TMI Tax Updates - e-Newsletter
May 30, 2012

Case Laws in this Newsletter:

Income Tax Customs Service Tax Central Excise

Articles

1. REVISION MECHANISM IN SERVICE TAX

   By: Dr. Sanjiv Agarwal

2. Exemption u/s 54F extendable to the total consideration paid for purchase of property in Joint names

   By: C.A.Sapna Avasthi

3. SUPPORT SERVICE BY GOVERNMENT, LOCAL AUTHORITIES ETC. WILL BE TAXABLE UNDER REVERSE CHARGE METHOD- A MAJOR BURDEN ON SERVICE RECEIVERS AND LIKELY REVENUE LOSS. SERVICE PROVIDERS MUST BE TAXABLE IN SUCH CASES.

   By: DEVKUMAR KOTHARI

4. CONSISTENCY IN RENDERING JUDGMENT OR PASSING INTERIM ORDERS.

   By: DR.MARIAPPAN GOVINDARAJAN

5. MORE WIDE REVERSE CHARGE METHOD OF SERVICE TAX IS DESIRABLE – THAT WILL IMPROVE COLLECTION OF TAX CONSIDERABLY.

   By: DEVKUMAR KOTHARI

6. REVISION ON GROUND DIFFERENT FROM THAT STATED IN SHOW CAUSE NOTICE IS NOT PERMISSIBLE.

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. 25 FDI Proposals Amounting to Rs. 2973.40 Crore Approved.

2. Guidelines for Declaring a Financial Institution as Public Financial Institution Under Section 4a of the Companies Act, 1956.

3. FM to Inaugurate Pratyaksh Kar Bhawan Tomorrow.

4. Auction For Sale of Government Stocks.

5. Text of Address of Finance Minister Shri Pranab Mukherjee at Launch of Bank of India’s 4001st Branch in Manipur.

Notifications

Companies Law

1. F.No. 2/1/2011-CL. V - dated 28-5-2012 - Co. Law

Companies (Director Identification Number) Amendment Rules,2012.

Customs

2. 30/2012-Customs (ADD) - dated 29-5-2012 - ADD

Seeks to levy definitive anti-dumping duty on import of Aniline when originating in or exported from European union.

3. 29 /2012-Customs (ADD) - dated 29-5-2012 - ADD

Seeks to withdraw anti-dumping duty on import of Acetone when originating in or exported from Chinese Taipei.

4. 38 / 2012- Customs - dated 29-5-2012 - Cus

Seeks to amend Notification No.85/2004-Customs - Exemption Notification for items covered under Inia-Thailand Free Trade Agreement.

Circulars / Instructions / Orders

Income Tax

1. 04/2012 - dated 25-5-2012

Section 143 of the Income-tax Act, 1961 - Assessment - General - Processing of returns of A.Y. 2011-12 - Steps to clear backlog - Withdrawal of Instruction No. 1/2012.

Companies Law

2. 11/2012 - dated 25-5-2012

Cost Accounting Records and Cost Audit - clarifications about coverage of certain sectors thereunder.

Highlights / Catch Notes

Income Tax

• Receipt Not Taxable Under Income Tax Act Exempt from Double Taxation Agreement Assessment; Decision Favors Taxpayer.

  Case-Laws - HC : It is axiomatic that if the receipt is not taxable under the Income Tax Act, then there is no need to examine whether it would fall under any of the provisions of the agreement for avoidance of double taxation. - Decided against revenue. - HC
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• Court Rules No Addition Needed for Unexplained Expenditure u/s 69C in Cash Withdrawal Case.

  Case-Laws - AT : Reassessment - Addition u/s 69C - Unexplained expenditure - Withdrawal of cash from third party account after making payment against purchases - no addition - Decided in favor of assessee. - AT
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• Expenses Deductible Even if Assessee's Income is Minimal or Negligible Under Income Tax Laws.

  Case-Laws - AT : Merely because the assessee's income, after incurring such expenses, was found to be little or negligible, it cannot be said that the said expenditure became an impermissible deduction. - AT
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• Head Office and Branch Transactions in India: No Valid Sale Allowed Between Principal Entities Under Law.

  Case-Laws - AT : Transaction between the head office of the assessee and its branch in India was a transaction between the principal and principal. In law, there cannot be a valid transaction of sale between the branch and its head office. As it is ultimately based on a proposition that no person can enter into contract with one self. Debiting or crediting one's account cannot alter the legal position. - AT
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• Income Tax Act Update: Streamlined Assessment Process for 2011-12 with Withdrawal of Instruction No. 1/2012.

  Circulars : Section 143 of the Income-tax Act, 1961 - Assessment - General - Processing of returns of A.Y. 2011-12 - Steps to clear backlog - Withdrawal of Instruction No. 1/2012. - Order-Instruction
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Customs

• Amendment to Notification No. 85/2004-Customs updates exemption terms for items under India-Thailand Free Trade Agreement.

  Notifications : Seeks to amend Notification No.85/2004-Customs - Exemption Notification for items covered under Inia-Thailand Free Trade Agreement. - Notification
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• India Imposes Anti-Dumping Duty on EU Aniline Imports to Protect Domestic Industry from Unfair Pricing Practices.

  Notifications : Seeks to levy definitive anti-dumping duty on import of Aniline when originating in or exported from European union. - Notification
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• Anti-Dumping Duties Withdrawn on Acetone Imports from Chinese Taipei, Signaling Shift in Trade Policy.

  Notifications : Seeks to withdraw anti-dumping duty on import of Acetone when originating in or exported from Chinese Taipei. - Notification
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Corporate Law

• Amendments to Companies Law Simplify Director Identification Number (DIN) Application Process for Better Compliance and Governance.

  Notifications : Companies (Director Identification Number) Amendment Rules,2012. - Notification
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Indian Laws

• Finance Bill 2012 Becomes Law in India with Presidential Assent on May 28, 2012.

  None : Finance Bill, 2012 got presidential assent as on 28-5-2012 as Finance Act, 2012
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• Advocating Broader Reverse Charge for Service Tax: Shifts Payment Duty to Recipients, Boosts Compliance, Reduces Evasion.

  Articles : MORE WIDE REVERSE CHARGE METHOD OF SERVICE TAX IS DESIRABLE – THAT WILL IMPROVE COLLECTION OF TAX CONSIDERABLY. - Article
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• Revisions on new grounds not in initial show cause notice violate Indian law, ensuring fair defense preparation.

  Articles : REVISION ON GROUND DIFFERENT FROM THAT STATED IN SHOW CAUSE NOTICE IS NOT PERMISSIBLE. - Article
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Service Tax

• Document Arrangement for Bank Credit Assessments Classified as Business Auxiliary Service for Tax Purposes.

  Case-Laws - AT : Service provided to bank in relation to loan - arranging documents for the bank to evaluate creditability, eligibility and financial status of the prospective customer for funding by the bank - held as Business Auxiliary Service (BAS) - AT
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Central Excise

• SEZ Export Bill Filing: Ensure Substantial Rebate Claims Aren't Denied for Procedural Non-Compliance.

  Case-Laws - CGOVT : Though Bill of Export is required to be filed for making clearances to SEZ, yet the substantial benefit of rebate claim cannot be denied only for this lapse. - CGOVT
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Case Laws:

• Income Tax

• 2012 (5) TMI 466
  Power of Tribunal to admit Additional Ground - assessee contesting jurisdiction assumed by AO u/s 153A - assessee contended that the ground has been taken in the memorandum of appeal, therefore, it is not an additional ground for which leave is required from the Tribunal, whereas Revenue submitted that ground does not arise out of the order of lower authorities as this question was never taken up before any one of them - Held that:- A person can be “aggrieved” only if a ground had been raised and it is decided against him. S. 253(1) bars a ground which was not raised and not decided by the CIT(A) because there can be no grievance in respect of a matter which is not raised at all. Therefore, ground taken in the memorandum of appeal cannot be a ground validly taken as a grievance from the order of lower authorities. However, on question that whether, such a ground can be raised for the first time before the Tribunal, it is held that Tribunal is not confined only to issues arising out of the appeal before the CIT(A) but has the discretion to allow a new ground to be raised. If a pure question of law arises for which facts are on record of the authorities below, the question should be allowed to be raised if it is necessary to assess the correct tax liability. The submission that the ground could not be raised earlier as the assessee did not have the services of an advocate at its command is reasonable and bona-fide - Additional ground admitted.

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• 2012 (5) TMI 465
  Charitable Institution - alleged violation of Section 13(1)(c)(ii) read with Section 13(3) on belief that society was for the private benefit of the members - Tribunal without referring to factual matrix held that assessee is charitable institution - Held that:- Order of the tribunal in the AY 2005-06 is devoid of reasoning and does not refer to factual matrix and details which have to be examined and considered while deciding the question whether or not Section 13(1)(c)(ii) read with Section 13(3) is violated. The facts, figures mentioned in the income expenditure account and the activities undertaken etc. have not been mentioned or specifically examined. What was and whether any benefit or advantage was enjoyed by the person mentioned in Section 13(3) has not been adverted to and considered. General observations have been made. The order of the tribunal is cryptic and cannot be categorized as a reasoned and speaking order which is mandated and required to be passed by the final fact finding authority - Matter remitted back to Tribunal to examine and record finding on facts relevant and which are to be examined - Partly decided in favor of Revenue.

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• 2012 (5) TMI 464
  Admissibility of deduction u/s 80HHC when deduction u/s 80IA has been made - Held that:- If deduction u/s 80IA has been made, deduction u/s 80HHC was not admissible in view of Section 80IB (13) r.w.s. 80IA (9) of the Act. See CIT (Central), Ludhiana vs. M/s. Davinder Exports(2011 (4) TMI 96 (HC)) - Decided in favour of the revenue. Whether “Profit” or the whole amount of DEPB is to be excluded for computation of the deduction u/s 80HHC - Section 28(iiid) - Held that:- Apex court held in case of Topman exports (2012 (2) TMI 100 (SC)) that not the entire amount but the sale value less the face value of the DEPB will represent profit on transfer of DEPB. Difference between the sale value and the face value of the DEPB will fall under clause (iiid) of Section 28. Therefore, matter is remanded back to the AO to pass fresh order in accordance with aforesaid judgement.

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• 2012 (5) TMI 463
  Power of Settlement Commission to reopen its concluded proceedings by recourse to Section 154 to withdraw the partial/full waiver of interest u/s 234B and 234C - Held that:- Supreme Court in case Brij Lal and others Vs. CIT (2010 (10) TMI 8 (SC)) held that after the Settlement Commission allows the application for settlement to be proceeded with, there will be no further charge of interest u/s 234B and that invocation of Section 154 of the Act cannot be justified. Therefore, order dated 31.03.2003 and the subsequent proceedings raising demand of interest are quashed - Decided in favor of assessee.

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• 2012 (5) TMI 462
  Confirmation of addition of Rs.2,62,184/- paid in cash out of total disallowance of Rs.5,55,284/- made for purchase of car – assessee purchased car for Rs.5.55 lakhs. Loan of Rs.2.93 lakhs was arranged from Standard Chartered Bank and the remaining amount of Rs.2.62 was claimed to have been contributed out of own funds - Held that:- The explanation given for the cash payment is devoid of any merit as the capital account of the assessee for the year in question does not show the withdrawal for the purchase of car - car is not appearing on the asset side of the balance sheet of the assessee – against assessee. Disallowance of set off of brought forward business loss - AO rejected the set off as it was not claimed in the original return of income and could not be allowed in the return filed in response to notice u/s.153A – Held that:- Once loss is determined in the return file u/s.139(3), the assessee becomes eligible for set off against the income of the subsequent years irrespective of the fact whether the returns of such later years are filed u/s.139(1) or not - Sec. 80 read with sec. 139(3) requires the submission of return for loss before the due date - the return filed in response to notice u/s.153A is treated as the return filed u/s.139 – in favour of assessee. Disallowance of set off of brought forward business loss for assessment year 2001-02 – Held that:- Brought forward business loss has to be mandatorily set off against the income of the subsequent year, whether or not it is below the taxable limit - the necessary details about the income for assessment years 2003-04 to 2006-07 are not available on record the impugned order is set aside and restore the matter to the file of AO for deciding afresh.

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• 2012 (5) TMI 461
  Addition of undisclosed income - assessee-firm is a builder and during this year, a survey action under section 133A of the Act was carried out on March 9, 2005 - Assessing Officer held that there is clear-cut shortage of income declared and finally the returned income and the assessee has not filed any explanation in this regard. The Assessing Officer worked out the regular income should have been 8 per cent - It was submitted by him that there is no dispute regarding the turnover declared by the assessee in the regular books. Regarding this aspect that amount declared in the course of survey was not added in the income to the extent of Rs. 20,76,537, it was submitted that this allegation is not correct and he submitted that audited accounts are available - the voluntarily disclosed income is only Rs. 1,75,00,000 less by Rs. 5 lakhs to the disclosed amount of Rs. 1,80,00,000 - Held that: Profit before interest on partners' capital and partners' salary is shown by the assessee at Rs. 184.06 lakhs and the net income arrived at was Rs. 175.24 lakhs after allowing deduction of Rs. 1,81,369 on account of interest on partners capital and Rs. 7,00,000 on account of partners' salary - Decided in favor of the assessee Addition u/s 154 made by the CIT(A) - In the present case, this is not the case of the Revenue that the partners of the assessee-firm are fictitious because in the statement of the partner, additional income of Rs. 180 lakhs was declared during the course of survey and it was duly shown in the return of income and the addition was made by the Assessing Officer on the basis of that statement only, which although is deleted, the fact remains that it is not a case of the Revenue that the partners of the assesseer-firm are fictitious - apex court in the case of CIT v. Orissa Corporation P. Ltd. [1986] 159 ITR 78 (SC) - Held that: this addition made by the Assessing Officer under section 68 is not sustainable in the light of this decision of the hon'ble Supreme Court and in the light of the facts of the case, since confirmations along with addresses and permanent account numbers were made available by the assessee to the Assessing Officer and no effort was made by the Assessing Officer to pursue the loan creditors - Decided in favor of the assessee Regarding validity of assessment proceedings - this is the claim of the assessee that this notice said to have been issued by the Assessing Officer on June 20, 2006 was never served on the assessee but as per copy of the notice brought on record, there is some signature of some person although no name or date is appearing and hence, it is not coming out whether the same was served on the assessee or not - Appeals are allowed

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• 2012 (5) TMI 460
  Disallowance of Rs.62,19,593 on account of non receipt of confirmation of unsecured loans - Addition u/s 68 - During the course of assessment proceedings, the Assessing Officer noticed that unsecured loans as at the end of relevant previous years stood at Rs.2,52,05,395 whereas, as at the beginning of the year, unsecured loans only amounted to Rs.1,89,85,802 - in the present case, no specific show cause notice with respect to enhancement was not given by the CIT(A) - assessee has now filed additional evidences by way of confirmations and other supporting material to demonstrate bonafides of the creditors - Held that: assessee's failure to have produced all these materials should not come in the way of substantive justice, and, now that the matter is going back to CIT(A) anyway, all these evidences should be examined and considered on merits - Appeal is allowed by way of remand to CIT(A)

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• 2012 (5) TMI 459
  Whether CIT(A)'s upholding the action of the AO in treating the sums being long term capital gains arising on exercise of rights under ESOP, as "perquisites" and taxed the same in the computation of income under the head "salaries is correct - During the course of assessment proceedings, the Assessing Officer noticed that the assessee had received rights under Stock Option Grant from the parent company of Pfizer India Ltd., viz; Pfizer Inc, USA being the grantor of rights under Stock Option Grant - Held that: Learned Representatives fairly agree that the issue is covered against the assessee in assessee's own case for the assessment years 1999-2000 to 2002-03, and so far as this Tribunal is concerned, the matter is to be decided against the assessee - Appeals are dismissed Whether CIT(A)'s upholding the action of the AO in calculating Annual Ratable Values (ALV) of three house properties for the purpose of computing "income from house property" on estimated basis is correct - It was also submitted that since these houses were purchased lock back, values are estimated and no such certificates from Municipal authorities are available with the assessee. It was in this backdrop that the Assessing Officer, inter alia, came to the conclusion that the assessee has not been able to give/submit the municipal ratable and substantiate the basis of the computation of ALV and also current capital value - Held that: assessee has furnished the certificates given by the Brihanmumbai Mahanagarpalika showing the rateable value of the flats and these certificates were enclosed to the return of income. The calculation of the assessee was based on these certificates. In the light of these certificates the Assessing Officer was not justified in redetermining the annual letting value of the flats on the basis of the Times of India property chart - Appeal is allowed Whether CIT(A)'s upholding the action of the AO in disallowing expenses of Rs.1,27,786 for A.Y. 2004- 05 and Rs.2,43,375 for A.Y. 2005-06 incurred on management fees on the alleged ground that these fees are for the purpose of holding assets in Fiduciary Trust of International Account is correct - It was also stated that the copy of the mandate of account opening from FTI account shows that the bank at its discretion may change the nature and composition particularly by selling or purchasing securities, currencies and/or precious metal - Appeals are dismissed

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• 2012 (5) TMI 458
  Addition of Rs.47,72,525/- u/s 69C as unexplained stock - During the course of assessment proceedings the assessee was asked to submit item wise and month wise quantitative details of raw materials as well as sale of finished products - On verification of books of accounts of the assessee and the details as produced before the AO, it was observed that the assessee was maintaining detailed record of purchases, sales and issue of these goods for mixing/preparation of other spices but not produced the same before him - According to the AO, the assessee had showed negative stock and the assessee was asked to explain the negative stock and also why the discrepancy should not be treated as unexplained expenditure incurred by the assessee on purchase of hing - learned DR relied upon the orders of the authorities below and submitted that the assessee has failed to explain the discrepancies in hing account and there was negative balance in the stock on certain dates - Held that: instead of making huge addition against the assessee, it could be reasonable and proper for the AO to reject the book results of the assessee and to make reasonable addition considering the history of the assessee The stock during the course of the proceedings was found to be negative, therefore, it could be presumed that the same was sold outside the books of accounts - The assessee deals in several varieties of the items and as such it would be difficult to maintain details of the stock. The assessee produced all the books of accounts and sales and purchases vouchers before the AO for verification - Decided in favor of the assessee by way of addition of Rs.47,72.525/- is restricted to Rs.3,00,000

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• 2012 (5) TMI 457
  Deemed dividend u/s 2(22)(e) - assessee's shareholding in Claris Lifesciences Ltd. was less than 10% - advance on a date prior to 03.03.2006 - held that:- since on the date of receipt of the amount, the assessee was having less than 10% of beneficial interest in that company, by no stretch of imagination the amount of Rs. 25 lacs received by the assessee can qualify as deemed income under the provisions of Section 2(22)(e) - Held that: the provisions of Section 2(22)(e) of the Act are not applicable in the present case under these facts - Decided in favor of the assessee Addition u/s 43B on account of service tax - The assessee enclosed a copy of the service tax payable account and service tax receivable account for the financial year 2005-06. It was further submitted by the assessee before the A.O. that the amount of consultancy fee credited to P and L account does not include service tax and expenditure debited to P and L account also does not include services tax as the company is merely an agent or government and is liable to collect and pay service tax in accordance with the provisions of law - Held that: even if this balance amount of Rs.10.93,542/- was paid by the assessee after 31.03.2006 but before the date of filing of return of income of the present year being 29.12.2006, assessee is eligible for deduction u/s 43B of the act in respect of future payment whether by way of cash or by way of adjustment against service tax receivable account - Decided in favor of the assessee

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• 2012 (5) TMI 449
  Pre-operative expenses - revenue or cpaital expenditure - Non deduction of TDS - testing charges paid to the US Company - Disallowance u/s 40(a)(i) - fee for technical services under Section 9(1)(vii)(b) - held that:- the fees for technical services are taxable in the hands of the US Company under the provisions of the Act. The question to be considered then would be whether there is anything in the agreement for avoidance of double taxation between India and USA which would exempt or reduce the burden of taxation in respect of the fees for technical services received by the US Company. This aspect of the matter has not been examined by the Tribunal, though raised before it by the assessee, since there was no occasion for the Tribunal to do so on account of the view it took regarding the taxability of the fees for technical services under the Act. It is axiomatic that if the receipt is not taxable under the Act, then there is no need to examine whether it would fall under any of the provisions of the agreement for avoidance of double taxation. - Decided against revenue. Pre operative expenses - held that:- The fact that in the books of account the assessee had capitalised the expenses does not prevent the assessee from claiming them as revenue expenses since the question of allowance of expenses has to be considered in the light of the legal position and the accounting treatment cannot be conclusive. - Decided in favor of assessee and against the revenue. Expenditure relating to fully convertible debentures - whether related to issue or shares or merely related to issue of debenture - held that:- It is well settled that expenditure incurred in connection with the issue of debentures or obtaining loan is revenue expenditure. - The question before us however, is whether it is a debenture issue or an issue of share capital involving the strengthening of the capital base of the company. Though it prima facie appears that there are sufficient facts to indicate that what was contemplated was an issue of shares to the Mauritius Company under the Investor Agreement which would result in strengthening of the assessee's capital base, having regard to the judgments cited on behalf of the assessee [India Cements Ltd. v. CIT [1965 (12) TMI 22 (SC)], in which it has been held that despite indications to the effect that the debentures are to be converted in the near future into equity shares, the expenditure incurred should be allowed as revenue expenditure on the basis of the factual position obtaining at the time of the debenture issue - Decided in favor of assessee.

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• 2012 (5) TMI 443
  Set Off of Losses - rectification application u/s 154 seeking set off of brought forward loss and carry forward of the balance loss rejected stating that set off of losses cannot be a matter of rectification - in electronic processing of e-return filed by assessee, loss set off was shown at Zero - Held that:- Copy of return as well as the processing done by the CPC clearly shows that the assessee had claimed set off of losses amounting to Rs. 9.53 crores out of total carry forwarded losses of Rs.12.43 crores. Further the assessee had also filed the copy of return for earlier years which shows that the losses were returned in those years. Once the losses have bee claimed the same were required to be allowed as set off after verification that such losses were determined losses - Decided in favor of assessee. AO and appellate authority passed orders while performing their duty, therefore, this is not a fit case for levy of cost.

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• 2012 (5) TMI 442
  Reassessment - Addition u/s 69C - Unexplained expenditure - Withdrawal of cash from third party account after making payment against purchases - held that:- The information emanates from a third party, namely, JECPL. - The impugned bank account and the Kachhi Rokar is owned, operated and maintained by JECPL. The third party in factual terms accepted that the assessee used to make the payment of purchases by way of a/c payee cheques, which are deposited in JECPL a/c in clear and unambiguous terms. - In our considered opinion, looking at the entirety of facts and circumstances and in view of above observations, the addition on the basis of such a third party's evidence cannot be made in the hands of the assessee. - The bank a/c is owned and operated by JECPL, assessee clearly has no role or involvement in operation of this bank a/c. - In our considered opinion, by interpreting 2 or 3 sentences of third party's statement, which is not allowed for cross-examination by the assessee, cannot be made a basis to make these additions in the hands of the assessee u/s 69C as unexplained purchases. - Decided in favor of assessee.

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• 2012 (5) TMI 441
  Revision u/s 263 - computation of Capital gains - determination of cost of acquisition - It is on record that A.O. has issued show cause notice to the assessee to enquire about the working of the capital gains. It is also on record that assessee has replied in detail as stated in the arguments with reference to the working of long term capital gain of lese hold land and relied on the valuer's report - In the year 1989, for the first time Ready Reckoner was prepared and relevant instructions were issued in respect of how to adopt the valuation of properties of 1981 on the basis of the valuation adopted in the year 1989 - As seen from the above letter it is very clear that there was no fixed guidelines as of year 1981 and it is only on estimation and presumptions the valuation was done, therefore, even the rate at which the CIT took decision of Rs.72/-per sq.ft. is not based on any authentic documentation but only on certain instructions given how to adopt valuation of property based on Ready Reckoner 1989. At the time of passing the assessment order the A.O. has relied on the valuation report in which the valuer for the reasons stated therein has adopted the average value of the value of open land and value of land with buildings and adopted an average value so arrived at - A.O. has taken one of the possible views in adopting the cost of acquisition as supported by the valuation report - the action of the CIT in invoking of section 263 is without any jurisdiction for the reasons stated - Decided in favor of the assessee

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• 2012 (5) TMI 440
  Disallowance of 90% of expenses related to other group concerns and their directors or their relatives - held that:- while accepting the principle that for eligibility of an allowance under section 10(2)(xv), there should be a nexus between the expenditure and the purpose of the business and the expenditure should have been wholly and exclusively laid out for that purpose. Merely because the assessee's income, after incurring such expenses, was found to be little or negligible, it cannot be said that the said expenditure became an impermissible deduction. Once it is found that the expenditure was bona fide incurred and that the same related to the business activity, then it would become deductible as the same is permitted by the provisions of law. In the light of view taken in these decisions, we are of the opinion that disallowance of a portion of establishment expenses by the ld. CIT(A) was not justified. - The mere fact that no tangible business came out of the foreign visit is not a ground for disallowing the foreign travel expenditure, because it is possible that in the first meeting only business discussions would take place and nothing tangible may come out. - Unless the business is abandoned or closed and even if business is at a dormant stage waiting for proper market conditions to develop, the expenditure incurred in the course of such a business is to be allowed as deduction. Delay in filing an appeal - Appeal against order of Rectification u/s 154 - held that:- the asseessee seems to be quite negligent by not taking the necessary steps for filing the appeal within the time prescribed by the statute. The conduct of the assessee reveals that the assessee takes the condonation of delay provision as granted. The assessee did not care to submit any request for condonation of delay, even when it was brought specifically to their notice. In granting the indulgence and condoning the delay, it must be proved beyond the shadow of doubt that the assessee was diligent and was not guilty of negligence whatsoever. - Delay not condoned - decided against the assessee.

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• 2012 (5) TMI 439
  Non deduction of TDS - Payment to directors - Disallowance under section 40(a)(ia) - TDS u/s 194H or 192 - held that:- the commission paid to directors as per terms of employment for the work done in their capacity as whole-time directors is to be treated as incentive in addition to salary, etc. and did not come within the purview of commission and brokerage as defined in section 194H or fee for professional or technical services as defined in s. 194J and therefore, same cannot be disallowed under s. 40(a)(ia) of the Act. - Decided in favor of assessee.

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• 2012 (5) TMI 438
  Penalty u/s 271(1)(c) - It is quite evident that the appellant had made wrong claim of deduction in respect of commission intentionally and inspite of a number of opportunities given to the appellant by the A.O. the said claim was not withdrawn suo-moto - As per the evidence before us in this case, we have to draw the inference that it was a deliberate or conscious attempt on the part of the assessee to manipulate the book result by passing the false entry of 'commission payment' to evade the tax. Admittedly, as per the reply filed by the assessee to the A.O. it was contended that the assessee has paid the commission to M/s. KAP Ltd. and only after investigation was started by the A.O. through DDI (Invt), New Delhi, assessee came forward claiming innocence and stated it was a bona fide mistake - Decided against the assessee

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• 2012 (5) TMI 437
  Deduction u/s 10(23G) - assessee is a public sector scheduled bank and earned income of Rs.146,33,70,763/- by way of interest from infrastructure bonds - It was noted by the Assessing Officer that the total interest was to the extent of Rs.146,33,70,763/-. The notification granting the approval by the CBDT in respect of the other projects which involved the interest of Rs.109,56,32,636/- was not produced before the Assessing Officer Hence, the Assessing Officer made the addition - Held that: Learned CIT(A), in our view, has rightly directed the granting of exemption under Section 10(23G) of the Act in respect of interest on such bonds whose certificate of exemption was filed before him - However no assessee produced the remaining certificates - matter remanded back to AO - If the assessee, for any reason, is not able to produce such certificates when the Assessing Officer is giving effect to, the Assessing Officer is free to confirm the addition to that extent - Appeal is allowed for statistical purpose. Remission of liability - Deemed income u/s 41(1) - amount transferred from inter branch transaction blocked accounts to reserves through the medium of profit and loss account. - held that:- the disputed amounts were part of inter branch transactions and there was a mismatch of the transactions between different branches of the same bank and it was not reconciled and these are all carried forward from so many years from the bank and its branches. - None of these transactions, as we see from the records presented before us and the information available with us, show that the involved transactions have revenue implications by nature which could spring the income subject to assessment under the Income-tax Act. Transaction between the head office of the assessee and its branch in India was a transaction between the principal and principal. In law, there cannot be a valid transaction of sale between the branch and its head office. As it is ultimately based on a proposition that no person can enter into contract with one self. Debiting or crediting one's account cannot alter the legal position. When that primary requirement is absent, the question of bringing the sums in question to tax under Section 41(1) may not be legally permissible to the Revenue. - Decided in favor of assessee.

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• 2012 (5) TMI 436
  Rejection of book of accoutns - Estimation of income at 5% of the gross turnover of the company - A.O. noticed that there are huge losses incurred by the assessee and the losses cannot be accepted as the projects undertaken by the assessee were having escalation clause - held that:- The provision empowers the A.O. to reject the books of account and estimate income as provided under section 144 / 145 only if he is satisfied about the correctness and completeness of accounts of assessee or accounting standards notified have not been followed by the assessee. The assessee has maintained complete books of account including vouchers and also justified the increase in cost, reasons for suffering losses and also the fact that stock registers were maintained at the respective places. Just because the assessee has suffered losses, it does not mean that the assessee's books of account are to be rejected. Assessee has maintained complete books of account including vouchers and also justified the increase in cost, reasons for suffering losses and also the fact that stock registers were maintained at the respective places - The assessee also justified why it has suffered losses by giving detailed reasons including the escalation clause, cost of increase in material and difficulty in implementing the road projects in Naxal-hit areas as a new venture - Decided in favor of the assessee

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• 2012 (5) TMI 435
  Deleting the addition by CIT (A) on account of treatment of dead stock expenses as capital expenses – Held that:- Examining the details of dead stock expenses , the expenses incurred for purchase of TV, Refrigerator, Battery and Office table etc. are to be capitalized and the same is not allowable as revenue expenditure - the disallowance was rightly made by the AO and the order of ld. CIT(A) is not sustainable – in favour of revenue. Deleting the addition by CIT (A) on account of treatment of land restoration expenses as capital expenses - Held that:- No finding of ld. CIT(A) that the receipts on this account are not declared as income in the present year then even if it is accepted that these expenses are in connection with laying of pipe lines, the same has to be added to the value of closing stock and it will not be allowable as expenditure in the present year – remand back matter to the file of ld. CIT(A) for fresh adjudication whether the receipt on account of laying of pipe lines in respect of which it is claimed that the land leveling expenses were incurred have been shown as income in the present year or not - order of ld. CIT(A) is not sustainable – in favour of revenue. Deleting the addition by CIT(A) on account of treatment of stamp duty expenses as capital expenses – Held that:- Merely making contention that stamp duty expenses were incurred for obtaining loan cannot be accepted unless the same is supported by some evidence - since there is no mention in the order of ld. CIT(A) or in the submission made about evidence and no reply or evidence was produced before the AO, the disallowance made by the AO is justified and the order of ld. CIT(A) for deleting the addition is not sustainable – in favour of revenue. Deleting the addition by CIT (A) on account of disallowance of depreciation – Held that:- Simply because the payment is made by cheque and some entries are made in the inward register, it cannot be accepted that the assets were procured and were put to use and hence depreciation is allowable - No such bill has been produced by the assessee before ld. CIT(A) regarding the purchase of assets or evidence in respect of putting into use of the assets- in favour of revenue.

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• 2012 (5) TMI 434
  Business income or Capital gain - shares - investment or stock in trade - Held that:- as long as shares are acquired on the grounds of business expediency, any loss on sale thereof is also required to be treated as an admissible business deduction - Tribunal held that the investment was made by way of commercial expediency for the purpose of carrying on the assessee's business and that, therefore, the loss suffered by the assessee on the sale of the investment must be regarded as a revenue loss - Appeal is dismissed

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• Customs

• 2012 (5) TMI 456
  Rate of CVD in respect of goods where full exemption withdrawn - 1% or 5% - Whether the benefit of Notification No. 1/2011 CE dated 1.3.2011 is available to the impugned goods or not - assessee contested that impugned assessment orders on the impugned Bills of Entry No. 3481711 was passed by Assessing Authority rejecting the appellant's claim of CVD without passing a speaking order in terms of Section 17(5) of Customs Act, 1962 - Held that:- The impugned assessment order is set aside and the concerned authority is directed to pass a speaking order within 15 days of the receipt of this order failing which the appellants appeal shall be treated as allowed - in favour of assessee.

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• 2012 (5) TMI 455
  100% EOU - exported goods for display at Fair Singapore 2006 on returnable basis, claiming clearance without payment of duty – Held that:- goods imported by an EOU is exempt from customs duties vide Notification No. 52/2003-Cus., dated 31-3-2003. I further, find force in the submission of appellant that the imported goods will be finished and re-packed which according to para 9.37 of chapter 9 of the policy is a manufacturing process. Therefore, the imported goods are going to be used for the purpose mentioned in the exemption Notification, Revenue’s appeal is accordingly rejected

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• 2012 (5) TMI 433
  Confiscation of the newsprint seized - Redemption fine - As per the public notice dated 31-9-1993 issued by Ministry of Commerce, Govt, of India, the newsprint can be imported directly by those who hold a certificate of entitlement to import newsprint issued by Registrar of Newspaper, Govt, of India or through Newspaper handling agency authorized by them - redemption fine and penalties on appellants as there is a violation of conditions of import policy, keeping in view the value of the seized goods which were subsequently confiscated, the redemption fine is reduced

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• Service Tax

• 2012 (5) TMI 471
  Refund – unjust enrichment - respondent is engaged in the providing Business Auxiliary Service and paying service tax thereon. The respondent claimed refund of service tax amounting to Rs.6,52,080/- paid by them for the period from 1.12.2007 to 31.8.2008 on the ground that the services rendered by them amounts to export of services in terms of Rule 3(2) of the Export of Service Rules,2005. The refund claim was rejected on the doctrine of unjust enrichment – Held that:- in the case of Sparkler Ceramics Pvt. Ltd (2011 - TMI - 203997 - CESTAT, MUMBAI - Central Excise) unjust enrichment will not be applicable to this case as it involves export of goods. Commissioner (Appeals) order is upheld and Revenue's appeal is dismissed.

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• 2012 (5) TMI 470
  Laying of cables under or alongside roads - Erection, Commissioning or Installation - appellant claims prima facie case on the strength of both Board's Circular No. 123/5/2010-TRU dated 24.5.2010 it was clarified inter alia that laying of cables under or alongside roads did not constitute any taxable service under Section 65(105) of the Finance Act, 1994 - Held that:- in the case of Rajeev Electrical Works (2012 (5) TMI 470 - PUNJAB & HARYANA HIGH COURT - Service Tax) had held that laying of pipes in wall/roof/floor for crossing of wires, fixing junction box, MS box, wooden box, fixing cable trays to lay cables, digging earth to lay the cables and digging earth pits for earthing of equipments did not amount to installation of plant, commissioning of machinery/ equipments etc. appellant need not be asked to make any pre-deposit. order is set aside and the appeal is allowed by way of remand

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• 2012 (5) TMI 469
  Power to remand - respondent challenged the order of the ld. Commissioner (Appeals) found that the lower adjudicating authority has not appreciated the facts and circumstances of the case and remitted the case that the lower adjudicating authority to decide as afresh - department filed appeal against the order-in-appeal on the ground that the Commissioner has no power to remit the case to lower adjudicating authority – Held that:- after 11.5.2001 in Central Excise Act, 1944, power of remand is not given to Commissioner (Appeals), Commissioner is not empowered to remand the matter, he has to decide the matter by himself. Therefore the order of ld. Commissioner (Appeals) remanding the case to the lower authority, is not sustainable, Appeal disposed of by way of remand

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• 2012 (5) TMI 468
  Waiver of pre-deposit of Service tax - ‘Banking and other financial services.’ - there is no evidence on record to show that the amounts collected were in connection with the loans granted by the assessees to the individuals, pre-deposit waived

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• 2012 (5) TMI 467
  Penalty - It is not clear whether there was any evasion of service tax. Merely for delay in replying to a letter by the Range Superintendent, penalty may not be imposable, waiver of pre-deposit of penalty allowed and stay of recovery

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• 2012 (5) TMI 448
  Demand of service tax along with interest and penalties - appellant had claimed that the amount which is sought added in gross value in storage and warehousing services, is pertaining to rent received for leasing out of godown to various customers and that the amount accounted as 'dispatch money' is nothing but an incentive received for speedy discharge of goods. It is the submission that they had produced various evidence before the Commissioner (Appeals) in support of the claim which have not been considered - appellant's claim that he had produced the evidence seems to be correct. It is also seen that the Commissioner (Appeals) had not considered the said evidence and no findings have been recorded. appeal is allowed by way of remand

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• 2012 (5) TMI 447
  CENVAT credit of Service Tax paid on outdoor caterer's service – Held that:- Under the provisions of Section 46 of the Factories Act, 1948, it is mandatory for the appellant to provide canteen facility for the worker in their factory premises as a measure of welfare of the workers. The canteen facility also helps in furtherance of the manufacture. Thus, the caterer service has nexus or integral connection with the business of manufacture of final product and this would qualify to be input service under Rule 2(1) of Cenvat Credit Rules, 2004. Revenue's appeal is dismissed

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• 2012 (5) TMI 446
  CENVAT credit - assessee availed CENVAT credit on 'Business Auxiliary Services' for the period from March, 2005 to June, 2007 – Held that:- in the case of ABB Ltd. (2009 - TMI - 34139 - CESTAT, BANGALORE - Service Tax) has held that the services availed by a manufacturer for outward transportation of final products from the place of removal shall be treated as input services in terms of Rule 2(l)(ii) of Cenvat Credit Rules, 2004. ultimate order passed by the Larger Bench of the Tribunal does not suffer from any infirmity so far as period prior to amendment of the said Rule i.e.01.04.2008, is concerned. decision is squarely applicable to the present case since the period involved in the case is prior to 01.04.2008 as already discussed, supra. order is set aside and appeal is allowed.

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• 2012 (5) TMI 445
  Refund claim - refund claim of Service Tax paid on GTA services on outward freight in relation to transportation of export consignment under Notification No. 41/07 dated 6.10.2007 – Held that:- expression used in the Notification No. 3/2008 is 'in relation to transport of export goods'. This expression covers the transport of empty container from the factory to place of export of goods.The Tribunal in the case of Tata Coffee Ltd. (2010 - TMI - 204927 - CESTAT, CHENNAI - Service Tax) has held that the expression 'in relation to transport of export goods' is wide enough to cover even transport of empty containers from the yard to the factory for stuffing of export goods. Commissioner (Appeals) is not sustainable in law, the same is set aside and the appeal is allowed

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• 2012 (5) TMI 444
  Business Auxiliary Service (BAS) - Service provided to bank in relation to loan - arranging documents for the bank to evaluate creditability, eligibility and financial status of the prospective customer for funding by the bank. - held that:- Appellant promoted funding business of bank gathering documents and preparing profiles to enable the bank to consider its funding activity. All these facts and attendant circumstances bring the bank and the Appellant to the understanding as taxable service provider and recipient of such service. - Appellant provided 'Business Auxiliary Service' to the bank liable to tax. Extended period of limitation - Show Cause Notice issued on 22.8.2006 for the period from 1.7.2003 to 31.3.2005 – Held that:- In the present case, limitation can be reckoned from the date of knowledge of the department on 20.1.2005 giving rise to cause of action. Adjudication is not time-barred. - Decision of Apex Court in CCE, Visakhapatnam Vs. Mehta & Co. (2011 (2) TMI 2 (SC)), followed. Whether amendment made by Finance Act 2004 coming into force with effect from 10.9.2004 read with Notification No.14/2004 dated 10.9.2004 granted immunity to the Appellant from levy – Held that:- service provided by the Appellant in the present case was to the financing bank but not to the borrower. Relation between the Appellant and the bank proves that there was quid pro quo between the Appellant and the bank to meet the requirement of funding. The Appellant had only served the bank but not acted on behalf of the bank. Borrower was not privy to the contract between the Appellant and the bank. So also in absence of any letter of appointment and agreement. Appellant has no scope to be benefited by the amendment of law. Penalty - held that:- But while appreciating the levy was new imposition of penalty under Section 78 and 76 of the Act, simultaneously shall be harsh. Therefore levy of penalty under Section 78 shall be proper dose to prevent the Appellant from recurrence of the contravention of law and to cause loss of revenue.

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• Central Excise

• 2012 (5) TMI 454
  Non fulfillment of export obligation - demand imposed for the duty free import of the capital goods along with interest and for imposition of penalty - assessee registered for an 100% EOU, on failure to comply with export obligation, re-exported impugned capital goods imported - Held that:- Since the goods imported after availing of the facility under EOU scheme, were subsequently exported after observing Customs and Central Excise procedure, no duty liability continue to exist on the assessee and they fulfilled all the conditions as laid down in Para 6.18(e) of Foreign Trade Policy 2004 2009 to exit from the EOU scheme, there is no question of further imposition of duty of Customs on such imported goods subsequently allowed to be re exported. Charge of non fulfillment of export obligation is not established - Decided in favor of assessee.

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• 2012 (5) TMI 453
  Whether matter can be kept pending before Tribunal on ground of pendency of an application/petition before High Court when order staying the operation of the Predeposit Order or modifying the Predeposit Order has not been passed by High Court - assessee neither pre-deposited the directed amount nor reported any compliance on stipulated date - Held that:- It is settled position of law pendency of any appeal or for that matter any proceedings which is akin to appeal do not operate as a stay, the stay has to be obtained specifically from the higher forum. Therefore, Tribunal was justified in dismissing the appeal on ground of failure of assessee to make pre-deposit within stipulated time,

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• 2012 (5) TMI 452
  Application for restoration of appeal - the demand and recovery of excise duty against Main party and also penalty on various other parties including applicant (transporter) – Held that:- Hon'ble High Court vide order directed Main party to deposit Rs. 15 crores in eight equal installments and in the event of such deposit pre-deposit of the penalties imposed on other appellants shall stand waived - the main appellant has failed to comply with the order - since the petitioner has failed to comply with the order of deposit, his appeal has been rightly dismissed for contravention of Section 35F of the Central Excise Actand there is no merit in the request of the restoration of the appeal - against assessee.

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• 2012 (5) TMI 451
  Cenvat credit - 100% credit availed in the first year – Held that:- at the time of receipt of the capital goods while the credit should have been confined only to 50% of the duty amount and balance amount of the credit should have been taken in the next financial year, the appellant have taken full credit at the time of receipt of the capital goods, appellant would become eligible for the balance 50% of the credit and as such the appellant liability would be only in respect of interest on the amount of wrongly Cenvat credit taken for the period for which it was irregular, appellant are directed to deposit an amount of Rs. 2,50,000/- (Rupees Two Lakhs Fifty Thousand only) within a period of eight weeks from the date of this order. On deposit of this amount within the stipulated period, the requirement of pre-deposit of balance amount of Cenvat credit demand, interest and penalty would stand waived and recovery thereof stayed till the disposal of the appeal

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• 2012 (5) TMI 450
  Whether the Learned Tribunal not err in dismissing the Appellant’s Appeal even though the issue of pre-deposit was pending before the Hon’ble Court - Tribunal vide order dated 19th July, 2010 dismissed the appeal of the appellant on the ground of non-compliance of the order dated 15th February, 2010 - Held that:- Tribunal erred in dismissing the appeal of the appellant vide order dated 19th July, 2010. Time upto 16th May 2011 is granted to the appellant to make deposit of the entire tax amount and in case the said deposit is made, the appeals filed by the appellant will be heard by the Tribunal. - However stay order not to be interfered.

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• 2012 (5) TMI 432
  Demand of duty, interest and penalty – assessee availed facility of Cenvat credit of duty paid on inputs and capital goods and service tax paid on input services used in or in relation to the manufacture of their final products in terms of Cenvat Credit Rules, 2004 - As per the conditions of this agreement, the appellant are entitled for “Operational Compensation” at specified rates if in a financial year M/s. Eicher Motors Ltd. failed to lift certain specified quantity of the goods – Held that:- operational compensation amount being received by the appellant is part of the price of the goods and the appellant’s plea that the same has no nexus with the sale of the goods does not appeal to be acceptable, requirement of pre-deposit of the interest and penalty shall stand waived and recovery thereof stayed till the disposal of the appeal

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• 2012 (5) TMI 431
  Demand of duty - order Commissioner has confirmed the demand of duty, which was earlier granted as rebate to the appellants - Commissioner has not doubted the factum of export of goods in question, in which case the appellants would be entitled to the benefit of duty draw back - exports were made under the rebate claim – Held that:- appellants rebate claim to the extent of around Rs. 2.20 Crores stands denied by the authorities below in respect of admitted exports, appellants have been able to make out a prima facie good case in their favour so as to dispense with the condition of pre-deposit of duty and penalty, stay petitions allowed

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• 2012 (5) TMI 430
  Legality of remand order passed by Commissioner - CENVAT Credit on electric cables and wires - Commissioner without giving any finding on the case laws cited by appellant, remanded the matter to lower authority after concluding that assessee is not entitled for credit - Held that:- Commissioner is not empowered to remand the case to the lower Adjudicating Authority, after the amendment of Section 35A and the Supreme Court's decision in the case of MIL India Ltd. vs. CCE, Noida (2007 (3) TMI 8 (SC)). In these circumstances, we direct Commissioner (Appeals) to decide the case afresh, while taking into consideration the case laws cited by the Appellant without insisting for predeposit.

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• 2012 (5) TMI 429
  CENVAT credit - bogus invoices and passing CENVAT credit wrongly without physical movement of Cenvatable inputs to their customers – Held that:- goods have been received. The department could not produce any evidence that the goods have not been received. in the case of CCE v. HMM Ltd. (1995 (1) TMI 70 (SC)) held that penalty is not imposable unless the department is able to sustain its demand show-cause notice which was under challenge on the ground of limitation. Revenue's appeal is dismissed

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• 2012 (5) TMI 428
  Revision Application - rebate claim – Held that:- Bill of Export should be filed under the claim of drawback or DEPB. Though Bill of Export is required to be filed for making clearances to SEZ, yet the substantial benefit of rebate claim cannot be denied only for this lapse. Government further observes that Custom Officer of SEZ Unit has endorsed on ARE-1 that the goods have been duly received by them. As the duty paid nature of goods and supply the same to SEZ is not under dispute, the rebate on export of duty paid goods under Rule 18 of Central Excise Rules, 2002 is admissible. Commissioner (Appeals) has rightly allowed the rebate claim, revision application by revenue rejected

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