TMI Tax Updates - e-Newsletter
May 4, 2012

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws Service Tax Central Excise

Articles

1. PROCESS AMOUNTING TO MANUFACTURE OR PRODUCTION OF GOODS

   By: Dr. Sanjiv Agarwal

News

1. Advisory Group for International Taxation and Transfer Pricing Constituted.

2. India-Australia to Collaborate for Wool Testing Facility in Mumbai Bilateral Trade Touches US$ 14.90 Billion in 2011.

3. Including Procedural Simplification in Annual Supplement to FTP.

4. Annual Growth of Exports at 26.7 Per Cent.

5. Exploration of Potential of Small Tea Growers.

6. Stringent Rules of Revalidation for Cotton Export.

7. Export of Agricultural Products.

8. Ban on Export of Iron Ore.

9. Steps to Increase Export of Coffee .

10. Clarification on Vodafone Tax Issue.

11. Quarterly Report on Public Debt Management for the Quarter Jan-Mar 2012 Released.

12. Finance Minister to Leave for Three-Day Official Visit to Manila And Dhaka Tomorrow; to Take over the Chair for Next ADB Annual Board of Governors’.

Notifications

Customs

1. 22/2012 - dated 2-5-2012 - ADD

Anti-dumping duty on imports of Partially Oriented Yarn originating in, or exported from, the People’s Republic of China.

2. F.No. 437/73/2010-Cus. IV - dated 2-5-2012 - Cus (NT)

Corrigendum to, Office Order dt. 06-05-2011, regarding Common Adjudicating Authority.

3. 40/2012 - dated 2-5-2012 - Cus (NT)

‘Proper officer’ under the Customs Act, 1962 - assigning functions as the proper officers in relation to the various sections of the Customs Act

DGFT

4. 112 (RE – 2010)/2009-2014 - dated 1-5-2012 - FTP

Amendment in policy for export of Casein and Casein products.

VAT - Delhi

5. F.3(27)/Fin(Rev-I)/2011-12/DSIII/353 - dated 25-4-2012 - DVAT

Amendment in Delhi Value Added Tax Rules, 2005.

Circulars / Instructions / Orders

FEMA

1. 114 - dated 2-5-2012

Exim Bank's Line of Credit of USD 80 million to the Government of the Republic of Burundi.

DGFT

2. 108/2009-2014 (RE-2010) - dated 2-5-2012

Amendment in Appendix 1 of Handbook of Procedure Vol. I (Appendices and Aayat Niryat Forms), 2009-2014.

3. 61(RE-2010)/2009-14 - dated 1-5-2012

Clarification regarding withdrawal of provision of revalidation of RCs by RAs for export of cotton and cotton yarn.

4. 107 (RE-2010)/2009-14 - dated 30-4-2012

Amendment of Standard Input Output Norms (SION) of Food Products (Product Code: ‘E’) in the Handbook of Procedures V.2 (2009-14) : Re-numbering of SION E - 1A as E - 131.

5. 106 (RE-2010)/2009-14 - dated 30-4-2012

Amendment of Standard Input Output Norms (SION) of Food Products (Product Code: ‘E’)in the Handbook of Procedures V.2 (2009-14) : Re-numbering of SION E - 129A as E - 130.

Customs

6. 12/2012 - dated 1-5-2012

Classification of Micro / Mini SD Cards - regarding.

Highlights / Catch Notes

Income Tax

• High Court Rules Reassessment Valid Despite 4.5-Month Delay in Assessing Officer's Recorded Reasons to Petitioner.

  Case-Laws - HC : Re-assessment proceedings - only a delay of 4 ½ months in supplying the reasons recorded by the AO to the petitioner cannot invalidate the reassessment proceedings - HC
  Visit to Get Source

  ---

• Court Evaluates Tax Classification of Power Station Repair Costs: Revenue vs. Capital Expenditure for Tax Purposes.

  Case-Laws - HC : Expenditure on current repair, maintenance and replacement on the leased Thermal power station - revenue expenditure or capital expenditure - HC
  Visit to Get Source

  ---

• Income from services rendered abroad not taxable in India u/ss 6 and 9(1)(ii) of Income Tax Act.

  Case-Laws - HC : Profit in lieu of salary for services rendered outside India - said income did not accrue or arise in India in terms of Section 6 and Section 9(1) (ii) - HC
  Visit to Get Source

  ---

• High Court Examines Legitimacy of Reassessment Proceedings Based on Information from Director of Investigation on Bogus Entries.

  Case-Laws - HC : Reassessment proceedings after information received from Director of Investigation regarding bogus/accommodation entries - HC
  Visit to Get Source

  ---

• High Court clarifies whether surrendered income qualifies for export deduction u/s 80HHC of the Income Tax Act.

  Case-Laws - HC : Nature of surrendered income - Claim of deduction under Section 80HHC on account of export - HC
  Visit to Get Source

  ---

• High Court Grants 40% Waiver on Interest u/s 234C of Income Tax Act.

  Case-Laws - HC : Application for waiver of interest u/s 234C - interest waived to the extent of 40%. - HC
  Visit to Get Source

  ---

• Understanding Section 36(1)(viia): New Provisions for Bad Debts Cannot Offset Reversed Amounts; Only Increases Count.

  Case-Laws - AT : Deduction u/s 36(1)(viia) of the Act - Provision for bad and doubtful debts - provision for bad and doubtful debts newly created during the year under consideration should not be netted against the amount written back or reversed. However, there might be a situation that the provision created for a particular debt needs enhancement and in that situation, only the enhanced amount should be treated as the new provision for the purpose of sec. 36(1)(viia) of the Act. - AT
  Visit to Get Source

  ---

• Court Rules Excess Suspense Account Funds to Be Taxed Over Three Years, Altering Taxation Timeline.

  Case-Laws - HC : Assessment of excess amount kept in suspense account - to be taxed in three years instead of one year - HC
  Visit to Get Source

  ---

• Criminal Courts Empowered to Issue Requisitions for Books of Account u/s 132A(2.

  Case-Laws - HC : Criminal courts are appropriate authority or the person in terms of sub-section (2) of Section 132A to issue for requisition books of account. - HC
  Visit to Get Source

  ---

Customs

• Customs Act 1962: Updates on Officer Assignments and Jurisdiction for Effective Compliance and Enforcement.

  Notifications : Assignment and jurisdiction of the officers and above the rank of officers, the functions as the proper officers under Customs Act, 1962
  Visit to Get Source

  ---

• Customs Circular Clarifies Tariff Classification for Micro and Mini SD Cards to Streamline Import Duties and Taxes.

  Circulars : Classification of Micro / Mini SD Cards - regarding. - Cir. No. 12 / 2012 - Customs Dated: May 1, 2012
  Visit to Get Source

  ---

• Shrimp Export to Canada Returned Due to Expired "Best Before" Date; No Samples Taken by Port Health Officer.

  Case-Laws - HC : Return of Export cartons of shrimps to customer at Canada - shelf life of the shrimp - it had been typed in the carton boxes, as 'Best Before Use' as April, 2011 - Port Health Officer refused to take the samples - HC
  Visit to Get Source

  ---

• Court Approves Reprocessing of Returned Product; Test Report Confirms Safety for Human Consumption Under Official Supervision.

  Case-Laws - HC : Re-import of the product returned by dis-satisfied customer - The test report and the details no where indicates that the product is dangerous for human consumption - re-process under the supervision of the concerned official allowed - HC
  Visit to Get Source

  ---

DGFT

• DGFT Amends Appendix 1 of Handbook of Procedure Vol. I (2009-2014) via Circular No. 108/2009-2014.

  Circulars : Amendment in Appendix 1 of Handbook of Procedure Vol. I (Appendices and Aayat Niryat Forms), 2009-2014. - Cir. No. 108/2009-2014 (RE-2010) Dated: May 2, 2012
  Visit to Get Source

  ---

• SION for Food Products Updated: E-129A Renumbered to E-130 in Handbook of Procedures V.2 (2009-14.

  Circulars : Amendment of Standard Input Output Norms (SION) of Food Products (Product Code: ‘E’)in the Handbook of Procedures V.2 (2009-14) : Re-numbering of SION E - 129A as E - 130. - Cir. No. 106 (RE-2010)/2009-14 Dated: April 30, 2012
  Visit to Get Source

  ---

• SION for Food Products Renumbered: E-1A is Now E-131 in Handbook of Procedures V.2 (2009-14) per DGFT Circular.

  Circulars : Amendment of Standard Input Output Norms (SION) of Food Products (Product Code: ‘E’) in the Handbook of Procedures V.2 (2009-14) : Re-numbering of SION E - 1A as E - 131. - Cir. No. 107 (RE-2010)/2009-14 Dated: April 30, 2012
  Visit to Get Source

  ---

• No Revalidation for Cotton and Cotton Yarn RCs; Affects Trading and Export Processes under New Directive.

  Circulars : No revalidation will be granted to RCs for cotton and cotton yarn.
  Visit to Get Source

  ---

• Casein Export Reclassified: Shift from "Prohibited" to "Restricted" Category Enables Controlled Trade Opportunities.

  Notifications : Export of Casein and Casein products has been moved from “Prohibited” to “Restricted” category.
  Visit to Get Source

  ---

FEMA

• Exim Bank Provides $80 Million Credit Line to Burundi Government Under Circular No. 114, Dated May 2, 2012.

  Circulars : Exim Bank's Line of Credit of USD 80 million to the Government of the Republic of Burundi. - Cir. No. 114 Dated: May 2, 2012
  Visit to Get Source

  ---

Service Tax

• Service Tax Demand Issued for Convention; Delegate Fees Used for Event Arrangements Under Scrutiny.

  Case-Laws - AT : Demand of service tax against holding a convention - money collected from the delegates made arrangement for the mutual benefit of delegates in the conference - AT
  Visit to Get Source

  ---

• Unregistered Head Office Risks Legal Issues Over Invoice Misstatements in Service Tax Compliance Under ISD Rules.

  Case-Laws - AT : ISD (input service distributor) - Suppression or mis-statement - the invoices are in the name of head office, who was not registered as ISD - AT
  Visit to Get Source

  ---

• Are Payments to SWIFT for Inter-Bank Transfers Subject to Service Tax? Legal Analysis Underway.

  Case-Laws - AT : Whether the payment made by the applicant to Society for Worldwide Inter-bank Financial Telecommunication (SWIFT) for transfer of funds to members Banks is liable to service tax - AT
  Visit to Get Source

  ---

• Reimbursement of Expenses in CHA Services: Understanding "Pure Agent" Criteria for Service Tax Valuation.

  Case-Laws - AT : Service Tax valuation - reimbursement of expenses - Pure Agent - CHA services - AT
  Visit to Get Source

  ---

Central Excise

• Dismissal on Limitation Grounds Doesn't Merge with Original Decision: Doctrine of Merger Explained.

  Case-Laws - SC : Doctrine of merger - If for any reason an appeal is dismissed on the ground of limitation and not on merits that order would not merge with the orders passed by the first appellate authority - SC
  Visit to Get Source

  ---

• Supreme Court Orders Tribunal to Reassess Case After Rejecting Ex Parte Order Recall Application.

  Case-Laws - SC : Application for recall of ex parte order - tribunal rejected the application - Apex Court ordered the tribunal to fresh adjudicate the matter - SC
  Visit to Get Source

  ---

• Appellate Authority Must Independently Evaluate Arguments, Not Just Repeat Appellant's Grounds, Says High Court.

  Case-Laws - HC : Application of mind by appellant authority - mere quoting of the grounds verbatim and extenso in the order itself cannot be application of mind on the grounds raised by appellant. - HC
  Visit to Get Source

  ---

VAT

• Delhi VAT Rules Amended: Key Updates on Sales Tax Regulations for Businesses Under Notification No. F.3(27)/Fin(Rev-I)/2011-12/DSIII/353.

  Notifications : Amendment in Delhi Value Added Tax Rules, 2005. - Ntf. No. F.3(27)/Fin(Rev-I)/2011-12/DSIII/353 Dated: April 25, 2012
  Visit to Get Source

  ---

Case Laws:

• Income Tax

• 2012 (5) TMI 45
  Addition made consequent to a transfer pricing adjustment to international transaction - interest free loan given to one its AE – TPO determined the arm's length interest at the rate of 10 percent per annum based on the rate of interest charged by the taxpayer on Euro denominated loan granted to its German AE – Held that:- Assessee confirmed the transfer pricing adjustment - once the transaction between the assessee and the AE is in foreign currency and the transaction is an international transaction the domestic prime lending rate would have no applicability and the international rate fixed being LIBOR would come into play - the average of the LIBOR rate for period in question is 4.42% and the assessee has charged interest at 6% which is higher than the LIBOR rate no addition on this count is liable to be made in the hands of the assessee – Appeal partly allowed.

  ---

• 2012 (5) TMI 44
  Re-assessment proceedings - return of income declaring loss – assessee contested against the re- assessment proceedings as notice u/s 148 has been issued beyond the period of 4 years from the end of the assessment year – Held that:- Sanction for the proposal to reopen the assessment was accorded by the ACIT on 9.3.2011, notice to reopen the assessment was issued on 15.3.2011 and reasons for reopening the assessment had been recorded on 9.3.2011. These were however supplied to the petitioner only on 30.8.2011 - There is no requirement in Section 147 or Section 148 or Section 149 that the reasons recorded should also accompany the notice issued under Section 148 and served on the assessee before the period of limitation - only a delay of 4 ½ months in supplying the reasons recorded by the AO to the petitioner cannot invalidate the reassessment proceedings - against assessee.

  ---

• 2012 (5) TMI 43
  Expenditure on current repair, maintenance and replacement on the leased Thermal power station - ITAT treated it as revenue expenditure and not a capital expenditure – Held that:- The basic test to find out as to what would constitute current repairs is that the expenditure must have been incurred to “preserve and maintain” an already existing asset, and the object of the expenditure must not be to bring a new asset into existence or to obtain a new advantage ”- No new asset came into existence and the expenditure was incurred to make the plant operational and functional - the clause of lease agreement conveys that what the assessee is entitled on the expiry of lease is only written down value of the additions and alterations to the building, station or additional machinery and none of the items represents addition or alteration to the building, station or additional machinery – against revenue.

  ---

• 2012 (5) TMI 42
  Profit in lieu of salary for services rendered outside India - ITAT deleted the addition made by the AO – Held that:- Payment in question was received towards retirement benefit/severance/vacation engagement from the erstwhile employer on termination of employment in November, 1999 - employer was based in USA and services were rendered to the erstwhile employer in USA - the said amount cannot be taxed in India as the status of the assessee during the year in question was that of “not ordinary resident” - said income did not accrue or arise in India in terms of Section 6 and Section 9(1) (ii) - in favour of the assessee.

  ---

• 2012 (5) TMI 41
  Reassessment proceedings after information received from Director of Investigation regarding bogus/accommodation entries - question arose whether the share application money received was a genuine transaction - Held that:- Assessee's reliance on the judgment of Hon ble Supreme Court in the case of CIT Vs. Lovely Exports Pvt. Ltd.(2008 (1) TMI 575 - SUPREME COURT OF INDIA)is not applicable to this case as summons issued by the AO could not be served in the address of such share applicants by the postal authorities as none of them was found in the said address, thus it cannot be said that the AO has not brought on record any evidence to show that applicants were mere paper entities - it is also to be noted that share were not allotted to these parties in the immediate future - the orders of the authorities below are required to be set aside on the impugned issues and the matter remitted back to the file of the Assessing Officer for re-adjudicating -the Assessing Officer should pass a fresh order as per law after giving the assessee adequate opportunity of being heard.

  ---

• 2012 (5) TMI 40
  Notice of hearing sent to the assessee at the address given in Form No. 36 returned back unserved - no intimation given by departmental representative for effective service on the respondent assessee - Held that:- Since notice of hearing was handed over to the DR well in advance of the date of hearing and was unable to say whether service had been effected or not the appeal of the Revenue could not be heard on merit in absence of service of notice upon assessee - revenue has not provided proper address of assessee - opportunity of hearing is essential before adjudicating appeal for which service of notice is condition precedent - once revenue is not able to get exact address of assessee, how it will follow the same, in case matter is decided in favour of revenue – against revenue.

  ---

• 2012 (5) TMI 39
  Nature of surrendered income - Claim of deduction under Section 80HHC - the assessee had taken the surrendered value of stock of bullion lying with karigarsas as business profits – Held that:- Deduction under Section 80HHC could be claimed only on showing facts which make an assessee eligible for the deduction - there was no presumption that the surrender made was on account of unexplained stocks representing the export income - burden to prove to said facts was on the assessee and not on the Revenue - there cannot be any presumption that the surrender made represents income from exports – against assessee.

  ---

• 2012 (5) TMI 31
  India U.K. DTAA - Reinsurance brokerage/commission with international re-insurance companies – Revenue treated it within the definition of fees for technical services u/s 9(1)(vii) r.w Article 13 of the India U.K. DTAA - Held that:- The assessee company was an international reinsurance intermediary (broker) a tax resident of United Kingdom - not maintaining any office in India and had a referral relationship with reinsurance Broker duly licensed by the Insurance Regulatory & Development Authority to transact reinsurance business in India - the role played by the assessee in the reinsurance process is only rendering intermediary services or facilitator in getting the reinsurance cover for New India Insurance Co - Tribunal rightly held that such receipts would not amount to FTS as the "make available" clause contained in article 13(4)(c) had not been satisfied in the facts and circumstances of the present case – in favour of assessee.

  ---

• 2012 (5) TMI 30
  Addition made on account of cessation of liability – various creditors are very old and no interest has been paid on these loans - AO held that the liability incurred in regard to the purchase from the parties as claimed have seized to exists – ITAT deleted addition made by AO - Held that:- ITAT is justified in taking the view that as assessee had continued to show the admitted amounts as liabilities in its balance sheet the same cannot be treated as assessment of liabilities - merely because the liabilities are outstanding for last many years, it cannot be inferred that the said liabilities have seized to exist – it is on part of AO to prove that the assessee has obtained the benefits in respect of such trading liabilities by way of remission or cessation which he fails to do - in the absence of the creditor, it is not possible for the authority to come to a conclusion that the debt is barred and has become unenforceable – in favour of assessee.

  ---

• 2012 (5) TMI 29
  Claim of assessee as bad debts written u/s 36(1)(vii) - Revenue stated writing off bad debts of Rs.5.12 crores in one year itself would distort the income of the said year - Held that:- The income returned in the year in question was at loss and the income assessed by the Assessing Officer is at a loss of more than Rs.7.94 crores, writing off of bad debts would result in increase in the loss figure - no evidence or material on record to show the deliberate attempt by the assessee to delay writing off the bad debts in the earlier assessment years, which has resulted in understatement of income or short recovery of tax - in most of the earlier years, the assessee had shown taxable income and if bad debts were written off in the said years, it would have resulted in lower taxation or nil taxation - Revenue has not been able to dispute and show that the provisions of Section 36(1)(vii) r.w.s 36(2)(i) are not satisfied in the present case – in favour of assessee.

  ---

• 2012 (5) TMI 28
  Recovery proceedings - series of appeals together with series of stay petitions are pending consideration of the second respondent - Writ petitions - Held that:- Directing the Appellate authority, the second respondent, to consider and pass orders on pending appeals and stay petitions filed by the respective petitioners as expeditiously as possible at any rate within four weeks of receipt of a copy of judgment - recovery proceedings stand stayed – in favour of assessee.

  ---

• 2012 (5) TMI 27
  Revised return declaring Nil income after claiming deduction u/s 80HHC and 80IB - Revenue stated that no deduction u/s 80IB available as the machinery was found to have been used previously for some other purpose – AO issued notice for reassessment - Held that:- No concealment on the part of the assessee in disclosing the facts to the Assessing Officer, thus not open to the AO to invoke the provisions of Section 148 for the purposes of reassessment - change of opinion on the same facts cannot constitute basis for exercise of jurisdiction under Section 147/148 – in favour of assessee.

  ---

• 2012 (5) TMI 26
  ITAT deleted the disallowance made under Section 14A - Held that:- The matter is no longer res integra - questions of law already been decided against the revenue by the Division Bench of this Court in the case of Commissioner of Income Tax-II v. M/s Hero Cycles Ltd.( 2009 - TMI - 35238 - PUNJAB AND HARYANA HIGH COURT ) stating disallowance under Section 14A requires finding of incurring of expenditure where it is found that for earning exempted income no expenditure has been incurred, disallowance under Section 14A cannot stand - against the revenue.

  ---

• 2012 (5) TMI 25
  Reassessment - Addition u/s 68 - Reason to believe - AO after verifying the assessment records and information received from the Director General (Investigation) through CIT, Delhi-IV, had come to the conclusion that the assessable income had escaped assessment - held that:- Mere reproduction of the language of the proviso and observation by the Assessing Officer that there was failure or omission on the part of the assessee to disclose fully and truly all material facts is not necessary. It has to be examined whether the Assessing Officer had drawn an inference or given a finding that there was omission or failure on the part of the assessee to disclose fully and truly material facts. The requirement is that there should be full and true disclosure of the material facts before the Assessing Officer. In the present case, the tribunal has not referred to the letter dated 19th July, 2006 written by the Additional CIT and the information, which was enclosed with the said letter. What was the nature and character of the said information has not been considered and examined by the tribunal. - Matter remanded back to tribunal - Decided in favor of revenue.

  ---

• 2012 (5) TMI 24
  Closing stock of the subsidiary company not shown as opening stock of that company but shown as opening stock of the holding company - Revenue stated that the value of the stock should be considered for assessment only at the hands of one company – Held that:- Since the subsidiary company submitted that in the Income Tax Appeal that was pending against the assessment of closing stock of the subsidiary company, they will not press that ground thereby accepting the closing stock of that company to be treated as opening stock for assessment - allow the appeals by setting aside the orders of the Tribunal and restore the matter to the Assessing Officer for re-consideration while revising the orders of assessment issued pursuant to the judgment in the case of Holding company

  ---

• 2012 (5) TMI 23
  Application for waiver of interest u/s 234C - CCIT (Central) rejected the application for waiver of interest - Held that:- Circular/instructions dated 26.06.2006 does not have any clause similar to clause (b) of the earlier circular/instructions dated 26.06.1996 in respect of cash which is seized and which was not allowed to be utilized for payment of advance tax installment or installments if they fell due after the seizure of cash - the department had released FDRs worth Rs.6 crores on or about 17.02.1999 and the said amount was utilized towards payment of advance tax on 17.02.1999. Similarly, some further FDRs were released on or about 15.03.1999 and an amount of Rs.1.5 crores was paid as advance tax on the said date - assessee is entitle to waiver of some/proportionate interest under Section 234C in terms of the Boards Circular dated 23.05.1996 - interest waived to the extent of 40%.

  ---

• 2012 (5) TMI 22
  Deduction u/s 36(1)(viia) of the Act - Provision for bad and doubtful debts - The assessee is assailing the decision of Ld CIT(A) in holding that the Provision for bad and doubtful debts created during the year should be netted off by the amount of provision created in earlier years and written back during the year and the amount of net provision so arrived at is only to be considered for the purpose of allowing deduction u/s 36(1)(viia) of the Act. - held that:- the decision in the case of The Lord Krishna Bank Ltd. [2010 (10) TMI 860 - Kerala High Court] shall apply to the assessee herein. We agree with the contention of the assessee that the provision for bad and doubtful debts newly created during the year under consideration should not be netted against the amount written back or reversed. However, there might be a situation that the provision created for a particular debt needs enhancement and in that situation, only the enhanced amount should be treated as the new provision for the purpose of sec. 36(1)(viia) of the Act. Hence the claim of quantum of new provision made by the assessee, needs verification at the end of the AO. If the assessee has created a new provision on a particular asset by fully reversing the opening balance of provision relating to that asset, then the net accretion should only be treated as new provision. The appeal of the revenue is allowed and the appeal of the assessee is partly allowed.

  ---

• 2012 (5) TMI 20
  Writ petition - Warrant u/s 132A - Rule 112D(1) of the Income Tax Rules - Powers to requisition books of account - Powers of criminal court - held that:- the restriction placed by the provisions of Sections 132, 132-A or Rules 112-A are not unreasonable restrictions on the freedom under Articles 19 (1) (f) and (g) or Article 14 of the Constitution. The provisions of Sections 132 (1) (5), 132A and R. 112A are directed against persons who are believed on good grounds to have illegally evaded the payment of tax on their income and property. Therefore, drastic measures to get at such income and property with a view to recover the government dues would stand justified in themselves. In the interest of the community, it is only right that the fiscal authorities should have sufficient powers to prevent large-scale tax evasion. Provisions of Section 451 of the Code of Criminal Procedure - A plain reading of the aforesaid provision leaves no doubt that the said Section makes the Criminal Court custodia legis of the property produced before the court in connection with the case regarding which an offence appears to have been committed or which appears to have been used for the commission of the offence. Criminal courts are appropriate authority or the person in terms of sub-section (2) of Section 132A to issue for requisition books of account.

  ---

• 2012 (5) TMI 19
  Block assessment - addition u/s 68 is based on evidence recovered in the course of search in the form of realisation statement from the premises of another partner who is assessee's brother - Held that: the addition of 40% share income received by the assessee from the above said film i.e. Rs.4.5 lakhs for the assessment year 1994-95 sustained. - In the case of assessee's brother, we have not considered the addition for the year 1995-96 in respect of the same film as the amount involved was low. The findings therein apply to this assessee also for the year 1995-96 - the addition should be separately considered in the case of this assessee alone.

  ---

• 2012 (5) TMI 18
  Question of law - Order of the tribunal cancelling assessment - Block assessment - Search and seizure - assessment based on evidence - held that:- the contention raised by Senior counsel for the Revenue is that when assessment of undisclosed income is based on concrete evidence received from the documents and accounts seized from the residence of assessee and the film distributor above referred, the Tribunal's refusal to uphold the assessment without any basis or material is a perverse finding which gives rise to a question of law. We find force in this contention because when block assessment of any item is made based on evidence collected in the course of search, the assessment under Section 158BC read with Section 158BD is supported by statutory provision namely, Section 158BB of the Act. The Tribunal cannot cancel the assessment of undisclosed income if the same is based on tenable and acceptable evidence recovered in the course of search and which is not disproved by the assessee. - Decided in favor of revenue. Block assessment - AO computed undisclosed income movie-wise and the basis of addition is that the film distributor namely, Sri.P.D.Abraham of Swargachitra Films for whom assessee produced the film, has accounted payment of higher amount than what is shown as received by the assessee in his books of accounts. - held that:- The assumption by the C.I.T.(Appeals) as well as by the Tribunal that without the confirmation statement by the assessees undisclosed income cannot be assessed based on evidence gathered on search is wholly unrealistic and contrary to statutory scheme for assessment of undisclosed income under Chapter XIV B of the Act. We, therefore, set aside the order of the Tribunal and that of the first appellate authority and restore the addition of Rs.10 lakhs being the undisclosed income from the film "Manathevellitheru". Regarding addition of Rs. 10 lakhs - held that:- The first appellate authority as well as the Tribunal deleted the addition by stating that assessee has not given statement to corroborate the unaccounted income. We do not know what more evidence is required other than the clandestine account received from the assessee - Decided in favor of revenue. No other ground raised by the Revenue gives rise to any substantial question of law. In the result, we allow the appeal in part by sustaining a total addition of Rs.22,20,959/- and confirming the order of the Tribunal cancelling the balance addition of Rs.78,64,811/-.

  ---

• Customs

• 2012 (5) TMI 38
  Penalty on Seven traders - held to be trading in Chinese silk cloth and unstitched cloth illegally imported - Customs duty was not paid on the said import – Held that:- Tribunal was not right in disposing of the appeal without specifically dealing and examining the contentions and issues raised - The contentions and issues raised by the appellants e.g., in the case of Mahender Jain (Appearance for Assessee)it was submitted that his statement under Section 108 of the Act does not bring out or support the Revenue’s allegation; does not show his involvement in the smuggled goods was ignored – Non speaking and unreasoned order was passed ignoring the evidence and material relied upon by the parties - remit back the issue to the tribunal to re-hear the arguments and thereafter pass a reasoned and speaking order - in favour of the assessee .

  ---

• 2012 (5) TMI 37
  Levy and demand of interest under Section 28AB (now Section 28AA) r.w.s 28(2) for belated payment of customs duty for the goods imported through the Cochin Customs – Held that:- Decided in ICI INDIA LIMITED VS. COMMISSIONER OF CUSTOMS PORT (2004 (9) TMI 127 - HIGH COURT AT CALCUTTA) that interest is sustained as assessee also produced forged DEPB credit and the fraud perpetuated in a transaction of this type should automatically lead to demand of duty and interest – the mistake committed by the Customs on not verifying the genuineness of the Telegraphic Release Advice produced on the DEPB credit cannot be encased by the appellant by avoiding statutory interest which is mandatory and payable at the prescribed rate for delay in payment of customs duty – against assessee.

  ---

• 2012 (5) TMI 17
  Writ Petition – Goods imported were seized as the packings did not have the name and address of the manufacturer and Importer - Held that:- Such seizure is clearly without authority of law, no reasonable belief has been entertained or made out on the face of records to show that the imported goods are indeed liable for confiscation under the Customs Act - Revenue is directed to release the subjected to necessary tests by the Port Health Authorities before the customs clearance is sought for by the assessee, the respondent shall allow the petitioner to re-pack and re-label the goods in a customs bonded area - the respondent shall not release the goods unless they are found to be fit for human consumption

  ---

• 2012 (5) TMI 15
  Re-import of the product returned by dis-satisfied customer - Port Health Inspector declared the goods not in conformity to the standards prescribed by the Prevention of Food Adulteration Act – cannot be allowed to be dumped on the local consumers - Held that:- The test report and the details no where indicates that the product is dangerous for human consumption - the appellant must be given a chance and allowed to re-process under the supervision of the concerned official at the ware house and then re-export the same subject to test report to be obtained from CFTRI at the instance of the Port Health Officer – in favour of assessee.

  ---

• Corporate Laws

• 2012 (5) TMI 36
  Application filed under Section 543(1) by Official Liquidator alleging misfeasance on the part of the Directors of the Company-in-liquidation – Held that:- As per the scope of Section 543 of the Act and having noticed the fact that within the period of one year between the two balance sheets dated 31.03.1995 and 31.03.1996, the respondents have made efforts and have recovered the major portion of the amount –for unrecovered portion, a satisfactory explanation has been provided as to why the Directors could not recover the said amount - with regard to the adjustments made by the bankers and the landlord from the deposits which were available in the bank the Directors cannot be held directly responsible of the acts in adjusting the amount available with them and the Directors in no way could have prevented the same - with regard to the loans and advances the witness (PW-1) has admitted that these are the statutory deposits and are recoverable and it can still be recovered in accordance with law and the same cannot be considered as an act of misfeasance to hold that the respondents are guilty – against Official Liquidator

  ---

• 2012 (5) TMI 14
  Application filed by the Official Liquidator – misapplication of funds belonging to the company to the extent of Rs. 1,88,60,835/-and are therefore guilty of misfeasance and breach of trust - Held that:- No contrary material to indicate that the said entries were dishonestly made by the first respondent for his benefit and to cause loss to the Company-in-liquidation and has been misapplied by him – since the first respondent was also a Director in the sister concern, the adjustment of amounts by Journal entries cannot be considered as a benefit derived by the first respondent for himself - as the amount which was due to the Company-in-liquidation from the sister concern as against the dues from the Company-in-liquidation to its sister concern as Indicated item wise has been wiped out by book adjustments by virtue of the journal entries but no personal benefit is evident or is proved – in favour of assessee.

  ---

• Service Tax

• 2012 (5) TMI 47
  Demand of service tax against holding a convention - Held that: the delegates who had attended the conference were not clients of the appellant. It is the appellant, who out of the money collected from the delegates made arrangement for the mutual benefit of delegates in the conference - Decided in favor of the assessee

  ---

• 2012 (5) TMI 46
  Delay of 17 days in filing the refund claim -services received from persons located abroad paying service tax as per the proviso of section 66A - claim of refund as per Notification No. 9/09-ST dated 3.3.09 superceded by another notification No.17/11-ST dated 1.3.11 – Held that:- Do not agree with the argument that the time limit under Notification dated 1.3.11 cannot be made applicable to the claims filed before that date and pending on that date - the Deputy Commissioner had power to condone the delay - the delay involved was only 17 days and when a public authority is given any power he is expected to exercise it unless there is a reason for not exercising such power - should have considered the claim as per the proviso of Notification 17/2011 ST dated 1.3.11 which was in force on the date when Order was issued - claims are not time barred and the matter is remanded to the adjudicating authority to decide the case afresh, on the merits of the claim.

  ---

• 2012 (5) TMI 32
  Whether the payment made by the applicant bank to Society for Worldwide Inter-bank Financial Telecommunication (SWIFT) for transfer of funds to members Banks is liable to service tax - Held that:- As per provisions of Section 65(12) the definition of ‘banking and other financial services' which provide the services provided by a banking company or a financial institution including a non-banking financial company or any other body corporate or commercial concern, namely provision and transfer of information and data processing the activity undertaken by the applicant is covered under the ‘banking and other financial services'- no waiver of pre-deposit of the service tax - against assessee.

  ---

• Central Excise

• 2012 (5) TMI 35
  Doctrine of merger - Disallowed the MODVAT credit availed by it and penalty under Rule 173Q - delay in filing the appeal - First Appellate authority having no powers to condone the delay beyond the prescribed period rejected the appeal - application for rectification of the judgment and orders requesting the Tribunal to first condone the delay and next to decide the appeal on merits Held that:- If for any reason an appeal is dismissed on the ground of limitation and not on merits that order would not merge with the orders passed by the first appellate authority - High Court was justified in rejecting the request made by the assessee for directing the revenue to state the case and also the question of law for its consideration and decision against assessee.

  ---

• 2012 (5) TMI 34
  Application for stay - Waiver of pre-deposit - Time limitation - It was found that the applicants manufactured the goods as per the drawings and designs supplied by their customers free of cost and the applicants have not included the money value of drawings and designs supplied by their customers free of cost in the assessable value of the goods cleared by them to their customers - Held that: in the case of International Auto Ltd. Vs. Commissioner of Central Excise, Bihar reported in (2005 (3) TMI 132 - SUPREME COURT OF INDIA), the Hon'ble Apex Court has held that the assessee is not liable to pay duty on the inputs supplied by the final product manufacture, since it had not taken credit for Modvat in respect of inputs - the issue is debatable and the applicants have paid the duty demand along with interest for the normal period of limitation and the same is sufficient for compliance of the provisions of Section 35F.

  ---

• 2012 (5) TMI 33
  Waiver of pre-deposit - Demand is confirmed after denying credit of service tax paid in respect of services availed by the applicant for setting up of storage tanks at the port - The applicant in reply to the contention raised by the Revenue such as per Rule 6(5) of the Cenvat Credit Rules, 2004 credit availed on the service tax paid in respect of Consulting Engineering Services, technology and software services and erection, commissioning and installation of services is admissible even these are used in or in relation to the manufacture of exempted final product - Held that: the service tax paid on input services which are used in or in relation with setting up, modernization, renovation or repairs is admissible. The applicant is engaged in manufacture of excisable goods and the inputs were imported which are being stored at the port and subsequently transported to the factory for use with the manufacture of the final product - pre-deposit waived.

  ---

• 2012 (5) TMI 13
  Determination of the cost of raw material in the assessable value of the final product for the purpose of levy of Excise duty - The application filed on behalf of the assessee for recall of the said order was dismissed by the Tribunal by a cryptic order dated 21st September, 2007. It is argued that the appellant had made out a very strong case for recall of order dated 31st May, 2006 but the Tribunal without adverting to the cause shown for non-appearance of the counsel, dismissed the application on the ground that the appellant did not have a strong case on merits. - Held that:- Determining the question of invocation of extended period of limitation in the interest of justice, it is a fit case where the appellant deserves to be granted adequate opportunity to place before the Tribunal its view point on all the aspects of their case - the impugned orders are set aside and the matters are remitted back to the Tribunal for fresh adjudication - in favors of assessee.

  ---

• 2012 (5) TMI 12
  Penalty u/s 11AC - Cenvat credit - Transit loss - Order of first appellant authority - Application of mind - held that:- in the process of giving brief statement of submission of the appellant, if all the grounds running in several pages are quoted in any order or judgment and that too in a different font, then it may be possible that instruction may have been given to the Steno or any other person to type verbatim the grounds raised in the appeal starting from one point to the last point. It will be appropriate to mention here that in the judgment, if there is reference of previous judgments, then such portion also are required to be quoted, but for the purpose of finding out application of mind upon the ground raised by the appellant, mere quoting of the grounds verbatim and extenso in the order itself cannot be application of mind on the grounds raised by appellant. Such practices are required to be deprecated and the Appellate authority and the Tribunal should be very precise in narrating the facts of the case and the grounds raised by the parties. Reduction of penalty to 25% - held that:- So far as benefit of the proviso under section 11AC is concerned, that was available to the appellant as statutory benefit. It may be true that the Division Bench of Delhi High Court issued instruction to the authorities to incorporate the intimation to the assessee of condition of payment within 30 days to take the benefit of waiver of 75% of penalty and interest amount but that is a guideline which cannot be the reason for giving benefit to the person who did not deposit the amount in time knowing the law very well and tried to evade the provisions of law and further to the person who did not deposit such amount before preferring the appeal. The appellant, even before lower appellate authority, did not pray to permit him to deposit 25% of the amount of penalty and interest, therefore, we are not inclined to extend that period available under section 11AC and thus, the appellant is not entitled to such benefit.

  ---