TMI Tax Updates - e-Newsletter
June 11, 2013

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws Service Tax Central Excise CST, VAT & Sales Tax Indian Laws

News

1. RBI releases its Monthly Bulletin for June 2013

2. RBI penalises Axis Bank, HDFC Bank and ICICI Bank

3. BBC Covers Income Tax Story

4. Anand Sharma and President U Thein Sein Agree for India’s Help to Revive 300 Apparel Factories in Myanmar, Disha Myanmar to Emerge as Common Compliance Code

5. India Offers Usd 150 Million for SEZ in Sittwe

Highlights / Catch Notes

Income Tax

• High Court Upholds DDIT Moradabad's Notice Validity u/s 131(1A) Despite Assessee Filing Returns in Delhi.

  Case-Laws - HC : Inquiries u/s 131(1A) - Jurisdiction - Notice issued by DDIT Moradabad (UP) - Assessee is filing returns in Delhi - validity of notice upheld - HC
  Visit to Get Source

  ---

• Commissioner Cannot Indefinitely Delay Section 12A Registration Applications Necessary for Initial Tax Exemptions u/s 80G.

  Case-Laws - AT : Registration u/s 12AA and initial exemption u/s 80G - it is not open to the Commissioner to keep an application for registration under section 12A pending indefinitely - AT
  Visit to Get Source

  ---

• Section 54: New Asset Investment Need Not Be Solely from Original Asset Sale Proceeds.

  Case-Laws - AT : For claiming exemption under S.54 it is not necessary that the investment in new asset should be out of the sale consideration received from transfer of the original asset only - AT
  Visit to Get Source

  ---

• Investment Recorded in Books Makes Section 69 Inapplicable; Section 142A(1) Conditions Render Reference Invalid.

  Case-Laws - AT : Reference u/s 142A - section 69 is not applicable since the investment has been recorded in the books of account. - Therefore, as per condition prescribed u/s 142A(1) itself is an invalid - AT
  Visit to Get Source

  ---

• Transfer pricing adjustments for advertising, marketing, and sales promotion expenses to enhance foreign marketing intangibles are allowed.

  Case-Laws - AT : TP Adjustments in relation to advertisement, marketing and sales promotion expenses incurred for creating or improving the marketing intangible for and on behalf of the foreign AE is permissible - AT
  Visit to Get Source

  ---

• Taxpayer Can't Use Incorrect Method for Arm's Length Price Despite Past Acceptance by Transfer Pricing Officer.

  Case-Laws - AT : TP - If a wrong method has been inadvertently accepted by the TPO in an earlier year, license can’t be given to assessee to continue calculating the ALP in such a grossly erroneous manner in perpetuity. - AT
  Visit to Get Source

  ---

Customs

• Claim for Refund Requires Appeal of Initial Assessment Due to Discovery of Beneficial Notification on Duty Payment.

  Case-Laws - AT : Refund claim related to excess paid duty - on realizing that the other notification is more beneficiary, they were required to challenge the assessment by way of filing appeal against the same. - AT
  Visit to Get Source

  ---

VAT

• Exemption for Minor Forest Produce Under VAT Applies Only to Taxable Items; Includes Tendu Leaves.

  Case-Laws - HC : Tendu leaves versus minor forest produce - the exemption is applicable to all the forest produce which are eixigible to tax. The exemption will certainly be applicable to only those minor forest produce, which are exigible to tax. - HC
  Visit to Get Source

  ---

• Failure to Surrender Transit Pass at Exit Checkpost Presumes Sale Occurred in Uttar Pradesh u/s 28-B.

  Case-Laws - HC : Inter state sale or local sale - In case of failure to surrender the transit pass at the exit check post, Section 28-B contemplates presumption of sale of goods inside the State of U.P. - HC
  Visit to Get Source

  ---

Case Laws:

• Income Tax

• 2013 (6) TMI 232
  Special leave petition dismissed against order of Delhi High Court [2012 (4) TMI 286 - DELHI HIGH COURT] considering the assessee be treated as “served” with the notice u/s 148, which was earlier issued at the address mentioned in the return.

  ---

• 2013 (6) TMI 228
  Inquiries u/s 131(1A) - Jurisdiction - Notice issued by DDIT Moradabad (UP) - Assessee is filing returns in Delhi - Held that:- the Assessing Officer has exclusive jurisdiction in respect of a person residing within his territory under Section 124 of the Act. While assessing, the Assessing Officer can exercise the powers under Section 132 and 135 also. But powers of the Assessing Officer under Section 132 and 135 of the Act are not exclusive. Under Section 120 (1) of the Act the Board is competent to assign jurisdiction on one or more authority. Section 135 provides that income-tax authority, while making an inquiry, shall have all the powers of Assessing Officers. Thus powers under Section 132 and 135 of the Act can be concurrently exercised by the Assessing Officer as well as other income-tax authorities. Jurisdiction of the Director is concurrent with the powers of Assessing Officer and has not been excluded under the Act. Thus the notices issued by Deputy Director of Income-tax(Investigation) Moradabad (respondent-2) were well within his jurisdiction. Pendency of assessment proceedings - held that:- Use of the words "notwithstanding that no proceedings with respect of such person or class of person are pending before him or any other income-tax authority" used under Section 131 (1A), makes it clear that for exercising the jurisdiction under this section pendency of any matter before the income-tax authority is not a condition precedent. Person versus assessee - held that:- Learned counsel for the petitioner reads the word "person" as "assessee", which is not correct reading of section. - The word assessee is defined in Section 2(7) of the Act, which means by whom any tax or any other sum of money is payable under the Act. It is an inclusive definition. On a plain and simple reading of the aforesaid Sub-section (1A) of Section 131, the irresistible conclusion is that any person who is suspected to have concealed the income etc. within jurisdiction of the authorities mentioned in Sub-section (1A) of Section 131 of the Act, the authority concerned may issue notice for the purposes of investigation under Section 131(1A) of the Act. - Decided against the assessee.

  ---

• 2013 (6) TMI 227
  Expenditure on voluntary retirement scheme in respect of two units - whether allowable even though such expenditure concerned the closure of the business activities of the assessee in these units? - Held that:- As decided in Ravindranathan Nair case [2000 (11) TMI 3 - SUPREME Court] having regard to the finding that all the other units formed one business, the expenditure must be held to have been incurred in regard to such business - impugned expenditure was a business expenditure so entitled to deduction u/s 37. In favour of assessee.

  ---

• 2013 (6) TMI 226
  Penalty u/s 271(1)(a) - delayed filing of return beyond the limit prescribed under Section 139 (1) - Tax effect - monetary limit for filing an appeal before HC - Held that:- One fails to understand how Revenue can contend that so far as new cases are concerned, circular issued by the Board is binding on them and in compliance with the said instructions, they do not file references if the tax effect is less than Rs.2 lakhs. But the same approach is not adopted with respect to the old referred cases even if the tax effect is less than Rs.2 lakhs. In our view, there is no logic behind this approach. From the perusal of the instructions issued by the Board, we find that the Board had issued directions that the appeals will be filed only in cases where the tax effect exceeds Rs.2 lakhs in the matter of High Court in appeals U/s 260A or Reference U/s 256(2). The aforesaid circular is binding on all the authorities under the Board including the appellant Commissioner of Income Tax, Jabalpur. - Decided against the revenue.

  ---

• 2013 (6) TMI 225
  Profit on transfer of the Duty Entitlement Pass Book Scheme - whether required to be taken into consideration and not the quantum of sale proceeds for the purpose of sub-section iii(d) of Section 28 and Section 80 HHC - Held that:- As decided in Topman Exports's case [2012 (2) TMI 100 - SUPREME COURT OF INDIA] DEPB has direct nexus with the cost of imports for manufacturing an export product, any amount realized by the assessees over and above the DEPB on transfer of the DEPB would represent profit on the transfer of DEPB and while the face value of the DEPB will fall under clause (iiib) of Section 28, difference between the sale value and the face value of the DEPB will fall under clause (iiid) of Section 28 – Decided in favor of assessee.

  ---

• 2013 (6) TMI 224
  Deduction u/s 80IB - activity of cutting of stone and manufacturing tiles - manufacture / production - Held that:- present appeal is fully covered by decision of the Division Bench of this Court in Commissioner of Income Tax, Udaipur vs. M/s. Arihant Tiles & Marbles Pvt. Ltd. [2013 (6) TMI 45 - RAJASTHAN HIGH COURT] - assessee is entitled to deduction under Section 80HHC - Decided in favor of assessee.

  ---

• 2013 (6) TMI 223
  Disallowance of interest expenditure u/s. 14A - part deletion by ITAT - Held that:- Tribunal has committed no error. Basically the entire disallowance has been made on the basis of facts emerging on record. The Tribunal also relied on the decision of CIT v. Reliance Utilities & Power Ltd. [2009 (1) TMI 4 - HIGH COURT BOMBAY] wherein ITAT have given a clear finding that the assessee had interest free funds of its own & as AO had, without giving a finding as to how much administrative expenditure have been incurred to earn the exempt income, had made disallowance. In the earlier years also, similar position obtained. That being the fact, no question of law arises.In favour of assessee Compensation paid to property owner - whether a revenue expenditure incurred for business when it was compensation for non-occupation and a capital loss in nature - Held that:- The transaction in respect of which the compensation was paid arose during the course of business and was for the purpose of business. The expense has been incurred by the assessee to protect its interest and in lieu of the claims that could have been raised by the landlord. The incurring of expenditure has not been doubted by the Revenue. The Apex Court in case of J.K. Wollen v. CIT [1968 (8) TMI 15 - SUPREME Court] has held that in applying the test of commercial expediency for determining whether an expenditure was wholly and exclusively laid out for the purpose of the business, reasonableness of the expenditure has to be adjudged from the point of view of the businessman and not of the IT Department. In favour of assessee.

  ---

• 2013 (6) TMI 222
  Penalty u/s 271(1)(c) - debatable issue - taxation of short term capital gains under Section 45(4) - held that:- The Tribunal was of the opinion that transaction which had taken place by passing book entries and not by executing any conveyance deed and since this was a debatable issue and when the assessee has acted upon the advice of the Chartered Accountant it cannot be said to be an attempt on the part of the assessee to conceal any material facts. It also relied on the judgment of BTX Chemical P. Ltd. vs. Commissioner of IncomeTax(2006 (7) TMI 155 - GUJARAT High Court) wherein also the question of penalty had arisen before this Court on account of alleged concealment of income and this Court had held that the assessee, who was under a bona fide belief on the basis of the advice received from his Chartered Accountant that the loss occurred as a result of destruction of asset was of revenue nature and claimed the same by way of deduction, the same cannot be held to be a case of concealment coming within the scope of Section 271(1)(c) of the Act. - No penalty - Decided in favor of assessee.

  ---

• 2013 (6) TMI 221
  Registration u/s 12AA and initial exemption u/s 80G denied - Held that:- It was for the Commissioner to dispose of the application for registration, and the order thereon could not have been passed by any other authority to which such powers may have been delegated. The communication by the Income Tax Officer (Technical), therefore, does not have, any authority of law. A communication, or even an order, signed by the Income Tax Officer cannot be treated as disposal of application. No reasons whatsoever have been given in the ITO's letter but he mentions that the application was considered "sympathetically" and rejected. This kind of authoritarian approach, and unwillingness to give legal reasons, does not anyway befit conduct of any public authority in a democratic set up like ours, wherein rule of law is of paramount importance. As held in the case of Bhagwat Swarup Shri Shri Devraha Baba Memorial Shri Hari Pamarth Dham Trust v. CIT [2007 (8) TMI 380 - ITAT DELHI-B] it is not open to the Commissioner to keep an application for registration under section 12A pending indefinitely, and when the application is not disposed of within a period of six months from the date of filing the application, the approval is deemed to have been granted. Clearly, in the present case, the period of six months of the date of application has passed and no order has been passed by the Commissioner. Therefore, the registration under section 12A should be deemed to have been granted. In favour of assessee.

  ---

• 2013 (6) TMI 220
  Revenue Expenses disallowed - assessee has maintained four separate divisions of cost centers - Held that:- As in earlier year the HO expenses were allocated at 93% capital and 7% revenue as only one Multiplex was in operation for part of the period. But the basis of allocation is the cost of the project. This year the investment in operational project was at Rs. 124.01 crores whereas other projects was at Rs. 60.63 crores. Therefore assessee allocated the expenditure at 67.16% revenue and 32.84% capital during the year. There is justification in the claim of assessee as the newly operational projects also require more attention and in some projects there was no activity except purchase of land. In the absence of any details of manpower allocation, time spend on each project, the only rationale method adopted by assessee is capital cost allocation. This cannot be faulted as AO did not examine any other method to allocate but estimated at two thirds capital and one third revenue (as against the similar ratio of assessee in contrary method ie. 1/3rd : 2/3rd). Bangalore project does not require any allocation as only land was purchased. Even one takes the operational under construction ratio, it is 3: 3 i.e. 50% capital and 50% revenue. Looking at it either way the allocation made by AO has no basis or logic. In view of this, the allocation made by assessee on cost of project basis which is the only rationale method on the given facts. Therefore, AO is directed to delete the amount so treated. In favour of assessee. Taxing the interest income arose during the preoperative period - Held that:- AO observed that assessee has credited interest income to the Capex Account of projects under completion & has not given any specific reason as to why this amount should be allowed as interest capitalized added it as revenue receipt and brought to taxation. The appellant earned an interest which was given to it by the Head Office. The said income is a income which cannot be capitalized and has to be treated as Income from other sources. The AO therefore, has rightly treated the income as income from other sources as held by CIT(A) - No reason to disturb the findings of AO and the CIT. Against assessee. Disallowance of Prior Period Expenses - Held that:- As seen from the order of AO, AO has not examined the nature of expenditure inspite of giving the details. Otherwise, he would not have disallowed the depreciation which was actually disallowed by assessee in computation. Just because the income and expenditure was classified as prior period, they need not be excluded or disallowed. AO has to examine whether the expenditure crystallized during the year or not. Moreover, there may be some capital expenditure as noted by the CIT (A), but the same was not examined or adjusted to the project. These aspects require examination. Therefore, the issue in this ground is restored to AO for detailed examination and to consider the contention of assessee - in favour of assessee for statistical purposes. Treatment to entertainment tax in respect of Multiplexes at Ahmedabad, Andheri (Mumbai), and Chandigarh - revenue v/s capital receipt - Held that:- The issue requires examination by AO. The respective State Govt. Policies and the orders are required to be examined whether the contentions of assessee is correct or not thus the matter is restored to the file of AO for adjudication. In favour of assessee for statistical purposes. Basis for allowing depreciation claim - Held that:- First of all there is no basis for working out the utilized and unutilized areas as was done by AO when the entire Multiplex was put to use. Assessee has started operation in only three places and balance of projects are under various stages of construction. Therefore, what assessee claimed was depreciation of projects under operation and repairs and maintenances of the same. Once the entire project has commenced the business operation, just because part of it was not leased out or commercially exploited cannot be a basis for disallowing of depreciation and expenditure. Following the concept of block assets of an asset has entered into “Block of Assets” and depreciation has been granted on it, the claim of depreciation cannot be denied in subsequent years. See CIT Vs. Sonal Gum Industries [2009 (2) TMI 84 - GUJARAT HIGH COURT]. In favour of assessee. Claim of revenue expenditure on repairs and maintenance - Held that:- No merit in action of AO in disallowing the amounts. In favour of assessee.

  ---

• 2013 (6) TMI 219
  Exemption claimed u/s 54 denied - as per CIT(A) since the assessee has made payment for purchase of the plot from a different source and has no actually utilised the sale consideration received from transfer of the original asset - Held that:- As decided in Muneer Khan Versus ITO [2010 (8) TMI 752 - ITAT HYDERABAD] provision contained u/s. 54 is pari materia with S.54F. Therefore, following the aforesaid ratio laid down to hold that exemption claimed by the assessee under S.54 cannot be denied on the ground that the assessee has not utilised the sale consideration received from the sale of flats itself, in purchasing the plot. Law is well settled by the judicial precedents that investment in purchase of pot for construction of house would entitle an assessee to claim exemption u/s.54 or 54F. Board's circular No.667 dated 18.10.1993 also says so. In favour of assessee. Whether the assessee has constructed the residential house within a period of three years as stipulated in S.54 - Held that:- Neither the AO nor the CIT(A) has dealt this fact. While the CIT(A) has disallowed the claim of the assessee on the ground that the sale consideration received on transfer of assets has not been utilized in purchasing the plot, AO has disallowed it by observing that the assessee has not purchased a residential house within one year. It is categorical submission of assessee that the assessee has constructed the residential house within the stipulated period of three years as per S.54 and necessary information and evidences were also produced before AO with bank account and letters submitted. In the absence of any material to the contrary brought on record by the Revenue, inclined to accept the assessee's claim that the construction was completed within the stipulated period of three years as per Section 54. In favour of assessee. Method of computation of long term capital gains adopted by AO challenged - restriction of the cost of construction and cost of improvement to Rs.3 lakhs as against Rs. 6 lakhs claimed by the assessee - Held that:- As it is evident from the orders of the revenue authorities that the assessee has not produced enough supporting evidence to prove that she has in fact incurred expenditure of Rs.6 lakhs towards cost of construction and cost of improvement, the allowance of 50% of cost of construction at Rs.3 lakhs is reasonable, and no interference is called for. Against assessee. Disallowance of expenditure of digging of borewell while computing the cost of acquisition - Held that:- In the absence of any evidence in support of her claim in this behalf no infirmity in the action of the revenue authorities in rejecting the claim of the assessee. Against assessee. Disallowance of cost of boundary wall as part of construction cost of the new property - CIT(A) and AO have rejected the assessee's claim only on the ground that the construction made was not out of sale proceeds of the flats. Held that:- As for claiming exemption under S.54 it is not necessary that the investment in new asset should be out of the sale consideration received from transfer of the original asset only. Thus the assessee is entitled for deduction of Rs.3 lakhs, being expenditure incurred on construction of compound wall. In favour of assessee.

  ---

• 2013 (6) TMI 218
  Exemption u/s 11 directly and indirectly . It is to note that the Revenue authorities have failed to distinguish difference between indirect benefits and presumption of benefits. Both are separate situations. Even in case of indirect benefit, there must be certain evidences, it can not be held on presumption basis that Managing Trustee was benefited by inflating construction cost. In the case under consideration, entire basis of the A.O. is on presumption and such presumption is not sustainable in law. A.O. referred the matter during the assessment proceedings to the D.V.O. under section 142A which is contrary to the law laid down in the case of Sargam Cinema v. CIT [2009 (10) TMI 569 - Supreme Court of India] wherein held that reference under section 142A cannot be made unless the books of account is not rejected. In the case under consideration AO referred the matter to DVO without rejecting books of account which is contrary to the law. Reference under section 142A can be made by the A.O. only under those circumstances for estimating the value of the investment referred in the section 69 to 69B or fair market value of any property provided in the section. As per section 69 if the investment was not recorded in the books of account and under section 69B under the circumstances where the A.O. was of the view that the investment acquiring prescribed asset exceeds the amount recorded in the books of account. In the case under consideration, section 69 is not applicable since the investment has been recorded in the books of account. Section 69B is also not applicable. As per the A.O. the assessee has shown excess investment in the books of account. Therefore, as per condition prescribed under section 142A(1) read with section 69 and 69B the reference itself is an invalid reference. In favour of assessee.

  ---

• 2013 (6) TMI 217
  Transfer pricing adjustment in relation to advertisement, marketing and sales promotion expenses - international transaction of brand building - whether the assessee should have earned a mark up from the associated enterprise in respect of advertising, marketing and promotion expenses alleged to have been incurred for and on behalf of the associated enterprise? - Jurisdiction of TPO - improper selection of comparable - TPO/DRP have determined ALP in respect of AMP expenses by applying the bright line test Held that:- Scope of sub-section (2B) of section 92CA covers all types of international transactions in respect of which the assessee has not furnished report, whether or not these are international transactions as per the assessee s version. Thus the instant case is fully and directly covered under sub-section (2B) of section 92CA as it becomes evident that no fault can be found with the jurisdiction of the TPO to process the transaction under reference. Once there was no reporting of an international transaction by the assessee it was well within the power of the TPO to consider such transaction whether or not it was referred by AO to him. As noticed that the Revenue has amply shown that the assessee not only promoted its name and products through advertisements, but also the foreign brand simultaneously, which has remained uncontroverted on behalf of the assessee. This factor together with the fact that the assessee s AMP expenses are proportionately much higher than those incurred by other comparable cases, lends due credence to the inference of the transaction between the assessee and the foreign AE for creating marketing intangible on behalf of the latter. As from the agreement entered into between assessee and LGK, it can be concluded that it is the assessee who agreed to make arrangements for advertising, marketing and sale promotion in India for the LG products manufactured by it as well as LGK. The cost of such advertising, marketing and sale promotion in India was also agreed to be exclusively borne by the assessee. It is not only the products manufactured by LGI for which the assessee has undertaken to incur AMP expenses but even for the products manufactured by LGK as well. Ex consequenti it is held that there is a transaction between the assessee and the foreign AE for the promotion of brand LG in India, which is legally owned by the latter. The mere fact that no consideration moved between the associated enterprises for a transaction is not a decisive factor to have influence over its nature. Payment of consideration has not been made as a condition precedent for inclusion of any transaction within the ambit of section 92B. The transfer pricing provisions should be seen in the backdrop of the fact that these are special provisions for avoidance of tax on the transactions structured between two associated enterprises. The simple fact that the foreign AE did not pay any consideration to the Indian AE will not take the transaction out of the purview of the transfer pricing provisions, if it is otherwise an international transaction. Thus it is palpable that all the three necessary ingredients as culled out from a bare reading of section 92B are fully satisfied in the present case. There was a transaction of creating and improving marketing intangibles by the assessee for and on behalf of its foreign AE; the foreign AE was non-resident; such transaction was in the nature of provision of service. Resultantly, the Revenue authorities were fully justified in treating the transaction of brand building as an international transaction under section 92B in the facts and circumstances of case. Suppose the Indian AE has rendered any service to its foreign AE and has charged less than what an independent comparable entity would have charged, section 92 will intervene to bring the income from such service at arm s length price. In such a situation even though there is no item of income in the profit and loss account of the Indian assessee, still section 92 will apply to dictate that the income should be included in the total income of the Indian AE for rendering such services as an independent comparable entity would have charged. The correct position is that the Revenue by this exercise has only ascertained the cost/value of the service rendered by the assessee to the foreign AE towards creation and improvement marketing intangibles. Therefore, there was no merit in the contention of the assessee that the Assessing Officer/TPO has made any disallowance out of advertisement expenses, which were otherwise deductible in full under section 37(1). As it is found that the TPO restricted the comparable cases to only two without discussing as to how other cases cited by the assessee were not comparable. Further it can be seen that the TPO has not considered the effect of any of the relevant factors as discussed above. A bald comparison with the ratio of AMP expenses to sales of the comparable cases without giving effect to the relevant factors as discussed above, cannot produce correct result. As the TPO has neither properly considered the request of the assessee for inclusion of some other comparable cases nor examined the effect of determination of the cost/value of international transaction, the ends of justice will meet adequately if the order of the TPO and that of AO giving effect to such order is set aside and the matter is restored to the file of the TPO for determining the cost/value of the international transaction and the consequent ALP afresh. As per section 92D alongwith section 92C(3), it becomes apparent that if the assessee does not consider a particular transaction as international and further fails to maintain relevant records in this regard, AO is free to determine the ALP on the basis of such material or information or document as are available with him. Here is a case in which the assessee did not maintain any document, information or evidence about the international transaction in question. In such a situation, it became incumbent upon the authorities to determine arm s length price as per section 92C(1) and (2). It is further evident from the order of the DRP that there is no discussion on any such plea raised by the assessee. Rather it can be seen that the assessee assailed the order of the Assessing Officer/TPO tooth and nail before the DRP on merits. As the computation of the ALP has been set aside by the authorities below with a direction to do it afresh as per law after allowing a reasonable opportunity of being heard to the assessee. Now the assessee would get full opportunity to put forth its case against any part of the computation of ALP of the international transaction by the TPO , thus there is no merit in the contention of the assessee that the ALP has been determined by applying the bright line test, which is not one of the recognized methods in India and hence the provisions of Chapter X will not apply. It has been noticed that the DRP applied the essence of cost plus method in determining the ALP of the transaction. Such addition of mark-up to the costs has the sanction of law as can be seen from sub-clause (iv) of clause (c) to rule 10B(1). Albeit the matter of determining the correct mark-up in the facts and circumstances of the present case has been restored to the file of the TPO, yet there is no hitch in holding that mark-up can be validly imposed. Thus both the questions posted are answered in positive by holding that the transfer pricing adjustment in relation to advertisement, marketing and sales promotion expenses incurred by the assessee for creating or improving the marketing intangible for and on behalf of the foreign AE is permissible and earning a mark-up from the Associated Enterprise in respect of AMP expenses incurred for and on behalf of the AE is also allowable.

  ---

• 2013 (6) TMI 216
  Minimum Alternate Tax (MAT) - Section 115JB - Whether applicable to foreign company - applicability of MAT on capital gain exempt u/s 10(38) - Held that:- Normally, when the charging provision itself indicates how to deter-mine the chargeable income and the rate at which it is to be taxed, one cannot resort to the so-called machinery provision to nullify the effect of the charging provision. Here, the requirement of the machinery provision, (if section 115JB(2) is a machinery provision) has to be complied with by one who comes within the sphere of the charging provision, that is, section 115JB(1). The principle of B. C. Srinivasa Setty [1981 (2) TMI 1 - SUPREME Court] cannot be legitimately invoked to find non-taxability when the taxability is patent. The argument that a foreign company which is an investment company cannot comply with section 115JB(2) of the Act since it has no other business in India may only mean that the long-term capital gain covered by section 10(38) of the Act may itself become the book profit for the purpose of section 115JB. A foreign company under section 112 of the Act may have to pay tax at 20 per cent. of the gain, but for section 10(38) read with section 115JB(1). The applicant has insisted even at the concluding hearing that it does not seek or want a ruling on the applicability of section 10(38) of the Act canvassed for by the Revenue. I have endeavoured to show that for giving a ruling satisfactory to its conscience, this Authority has to interpret both sections, section 10(38) and section 115JB of the Act together. That alone will answer the question of taxability of the transaction in question, in the context of section 115JB of the Act. Since the applicant does not seek and does not want a ruling on all the aspects arising out of the ques-tions posed for ruling, I think that it would be proper to decline a ruling on the questions as raised. Hence, I decline to give a ruling on this application. As noticed by this Authority, in Microsoft Operations P. Ltd., In re (AAR No. 781 of 2008) [2009 (2) TMI 23 - AUTHORITY FOR ADVANCE RULINGS] this Authority has the discretion not to entertain an application or to give a ruling, if the circumstances warrant it. I consider this a fit case to decline a ruling on the questions as sought for by the applicant. The application is hence disposed of by refusing to give a ruling on the questions now posed.

  ---

• 2013 (6) TMI 209
  Disallowance on account of late deposit of contribution to EPF / ESI - disallowance has been made simply for the reason that the assessee did not deposit its contribution before the due date under the respective Act. – Held that:- The Hon ble Supreme Court in the case of CIT vs. Alom Extrusions Limited [2009 (11) TMI 27 - SUPREME COURT] has held that the amendment to first proviso and omission of the second proviso to section 43B by the Finance Act, 2003 is retrospective. The Hon ble Delhi High Court in the case of CIT vs. Aimil Limited [2009 (12) TMI 38 - DELHI HIGH COURT] has allowed deduction in respect of employees share when the amount was paid before the due date under the Act. it becomes clear from the two judgments that both the employer s and employees contribution are allowable as deduction if the amount of provident fund etc., though belatedly, but is paid before the due date of filing of return u/s 139(1) of the Act. Treatment of interest income as Income from other sources against the Business income claimed by the assessee – Held that:- Tribunal in the assessee s own case for the immediately preceding assessment year has decided this issue in favour of the Revenue. Respectfully following the precedent, the interest income should be considered as falling under the head Income from other sources . Claim of deduction u/s 10A - This ground has two parts. First part deals with the inclusion of Finder fees and Marketing fees in the total turnover. Revenue admitted that the Tribunal in its afore-noted order for the preceding year has decided this issue against the assessee. Respectfully following the precedent, we uphold the action of the AO in this regard. Second component is against the inclusion of expenditure incurred in foreign currency from the total turnover. Revenue submitted that the Tribunal has decided this issue in assessee s favour in the afore-quoted order. The learned Departmental Representative admitted the position stated on behalf of the assessee in this regard. Respectfully following the precedent this issue is held in favour of the assessee. Transfer Pricing adjustment to the value of international transactions- Determination of ALP in respect of international transactions being IT Enabled Services - Held that:- After detailed discussion of that how the method employed by the assessee for determining the ALP in respect of international transactions for the year under consideration is contrary to the statutory provisions having no approval from any judicial forum. If such a wrong method has been inadvertently accepted by the TPO in an earlier year, license can’t be given to assessee to continue calculating the ALP in such a grossly erroneous manner in perpetuity. It needs to be discontinued forthwith. Therefore, reject this contention advanced on behalf of the assessee that the application of such a wrong method be granted a seal of approval on the basis of its acceptance by the TPO in a preceding year.

  ---

• Customs

• 2013 (6) TMI 233
  Anti-dumping duty levied in terms of Notification No. 52/2010-Cus. dated 19.4.2010 has been set aside - SRF Ltd. Vs. Refex Refrigerants Ltd. [2011 (1) TMI 713 - MADRAS HIGH COURT] - no interference is called for. The special leave petitions are dismissed

  ---

• 2013 (6) TMI 208
  Refund claim related to excess paid duty - Rejection on the ground that same had been paid due to mention of wrong exemption notification which was due to clerical mistake - Held that:- Goods imported are LDPE which are covered under Chapter 39 and both the Bills of entry filed by the appellant, they have claimed the benefit of notification No. 13/05. Though the appellant have pleaded that this notification is not applicable to the goods imported, on going through the notification, we find that this plea is totally wrong as S.No. 16 of the table annexed to this notification covers notes of Chapter 39 for which concessional rate of duty prescribed is 15%. Notification No. 21/02 Cus which was claimed subsequently by the appellant also covers the LDPE granules as Sr.No. 4 prescribes concessional rate of 10%. When both the exemption notifications were available and at the time of import, the appellant chooses to avail one particular notification No. 13/05 Cus and later on realizing that the other notification is more beneficiary, they were required to challenge the assessment by way of filing appeal against the same. They cannot claim the refund directly without challenging the assessment order in view of Apex Court judgment, in Priya Blue Industries Ltd. reported as [2004 (9) TMI 105 - SUPREME COURT OF INDIA]. Thus, there is no infirmity in the impugned order. Appeal dismissed.

  ---

• 2013 (6) TMI 207
  Confiscation/imposition of penalty - Export of non basmati rice - Held that:- Following the earlier order of the Tribunal in the case of Vikram Bisht and others vs. CCE, Ghaziabad, there is reduction in the redemption fine and penalties to 10% of the value of the Rice and modified the order of the Commissioner accordingly. As regards the appeals of CHA and its Director, there is no finding by the Commissioner as regards there being an active participant in the alleged export of non-Basmati Rice.

  ---

• 2013 (6) TMI 206
  Demand of duty/penalty - Shortage - Held that:- Revenue has not advanced any evidence to show that short quantities stand either cleared by the appellant clandestinely or used in the manufacture of their final product which stand cleared clandestinely. It is noted that variation is only to the extent of 3% which stand attributed to various reasons as discussed by the appellate authority. Revenue has also not contested the finding of Commissioner (Appeals) that weighment of raw cotton is governed by provisions of Bylaws made in the form of International Cotton Association and the Rules framed there under which allow variation in weight and such variation are on account of moisture components which may result in gain or loss all way. Thus, no reason to disturb the finding of the Commissioner (Appeals). Appeal is rejected.

  ---

• Corporate Laws

• 2013 (6) TMI 211
  Suit for commercial disparagement - Plaintiff has sought an interim injunction restraining the defendant from publishing advertisements or using any depiction or any other indica which disparages the goodwill and reputation of the plaintiff’s product sold under the trade mark DETTOL HEALTHY KITCHEN. A brief summary of the controversy is as follows. The plaintiff alleges that this reference in the advertisement was clearly directed to the plaintiff’s brand DETTOL being referred to as a Harsh Antiseptic. It also contends that the defendant has attempted to misrepresent that the plaintiff has done nothing but repackage its Antiseptic Liquid as DETTOL HEALTHY KITCHEN and the reference to “harsh antiseptic” in itself is denigrating of the plaintiff’s brand DETTOL. Held that:- Perusing the documents placed on record including the newspaper advertisement same subtly yet certainly targets the plaintiff’s brand DETTOL and its product DETTOL HEALTHY KITCHEN. - the defendant’s claim that “NO ONE REMOVES GREASE BETTER;NO ONE REMOVES GERMS BETTER” can be considered to fall within the purview of permissive comparative advertising. However, by stating that, An Antiseptic is for cleaning wounds and floors. Would you use to clean the utensils your family eats from? An antiseptic is for cleaning wounds and floors. Would you use it to clean the utensils your family eats from?, the defendant is to that extent impliedly referring to the plaintiff’s product by appealing to the consumer’s perception that the plaintiff’s product must be a harsh antiseptic and thereby denigrating the plaintiff’s product. Therefore, interim order has passed restraining the defendant to the extent indicated above from publishing the impugned advertisement or any other similar advertisement or depiction aimed at disparaging the goodwill and reputation of the plaintiff’s.

  ---

• Service Tax

• 2013 (6) TMI 237
  Service tax liability on rendering the service under Business Auxiliary Services - assessee contested that this is the only stray incident wherein they have got a commission for giving some help regarding machines to be procured for wind mill energy & he is a manufacturer of chemicals - Held that:- Consedring submission of appellant that he is eligible for the benefit of small scale service provider notification which has not been considered by the lower authorities but hastens to add that this point was not raised before the lower authorities. Since the issue involved was raised before the Tribunal for the first time adjudicating authority should be allowed to consider this submission and come to a conclusion.

  ---

• 2013 (6) TMI 236
  Utilization of cenvat credit for discharge of service tax on the GTA services - FAA had directed the appellant to deposit the entire amount of the service tax liability along with interest and penalty for hearing and disposing the appeal - Held that:- The issue involved in this case is prior to 01.03.08. Prior to issuance of the notification No.10/08-CE (NT) dated 01.03.08, there are various decisions which have held that the assessee is eligible to utilise the cenvat credit for the discharge of service tax liability on the GTA services. Thus this decided ratio will be applicable in this case. Set aside the impugned order and remand the matter back to the FAA to reconsider the issue afresh and pass an order on merits without insisting any amounts as pre-deposit. Appeal is allowed by way of remand.

  ---

• 2013 (6) TMI 235
  Service tax payable on reverse charge mechanism for availing the services of persons located outside - stay petition for waiver of pre-deposit of amount of service tax confirmed - Held that:- Lower authorities have come to a conclusion that the appellant has organised a business exhibition abroad and hence liable to pay service tax under the provisions of Section 66A of the Finance Act, 1994, for the amounts paid by appellant for organising such exhibition whereas appellant’s contention that they have not organised any exhibition but have paid for participating in such exhibition. There is a vast difference between organising and participating in an exhibition. Both the lower authorities have not considered this obvious difference. Finding strong force in the contentions raised by the assessee that CBEC Circular No. 354/11/2011-TRU dated 22.3.2011, will have bearing on the issue in hand, which has not been discussed by the lower authorities the appellant has made out a case for disposal of his appeal on merits by the first appellate authority after following the principles of natural justice and without insisting on any pre-deposit from the appellant.

  ---

• 2013 (6) TMI 234
  Refund - Show cause notice issued for not filing of refund claim in time and secondly that the export was in the name of M/s. Welspun Trading Ltd - While passing the adjudication order adjudicating authority rejected the refund claim on an altogether different ground of absence of certain documents which was not satisfied nowhere in the show cause notice - Held that:- It is a well settled principle that adjudicating authority cannot go beyond the scope of show cause notice. However, to meet the ends of justice it will be proper to ask the appellant to provide the specific documents required in addition to what they have already supplied to the department on 09.01.09 before issue of show cause notice. The matter is accordingly remanded to the adjudicating authority with a direction to specify the documents required and take appropriate action.

  ---

• Central Excise

• 2013 (6) TMI 215
  Polyester Filament Tow/Polyester Staple Fibre from Waste PET Bottles - whether the process adopted by the appellant amounts to manufacture or not? - Stay petition - the applicant was clearing the goods without payment of duty in terms of decision in the case of GPL Polyfils Ltd. (2005 (1) TMI 375 - CESTAT, NEW DELHI) which held that no manufacture was involved - Held that:- The period prior to the amendment in law i.e. prior to June, 2010 would be covered by the decision in the case of GPL [supra] as such, at the most, the appellant would be under duty liability for the period subsequent to June, 2010. The appellant have already deposited an amount of Rs.11.20 crores, as is clear from the said letter dated 5.4.2013 of the Asstt. Commissioner & as submitted that even for the subsequent period, the efforts are being made at the association level, for the issuance of Section 11 C-notifications also confirmed by another Advocate, Shri Prabhat Kumar submits that on behalf of the association, he is pursuing the matter before the Ministry for the issuance of Section 11 C notification though he fairly admits that no survey stands floated by the Ministry Thus it is deemed fit to dispense with the condition of pre-deposit of balance amount of duties and entire amount of penalties and stay the recovery of the same during the pendency of the appeals.

  ---

• 2013 (6) TMI 214
  Input service credit denied - Outward transportation service & Manpower supply service - Held that:- Although there is a change in the definition of input service credit post 1.4.2008, but an assessee who qualifies the condition laid down in Board's Circular NO.97/08/2007-S.T. dated 23.08.2007 is entitled for input service credit. Admittedly, in this case as per the sale agreement the goods were supplied on CIF, FOB or DDU basis. Therefore, the first condition of the said circular is satisfied and when the goods are transported upto port by the appellant therefore the risk of loss or damage to the goods are also vested with the appellant. It is not in dispute that the freight charges were not integral part of the sale value of the impugned goods. As the appellant has satisfied the condition of Circular No. 97/08/2007 dated 23.08.2007, therefore, the appellants are entitled for input service credit. See Ambuja Cements Ltd. vs. Union of India [2009 (2) TMI 50 - PUNJAB & HARYANA HIGH COURT] As for bonus and lunch allowance, the supplier of manpower has raised invoices of the services provided by him and the appellants have become service recipient thereon, thus as held in Ultratech cement (2010 (10) TMI 13 - BOMBAY HIGH COURT) that any services availed by the manufacturer of excisable goods in the course of business is entitled for input service credit, therefore the appellants are entitled for input service credit.

  ---

• 2013 (6) TMI 213
  Non-receipt of the inputs - comparison of inputs figures from the bank statement and figures stated in the statement dated 24.03.2005 recorded from Shri Surendra Pilai - whether mere paper credit was enjoyed by appellant as cenvat credit - Held that:- Summary adjudication in respect of ingredients of inputs without any break-up thereof to examine status of each ingredient thereof in each of the five years. An abrupt conclusion was drawn by Adjudicating Authority by a summary order thorough analysis of the composition of different ingredient of inputs of each year. The ingredient contributed to the allegation of difference of stock of inputs of 408.283 Mts. is necessary to be brought to record. When such situation comes to the face of order is possible to draw rational conclusion. Therefore matter should go back to Adjudicating authority to re examine it.

  ---

• 2013 (6) TMI 212
  Clandestine removal - verification of the loaded truck - it was found excess quantity of 11,500 Kgs. over and above the quantity shown in the invoice - penalty u/s 11AC - held that:- The Appellate Authority as well as Tribunal, both have recorded a concurrent finding of fact that demand of duty on the basis of Notebook is not sustainable in absence of sufficient corroborative evidence. It has been further held by both the authorities that Invoice No. 64 dated 7th January, 2005 cannot be rejected for three days delay to produce before the Central Excise Officers. The question involved in the present appeal relates to question of facts and there is concurrent finding of facts recorded by Appellate Authority as well as Tribunal both. - decided against the revenue.

  ---

• CST, VAT & Sales Tax

• 2013 (6) TMI 231
  Tendu leaves versus minor forest produce - Levy of purchase tax @25% versus 4% (5%) - held that:- There is no taxable entry separately for minor forest produce. The exemption notifications provide for granting exemption to minor forest produce partly so as to reduce the rate of tax to 5%. This tax exemption is available to all the minor forest produce. The issue asto whether exemption would be available to such goods, which are not exigible to tax came up for consideration before the Supreme Court in the matter of Reliance Trading Company v. State of Kerala [2006 (3) TMI 320 - SUPREME COURT OF INDIA], it was observed that “there could be nothing like exemption of goods from tax unless goods are exigible to tax.” There is no dispute that minor forest produce as such, is not exigible to tax. Forest produce like Bamboo, Tendu leaves etc. are exigible to tax under different entries. Thus, the exemption is applicable to all the forest produce which are eixigible to tax. The exemption will certainly be applicable to only those minor forest produce, which are exigible to tax. Since these petitions involve mixed question of facts and law, liberty is reserved to the respective petitioners to prefer an application before the Commissioner, VAT Act, if so advised, for exemption under the above stated notification. - Decided in favor of assessee.

  ---

• 2013 (6) TMI 230
  Inter state sale or local sale - The assessing authority inferred that the goods have been sold inside the State of U.P. He valued the goods and levied penalty to the extent of 40% of the value of the goods in both the cases. - held that:- the applicant failed to rebut the presumption under Section 28-B of the Act that the goods have not been sold inside the State of U.P. and have gone outside the State of U.P. Section 28-B of the Act is a machinery Section. It has been introduced in the Statute to check the evasion of the tax. If the goods are coming from the outside of the State of U.P. and are intended to be transported outside the State of U.P., the person concerned has to obtain transit pass at entry check post and has to surrender the same at the exit check post so that it may be established that the goods are not being sold inside the State of U.P. and has gone outside the State of U.P. In case of failure to surrender the transit pass at the exit check post, Section 28-B contemplates presumption of sale of goods inside the State of U.P. Undoubtedly, the presumption is a rebutable presumption which can be rebutted by adducing evidence. In the present cases, as stated above, the applicant failed to rebut the presumption. - Decided against the assessee.

  ---

• 2013 (6) TMI 210
  Writ petition - Challenging the notice issued by the department for filling objection claim – As per petitioner that the said reply/objections, and the invoices enclosed therein have not been looked into by the respondents, and therefore, the impugned notice is legally infirmed - Held that:- The course adopted by the petitioner is unwarranted at this stage as the remedy of filing Writ Petition is available to a person only when there is violation of fundamental rights, if principles of natural justice have not been followed and if any action/order/notice is ultra-vires the relevant Act/Rules. Hence, the Writ Petition challenging the notice is not maintainable.

  ---

• Indian Laws

• 2013 (6) TMI 229
  RTI application - records relating to the proposed disciplinary action and/or imposition of penalty against Sri G.S. Narang, IRS, Central Excise and Customs Service - CPIO had denied the information by claiming exemption u/s 8(1)(j) of RTI Act - Held that:- CPIO was not right in denying this information as far as the UPSC is concerned, the Respondent informed, it receives references from the Ministries and Departments in disciplinary matters to give its comments and recommendations on individual cases. In this case too, the UPSC had been consulted and that it had offered its comments and views to the Government. Whatever records it holds in regard to this case will have to be disclosed because this cannot be classified as personal information merely on the ground that it concerns some particular officer. As decided in Centre of Earth Science Studies Versus Dr. Mrs. Anson Sebastian, Scientist, State Information Commission [2010 (2) TMI 986 - KERALA HIGH COURT] information sought by an employee, from his employer, in respect of domestic enquiry and confidential reports of his colleagues would not amount to personal information as provided under Section 8(1)(j) of Right to Information (RTI) Act. Thus information regarding the disciplinary matters against any government employee cannot be withheld by claiming it to be personal information. Thus direct the CPIO to invite the Appellant on any mutually convenient date within 15 working days from the receipt of this order and to show him the relevant records in the possession of the UPSC for his inspection & if the Appellant chooses to get the photocopies of some of those records, the CPIO shall provide the same free of cost.

  ---