover Regulations. The appellants, in fact, were prevaricating and did not agree with the interpretation placed on Regulation 27(1) (d) by the Merchant Banker. We, therefore, reject the submission of Mr. Shyam Divan that there was delay on the part of SEBI in approving the draft letter of offer. Regarding valuation - held that:- The formula given in Regulation 20 would have no applicability in the facts and circumstances of this case. The determination of the lowest price under Regulation 20 would be at a stage prior to the making of the public announcement and not thereafter. - appeal dismissed - Decided against the appellant company.
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Service Tax
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2013 (5) TMI 647
Refund - export - service tax paid on technical testing and analysis service and transportation of empty containers - held that:- in view of Balkrishna Industries Ltd. Vs. CCE Aurangabad [2012 (5) TMI 445 - CESTAT, MUMBAI] and CCE Madurai Vs. Tata Coffee Ltd. [2010 (11) TMI 364 - CESTAT, CHENNAI] refund is available in respect of Service Tax paid on transportation of empty containers which are required to be used for stuffing of export goods. - decided in favor of assessee. In the case of Ramdev Food Products Pvt. Ltd. [2010 (6) TMI 178 - CESTAT, AHMEDABAD], this Tribunal has taken a view that for refund of the Service Tax paid on technical testing and analysis service, there has to be a written agreement between the two parties. In view of the above, the refund of Service Tax paid in respect technical testing and analysis service has been rightly rejected. - decided against the assessee.
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2013 (5) TMI 646
Waiver of penalty - person who had conducted the coaching classes had died and apparently the service provider was a proprietary concern - initially it was a partnership of husband and wife and later on the wife tried to run the coaching classes and had to discontinue and thereafter the daughter-in-law started it again. - held that:- the penalties imposed on the appellant can be set aside. - In any case this is also a suitable case for waiver of penalty by invoking the provisions of Section 80 of Finance Act, 1994 - There is no indication that the same concern was continued in view of the fact that there was a break in between. - penalty waived.
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2013 (5) TMI 644
Power of commissioner to remand - held that:- in the case of Commr. of Customs, Amritsar v. Enkay (India) Rubber Co. Pvt. Ltd. [2007 (3) TMI 276 - HIGH COURT OF PUNJAB & HARYANA] also held that once the power to remand has been expressly taken away buy the finance Act, 2001, the Commissioner (Appeals) is divested of power to remand the case back to the adjudicating authority. - Commissioner (Appeals) to decide the appeal in merit.
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Central Excise
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2013 (5) TMI 628
Appeal u/s 35-G – Waiver - Predeposit of duty - Order was passed relying upon an order of the CCE, Allahabad vs. Ramesh Food Products, 2[004 (11) TMI 103 - SUPREME COURT OF INDIA] - Held that:- In assesse's own case, the judgment of the Supreme Court has been examined by the Tribunal in respect of subsequent period and the claim of the Revenue in Ramesh Food Products' case (supra), has been found to be unsustainable, Tribunal was not right in relying upon the decision in Ramesh Food Products' case (supra) when the same has been explained by the Tribunal in assesse's own case. In favour of assesse. Order is set aside and remitted back to the Tribunal.
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2013 (5) TMI 627
Rejection of Refund claim - Wrong availment of modvat credit – Demand of duty/penalty/ - The appellant preferred an appeal against the above order-in-appeal before CESTAT, who allowed the appeal for Rs.19,984/- out of Rs.67,713 and also reduced penalty to Rs.2,500 from Rs.7,000 and accordingly refund claim was filed which was rejected on the ground that the same was filed beyond the time prescribed u/s 11B of the Central Excise Act 1944. Appellant submits that the refund claim is for the amount deposited at the same time challenging the decision to reject the claim. He submits that the amount deposited has to be treated as one paid under protest and therefore the time limit u/s 11B would not be applicable. He relies upon the decision of the Tribunal to submit that when the appellants make payments while challenging the demand that is to be treated as payment under protest. Held that:- Tribunal had considered the amended Section and since the refund claim in that case was filed within one year from the date of amendment, treated the same as a liberal consideration of provisions and decided that the refund claim should be allowed. Proviso introduced in 2007 is applicable in respect of past cases also and the only view or interpretation in favour of the appellant that can be taken is that from the date of amendment, refund claim should have been filed within one year ignoring the earlier period when according to the provisions existing at that time, there was no time limit for refund claim. Payment under this case has not been made under protest and refund claim filed by the appellant is also delayed. Thus, the appeal is rejected.
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2013 (5) TMI 626
Maintainability of review order – u/s 35E – As per respondent review order bearing had been signed by only one of the Chief Commissioners from the Committee of Chief Commissioners. Hence, it is not an Order of the Committee of the Chief Commissioners. Held that: - As per Section 35E of the Act, the Committee of Chief Commissioners are required to examine the legality and propriety of any such decision or order passed by the Commissioner. It is not a case for not signing the Review Order by the other Commissioner as contended by the ld. A.R. Tribunal’s decision in the case of M/s Rex Rubber Works [2002 (5) TMI 442 - CEGAT, MUMBAI], M/s Pragati Silicones (P) Ltd. [2001 (4) TMI 125 - CEGAT, COURT NO. II, NEW DELHI] and M/s Prakash Manufac. Indus. [2000 (3) TMI 550 - CEGAT, NEW DELHI] are applicable in this case. Thus, relying on these decisions Review Order is not in accordance with the provisions of Section 35E of the Act. The appeal is dismissed.
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2013 (5) TMI 625
Appeal against the stay order - non compliance of stay order - Whether the Appellate Tribunal was justified in directing the appellant to deposit 60% of the liability without considering the fact that under the Government scheme, the appellant was entitled for exemption from excise duty and also for the reason that the appellant company has been referred to BIFR under Sick Industrial Companies (Special Provisions) Act, 1985 - held that:- The appeal is a statutory right. The appellant has been deprived of his right of the appeal due to a precondition of deposit of 60% of the liability imposed by the order-in-original. While imposing the condition of predeposit, the Tribunal is required to examine prima facie merit of the appeal as well as the condition of the appellant. In the impugned order the Tribunal found that the appellant company was running under the financial loss and his request for rescheduling the payment of loan has been accepted by the banks. Even then the appellant was directed to deposit 60% of the liability which was a substantial amount for the appellant. In the financial circumstances of the company, it was an impossibility for it. In the meantime the company was also referred to Board of Industrial and Financial Reconstruction treating it as a sick company. The Supreme Court in Sangfroid Remedies Ltd. v. Union of India, [1998 (9) TMI 83 - SUPREME COURT] allowed full exemption from the liability to deposit precondition amount in appeal by the company, which was referred to the Board of Industrial and Financial Reconstruction treating it as a sick company. Instead of 60%, appellant directed to pre-deposit 4 crores within 6 weeks.
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2013 (5) TMI 624
Admissibility of Cenvat credit - Common inputs used in manufacture of exempted as well as dutiable goods - Held that:- Issue in this appeal is related to whether the applicant manufactured the exempted goods during the period in dispute from the non cenvatable inputs as per the remand order passed by the Tribunal. Observing the finding given by the Commissioner (Appeals) in the present order reproduced as ''I further observe that the adjudicating authority has verified the documents only in compliance with the Hon’ble CESTAT’s order dated 20.10.08 and confirmed that the ADV wheel rims and harvester combine rims were manufactured from the non-cenvatable stocks of inputs." Following the same the present demand is not sustainable and hence set aside.
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2013 (5) TMI 623
Clandestine clearance of goods – Demand related to clearance of unaccounted goods - The contention of the applicant is that except statement of the Director there is no evidence regarding clearance of goods without payment of duty. Held that:- Admission made by the appellant the Director of the manufacturing unit as well as the authorised signatory of the recipient that the goods were cleared and received without payment of duty. It is a clear case of clandestine clearance of goods therefore the ratio of the decision of the case Orissa Bridge & Construction Corpn. Ltd. Vs. CCE [2008 (8) TMI 585 - SUPREME COURT OF INDIA] is not applicable on the facts of the present case. Thus, as per admission made by the Director of the manufacturing unit as well as recipient there is no infirmity in the impugned order whereby the demand of duty is confirmed and penalties were imposed on the unit as well as on the Director.
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2013 (5) TMI 622
Recovery proceedings - circular dated 1-1-2013 - power of the board (CBEC) - recovery during the pendency of appeal before appellate forum - held that:- condition Nos. 3, 6 and 9, if read rigidly, fail to clear the test of reasonableness and thus fall foul to Article 14 of the Constitution. - there would be situations where for no fault of the assessee a stay application filed before the appellate forum may not be disposed of within 30 days of its filing. In such a situation, the said conditions would not require the recovery officer to initiate recovery proceedings. However, if after filing of stay application, it is found that the assessee is prolonging the hearing thereof or for some such similar reasons attributable to the assessee stay application is lingering, surely it would be open for the Revenue to proceed with the recovery irrespective of pendency of appeal and the stay application. - Decided against revenue. Regarding second appeal before tribunal when commissioner (appeals) reject the first appeal - held that:- to provide that recovery should commence immediately after the order is passed by the Appellate Commissioner, in our view, would not be permissible. - to provide that as soon as the order is passed by the Commissioner confirming the duty demand made by the adjudicating authority, the order should be executed without any leverage would give rise to large number of cases which would travel to the High Court at such an interim stage. We are not inclined to accept a situation where such unnecessary litigation would arise. - Condition No. 10 insofar as it provides for immediate recovery as soon as the order is passed in appeal also needs to be read down as to permitting reasonable time to the assessee to seek protection from the appellate forum. This period of reasonable time must be judged in the facts of each case and cannot be equated with full period of limitation. - Decided partly in favor of revenue. Regarding appealable orders either before the High Court or the Supreme Court - held that:- The period of limitation prescribed for filing such appeal is 180 days. The Central Excise Act or the Customs Act nowhere envisages that for the entire period of full 180 days of limitation, even at the stage of third appellate stage, the Revenue must stay its hand off. We, therefore, uphold Condition No. 11 without any modification. - Decided in favor of revenue. Protection of the interest of revenue - held that:- It would be highly desirable that the Appellate Commissioner and the Tribunal bestow their utmost consideration to the application for pre-deposit waiver and dispose of them as quickly as possible. While considering the question of waiver of pre-deposit, it is within the jurisdiction of the appellate forum to impose such conditions as deemed fit to safeguard the interest of the Revenue. - If the authorities fail to discharge their statutory functions, the High Court will be unnecessarily burdened with the hearing of the cases which are required to be heard by the statutory authorities constituted under the relevant Statutes, and the Legislative intention may be frustrated. Appellate authorities directed to pass appropriate orders on the stay applications expeditiously and preferably within four weeks of such application. None of the clauses of Circular, dated 1-1-2013 cover such a situation where having granted stay, the Tribunal could not dispose of the appeal within the period of 180 days and therefore, stay would be vacated. This circular is also not part of the specifically rescinded circulars mentioned in para 1 of the impugned circular. In our view, it would also not be covered under the description of any other circular, instruction or letter contrary to the said circular. In that view of the matter, the said circular dated 26-5-2010 would continue to operate in the limited field occupied by the said circular irrespective of the fresh guidelines dated 1-1-2013. We wonder why in the present day of advanced technology, the Department should be groping for latest information and current status of assessees further appeal proceedings. Surely, with proper inter-departmental cooperation and computerization and utilization of such technology, the Department should be in a position to track every appeal before the Appellate Commissioner or the Tribunal and the precise stage at which such proceedings are pending, including the reason for such pendency. This, of course, is an issue which the Department needs to address itself internally and we leave it to them. Decision on individual Special civil applications - in most of the cases, stay application was pending for no fault of the assessee.
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CST, VAT & Sales Tax
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2013 (5) TMI 649
Realization of tax on book profit under Section 8B of the Assam Agricultural Income Tax Act, 1939 - assessee's challenge to the applicability of Section 8B as amended by Act XXVII of 2010 as it could not be intended to tax income of the previous year i.e. 2008-2009, nor it could be intended that advance tax was payable in respect of such income - Held that:- Unable to accept the submission of the assessee as under the scheme of the Act, the tax is payable for the agricultural income of the previous year. The assessment is made in next year i.e. in the assessment year at the applicable rate of tax. Admittedly, the amended provisions are applicable for the assessment year in question and the same could be applied to the previous year irrespective of the fact that in the previous year the said provision was not there. It is not the case of the petitioner that the impugned provisions are beyond legislative competence or violate fundamental rights. In absence thereof, only question is of interpretation. In the face of the plain language of the provisions of 8B it is not possible to hold that the amended provisions did not apply for the assessment year 2009-2010 as such provisions were brought for the first time in the assessment year. Same is the position with regard to liability to pay interest. Petitioner's reliance upon the judgment of J.K. Synthetics Limited Vs. Commercial Taxes Officer, [1994 (5) TMI 233 - SUPREME COURT] to submit that failure to deposit tax due before making of assessment could not attract interest cannot apply to the present case. Therein, Section 11-B of the Rajasthan Sales Tax Act, 1954 came up for consideration in the light of Section 7(2) of the said Act. Under the scheme of the Act, liability to pay interest arose on failure to make payment of the amount payable as per return. If the assessee has paid as per return, he was not liable to pay interest. This is not the position under the scheme of the present law. The advance tax liability has been created which requires the assessee to pay tax on bonafide estimate of the income failing which there is liability to pay interest. If payment is not made during the financial year, higher rate of interest is attracted. In view of above, no merit in these petitions.
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2013 (5) TMI 648
Revision u/s 58 – Conduction of surveys - Discrepancies were found in the books of account – AO made additions u/s 7(3) & u/s 9(2) which was reduced by the first appellate authority to some extent – Held that:- In the instant case, no proper books of accounts were found at the time of survey. So, there was no option available before the A.O. except to made the addition on estimate basis. The first appellate authority again examined the material, loose papers etc. and made the addition on estimate basis by giving a partial relief to the assessee, which was upheld by the Tribunal. Tribunal is a final fact finding authority as per the ratio laid down in the case of Kamla Ganpati vs. Controller of Estate Duty, [2001 (2) TMI 132 - Supreme Court] Thus it is clear that no question of law is emerging from the impugned order passed by Tribunal. Order is hereby sustained.
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