Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
June 1, 2012
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
Wealth tax
Indian Laws
Articles
News
Notifications
Highlights / Catch Notes
Income Tax
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Deduction u/s 80HH & 80I - whether extracting stones and then cutting them into the required size and weight, can be held as 'manufacturing activity' - held no - HC
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Reference to the DVO does not become invalid on the completion of the assessment proceedings before the receipt of the valuation report and that after the receipt of the valuation report after completion of the assessment proceedings, the report would become part of the record which may enable the income tax authorities to take action as permissible under the Act, such as Section 147, Section 263, appellate power under Section 250 or Section 251 etc. - HC
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To “make available” technical knowledge, mere provisions of service was not enough and the payer had to be enabled to perform services himself. The department’s argument that the amendments by the Finance Act, 2012 changes the position is not acceptable, since there is no change in the DTAA between India and USA and the DTAA prevails where it is favourable to the assessee; - AT
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Discounting charges vs Interest - merely discount of the sale consideration on sale of goods, it was not “interest” u/s 2(28A) and there was no obligation to deduct TDS thereon - SC dismissed the SLP
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TDS u/s 194H – Trade discount provided by newspaper publishers to advertising agencies under Rules and regulations of Indian Newspaper Society - HC
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Income from house property - Vacancy allowance - Tenant stopped payment rent and stopped using the premises but did not handover the possession back to assessee owner - AT
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Levy of Sales Tax (VAT) on Fabric - Classification of Hook and Loop Tape Fasteners called as Velcro Fastener - what is a Narrow Fabric and Hook and Loop Tape Fasteners
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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 - HC
Customs
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Target Plus Scheme – validity of circular - circular dated 8 May 2007 quashed and set aside - HC
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Demand of Anti-Dumping Duty in respect of imports of CFL – contention of revenue that the parts imported by the appellants constitute 90% of the total requirement of manufacture of CFL and in terms of provisions of Rule 2(a) of Interpretative Rules to be treated as complete lamps - AT
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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 - AT
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Seeks to levy definitive safeguard duty on import of Phthalic Anhydride. - Notification
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Seeks to rescind Notification No.1/2012-Customs (SG). - Notification
Corporate Law
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Negotiable Instruments Act – Blank Cheque - dishonor of cheque - A person issuing a blank cheque is supposed to understand the consequences of doing so. He cannot escape his liability only on the ground that blank cheques had been issued. - HC
Service Tax
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Coaching or training to the employees of the buyer concerns - not taxable - AT
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Erection, Commissioning or Installation - laying of cables under or alongside roads did not constitute any taxable service under Section 65(105) of the Finance Act, 1994 - AT
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Service Tax (Compounding of Offences) Rules, 2012 - Notification
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Service Tax (Settlement of Cases) Rules, 2012 - Notification
Central Excise
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Seeks to rescind Notfns. 09/2012, 10/2012, 11/2012, 18/2012 and 23/2012 – C.E. - Notification
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Classification of other bathroom accessories of brass, namely soap dishes, toilet paper holder, tumbler holder, towel ring, towel rack, towel rack with single rail, coat hook, robe hook and for glass shelf - AT
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Non fulfillment of export obligation - 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 - AT
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Cenvat credit - 100% credit availed in the first year – liability would be only in respect of interest on the amount of wrongly Cenvat credit taken for the period for which it was irregular, - AT
Case Laws:
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Income Tax
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2012 (5) TMI 507
Dis-allowance u/s 40A(2)(b) on ground that both average manufactured cost and selling rate is less than the purchase rate of the assessee - assessee submitted that under business exigencies, purchases were made to tied over the crisis in the subsequent months when the raw material availability becomes very poor - Held that:- CIT(A) had rightly deleted the addition by comparing the purchase price paid by the assessee with the market price prevalent at the time of purchase, keeping in view the fact that the materials were supplied on FOR and the appellant had saved notional interest on working capital for a period of about 8 months - Decided in favor of assessee. Legal expenses incurred for increase in authorized share capital of the company - capital vs revenue expenditure - Held that:- Expenditure incurred for increase in the share capital of the company after commencement of business is not a capital expenditure but a regular business expenditure of revenue nature - Decided in favor of assessee. Addition made on account of illegal transportation and illegal stock - survey - assessee contended that additions are based upon surmises and assumptions without placing any corroborating material and observations purely on the basis of third party reports the findings which were also stayed by the higher authorities - Held that:- Following the Tribunal order in the case of M/s JP Stone Crushers (P) Ltd. v. DCIT based upon identical facts, issues involved on these points in this appeal are restored back to the file of the Assessing Officer for fresh adjudication after taking into account the final outcome of survey. Dis-allowance u/s 40(a)(ia) - non-deduction of tax at source - Revenue contending hiring of machine and equipments as transportation contract - AY 2005-06 - Held that:- From the facts of the case it is established that agreement was for lease of dumpers/JCB only and there was no agreement for executing any work or contract and hence cannot be classified as works contract or a service contract. See DCIT v. Satish Aggarwal & Co [2008 (11) TMI 322 (Tri)] - Decided in favor of assessee. Deduction u/s 80IB - dis-allowance on ground that it was not claimed in the original return of income - Held that:- If an assessee under a mistake, misconception or not being properly instructed is over-assessed, the authorities under the Act are required to assist him and ensure that only legitimate taxes are collected. Matter restored to the file of the Assessing Officer - Decided in favor of assessee for statistical purposes.
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2012 (5) TMI 506
Deduction u/s 80HH & 80I - whether extracting stones and then cutting them into the required size and weight, can be held as 'manufacturing activity' - assessee, engaged in the business of excavating stone boulders of specific size and weight - Held that:- Present is a case where boulders are cut to different sizes and weights. The nature and character of the boulders remain the same and from the facts which are brought on the record as noticed by the Tribunal, it cannot be said that the assessee was engaged in any manufacturing activity so as to enable him to take the benefit of deduction u/s 80-HH and 80-I - Decided in favor of Revenue.
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2012 (5) TMI 505
Validity of Valuation proceedings referred to DVO, once the assessment u/s 143(3) was completed – reference made to DVO by AO on the basis of his opinion that the valuation as on 01.04.1981 provided by assessee was on the higher side leading to reduction in capital gains – assessment completed without waiting for the report from the DVO on ground of assessment getting time barred – assessment reopened u/s 147 on getting valuation report from the DVO after the completion of the assessment – Held that:- Reference to the DVO does not become invalid on the completion of the assessment proceedings before the receipt of the valuation report and that after the receipt of the valuation report after completion of the assessment proceedings, the report would become part of the record which may enable the income tax authorities to take action as permissible under the Act, such as Section 147, Section 263, appellate power under Section 250 or Section 251 etc. If any action is taken by the departmental authorities on the basis of the report of the DVO received after the completion of the assessment, such action will be open to challenge by the petitioner and it is at that point of time that the Court may be called upon to examine the validity of the action taken by the revenue authorities. That stage has not yet arisen in the present case. Writ petition dismissed.
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2012 (5) TMI 504
Notional sales tax/ sales tax subsidy received under the schemes by the Government - Capital receipt vs Revenue Receipt - Held that:- Following decision of ITAT in assessee’s own case [2003 (10) TMI 255 (Tri)] it is held that claim for treatment of notional sales tax is capital receipt, thus not liable to tax. Further, CIT(A) has rightly held that it is not necessary to go into the alternative plea of the assessee as claiming the notional sales tax as deductible u/s 43B - Decided in favor of assessee. Interest on borrowed funds - dis-allowance of interest being interest referable to interest free loans and advances given to subsidiary companies - Held that:- High Court in the case of Reliance Utilities & Power Ltd.(2009 (1) TMI 4 (HC)), has held that if interest free funds available to an assessee is sufficient to meet its investment, it can be presumed that the investments were made from the interest free funds available with the assessee. Therefore, considering the fact that the assessee had its own funds more than the loans given to its subsidiaries and also in the absence of any nexus establishing that the interest bearing borrowed funds were given as interest free to its subsidiaries, we hold that the dis-allowance of interest is not justified - Decided in favor of assessee. Dis-allowance u/s 14A of estimated expenses out of administrative expenses being expenditure incurred in relation to earning the exempt income u/s 10(33) and 10(23G) - Held that:- Assessee's own funds are far in excess than the investments made by the assessee giving exempt income, the dis-allowance of the interest is not justified as it has to be presumed that the investments had come from the interest free funds available with the assessee - Decided in favor of assessee. Deduction u/s 80HHC - exclusion of gross interest or net interest - Held that:- 90% of net interest expenses have to be considered while computing deduction u/s 80HHC. See ACG Associated Capsules Pvt. Ltd. vs. DCIT(2012 (2) TMI 101 (SC)) - Decided in favor of assessee. Exclusion of profit allowed as deduction u/s 80IA/ 80IB with reference to all(exporting and non-exporting) units while arriving at deduction u/s 80HHC - assessee contended that exclusion should be restricted to export units with reference to which claim u/s 80 HHC is worked out - Held that:- When the deduction u/s 80 HHC is to be considered, it is to be allowed in proportion to export turnover to the total turnover of an undertaking and accordingly that proportion of the deduction allowed u/s 80 HHC is to be considered and reduced while allowing deduction u/s 80 IA of those three exporting units subject to the condition that total deduction will not exceed the eligible profits of the undertaking. Hence, we hold that the entire deduction allowed u/s 80 IA / 80 IB should not be reduced while computing deduction u/s 80 HHC. On the other hand, the claim of export profits of these three units u/s 80 HHC should be reduced while allowing deduction u/s 80 IA in proportion of export turnover to total turnover - Decided in favor of assessee. Deduction u/s 80HHC - inclusion of excise duty and sales tax in the turnover - Held that:- Excise duty and sales tax has to be excluded from the total turnover for the purpose of computing deduction u/s 80 HHC - Decided in favor of assessee. Computation of deduction u/s 80 HHC under the provisions of section 115JB with reference to the profits as worked out on the basis of adjusted book profits - Held that:- Deduction under chapter VIA of I.T Act has to be worked out not on the basis of regular income tax profits but it has to be worked out on the basis of the adjusted book profits in a case where section 115JA/115JB is applicable. See DCIT vs. Syncome Formulations (India) Ltd. [2007(3) TMI 288 (Tri)] Dis-allowance of expenses on account of traveling of spouse of executives - Held that:- Since assessee has not been able to establish that above expenses pertaining to wives/family members of the executives was necessary for the purpose of the business,hence such expenditure is dis-allowed - Decided against the assessee. Non-compete Agreement - assessee together with its subsidiaries sold substantial number of shares held by it in L&T and entered into agreement containing restrictive covenant for a minimum period of five years - SEBI guide for treating 25% of the sale consideration, towards consideration for accepting such restrictive covenant - AY 02-03 - Held that:- Part of the sale consideration received by the assessee on sale of shares has rightly been considered towards receipt on account of restrictive covenant and same is in the nature of capital receipt not taxable under the Act prior to AY 2003-04. Same has become taxable under clause (va) to section 28 w.e.f. 1/4/2003. Transfer pricing - dis-allowance u/s. 92C of ₹ 1.85 crores out of the charter hire charges paid to its associate enterprise - Held that:- Neither the assessee, nor the TPO, nor the AO, or the Commissioner (Appeals) has followed any of the method prescribed in the Act and Rules, for arriving at the ALP. However, both the parties agree that the “CUP” method should be followed. In absence of comparable transactions, we set aside the issue to the file of the AO for the limited purpose of re—computing the arm’s length price by taking the date available in the public domain. Transfer pricing - dispute regarding working of 'Cost plus' method followed by TPO - Held that:- A perusal of the workings clearly demonstrates that the TPO has taken 50% of total cost and whereas the assessee has taken the actual cost relating to charter hire activity. This has made a difference to the calculation of cost. Actuals have to be taken to arrive at the correct cost and only then cost plus method can be applied. Cost plus method does not contemplate estimation of cost. When actual figures are replaced in the calculation made by the TPO, then, no adjustment is called for as the payment is at arm’s length price - Decided in favor of assessee. Depreciation - restriction of depreciation claimed - assessee didn't claimed depreciation in earlier years thus claimed depreciation on WDV whereas Revenue after considering depreciation for earlier years reduced WDV, thereon restricted depreciation - Held that:- Claim of depreciation prior to insertion of clause 5 to section 32(1), inserted w.e.f. 1/4/2002 as applicable from A.Y 2002-03, was optional and depreciation could not be thrust upon the assessee. Therefore, the WDV of the assets as on 31/3/2001 has to be taken for considering the depreciation to be allowed to the assessee. We hold that AO while giving effect to this order will consider the WDV as on 31/3/2001 and allow the depreciation claim accordingly - Decided in favor of assessee. Pre-operative expenses - Held that:- Pre-operative expenses in question have been incurred for the purpose of business of the assessee and the expenditure was incurred for expansion of its existing activities. Hence, these preoperative expenses represent revenue expenditure incurred for the purpose of business and be allowed as deduction u/s 37 MAT - Revenue contending adding back of provision for doubtful debts while computing profits u/s 115JB - Held that:- Considering amendment made by the finance (No.2) Act 2009 with retrospective effect from 1/4/2001 by inserting clause “ i ” in Explanation -1 to section 115JB the issue is to be decided against the assessee and thus addition made by AO is restored.
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2012 (5) TMI 503
Dis-allowance 40(a)(i) on payment of hiring charges for transponder by assessee(Mauritius company), to foreign companies on the ground that no tax has been deducted at source by the assessee u/s 195 - Revenue contending such hiring charges to be Royalty - DTAA between India and USA - Held that:- As we have held that there is no PE, the question of a claim being made and disallowing such a claim for expenditure u/s. 40(a)(i) does not arise. However on merits it is held that issue stands covered in favour of the assessee by the decision of High Court in the case of Asia Satellite Communication Co. Ltd. Vs. DIT(2011 (1) TMI 47 (HC)) wherein it is held that payment made by the telecast operators situated abroad to the assessee which was also a non-resident did not represent income by way of royalty as defined in Explanation 2 to section 9(1)(vi). Further, in the case of DIT Vs. Guy Carpenter & Co. Ltd.(2012 (5) TMI 31 (HC)) it was held that to “make available” technical knowledge, mere provisions of service was not enough and the payer had to be enabled to perform services himself. The department’s argument that the amendments by the Finance Act, 2012 changes the position is not acceptable, since there is no change in the DTAA between India and USA and the DTAA prevails where it is favorable to the assessee; Even otherwise as the payment is made from one non-resident to another non-resident outside India on the basis of contract executed outside India, section 195 will not apply to such cases as held by in the case of Vodafone International Holdings B.V.(2012 (1) TMI 52 (SC)). Further, as prior to the insertion of Section 40(a)(i) in AY 2004-05, payments to a resident did not require TDS. Under the non-discrimination clause in the DTAA, the dis-allowance u/s 40(a)(i) in the case of non-residents cannot be made. See Herbalife International (2006 (2) TMI 220 (Tri)). Aforesaid view squarely apply in respect of payments made to Advanced Satellite( UK based company) for equipment and technical fees. As there is no change in the DTAA between India and UK, we have to hold that no dis-allowance can be made u/s 40(a)(i). No dis-allowance can be made in view of the nondiscrimination clause also. Dis-allowance u/s 40(a)(i) in respect of payments made to LMB(Mauritius) Ltd. for purchase of programmes - revenue contending the same to be payment for grant of broadcasting right - Held that:- Following proposition laid down in case of CIT vs B. Suresh (2009 (3) TMI 4 (SC)) and others it is held that that there is a sale of programmes, section 195 cannot be invoked in case of purchases. Further, it is a payment by a non-resident to another non-resident and as nondiscrimination clause also applies.
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2012 (5) TMI 502
Discounting charges vs Interest - assessee paid a sum of Rs. 3.97 crores to its associate concern in Singapore, on account of discounted charges for getting the export sale bills discounted - AO contended the same to be interest within the ambit of section 2(28A) and disallowed the expenditure u/s 40(a)(ia) on ground of non-deduction of tax at source u/s 195 - High Court relying on Circular No.65 dated 2.09.1971, Circular No.674 dated 22.03.1993 & Vijay Ship Breaking (2008 (10) TMI 6 (SC)) held that as the discounting charges were not in respect of any debt incurred or money borrowed and were merely discount of the sale consideration on sale of goods, it was not “interest” u/s 2(28A) and there was no obligation to deduct TDS thereon - Held that:- Special Leave Petition against the order of High Court stand dismissed - Decided in favor of assessee.
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2012 (5) TMI 501
Deduction u/s 80IA(4)(iii) - the assessing officer concluded that the assessee could not fulfil the conditions attached to the approval granted by the Ministry as well as CBDT for the Industrial Park - minor variation in construction cannot alter the fact that assessee made investment in developing the Industrial Park and also we cannot hold that the area so developed is not sufficient to locate the minimum number of three industrial units as specified in the approval by Ministry of Commerce, Government of India - Assessing Officer has opined that even if the assessee had not let out or used all of such 1,50,718 sq. ft. for approved industrial purposes during the year, it cannot be denied that all of such area had been developed as per the approval of the Central Government and was fit to be used for the specified industrial purposes - Held that: while the assessee has received such approval and notification, the same has not been withdrawn till date for contravention of any of the conditions, even though there is a specific provision for withdrawal, in case the Central Government finds that the conditions prescribed therein have not been adhered to - Decided in favor of the assessee
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2012 (5) TMI 500
Reassessment - Validity of notice - Deduction u/s 80HHC - Undisclosed income - the AO in the block assessment has doubted the genuineness of the purchases from the parties mentioned in the 148 notice and also doubled the sales treating the same as bogus - Held that: A.O. in his reasons recorded for re-opening of the assessment for the impugned assessment year has again referred to the block assessment order wherein it has been held that the assessee was not entitled to deduction u/s 80HHC as the entire purchase and sales are bogus in A.Y. 1999-2000 and 2000-01 - it as an attempt on the part of revenue to, somehow or other, re-open the proceedings and more particularly the block assessment proceeding which they could not successfully support and sustain right up the Tribunal - Decided in favor of the assessee Regarding reassessment proceeding - Held that: A.O. re-opened the assessment on the ground that purchase of diamonds/jewellery from the sister concerns namely M/s Galaxy Exports, M/s Kunal Exports and M/s Prime Star Exports were found to be bogus, hence, he has reason to believe that income has escaped assessment - It has been held in a number of decisions that when there is no reason recorded or the reasons recorded are wrong/absurd or irrelevant the re-assessment proceedings based on such no reason or absurd or irrelevant reason is invalid - Appeal is allowed
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2012 (5) TMI 499
TDS u/s 194C - Liability of Individual / HUF - receipt from its cable network subscribers - Disallowance u/s 40(a) (ia) - Circular No.715 dated 8/08/1995 - applicability of provisions of sub-section (2) of section 194C of the Act. - held that:- In the case of the assessee since the assessee paid the amount to M/s. Devshree Network Pvt. Ltd. For giving cable transmission, therefore, the assessee is a "person responsible for paying the sum in question to the contractor". The contractor in this case thus would be M/s. Devshree Network Pvt. Ltd. For applying the provisions of section 194 C (1) of the IT Act the contract should be between the contractor and the parties as per the list given from (a) to (j) of section 194 C (1) of the IT Act as per the provisions applicable to the assessment year under appeal in which sub-clause (k) being the individual do not find mention. Thus, in the assessment year under appeal, the contract between the contractor and individual would not cast any obligation on the individual to deduct TDS on the payment made to the contractor. Since in this case, payment is made by the assessee to M/s. Devshree Network Pvt. Ltd. for providing cable transmission, therefore, no other person is involved in the transaction/oral contract. Thus, the assessee did not act as a sub-contractor in this case. Assessee is not liable to deduct TDS - Decided in favor of assessee.
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2012 (5) TMI 488
Assessee in default – Trade discount provided by newspaper publishers to advertising agencies under Rules and regulations of Indian Newspaper Society - Revenue contended that said discount are deemed commission and that the assessee ought to have deducted TDS u/s 194H and was liable as assessee-in-default u/s 201 – demand of taxes and interest - Held that:- Two conditions, which are required to be fulfilled before holding a person liable for deduction at source u/s 194H, are the payment is received by a person as agent of principal and secondly payment is for services rendered (not being professional services). In present case, it is clear that advertising agency has never been appointed as agent of the petitioner. The relationship between the assessee and the advertising agency in accordance with the INS Rules is that of a principal to principal because (a) the assessee has no control over the advertising agency, (b) the advertising agency is responsible for payment even if the advertiser has not paid the advertising agency, (c) the advertising agencies are rendering service to the advertisers/ customers & other terms. Therefore, trade discount provided cannot be termed as Commission. Deductor who fails to deduct income tax at source shall be deemed to be an assessee in default only when the assessee has also failed to pay such tax directly. Thus, it flows that there is no occasion to treat the deductor as an assessee in default unless the assessee has not paid the tax directly. Even in case of short deduction, tax cannot be realised from the deductor and he is at best liable for interest and penalty only; Assessing authority has not considered the relevant materials i.e. rules & Regulations of INS, Circular No. 715 dated 8-8-1995 issued by CBDT to determine nature of relationship and applicability of TDS provisions while passing the assessment order, rather placed reliance on the article published in a newspaper, which was an irrelevant material. Hence, said reliance on irrelevant material clearly vitiates the assessment order. Maintainability of writ petition - Since huge liability running in several crores have been fastened on the petitioner and multiplicity of proceedings will increase the assessee’s sufferings even though s. 194H is clearly not applicable; therefore we are of the view that the petitioner has rightly invoked the jurisdiction of this Court under Article 226 and the petition cannot be thrown out on the ground of alternative remedy. Principle of natural Justice - It is the duty of the Department to make a correct assessment and not to make an excessive assessment merely on the ground of shortage of time, since it puts citizens to great harassment as exorbitant demands are raised and it breaches the principles of natural justice - Decided in favor of petitioner.
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2012 (5) TMI 487
Deduction u/s 80HHC - denial of benefit of netting of interest - Held that:- Apex court held in case of ACG Associated Capsules Private Limited v. Commissioner of Income Tax, Central-IV, Mumbai[2012 (2) TMI 101 (SC)] that 90% of not the gross interest/rent but only the net interest/rent, which has been included in the profits of the business of the assessee as computed under the heads ‘PGBP’ is to be deducted under clause (1) of Explanation (baa) to Section 80HHC for determining the profits of the business. Matter remanded back to A.O. to work out the deductions – Decided in favor of assessee.
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2012 (5) TMI 486
Addition u/s 68 - Addition of a sum of ₹ 27,61,50,000 and a sum of ₹ 6,42,00,000, being amount received on allotment of preference share capital and share application money received (pending allotment) - violation of the principles of natural justice - During the course of assessment proceedings, the AO noticed that the assessee had repaid loan to the tune of ₹ 16.90 crores by allotting preference shares to private corporate bodies - Tribunal in ITA No.3859/Mum/2009 for assessment year 2006-07 in the case of Chat Computers Ltd. vs. DCIT - The statements of the persons who allowed their bank accounts to be used for depositing cash and issuing account payee cheques for a commission,were recorded - Held that: The mode of payment of application money has been through banking channels and these details are available in the application forms. Thus the genuineness of the transaction has been prima facie established by the Assessee. The Assessee has given the Income Tax Permanent Account Number (PAN) in almost all the share applicants. This would be prima facie proof of the creditworthiness of the Assessee - It is settled proposition of law that the statement recorded during the course of investigation without corroborative evidence has no evidentiary value - Decided in favor of the assessee
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2012 (5) TMI 485
Deduction u/s 80-IB - Held that:- in the A.Y. 2003-04 the order of the Ld. CIT (A) was challenged before the Tribunal by filing appeals being ITAs 6033 and 6143/M/2007 and Tribunal allowed the claim of the assessee following the decision of the Special Bench in the case of M/s. Brahma Associates (2009 (4) TMI 215 (Tri)), copy of the Tribunal order is placed on record - Decided in favor of the assessee Eligible deduction under Section 80-IB(10) - the assessee has collected the development charges, electricity charges, worked done to the buyers of the flats etc. and the said receipts are having direct nexus with the project of the assessee - Assessee has collected the different charges from the flat buyers as builder for the specific purposes but as comparative expenditure is lesser hence, the balance credit was taken to the profit and loss account - Held that: that to the extent of Rs. 4,173,230.60 referred to the above, the same should be excluded from the eligible profit and balance has to be treated as part of the profit derived from the housing project - Appeal is partly allowed Deduction u/s.80IB(10) in respect of 'Sai Jyot' project as it relates to that project - Ld. Counsel argued that apart from the common office expenses relating to the 'Sai Jyot' Project of Rs. 23,96,673/- eligible profit of the 'Sai Jyot' has been reduced for working of deduction u/s.80IB(10) - Held that: the assessee should not have any grievance as M/s. Ganga Developers is one of the assessee's sister concern having identical issue for adjudication - Appeal is allowed by way of direction to A.O. to look into the grievance of the assessee in respect of double deduction and if it is so, then also to give consequential relief
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2012 (5) TMI 484
CIT(A) directing AO to exclude telecommunication expenses amounting from the total turnover for the purpose of computation of deduction u/s 10A – Held that:- For the purpose of applying the formula under sub-section (4) of section 10B, the freight, telecom charges or insurance attributable to the delivery of articles or things or computer software outside India or the expenses, if any, incurred in foreign exchange in providing the technical services outside India are to be excluded both from the export turnover and from the total turnover, which are the numerator and the denominator respectively in the formula – as the provisions of sections 10A and 10B are identical on all material aspects the order of the CIT(A) cannot be perverse - against revenue
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2012 (5) TMI 483
Exemption u/s 11 - Disallowance of salary - salary paid to Smt Shanta Kumar, member of the society section 13(3) - Held that: the payment of salary falls under the bar placed by section 13 of the Act, however, having regard to her qualifications and services rendered to the assessee, the case of the assessee falls under section 13(2)(c) of the Act as the salary paid is not unreasonable. In view of this, the assessee goes out of the bar placed by the provisions of section 13 of the Act, as the salary paid is reasonable - Decided in favor of the assessee Regarding disallowance of advertisement expense - Held that: the nature of professional services rendered by Shri Varun Bharati, who possesses requisite professional qualifications and evidence filed to prove the factum of rendering of such services, the impugned payment cannot be disallowed as it goes out of the mischief of the provision of section 13 - Decided in favor of the assessee
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2012 (5) TMI 482
Disallowance of expenses under section 14A - held that:- the claim that expenses such as salary etc. which are not directly relatable to earning of dividend income cannot be disallowed, is not legally tenable. The disallowance of expenses has however to be made on a reasonable basis. - suo-moto disallowance computed by the assessee can be reasonably taken as the expenditure relatable to the exempt income - disallowance under section 14A @ 10% if general expenses in the PD division upheld. Regarding interest u/s 234C - held that:- Once there is shortfall in payment of advance tax installment, the levy of interest is mandatory as we have pointed out earlier. In case, under estimate of income for advance tax payment was due to conditions beyond the control of the assessee, it could always apply to the competent authority, for waiver of interest in terms of the CBDT Circular - Decided against the assessee Regarding validity of opening of assessment under section 147 - reason to believe - held that:- The only requirement is that there should be some relevant material for formation of belief and the sufficiency of material cannot be questioned. There was material available before AO clearly showed that no expenses in relation to exempt income had been disallowed by the assessee under section 14A which in our view was relevant material for formation of reasonable belief that some income had escaped assessment as it was not possible to earn such huge dividend without incurring any expenses. - Decided against the assessee Speculation loss - setting off - section 73 - held that:- profit from purchase and sale of shares are not to be excluded from the deeming provisions of Explanation to section 73. It was accordingly held that the assessee was entitled to set off brought forward speculation loss against profit from sale and purchase of shares in the current year. - Decided in favor of assessee.
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2012 (5) TMI 481
Bad debt - Held that:- The amount has been correctly disallowed as bad debt because the conditions prescribed u/s.36[2] that either such amount should have been considered for computing the income or the amount could have been lent in the ordinary course of business, are not fulfilled. Loan to sister concerns without interest - Held that: The AO has made his case very clear that a specific amount was borrowed for the purpose of Narsonar Bala project and the loan proceeds were deposited in Kotak Mahindra Bank. Admittedly, the money has been given out of such loan to the sister concern. Therefore, there is a direct nexus between the interest bearing loan and the interest free advances granted to the sister concern. The Ld. Counsel for the assessee made a general submission that in Narsonar Bala project funds of more than Rs.10 crores were used but he has not given any source of such funds or any evidence that assessee was having some interest free funds which were used in this project. - Decided against the assessee.
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2012 (5) TMI 480
Deemed dividend u/s 2(22)(e) - Advance against rent or security deposit - During the course of hearing it is submitted that the assessee company received the said amount not as advance rent but a security deposit through journal entry and there was no actual movement of cash from the bank account - According to the assessee, this security deposit does not come under the ambit of sec. 2(22)(e) of the Act, whereas according to the A.O. this security deposit was nothing but deemed dividend inasmuch as two of the beneficial shareholders of lessee-company were also shareholders and substantially interested in the assessee - It is a principle of interpretation of statutes that where once certain words in an Act have received a subsequent statute, the legislature must be taken to have used them according to the meaning which a Court of competent jurisdiction has given them - Deemed dividend can be assessed only in the hands of a person who is a shareholder of the lender company and not in the hands of a person other than a shareholder. The deeming provision as it applies to the case of loans or advances by a company to a concern in which its shareholder has substantial interest is based on the presumption that the loan or advances would ultimately be made available to the shareholders of the company giving the loan or advance - the provisions are not applicable to the present facts of the case the nature of transactions has no effect. - Decided in favor of the assessee
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2012 (5) TMI 479
Income from house property - Vacancy allowance - Tenant stopped payment rent and stopped using the premises but did not handover the possession back to assessee owner - held that:- Since the above flats were not vacant, during the period July 2005 to December 2005 and it is not the case of the assessee that these premises were let out on higher rent, the explanation of the assessee cannot be accepted that these flats were let out for the period 1.1.2006 to 31st March 2006 on decreased rent as suitable tenants were not available. Thus, there is no question of application of the provision of section 23(1)(c) of the Act as pleaded by the Ld. A.R. The A.O thus has rightly applied the provision of section 23(1)(a) of the Act for computing the rent for this period. - Decided against the assessee.
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2012 (5) TMI 478
Registration u/s 12AA - Assessee-Society had earlier been granted registration u/s 12AA by the then CIT, Madurai, vide his order in C.No.464/24/07- 08/CIT-I dated 12.10.2007, for the assessment year 2007-08 and onwards, but the application for recognition u/s 80G was rejected by the same CIT vide his order dated 24.12.2008 - It is clear that the ld. CIT has been empowered to either continue registration, once granted u/s 12A(a) or else, he can cancel the same if the requisite conditions are no longer found to be fulfilled - From the Income and Expenditure Account of these years, it is clearly seen that the Society was receiving income from laces and embroidery articles, income from coconut shell, SHGs contribution, own contribution, grants received, donations received, interest received, etc. The financing activities undertaken by the Society is clearly evidenced from these facts - It is true that certain amount of commercial activity is permitted under the provisions of the Act, but this has to be only a by-product of 'charitable activities' with a certitude that surplus so generated out of commercial activity are utilized for the charitable objects of the Trust/Society and not for personal use of settlers/beneficiaries - commercial activity in such cases is permissible as per the requirement of section 11(4)/11(4A) and not as per the provisions of section 11(1)(a) of the Act. The commercial activity should aim at achieving end of the trust which is furtherance of its objects and it should not be the motive of the Trust to work for profit - Under these circumstances, we are also satisfied that the Society has ceased to be a genuine Society to be eligible for registration u/s 12AA - Decided against the assessee
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Customs
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2012 (5) TMI 498
Whether Interest u/s 28AA of Customs Act, 1962 for delay in payment of duty can be levied on demand of duty raised on review of earlier order wherein provisional assessments were finalized - whether Tribunal was justified in dropping demand of interest - Held that:- In present case, Apex court on 14.08.1996 imposed demand of duty by reviewing its earlier order dated 09.09.1991. Assessee discharged such liability, however, Revenue levied interest u/s 28AA on account of delayed payment of duty. Tribunal rightly concluded that finalization of provisional assessments are governed by Section 18 and Section 28AA would have no application as no duty has been determined u/s 28(2). Further, no notice u/s 28(1) to recover any short levy or non levy of duty was issued. Consequently no cause to recover any duty under sub section (2) of Section 28 would arise. Therefore Section 28AA of the said Act would have no application to present facts. Tribunal has only held that interest is not recoverable under the provisions of the said Act and has not allowed appeal of assessee on the ground that no show cause notice for demand of interest was issued - Appeal dismissed
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2012 (5) TMI 477
Demand of Anti-Dumping Duty in respect of imports of CFL – contention of revenue that the parts imported by the appellants constitute 90% of the total requirement of manufacture of CFL and in terms of provisions of Rule 2(a) of Interpretative Rules to be treated as complete lamps - Held that:- It is not appropriate inasmuch as the provisions of Rule 2(a) of the Interpretative Rules are in the form of a legal fiction created for the limited purpose of classification of incomplete or unfinished article in relation to any reference in a heading to an article in schedule and cannot be used to modify physical identity of an article mentioned in notification imposing a duty on that article, which has to be interpreted strictly - The Directorate General of Anti Dumping and Allied Duties have clarified that anti-dumping duties were not recommended on parts/ components of CFL - the notification No. 138/2002-Cus., dated 10-12-2002 stated that the anti-dumping was recommended only in respect of two types of CFLs (i) Complete, ready to use compact fluorescent lamps wherein choke is integrated within the lamp (ii) Complete, ready to use compact fluorescent lamps wherein choke is external - Admittedly in the present case, the appellants have not imported CFLs, in a ready to use condition but have only imported parts of the same – in favour of assessee.
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2012 (5) TMI 476
Whether Commissioner of Customs (Preventive), has jurisdiction to issue the show-cause notice - Counsel submits that he was not 'proper officer' as defined under Section 2(34) of the Customs Act inasmuch as there is no documentary material to show that the learned Commissioner had been assigned the function of issuing show-cause notice and adjudicating the same in relation to imports – Held that:- no evidence has been brought on record by the respondent to show that the Commissioner of Customs (Preventive) was specifically assigned the function of issuing the show-cause notice and adjudicating the same in relation to the subject imports, lack of jurisdiction for the Commissioner of Customs (Preventive) in this case becomes the common ground for allowing all the three appeals, order is set aside, appeals are allowed
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Corporate Laws
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2012 (5) TMI 496
Violation of companies act - oppression and mismanagement – company did not convene AGM - petitioners are seeking permission to sell the assets of the company and distribute the sale proceeds to the shareholders in proportion to their shareholding in the company – Held that:- aberrations in the conduct of AGM and non-compliance of statutory filings itself would not amount to an act of oppression. The alleged default from 2001 is raised only as a ground to challenge the sale deed. Even assuming that there is no Board of directors or if the Board of directors is not lawful Board or if the managing director is not a lawful managing director, the petitioners can get the same resolved by calling a general meeting of the company and get the directors appointed in the place of the retiring directors. Instead of doing that the only resolution in the requisition notice dated 19th November, 2006 is to wind up the company, and sell the assets and share the spoils which are not for the interest of the company, but for personal interests which cannot be entertained under sections 397 and 398 of the Act.
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2012 (5) TMI 495
Maturity proceeds/redemption amounts under section 205C of the Companies Act - Investment in bonds with an option of premature redemption – petitioner applied for redemption of their bonds - respondent No. 1 refused to make the payment and informed the petitioner that they had exercised the call option for early redemption in 2001 - As the petitioner did not submit the bond certificates respondent No. 1 transferred the maturity proceeds/redemption amounts under section 205C of the Companies Act, 1956 to the Ministry of Corporate Affairs – Held that:- petitioner is aggrieved because she did not stake her claim for refund within seven years. She did not inform change of address and, therefore, could not be communicated and informed about the premature redemption. The petitioner also did not bother to read the terms and conditions of allotment including the early redemption clause. These are serious lapses on the part of the petitioner Applicability of act – Held that:- Act deal with the deposits or promissory notes. There is no such limitation or prohibition in the Act. The Act itself is a principal enactment and not a delegated legislation Retrospective effect – Held that:- contention of the petitioner that section 205C has been given retrospective effect has no merit. The aforesaid section was introduced by Companies (Amendment) Act, 1999 with effect from 31st October, 1998. The call option was exercised by the respondent in January, 2001 and the bonds became due and payable in July 2001. The contention of the petitioner that they were not aware of this provision also does not merit acceptance. writ petition dismissed
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Service Tax
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2012 (5) TMI 512
Satisfaction of Rule 4A of Service Tax Rules, 1994 in respect of disputed invoices and bills - Held that:- The appellate order does not demonstrate the extent to which examination is done - as if the allegation was that there was non-compliance to Rule 4A, it was necessary to examine the manner and extent of departure to the Rule when applied to the concerned invoice/bill - as examination done by the first appellate authority was not complete, the matter is sent back to satisfy him regarding requirement of Rule 4A.
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2012 (5) TMI 511
Waiver of pre-deposit - assessees took credit on the strength of ineligible documents, namely, invoices not containing their registration number – Held that:- other particulars such as name and address of service receiver (customers of the assessees), value of taxable service etc. are available with invoices and therefore prima facie non-mention of the Service tax registration number of the assessees on the documents on the media for advertisement of the assessee’s products is not sufficient to deny credit which is substantive right. waive pre-deposit granted
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2012 (5) TMI 510
Reduction of penalty - appellant provided taxable service of maintenance, repair and expenses. Expenses reimbursed was held to be taxable - taxability of the transaction - assessee has discharged tax liability before adjudication - appeals are disposed of remanding the matter to the original authority
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2012 (5) TMI 509
Availability of CENVAT Credit of Service Tax paid in respect of services relatable to the Effluent Treatment Plant - CENVAT Credit denied on procedural aspect that various items on which the same can be availed was not having registration number of the service provider – Held that:- it is not clear from the impugned order of the Commissioner (Appeals) that as to whether the same is denied on the ground of procedural lapses or on the ground that the duty does not stand deposited by the service provider with the department, issue of non-payment of Service Tax by service provider was raised in the Audit. Whether this was the audit of present appellant or of the service provider is not clear, matter is remanded to Commissioner (Appeals), for fresh consideration, appeal is disposed off
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2012 (5) TMI 492
Extended Period of Limitation - Service Tax demand on the ground that the value of material used in providing photographic service was required to be added in the value of services - Held That:- As the demand is admittedly beyond the normal period of limitation and the Tribunal in the case SHOBHA DIGITAL LAB. Versus COMMISSIONER OF CENTRAL EXCISE, BHOPAL [2011 (8) TMI 721 (Tri)] held in favour of the applicant at similarly situation - set aside the impugned demand alongwith setting aside of penalty imposed upon the applicant - in favour of assessee.
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2012 (5) TMI 491
Waiver of pre-deposit of interest and penalty – denial of utilisation Cenvat credit for payment of service tax on the Goods Transport Agency as recipient of the service – Held that:- Commissioner (Appeals) has dismissed the appeal for non-compliance to the provisions of Section 35F of the Central Excise Act without going into the merits of the Appeal. in the case of Nahar Industrial Enterprises Ltd. (2008 (10) TMI 38 (Tri)) whereby the payment of service tax from Cevant amount was upheld. order is set aside and the matter is remanded to the Commissioner (Appeals) to pass afresh order without insisting upon any pre-deposit. Appeal is disposed of by way of remand. Stay petition and appeal is allowed
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2012 (5) TMI 490
Coaching or training to the employees of the buyer concerns - Held that:- Respondent was not providing any coaching or training to outsiders except the employees of the buyer concerns who were to use the machines purchased. The training is not appearing to be a primary commercial activity of the appellant nor also commercial activity of such nature as known to the fiscal laws was carried out by Respondent. stay application and appeal of Revenue are dismissed.
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2012 (5) TMI 489
Mandap Keeping-Service - receipt of the amount on account of renting out land and open ground – Held that:- There is nothing whisper in the show cause notice as to whether the receipt made by the respondent was in relation to or in respect of any of the functions envisaged by law to be performed using the immovable property. Finding no substance in the show cause notice, there is no need to dilate the matter further. both stay application and appeal of Revenue are dismissed.
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Central Excise
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2012 (5) TMI 514
Revision applications - rebate claims - rebate claims were rejected by the Divisional Assistant Commissioner on the basis of the fact that raw materials were directly sent to the job workers from the suppliers end without bringing it first to the applicants premises – Held that:- rebate of duty paid on materials will be admissible as per verified input output norms. The contention of the applicant that the approved formula of manufacture/input-output ratio is for the purpose of procurement of raw materials and has nothing to do with sanction of rebate claim is not legally sustainable in view of the above said provision of notification. The consumption of raw materials as per approved/declared input-output norms is required to be taken for computing rebate of duty involved in the materials used in the manufacturing of export goods. Government notes here that lower authorities have correctly followed the prescribed/laid down conditions in respect of export goods herein and sanctioned the rebate claims as per laid down guidelines, revision applications are rejected
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2012 (5) TMI 513
Whether Cenvat Credit of service tax paid in respect of GTA services availed by assessee, can be used for payment of service tax - period involved April, 2006 to September, 2006 - Held that:- Tribunal in the case of Shree Rajasthan Syntex (2011 (8) TMI 265 (Tri)) held that recipient of services from the GTA on payment of service tax gets covered by output service definition as appearing in Rule 2(p) of the Rules. As such, we find that deletion of explanation with effect from 18.4.06 from Rule 2(p) of the Cenvat Credit Rules, 2000 would not make much difference. Therefore, Cenvat credit can be utilised towards payment of Service Tax in respect of services received from Goods Transport Agency inasmuch as by a deemed fiction of law service recipient is held to be output service provider - Decided in favour of assessee. – Decided in favor of assessee.
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2012 (5) TMI 494
Demand of duty by classifying the products under Heading 84.38 not under 84.33 – goods are to be classified as excisable and have wrongly availed the benefit of SSI exemption notifications - Revenue contended that Chapter Heading 84.33 does not cover Tea Sorting Machine and Tea Extractor Machine manufactured by assessee – Held that:- The Assistant Commissioner has rightly held that the classification list effective from 1.4.95 was duly approved by the proper officer and similar classification lists/declarations were filed by the respondent for the periods under question - the show-cause notice itself was silent as to whether the machineries were cleared for some purposes other than tea industry – the assessee had been paying the duty under the same Chapter Heading by availing the benefit of Notification and the Department did not raise any objection, so far as the approved Classification List effective from 01.04.95 – rightly held that when classification lists are filed and approved allegation of suppression or willful mis-statement in order to invoke extended period for demand is not sustainable - adjudicating authority cannot alter the classification accepted by the Assistant Commissioner who is the proper officer under Central Excise Law to finalize classification – against revenue.
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2012 (5) TMI 493
Export - acts of commission and omission were imputed against the appellant - penalty - appeal, the challenge to the order of the Tribunal is on the ground that though the Tribunal has specifically taken note of the statements made by the appellant in para 28 of the impugned order but the statements are not dealt with and no conclusions/findings are arrived at by the CESTAT qua the appellant - violation of natural justice – Held that:- appellant herein had issued airway bills; he had acted as an agent of the 5 concerns which were owned by Shri Tejwant Singh; he played his role on specific instructions of Shri Tejwant Singh; and he was dealing with the Customs Officers in respect of export of these very goods. The Tribunal is thus categorical that the appellant was connected with the procurement of the goods by the exporters and there were other statements and sufficient material to implicate the appellant, no merit in these appeals accordingly dismissed
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2012 (5) TMI 475
Demand of Duty, Interest and Penalty on the basis of the value determined in terms of the provisions of Rule 10A - the appellant company is engaged in building of bus bodies - the Department was of the view that assessee were building bus bodies on job work basis – Held that:- This matter is covered against the appellants by the judgement of the Tribunal in the case of Audi Automobiles vs.C.C.E., Indore [2009 (5) TMI 426 (Tri)] Wherein it is decided that body fabricating and mounting on the chassis which were supplied to the said firms by the manufacturer of chassis is the activity for the purpose of valuation squarely fall under Rule 10A and not under Rule 6 - penalty imposed on the appellant company is not justified as the matter relates to interpretation of valuation Rules and it cannot be said that there was intention on the part of the appellant to evade duty - the duty demand along with interest is upheld and demand of penalty is set aside.
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2012 (5) TMI 474
Penalty – petitioners shifted around 70,000 plastic crates to the plot of M/s. Navneet Publications on emergency basis - officers of the Central Excise Department visited the said neighbouring premises and later on, the petitioners’ premises and seized the said 70,000 plastic crates shifted thereto - Tribunal has found that the action of the petitioners in removing the goods from the place of manufacture and storing them in the adjacent premises, was not suggestive of intention to evade duty - Held that:- penalty under Rule 209A, any person who acquires possession of, or is in any way concerned in transporting, removing, depositing, keeping, concealing, selling or purchasing, or in any other manner deals with, any excisable goods which he knows or has reason to believe are liable to confiscation under the Act or the rules, shall be liable to a penalty, merely because confiscation under Rule 173Q is set aside as the ingredients of Section 11AC of the Act and Rules 57-I(4) and 57U(6) of the Rules are not satisfied does not mean that penalty under Section 209A cannot be levied if upon the evidence on record a case is made out for levy of such penalty, petition partly succeeds and is, accordingly, allowed, penalty of Rs. 2 lakhs on the petitioner No. 2 under Rule 209A of the Rules is sustained
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2012 (5) TMI 473
Duty demand - clearances of cigarettes alleged to have been made without payment of duty - penalty - applications for waiver of the requirement of pre-deposit of duty demand and penalty - allegation against the GTC is that while MPTL, Durg is a dummy company floated by GTC, fully controlled by them and that actual operations right from the stage of procurement of raw materials, manufacture of cigarettes and transportation and marketing were being carried out and arranged by GTC, during the period from 12-10-90 to 31-3-92 clandestine clearances of cigarettes without payment of duty were made from MPTL’s factory and thereby contravening various provisions of Central Excise Rules, 1944 and that the duty involved on these clandestine clearances – Held that:- after 15 years from the date of issue of show cause notice, the appellants claim that all the relied upon documents have not been supplied/allowed to be inspected - Even if there was stay on adjudication proceedings by the order of Hon’ble Madhya Pradesh High Court, but still the relied upon documents could have been supplied as there was no stay on the same, matter is still un-adjudicated and the impugned order bearing 26-5-2010 has been issued but it is signed by the Commissioner who had retired in 2008. The order passed after 15 years is an ex parte and non-speaking order supposed to have been issued by an officer who had retired long time back, matter involving huge revenue being now 15 years old, we consider it appropriate to direct the Chairman of Central Board of Excise & Customs to monitor the de novo adjudication, appeals and the stay applications are disposed of
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2012 (5) TMI 472
Classification - classification of other bathroom accessories of brass, namely soap dishes, toilet paper holder, tumbler holder, towel ring, towel rack, towel rack with single rail, coat hook, robe hook and for glass shelf - respondent were paying Central Excise duty on these items by classifying the same under sub-heading 7419.99 of the Central Excise Tariff on their transaction value determined under Section 4 of the Central Excise Act. The Department was of the view that all these items are sanitary ware and parts thereof made of brass and hence the same are classifiable under sub-heading 7418.90 of the Tariff – Held that:- other than soap dishes and toilet paper holder of brass, whose classification has been upheld by the Commissioner (Appeals) under sub-heading 7418.90, none of the other items namely towel ring/towel racks, robe hook, coat hook, tumbler holder and glass shelf are classifiable under heading 7418.90, the duty has been correctly paid in respect of these items on the value determined under Section 4, no infirmity in the impugned order, Revenue’s appeal dismissed
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Wealth tax
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2012 (5) TMI 515
Denial of Claim of exemption u/s. 5(1)(vi) of the W.T. Act - AO denied exemption as claim has not been made in the return – Held that:- As assessee has wrongly shown the plot measuring 336 Sq. Meter in the return of wealth inadvertently as taxable it is not chargeable to wealth tax as per provisions of section 5(1)(vi) as the plot of land is of area comprising of 500 Sq. meter or less – exemption cannot be ignored even if the assessee has not made any claim of exemption in the return of wealth - since the assessee made claim before the first appellate authority who did not decide this issue and agreed with the finding of the AO the matter requires re-consideration for factual verification and decision in accordance with law - restore the issue to file of CWT(A) with the direction to decide the issue in accordance with law as observed – in favour of assessee for statistical purpose. .
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Indian Laws
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2012 (5) TMI 508
Negotiable Instruments Act – Blank Cheque - dishonor of cheque - co-extensive liability of the guarantor and the principle debtor - petitioner contended that guarantor cannot be prosecuted under section 138 of the Act without taking any action against the principal borrower. Blank cheques had been handed over by the petitioner to the respondent No. 1 towards security which have been misused - Held that:- Petitioner has not denied his signatures on the cheques. Once he has admitted his signatures on the cheque he cannot escape his liability on the ground that the same has not been filled in by him. When a blank cheque is signed and handed over, it means that the person signing it has given implied authority to the holder of the cheque, to fill up the blank which he has left. A person issuing a blank cheque is supposed to understand the consequences of doing so. He cannot escape his liability only on the ground that blank cheques had been issued. - petition is dismissed Bare perusal of the provision clearly shows that the section commences with the words "Where any cheque". The use of word "any" assumes significance here. It shows that for whatever reason if a cheque is drawn on an account maintained by the drawer with its bank, in favour of any person for the discharge of "any debt" or other liability, the ingredients of offence under section 138 of the Act gets attracted in case cheque is returned dishonoured for insufficiency of funds and the cheque amount is not paid within the statutory period despite service of notice.
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