TMI Tax Updates - e-Newsletter
June 13, 2012

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws Service Tax Central Excise

Articles

1. V-SAT CONNECTIVITY CHARGES IS NOT TAXABLE AS LEASED CIRCUIT SERVICE.

   By: DR.MARIAPPAN GOVINDARAJAN

2. Real Estate/Construction Industry: Reconfirmation of Applicability of Cost Accounting Record Rules 2011

   By: ajay singh

3. Reverse Charge – Practical Issues, Invoice & Cenvat

   By: CA.Ankit Gulgulia

News

1. Text of the Statement made by Finance Minister After the Review meeting of CEOs of PSBs and FIs

2. Finance Minister to review Annual Performance of Public Sector Insurance Companies tomorrow

3. Text of the Speech of Union Finance Minister Delivered During his Meeting with CEOs of PSBs and FIs

4. India invites Brazilian investment in infrastructure sector Anand Sharma attends India-Brazil Ministerial Dialogue in Brasilia.

5. FM says Government is fully seized of the current situation and there will be a turnaround in our growth prospects in the coming months; rejects S&P report that India could be the first BRIC country to falter.

6. Union Finance Minister’s Speech at 28th Annual Conference of the Chief Commissioners and Director Generals of Income Tax today.

7. Union Finance Minister to Review the Performance of Banks during the Annual Meeting of CEOs of Public Sector Banks and Financial Institutions tomorrow.

8. LLP Registry is Now Merged with MCA-21 and Decentralization of LLP Approval to Various ROCs.

9. CCI to foster competition and protect the markets from anti competitive practices.

10. Dr. M.Veerappa Moily releases Compendium to High Light the Achievements of the Ministry of Corporate Affairs.

Notifications

LLP

1. G.S.R. 430(E) - dated 5-6-2012 - LLP

Limited Liability Partnership (Amendment) Rules, 2012 - Amendment in rules 8, 18, Annexure-A and substitution of Form Nos. 1 to 31

Circulars / Instructions / Orders

LLP

1. 13/2012 - dated 6-6-2012

Extension of time in Filing of annual return by Limited Liability Partnerships (LLPs)

Customs

2. 14/2012 - Customs - dated 11-6-2012

Classification of Rail Cum Road Vehicle - regarding.

Highlights / Catch Notes

Income Tax

• Revenue Recognition for Developers: Apply AS-9, Not AS-7, When Assessee Qualifies as Contractor and Developer.

  Case-Laws - AT : Applicability of AS-7 to Developer - Since the assessee can be termed as a contractor as also a developer, therefore the Revenue can be recognized in terms of AS-9 and not As-7. - AT
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• Animal Welfare Efforts Qualify as Charitable Activities u/s 12A, Aiding in Preventing Cruelty and Alleviating Suffering.

  Case-Laws - AT : Registration u/s 12A - advancement of animal welfare directed towards prevention or suppression of cruelty to animals or prevention or relief of suffering by animals are nothing but charity. - AT
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• Court Denies Section 54B Deduction for Agricultural Land Sale; Land Bought in Son and Daughter-in-Law's Names.

  Case-Laws - HC : Deduction u/s 54B - denial - sale of agricultural land standing in assesee's name - purchases of land in name of son and daughter-in-law - disallowed the exemption u/s 54B - HC
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• Loans from Subsidiaries Not Deemed Dividends u/s 2(22)(e) of the Income Tax Act.

  Case-Laws - AT : Deemed dividend - Whether loans obtained by the assessee from its subsidiaries were in the nature of deemed dividends as per section 2(22)(e) - they cannot be treated as deemed dividend for the purpose of section 2(22)(e) of the Act. - AT
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• High Court Rules in Favor of Taxpayers: Ambiguities in TDS Interpretation u/ss 194-I and 194C Resolved for Assessees.

  Case-Laws - HC : TDS under Section 194-I or 194C - 'work' u/s 194C - where two interpretations are possible, the one which is favourable to the assessee should be adopted. - HC
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• Revenue Appeal Dismissed: Section 158BC Assessment Invalid Without Assessing Officer's Satisfaction for Section 158BD Transfer.

  Case-Laws - HC : If satisfaction is not recorded by the Assessing Officer for transferring the file under Section 158BD, the assessment made under Section 158BC is invalid. appeal filed by the Revenue dismissed. - HC
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• Taxpayer Claims Section 54F Deduction for Jointly Purchased Property; Entitled to Benefit on Total Investment.

  Case-Laws - AT : Deduction claimed u/s 54F of the Income Tax Act – long term capital gain – purchase of new property jointly in the names of the assessee and his wife - assessee is entitled to benefit of sec. 54F with reference to the total investment - AT
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• Corporate Membership Expense to Be Apportioned Over 10 Years, Not 15, Per AS 26 and Accounting Principles.

  Case-Laws - AT : Capital vs revenue expenditure – Following the matching concept, the materiality concept and Accounting Standard AS 26 in the assessee's case before us, the amount of Rs.15 lakhs claimed as expenses towards corporate membership for a period of 15 years has to be apportioned in ten years proportionately from the date of obtaining the membership. - AT
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• Section 194C TDS Exemption: Supply Agreement Part of Composite Transaction Excludes Tax Deduction Requirement.

  Case-Laws - HC : 'Work' under Section 194C - TDS on work contract - In a case where three separate agreements entered into and one such agreement is agreement for supply of material and because the said agreement is a part of a composite transaction, section 194C cannot be pressed into service to deduct tax at source. - HC
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• Court Rules Software Use Payments Are 'Royalty' Under Tax Laws for Copyright Transfers.

  Case-Laws - HC : Whether the consideration paid for transfer of the right to use the software/computer programme in respect of the copyrights falls within the mischief of 'royalty' - held yes - HC
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Customs

• Customs Circular Clarifies Classification Criteria for Rail Cum Road Vehicles to Ensure Proper Taxation and Compliance.

  Circulars : Classification of Rail Cum Road Vehicle - regarding. - Circular
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• Fertilizer bagging costs excluded from customs assessable value; considered post-importation activity under Indian customs rules.

  Case-Laws - AT : Import of goods - Bagging charges - The charges incurred by the respondents for bagging fertilizers could not be included in the assessable value as the goods have already landed into the Indian territory, and action of bagging is post-importation activity - AT
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LLP

• LLPs Get More Time to File Annual Returns: Extension Granted to Ease Compliance and Avoid Penalties.

  Circulars : Extension of time in Filing of annual return by Limited Liability Partnerships (LLPs) - Circular
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Service Tax

• SEZ Unit's Refund Claim Valid with Copies of Invoices and Payment Proof, Original Documents Not Required.

  Case-Laws - AT : Refund claim - SEZ unit - copies of invoices and proof of payments submitted. - refund can not be denied on the ground that original copies not submitted - AT
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• Refund Claims for Service Tax on Terminal Handling, REPO Charges Approved as Port Services Entitlement.

  Case-Laws - AT : Refund claims in respect of Service Tax - Both terminal handing and REPO charges paid to Port authorities are to be treated as a port service, hence appellants are eligible for refund claims filed by them. - AT
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• Court Confirms Service Tax on Commission Earned from Business Auxiliary Service with Jaipur Golden Transport Company.

  Case-Laws - AT : Business Auxiliary Service - appellant received commission from Jaipur Golden Transport Company – demand of service tax confirmed - AT
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• Court Grants Stay in Service Tax Case Favoring Assessee on Tower Construction Land Preparation.

  Case-Laws - AT : Construction of towers - Admittedly, no construction can be effected without first clearing land from unwanted material and preparing the same for construction. - prima facie in favor of assessee - stay granted - AT
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Central Excise

• Manufacturers Can Claim Cenvat Credit for Services Used in Production of Final Products Under Central Excise Rules.

  Case-Laws - AT : Cenvat credit - service used by the manufacturer whether directly or indirectly in or in relation to the manufacture of final products constitutes input service - AT
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• Dispute Over Denial of Benefits for Deemed Exports to Mega Power Project Under Notification No. 6/2006-CE.

  Case-Laws - AT : Deemed export - supply to mega power project - sub contractor - International Competitive Bidding (ICB) – denial of benefit of Notification no. 6/2006-CE dated 01.03.2006 by invoking the provisions of Exim Policy - AT
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Case Laws:

• Income Tax

• 2012 (6) TMI 241
  Applicability of AS-7 to Developer - assessee engaged in business of construction of Civil Work and Road Construction as a Contractor, had entered into an agreement with GSRTC for the development of a shopping complex - Revenue on observation that assessee was authorized to collect advances from the customers, opined that the assessee should have declared profit of the said project on percentage of completion method - Held that:- Facts reveal that assessee was developing the commercial complex and, therefore, acting as a developer. Also, units of complex were to be transferred to lessees on approval of GSRTC, which was not received till the end of the accounting period. Further, since only part money was received, hence shown as an advance and sales were not materialized till the end of the year. Since the assessee can be termed as a contractor as also a developer, therefore the Revenue can be recognized in terms of AS-9 and not As-7. It was wrong on the part of the AO to assess the income irrespective of the year of completion of project when the amount received in advance has not reached certainty and that too the AO has merely estimated 10% as the recognition of Revenue of the construction contract, without assigning any specific basis of such an estimation. Thus, percentage completion method could not be applied. Deletion of addition upheld - Decided in favor of assessee.

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• 2012 (6) TMI 240
  Registration u/s 12A - denial on ground that welfare of dogs and taking care of sick animals do not fall under the purview of Section 2(15) - Held that:- Whilst the charitable sector is enormous and very diverse, the aims of each and every charity, whatever their size, must be for public benefit. Public benefit is therefore central to the work of all charities. Thus, advancement of animal welfare directed towards prevention or suppression of cruelty to animals or prevention or relief of suffering by animals are nothing but charity. This would definitely, fall within the object of "general public utility". Order of the CIT is quashed and he is directed to grant assessee registration sought u/s 12A - Decided in favor of assessee.

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• 2012 (6) TMI 239
  Deduction u/s 54B - denial - sale of agricultural land standing in assesee's name - purchases of land in name of son and daughter-in-law - Held that:- Bare reading of Section 54B does not suggest that assessee would be entitled to get exemption for the land purchased by him in the name of his son and daughter-in-law. In the facts and circumstances of the case also aforesaid inference has not been drawn. Same is question of fact. No substantial question of law arises in appeal. Secondly, word 'assessee' cannot be given a liberal interpretation, as it would be tantamount to giving a free hand to the assessee and his legal heirs and it shall curtail the revenue of the Government, which the law does not permit. Thus, Tribunal has rightly disallowed the exemption u/s 54B - Decided against the assessee.

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• 2012 (6) TMI 238
  Annulling the assessment passed u/s 147/143(3)by CIT - assessment reopened – return declaring nil income after claiming set off of unabsorbed depreciation & book profits - addition of Rs.10,70,000/- being the 25% of royalty capitalized - Held that:- the AO reopened the assessment completed on 24.3.2003 u/s 143(3) of the Act merely on the basis of facts already available before him at the time of original assessment proceedings there is nothing to suggest that all the primary facts were not disclosed by the assessee at the time of original assessment nor any failure on the part of the assessee to disclose fully and truly all the material facts has been ascribed in the circumstances - It is well-settled that if a notice under section 148 of the Act has been issued after four years from the end of relevant assessment year there being no proof of failure on the part of the assessee to disclose fully and truly all material facts and thus, liable to be struck down – as during the course of assessment proceedings the AO raised a specific query relating to royalty expenses and indisputably, the assessee submitted a detailed reply no point of hiding any information – against revenue.

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• 2012 (6) TMI 237
  Adjustment made by the TPO to the arm's length price - rejecting the documentation maintained by the assessee and conducting the search of the comparables and also obtaining the information and documentation not available in public domain by exercising his powers u/s 133 – Held that:- Considering the case of Genisys Integrating Systems (India) (P.) Ltd. Versus Deputy Commissioner of Income-tax[2011 (8) TMI 952 (Tri)] wherein this Tribunal has directed the AO to adopt the filter of turnover and also to give the assessee an opportunity of rebutting the information and documents obtained by the TPO by exercising his powers u/s 133(6) -remand these two issues to the file of the AO to re-consider the same as per the guidelines issued - in favour of assessee by way of remand. Adjustment sought by the appellant towards receivable, marketing and credit risk borne by the comparables - assessee has claimed the risk adjustment which is not allowed by the TPO on the ground that the assessee also has the risk of having a single customer – Held that:- the assessee had acquired the business earning income out of the said transaction by cost plus basis, thus, it can be seen that the assessee has not encountered the risk of having a single customer, whereas the same cannot be said as regards the comparables - the comparables were dealing in open market and were prone to the marketing and technical risks, thus the risk encountered by the assessee cannot be said to be the equivalent risks attached to the comparables - the risk attributed to the assessee by the TPO is an anticipated risk whereas the risk attributed by the assessee to the comparables is an existing risk - direct the TPO to decide the percentage of risk adjustment to be made. Computation of the deduction u/s 10A by excluding an amount from the ambit of export turnover without excluding the same from ambit of total turnover – Held that:- As decided in the case of CIT v. Tata Elxsi Ltd. [2011 (8) TMI 782 (HC)] the AO to exclude the amount both from the export turnover as well as the total turnover for the purpose of computing the deduction u/s 10A of the IT Act – in favour of assessee. Not providing the benefit of +/- 5 percent of the range at the time of computing the transfer pricing adjustment – Held that:- As decided in the Genisys Integrating Systems (India) (P.) Ltd. Versus Deputy Commissioner of Income-tax[2011 (8) TMI 952 (Tri)] direct the AO to give plus or minus 5% variation for the purpose of computing the ALP.

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• 2012 (6) TMI 236
  Capital gain – enhanced compensation received on compulsory acquisition – assessee claimed capital loss - agricultural land – Held that:- CBDT has issued a notification in terms of section 2(14)(iii)(b) and that the land in question is situated in Village Kundli being an area adjoining the local limits of Panchkula municipality, which has already been notified by the CBDT for the purpose of section 2(14)(iii)(b) of the Income-tax Act and is therefore a capital asset. The order of the ld. CIT(A) is completely silent in this behalf also. assessee had neither filed any evidence before any of the authorities below to show his ownership of agricultural land nor filed details of expenses. All these aspects have not been looked into by the CIT(A). In this view of the matter, the order passed by the CIT(A) is vacated and the matter is restored to his file for a fresh decision. appeal filed by the Department is treated as allowed for statistical purposes.

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• 2012 (6) TMI 235
  Deemed dividend - Whether loans obtained by the assessee from its subsidiaries were in the nature of deemed dividends as per section 2(22)(e) of the Income-tax Act – assessee company had received loan amounts from different subsidiaries and those borrowed funds were in turn advanced to other subsidiaries – Held that:- The assessee company has not availed any benefit out of those loans availed from its subsidiaries. The assessee company had not retained those loan funds for its own activities. All the loan amounts have been redistributed to subsidiaries. These are normal business transactions carried out by any holding company. Where regular business transactions are carried on by an assessee in its ordinary course of business in the above manner, they cannot be treated as deemed dividend for the purpose of section 2(22)(e) of the Act.

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• 2012 (6) TMI 234
  TDS under Section 194-I or 194C - 'work' u/s 194C - contractors for rendering transportation services for goods and passengers by buses, cars, Sumos, Utility Vans, etc - Held that:- two explanations added to Sections 194-I and 194-C of the Act, it was never the intention of the legislature to overlap any of the items mentioned within the meaning of 'rent', by including the same within the meaning of 'work' under Section 194-C of the Act. - Since the agreement for carriage of goods by vehicles other than railways comes within the purview of explanation of 'work' within the meaning of Section 194-C of the Act. it is settled law that where two interpretations are possible, the one which is favourable to the assessee should be adopted. Tribunal below was quite justified in adopting the case of the assessee in the facts of the present case. Decided in favor of assessee. [Birla Cement Works (2001 (2) TMI 8 (SC) )]

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• 2012 (6) TMI 233
  Whether the Tribunal was justified in holding that in order to transfer a file by an Assessing Officer to another Assessing Officer to assess an assessee based on information gathered in search conducted on the premises of another assessee, the Officer transferring the file should record his satisfaction about the undisclosed income to be assessed at the hands of other assessee under Section 158BD of the Income Tax Act, 1961 – Held that:- in Manish Maheshwari (2007 (2) TMI 148 (SC)) if satisfaction is not recorded by the Assessing Officer for transferring the file under Section 158BD, the assessment made under Section 158BC is invalid. appeal filed by the Revenue dismissed.

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• 2012 (6) TMI 232
  Whether the consideration paid by the Indian customers or end users to the assessee - a foreign supplier, for transfer of the right to use the software/computer programme in respect of the copyrights falls within the mischief of 'royalty' as defined under sub-clause [v] to Explanation 2 to Clause [vi] of section 9[1] of the Act – Held that:- yes, it is within the mischief of 'royalty' as defined under sub-clause [v] to Explanation 2 to Clause [vi] of section 9[1] of the Income Tax Act, 1961. Decided in favour of the revenue and against the assessee. Appeal is allowed.

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• 2012 (6) TMI 231
  Revision u/s 263 - Whether CIT erred in holding that the deduction u/s. 80IA/80IB is not allowable to the Appellant Company on the ground that the unit owned by the Appellant Company does not manufacture or produce any article or thing - assessee is engaged in the business of buying different types of tea from the market, blending them in different proportions and thereafter sells the tea in the market - assessee has claimed that it is an industrial undertaking engaged in manufacturing activity and entitled for deduction u/s. 80IA/80IB of the Act – Held that:- assessee is engaged in the "Processing" activity only and there is no manufacturing activity of any kind. action of the AO in allowing the assessee's claim is erroneous and also prejudicial to the interest of revenue because income has been subjected to excessive allowance by deduction u/s. 80IA/80IB of the Act. In the absence of any specific enquiries on processing vs manufacturing of the various product of tea by blending various tea. AO failed apply his mind on the issue. order of the CIT does not call for any interference. - appeal of the assessee is dismissed

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• 2012 (6) TMI 230
  Deduction claimed u/s 54F of the Income Tax Act – long term capital gain – purchase of new property jointly in the names of the assessee and his wife - The AO allowed 50% of the exemption claimed under sec. 54F of the Act - Held that:-assessee is entitled to benefit of sec. 54F with reference to the total investment of Rs. 3,28,15,000/- invested by him towards purchase of new residential house property purchased in his own name along with his wife. - Decided in favor of assessee.

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• 2012 (6) TMI 229
  Capital vs revenue expenditure – Accounting Standards and GAAP, AS1 and AS26 - Amount paid to Club as corporate membership fee. - The AO was, however, of the view that the amounts paid to a club membership which was a payment once and for all, resulting in an enduring benefit to the assessee and, thus, treated the same as capital expenditure – Held that:- the gross income of the assessee is Rs.90,00,000. The assessee has claimed Rs.15 lakhs as expenses for obtaining corporate membership in the club thereby declaring a net income of Rs.75 lakhs in its return of income. It amounts to approx. 16.67% of the gross income of the assessee which is on a higher side thereby distorting the correct income of the assessee for the previous year. Following the matching concept, the materiality concept and Accounting Standard AS 26 in the assessee's case before us, the amount of Rs.15 lakhs claimed as expenses towards corporate membership for a period of 15 years has to be apportioned in ten years proportionately from the date of obtaining the membership. However, if the amount paid is negligible, it will be appropriate to write off the expense in the year in which such expense is incurred. We further make it clear that the expenditure incurred by way of fees for obtaining corporate membership in a club is revenue and prepaid in nature and has to be written off in the year in which it is incurred or to be apportioned for a period not exceeding ten years, as the case may be - Appeal of the Revenue is partly allowed

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• 2012 (6) TMI 228
  Deduction under Section 80HHC - appellant submitted that the Tribunal committed a fundamental error inasmuch as they have not considered eligibility of the respondent-assessees for deduction under Section 80HHC with respect to the profit on transfer of DEPB benefit – Held that:- matters remanded to the Tribunal with specific direction to them to consider the eligibility of the respondent-assessees for benefits under the proviso introduced, and if the respondent-assessees are found eligible then only to consider the question of computation of the relief Expenditure on issue of bonus shares – Held that:- in view of the case of General Insurance Corpn. (2006 - TMI - 6547 - SUPREME Court - Income Tax), decided in favor of assessee.

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• 2012 (6) TMI 211
  Set off of business loss - denial on ground of change in shareholding of the company - losses of AY 98-99 purported to set off against income of AY 2006-07 - assessee contended that A.O. was not competent to forbid the set off of the brought toward business loss for A.Y. 1998-99 against the business income for the current year because the so called change in the shareholding pattern took place in an earlier year and not the previous year relevant to the assessment year under consideration - Held that:- It is noticed that the contention now raised before us has been taken for the first time. Since additional evidence as well as this argument were admittedly not before the authorities below , we are of the considered opinion that it will be in the fitness of things if this aspect is sent back to the AO for taking a fresh decision after considering all the relevant material - Decided partly in favor of assessee for statistical purposes.

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• 2012 (6) TMI 210
  Deduction u/s 80-IA - partial denial on ground that assessee had sold power to its group concern and non-group concerns at different rates - Revenue restricted the allowance Held that:- Section does not provide that if the assessee earns more profit from related parties in compare to unrelated parties, then the allowance of deduction u/s 80-IA is to be restricted to the same proportion at which the profit was derived from unrelated parties, even in the circumstances where such profits derived from related parties were such that it could be expected to arise to such eligible business as ordinary profit. We find that the assessee has not furnished before us the party-wise break up of the rate charged by it in respect of its sister concerns. In our considered opinion, the working for the provisions of Section 80-IA(10) has to be made on individual basis and the same cannot be made on an average basis. Therefore, order is set aside matter is restored to file of AO for proper verification and computation - Decided in favor of assessee for statistical purposes.

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• 2012 (6) TMI 209
  Allowance of debenture redemption reserve and short provision of expenses - invoking Section 154 by A.O. as the assessee did not include the two while determining book profits u/s 115JB – Held that:- if the issue requires debate and discussion, it cannot become a subject-matter of rectification under section 154 of the Act because under this section only patent and obvious mistakes of law and facts can be rectified - it is not open to the AO to go into the true scope of the relevant provisions of the Act in proceedings under section 154 - T.S.Balaram, ITO Vs. Volkart Brothers& Others [1971 (8) TMI 3 (SC)]- as the facts of the case were debatable questions but when the Revenue have not placed any material in order to controvert findings of the ld. CIT(A) nor even pointed out any contrary decision while the issues are debatable no need to interfere with the conclusion of the ld. CIT(A) – against revenue

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• 2012 (6) TMI 208
  Denial of Benefit of declaration under the Kar Vivad Samadhan Scheme –Expenditure incurred by way of interest not eligible to be deducted in computing the income liable to tax - Held that:- Once determination is made under Section 90 towards full and final settlement of tax arrears, there is nothing to be treated as pending for final consideration before any authority which includes the Tribunal - As on the date of filing of its application under the Samadhan Scheme no notice was served on the assessee as regards the pending Revenue's appeal before the Tribunal - when once the amount payable by the declarant was determined by the CIT it amounts to the department having bestowed its attention to the entirety of the tax arrears to pass order under Section 90 - Even as per Section 90 of the Kar Vivad Samadhan Scheme only where the declaration furnished by the assessee is found to be false by the designated authority at any stage, all the proceedings against the declarant shall be deemed to have been revived but in the absence of any such situation arising herein, the Revenue cannot sustain its plea treating as one pending for further consideration at the hands of the Tribunal - the assessee's declaration that the amount payable was determined by the CIT in his proceedings dated 17.6.1999 and that the Revenue's appeal before the Tribunal was filed on 7.7.1999 by which time the Samadhan Certificate had already been made – in favour of assessee.

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• 2012 (6) TMI 207
  Unexplained investment - assessee is a non resident corporate entity registered with SEBI as a sub account under the FII – addition was made on the ground that the assessee could not reconcile the transactions which were considered by the AO as unexplained investments – Held that:- assessee has been successful in identifying the real sub-account to whom the transactions mentioned in the CIB report were allocated and thus, has been able to reconcile the unconcealed transactions which had been treated as unexplained investment by the AO. In the light of the above, he submits that the said additional evidence appearing at pages 1 to 93 of the assessee's paper book may be admitted under Rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963. matter pertaining to all the grounds should go back to the file of the AO to examine the same afresh after considering the additional evidence filed by the assessee and according to law after providing reasonable opportunity of being heard to the assessee. Appeal partly allowed

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• 2012 (6) TMI 206
  Block Assessment - Estimation of the undisclosed income - based on the admission made by the Manager/ Managing partner which is to the effect that the practice of the assessee was to reflect 75% of his business turnover in the books of account – Held that:- irregularity or illegality or anything wrong in law in the Tribunal directing the undisclosed income being computed based on the admission made by the very assessee. Insofar as the assessment of profit on the undisclosed part of the income is concerned, making it at 25% cannot be found fault with Whether income assessed twice i.e., both in the regular assessment and in the block period – Held that:- undisclosed income being taken at 25% over and above the disclosed turnover attributable to the turnover as reflected in the books of account and that being an admission of the assessee and the profit worked out at 25% on the undisclosed turnover, there is absolutely no scope to contend that the same income has been subjected to tax twice cannot succeed. Decided in favour of the revenue. Appeal dismissed

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• 2012 (6) TMI 205
  Revenue expenditure or capital expenditure - treatment of an expenditure - Product Development Expenses - In the account books, the said expenditure had been treated as a deferred revenue expenditure whereas the same was claimed as a revenue expenditure in the course of assessment proceedings - expenditure was incurred on testing and validation of the products already manufactured and sold by the assessee – Held that:- , before addressing the legal aspects of the controversy, it is imperative that the complete and true particulars of the expenditure are culled out. - matter remanded back.

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• 2012 (6) TMI 204
  'Work' under Section 194C - TDS on work contract - nature of Composite contract - whether composite or not - contract agreements on Total Turnkey Basis or Partial Turnkey Basis - setting up of its electrical sub-stations. - Held that:- When the statute was amended to clarify the word "work" under Section 194C by introducing the aforesaid clause, it is obvious that the amendment is only clarificatory in nature and therefore it is retrospective. The Parliament did not intend to change the law because of conclusion which resulted in litigation. The Parliament though it fit to clarify by way of amendment so that the litigation could be avoided. In view of the aforesaid clarification and the statutory provision, it is clear that "work" did not include manufacturing or supplying a product according to the requirement upon specification of a customer by using raw-materials purchased from a person other than such customer, as such a contract is a contract for sale. In a case where three separate agreements entered into and one such agreement is agreement for supply of material and because the said agreement is a part of a composite transaction. Section 194C cannot be pressed into service to deduct tax at source. The whole object of introducing the Section is that it should deduct tax in respect of payments made for a works contract. No deduction is permissible in respect of contract for supply of material for carrying out work. The transaction in question is not a case of composite contract. It is a case of the distinct contracts and the contract for supply of materials is a separate distinct contract in respect of which no deduction is permissible under Section 194C of the Act. - Decided in favor of assessee.

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• 2012 (6) TMI 203
  Whether the consideration paid by the Indian customers or end users to the assessee - a foreign supplier, for transfer of the right to use the software/computer programme in respect of the copyrights falls within the mischief of 'royalty' as defined under sub-clause [v] to Explanation 2 to Clause [vi] of section 9[1] of the Act – Held that:- yes, it is within the mischief of 'royalty' as defined under sub-clause [v] to Explanation 2 to Clause [vi] of section 9[1] of the Income Tax Act, 1961. Decided in favour of the revenue and against the assessee. Appeal is allowed.

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• 2012 (6) TMI 202
  Surcharge - Whether proviso to Section 113 which was inserted by the Finance Act, 2002 with effect from 1-6-2002 have retrospective application – Held that:- such a proviso is curative in nature and it merely clarifies that for a relevant date for of the financial year would be the year in which the search is initiated under Section 158-BC. in the case of CIT v. Vatika Township (P.) Ltd. (2009 (1) TMI 217 (SC) ) after referring to the aforesaid Supreme Court Judgment, have referred the said matter to a Larger Bench. Accordingly, the matter is referred to the Larger Bench. order of the Tribunal set aside and matter remanded to the assessing authority with a direction to await the Judgment of the Apex Court consequent to the order to be passed by the Larger Bench to that effect. appeal is allowed.

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• Customs

• 2012 (6) TMI 226
  Penalty u/s 112 - Non- clearance of goods by assessee by filing B/E - assessee contended abandonment of goods and that foreign supplier (TIL) has already contracted to sell these goods to another entity(WTPL) - Import General Manifest (IGM) amended accordingly - Held that:- It is seen that appellant herein has clearly been indicated as a person who is not an importer by the action of foreign supplier TIL and WTPL. Further, IGM has also been amended. As the said contract has already broken down and the foreign supplier has sought for change of the importer's name and subsequently also sought for re-export of the goods, in our considered view, the current appellant cannot be visited with any penalty u/s 112 inasmuch as the said provisions will apply only to a situation wherein there is a violation of the provisions of Section 111 of Customs Act, 1962 by an importer.

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• 2012 (6) TMI 225
  Levy of penalty u/s 114 of the Customs Act is in respect of export cargo for getting undue benefit under DEPB scheme - goods exported was garments - knitted T-shirts- declaring an average value at Rs.175 per piece. However, on enquiry customs found that the average market value per piece will not be more than Rs.40 – Held that:- version of the appellant in respect of the yarn was bogus. violation of S.113 leading to consequent confiscation u/s 113, penalty is levied under S. 114 of the Customs Act. However, counsel for the appellant submitted that penalty is based on estimation of value based on market enquiry. - Penalty reduced from Rs.3 lakhs to Rs.2 lakhs.

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• 2012 (6) TMI 201
  Bagging charges - inclusion in assessable value of the goods imported - Revenue contended that in case of goods imported in bulk, lying in the Customs area are bagged in the Customs area before clearance, the duty has to be discharged on the bagging charges - Held that:- Tribunal held in favor of assessee in case of earlier AY by holding that taxable event is reached at the time when the goods reach the customs barriers and when the bill of entry for home consumption is filed. The charges incurred by the respondents for bagging fertilizers could not be included in the assessable value as the goods have already landed into the Indian territory, and action of bagging is post-importation activity. Hence the same is followed in present appeal - Decided in favor of assessee.

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• Corporate Laws

• 2012 (6) TMI 224
  Winding up – directors – Non filing of statement of affairs - non-compliance of requirements - criminal proceedings – Held that:- since the company was ordered to be wound up on 07.11.2005 at the first instance, in any event, the Directors had time till 28.11.2005 for the purpose of filing their statement of affairs. The question would therefore be as to whether there was any intervening circumstance between the said dates which has made it impossible for the respondents to file the statement of affairs? The records and documents relating to the company was also in the premises and has been taken over by the Bank, the first respondent has addressed a letter to the Manager, - These aspects would indicate that there was reasonable cause for the respondents in not complying with the requirement. nature of a criminal proceedings the benefit of reasonable cause is to be granted to the respondents since the facts in the instant case as noticed above would disclose that the respondents were prevented by reasonable cause from filing statement of affairs within the time provided in law and also the non-rectification was due to the very same cause which has still continued to exist. respondents are to be exonerated. application is accordingly disposed of.

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• 2012 (6) TMI 223
  Impact of refusal of listing with NSE - public issue - refund of share application money - sought for a consequential direction to the respondents to desist from taking any coercive steps in pursuance of notice - Whether default of the merchant banker in payment of interest as envisaged under section 73(2) of the Companies Act, which has led to failure of the petitioner to pay interest as envisaged under section 73(2) of the Act, the petitioner cannot be found fault with and proceeded against by respondent No. 1 – Held that:- whether respondent No. 1 can proceed against the petitioner as proposed under the impugned show-cause notice can only be decided after the petitioner files its objections and makes out a case of lack of jurisdiction on the part of respondent No. 1 with reference to the interpretation of scope and object of the SEBI Act and the provisions of the Companies Act, besides the Regulations and the Guidelines, if any, issued under the SEBI Act. respondent No. 1 will not proceed against the petitioner under section 15C of the SEBI Act, the petitioner is permitted to file its objections to the impugned show-cause notice. writ petitions are disposed of

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• 2012 (6) TMI 200
  Winding up - respondent are commercially insolvent and they are unable to pay their debts - Held that:- As petitioner had advanced the loan under a loan agreement and since the respondents have not disputed the claim it is evident that the respondents are not in a position to discharge their liability - as there is negligence to pay the amount which is due to the petitioner the respondent company is liable to be wound up so as to enable the Official Liquidator to take charge of the assets and recover the amounts.

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• 2012 (6) TMI 199
  Winding up – supply of goods to respondent – dishonor of cheque due to insufficient funds - complaints filed under the Negotiable Instruments Act, 1881, are pending disposal Jurisdiction of court - respondent submits that as per the terms and conditions indicated in the invoice, the dispute, if any, is subject to Mumbai jurisdiction and therefore, this court has no jurisdiction to entertain the petition seeking an order of winding up of the respondent-company – Held that:- For the purposes of jurisdiction to wind up companies, the expression 'registered office' means the place which has longest been the registered office of the company during the six months immediately preceding' the presentation of the petition for winding up. registered office of the respondent-company is situated at Vijayawada, which is within the territorial jurisdiction of this High Court. Therefore, this court has territorial jurisdiction to entertain the petition seeking an order of winding up Authorized person to file the company petition for winding up – Held that:- power to file suits and/or proceedings for the recovery of the amounts due or becoming due cannot be held to embrace the power to institute proceedings for winding up under the Companies Act, 1956. Proceedings for winding up under section 433 of the Companies Act can by no stretch of imagination be equated to suits or for that matter suits for recovery of money. constituted attorney, B. Gopala Krishna is authorised to sign and verify plaints, written statements, petitions, vakalats, claims and objections and memorandum of all kinds and to present them in any court in India and offices and to file appeals, revisions and/or reviews for and on behalf of the company before any court in India and to appoint advocates and sign vakalats and to accept service on behalf of the company in connection with such proceedings. Since B. Gopala Krishna, who verified the contents of the petition has no authority to initiate winding up proceedings against the respondent-company, the company petition dismissed.

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• Service Tax

• 2012 (6) TMI 245
  Rejection of refund claim of Service Tax on service of C&F agent, transportation of goods, terminal charges etc. – Held that:- Sample invoices produced by assessee gives the details of shipping bill number, date of shipping bill, name of the party, the name of the port to which the goods are to be exported, name of the vessel etc. , thus to be concluded that the invoices can be linked with the export goods and therefore the refund cannot be rejected on this ground – against revenue. Photo-copies of the invoices were produced and the original copies were not produced – Held that:- CBE&C vide Circular No.112/06/2009-ST, dt.12.03.2009 has clarified that normally certified copies of the documents should be accepted and it is only in the case of in-depth enquiry that the original documents needs to be verified - Since the requirement is satisfied appeal filed by the Revenue has no merit. Rejection of refund claim on fumigation charges, a specialized process for cleaning the containers - Held that:- As decided in RAMDEV FOOD PRODUCTS PVT. LTD. Versus CCE, AHMEDABAD [2011 (3) TMI 1256 (Tri)]there has to be a written agreement between the buyer and the seller about testing and analysis of the product – as the assessee fairly agree that they do not have a written agreement, the benefit of refund would not be admissible – against assessee.

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• 2012 (6) TMI 244
  Refund claim - SEZ unit - rejected on the ground that the appellant did not submit copies of invoices and proof of payment and further the refund claim was not filed within 6 months from the date of services received - Held that:- Notification does not require the invoices to be submitted but the documents to show that Service Tax has been paid. The confirmation in original from the service provider giving the details of Service Tax received by them in the light of this requirement, can be said to be sufficient. In any case, it is found that copies of invoices and proof of payments are being submitted. Therefore, the rejection of claim on this ground is not correct. Condonation of delay - Held that:- Taking note of the fact that the notification itself was issued in March 2009, a liberal approach for condonation of delay was required. Order is set aside and the matter is remanded to original adjudicating authority to consider the refund claim afresh.

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• 2012 (6) TMI 243
  Consulting Engineering Service and Erection, Commissioning or Installation Service – Held that:- As the demand has been confirmed without taking into consideration the scope of all the contracts, therefore predeposit of the Service tax, interest and penalties are waived. Stay Petition is allowed.

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• 2012 (6) TMI 242
  G.T.A. service and maintenance and repair service activity - Held that:- transportation of faulty transformer was made under a different contract while repair and maintenance of transformer was done under a different contract and both being different contracts are governed by their own terms, no merit in stay application and appeal of Revenue. - appeal of Revenue dismissed

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• 2012 (6) TMI 217
  Refund claims in respect of Service Tax paid on terminal handling denied on the ground that the terminal handling is not a notified service in the Notification No.41/2007-ST - Held that:- Both terminal handing and REPO charges paid to Port authorities are to be treated as a port service, hence appellants are eligible for refund claims filed by them. See AIA Engineering Ltd (2010 (7) TMI 486 (Tri)) - Decided in favor of assessee.

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• 2012 (6) TMI 216
  Penalty u/s 76 - short payment of tax of Rs 6306 - dispute regarding calculation - Held that:- Though original adjudicating authority has made a detailed verification of calculation, however appeal memorandum lacks the clarity. Therefore, having regard to the amount involved in the appeal which is very small, and financial hardships of assessee, penalty leviable u/s 76 is waived while demand of service tax and interest is upheld.

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• 2012 (6) TMI 215
  Income declared in the balance sheet filed with Income Tax department is higher than the income declared in their ST-3 returns as revealed by CERA audit – assessee submitted during the hearing that after the audit was conducted by the CERA party, the officers of the Service Tax wing of the department also conducted the audit – Held that:- The period covered by the CERA party is also covered by the audit party of the department and therefore it can be said that the department has conducted the verification of the correctness of the ST-3 returns filed and whatever deficiencies were found, the same has been made good by the appellant - the demand confirmed by the lower authorities amounts to duplication of the demand in respect of the amount already paid by the appellant - both the lower authorities have not considered the audit report of Service Tax wing the fact that the amount has been deposited has also been mentioned in the audit report itself - no indication as to why the audit report and the worksheet prepared by the appellant for the purpose of audit is not acceptable to the lower authorities - the impugned order is set aside and the matter is remanded to original adjudicating authority to adjudicate the matter afresh- in favour of assessee.

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• 2012 (6) TMI 214
  Business Auxiliary Service - appellant received commission from Jaipur Golden Transport Company – Held that:- agreement between the appellant and Jaipur Golden Tpt. Company shows that later was engaged in transport business and the former was engaged in booking goods for the former. There was also prohibitory clause i.e. clause (2) refraining the appellant from carrying out such activity for any other transport. The appellant was getting commission @ 6.5 per cent of the booking amount. All these features clearly suggest that appellant’s earning was linked with transport charges extending its helping hand for marketing the service of M/s. Jaipur Golden Transport Company, appeal is dismissed - Decided against the assessee.

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• 2012 (6) TMI 213
  Stay Petition - construction of towers - condition of pre-deposit - (i) Commercial and Industrial Construction Service and (ii) Site Formation & Clearance Excavation & Earthmoving and Demolition service. - Held that:- Admittedly, no construction can be effected without first clearing land from unwanted material and preparing the same for construction. The efforts of the lower authority to de-link the above activity from main activity of construction and to hold that the same falls under the category of Site Formation & Clearance Excavation & Earthmoving and Demolition service, does not appear to be in accordance with the law. - pre-deposit of duty, penalty waived and Stay Petition allowed

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• 2012 (6) TMI 212
  Stay - Pre-deposit - denial of benefit of Cenvat Credit of duty paid on the capital goods as also credit of tax paid on input services - alleged that inasmuch as the capital goods were not installed at Hazira and the input services were not availed at Hazira, the credit so availed by Hazira in respect of capital goods installed at Vaghodia and services availed at Vaghodia, was not in accordance with the provisions of Cenvat Credit Rules – Held that:- in the case of BSNL (2010 - TMI - 205047 - CESTAT, CHENNAI - Service Tax) held that M/s. BSNL, as a whole, is a service tax assessee, though its different has taken Service Tax registration at different places, prima facie, they are eligible to take credit in respect of capital goods received at Secondary Switching area, station at Vaghodia is a technical necessity so as to boost the pressure of the gas for further transportation to the ultimate place. Inasmuch as the said Vaghodia station is also a part of the same M/s. GAIL, who are discharging their Service Tax liability on the entire activity of transportation of the gas through pipeline, appellant is entitled to avail Cenvat Credit of duty paid on the capital goods or input services availed in respect of their Vaghodia station, pre-deposit of duty, interest and penalty waived and Stay Petition allowed

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• Central Excise

• 2012 (6) TMI 222
  Period of Limitation - dispute regarding ineligibility of Cenvat credit availed under Business Auxiliary Services on the invoices raised by one of the Commission agent for sale of input/ raw materials - Held that:- Credit availed on the service tax paid on the sale of inputs by the appellant paid to the appellant's commission agent does not get covered under the Cenvat Credit Rules. Limitation - In SCN, no where it is alleged that cenvat credit has been availed with intention to evade payment of duty, nor any statement was recorded. In the absence of evidence indicating that the appellant had full knowledge of availing ineligible credit, show cause notice issued on 19.02.2009 is patently time-barred. Impugned order is set-aside only on the limitation ground - Decided in favor of assessee.

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• 2012 (6) TMI 221
  Cenvat credit - Rent-a-Cab service utilised for the purpose of transportation of employees to the place of work and vice-versa – Held that:- As decided in Commissioner of Central Excise, Bangalore-III, Commissionerate v. Stanzen Toyotetsu India (P.) Ltd.[ 2011 (4) TMI 201 (HC)] that any service used by the manufacturer whether directly or indirectly in or in relation to the manufacture of final products constitutes input service and the catering service, rent-a-cab and transportation services and the tax paid on the said services are stated as input services - substantial question of law framed answered in favour of the assessee.

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• 2012 (6) TMI 220
  Appeal dismissed by Commissioner (Appeals) for non-compliance with the provisions of Section 35F of Central Excise Act, 1944 - non-filing of application for waiver of pre-deposit of amount of penalty - Held that:- Since assessee contended that Stay Petition was not filed inadvertently and he undertakes to file the same if the matter is remanded back, hence assessee is directed to file stay petition. Matter remanded back to first appellate authority.

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• 2012 (6) TMI 219
  Deemed export - supply to mega power project - sub contractor - International Competitive Bidding (ICB) - applicants availed the benefit of Notification No.6/2006-CE dated 1.3.2006 and cleared the goods at nil rate of duty - Revenue wants to deny the benefit of Notification No.6/2006-CE on the ground that by invoking the provisions of Exim Policy – Held that:- Customs Notification 21/2002 does not provide any condition that the benefit is available subject to the provisions of the Exim Policy. Pre-deposit of duty, interest and penalty is waived for hearing of the appeal. The stay petition is allowed.

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• 2012 (6) TMI 218
  Deemed export - supply to mega power project - sub contractor - International Competitive Bidding (ICB) – denial of benefit of Notification no. 6/2006-CE dated 01.03.2006 by invoking the provisions of Exim Policy - Held that:- Customs Notification 21/2002 does not provide any condition that the benefit is available subject to the provisions of the Exim Policy. Pre-deposit of duty, interest and penalties is waived for hearing of the appeals. stay petitions allowed.

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• 2012 (6) TMI 198
  SSI exemption - denial of exemption for Yr 1990-91 on ground that aluminum circles cleared during the period 1989-90 as exempted goods, cannot be treated as exempted goods and consequently the total value of clearances exceeded the limit of Rs 2 Crores - Held that:- It is undisputed that during 1989-90, the appellant had manufactured and cleared the aluminum circles without recording the same and Notification No.180/1988 was applicable in the cases of goods manufactured. Prior to 25.07.91, the benefit of Notification No.180/1988-CE, cannot be denied to the appellant even if the product manufactured by him was cleared without accounting. If that be so, the aggregate value of such clearances under Notification No.180/1988 cannot be considered for the purpose of aggregate value of clearances made during the F.Y. 1989-90, which would mean that the appellant had not crossed the threshold limit of Rs.2 Crores for denying him the benefit of SSI Notification No.175/86-CE for the year 1990-91 - Decided in favor of assessee Whether the pat scrap was excisable to Excise duty - Held that:- Since adjudicating authority in his impugned order has not at all discussed how the duty liability on scrap arises if there is no manufacturing of scrap, hence, we remand the matter back to the adjudicating authority on this point to reconsider the issue afresh.

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• 2012 (6) TMI 197
  Clandestine removal of goods - non-acceptance of retraction of statement of partners - contradiction of the quantity allegedly cleared by the appellant - non co-relation of evidences and substantiation - Held that:- All these inherent commission and omission has to be properly reasoned out by the adjudicating authority in his findings for confirmation of demand against the appellant. In the absence of any such co-relation, we are of the considered view that the issue needs to be reconsidered by the adjudicating authority and hence we set-aside the impugned and remit the matter to the adjudicating authority to reconsider the issue afresh after following the principles of natural justice.

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• 2012 (6) TMI 196
  Challenging the powers of first appellate authority - the first appellate authority has remanded the matter back to the adjudicating authority - Held that:- The issue involved in this case is regarding refund of amounts claimed by the assessee and the adjudicating authority didn't considered the evidences on record and didn't called for more evidences from the appellant before disposing the refund claim - thus the errors are correctly pointed out by the first appellate authority and the case is remanded back to be decided afresh following the principles of natural justice.

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• 2012 (6) TMI 195
  Waiver of pre deposit of penalty as applicant has deposited the total duty involved - appeal filed by the appellant dismissed - Held that:- As the delay involved is only 28 days which is within the condonable period of 30 days, therefore, the delay is condoned - Commissioner (Appeals) has not decided the case on merit the case is remanded back without insisting any pre deposit - in favour of assessee by way of remand.

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• 2012 (6) TMI 194
  SSI exemption - denied - recovery of duty by classifying the products under Heading 84.38 not under 84.33 - Tea Sorting Machine, Tea Extractor Machine and parts thereof - lower adjudicating authority dropped the demands upheld by Commissioner (Appeals) - Held that:- On perusal of SCN no such evidence is shown which was not available to the Assistant Commissioner to determine the classification otherwise and it also did not allege that material facts were suppressed by the respondents - The case records reflect that the department was made aware of classification and it was open to the department to change the classification if the product was held to be classifiable under a different heading/sub-heading - review order also held that there is no estoppel in the matter of taxation - classification accepted by the Assistant Commissioner cannot be challenged who is the proper officer under Central Excise Law to finalize classification - against revenue.

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• 2012 (6) TMI 193
  Writ petition – Cenvat credit - Deputy Commissioner of Central Excise ordered recovery of credit claimed by the petitioner suo motu in their Cenvat Credit account under Rule 12 of the Cenvat Credit Rules 2001 - imposed as fine under Rule 13 of the Cenvat Credit Rules 2001 against which an appeal was filed to the first respondent, the Commissioner of Central Excise (Appeals) along with a stay application claiming waiver of duty and penalty – Held that:- suo motu taking credit by the petitioner is not justified and beyond the scope of Cenvat scheme. issue deserves to be considered in the main appeal filed by the petitioner before the first respondent. Further, the learned counsel for the petitioner states that the company is now revived. since a substantial amount has already been debited and also taking note of the interim order and the pendency of this case for a long period of time, it will be appropriate to direct the disposal of the appeal on merits.

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