TMI Tax Updates - e-Newsletter
June 13, 2013

Case Laws in this Newsletter:

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

News

1. Exchange Rate of Foreign Currency Relating to Imported and Export Goods Notified

2. RBI awards Prof. K N Raj Memorial National Fellowship to Prof. Ravi Kanbur

3. RBI launches the 32nd Round of Inflation Expectations Survey of Households

4. Consumer Price Index Numbers on Base 2010=100 For Rural, Urban and Combined for the Month of May, 2013

5. Statement of Srikant Kumar Jena on Consumer Price Index

6. Quick Estimates of Index of Industrial Production and use-Based Index for the Month of April, 2013 (Base 2004-05=100)

7. Statement of Srikant Kumar Jena on Index of Industrial Production

Notifications

Customs

1. 60/2013 - dated 12-6-2013 - Cus (NT)

Exchange Rate of Foreign Currency Relating to Imported and Export Goods Notified

DGFT

2. 18 (RE–2013)/2009-2014 - dated 11-6-2013 - FTP

Import of live-stock products - Amendment in ITC (HS) 2012, Schedule 1 (Import Policy)

FEMA

3. 274/2013-RB - dated 26-4-2013 - FEMA

Foreign Exchange Management (Manner of Receipt and Payment) (Second Amendment) Regulations, 2013

4. 273/2013-RB - dated 25-4-2013 - FEMA

Foreign Exchange Management (Export of Goods & Services) (Amendment) Regulations, 2013

Income Tax

5. 42/2013 - dated 11-6-2013 - IT

AMENDMENT IN RULE 12 & SUBSTITUTION OF FORMS ITR-2, ITR-3, ITR-4, ITR-5, ITR-6 AND ITR-7 - INCOME TAX RULES 1962

6. 41/2013 - dated 10-6-2013 - IT

Amendments in Rules 10A, rule 10AB, rule 10B, rule 10C, rule 10D, rule 10E and Substitution Of Form NO.3CEB - Income-tax Rules, 1962

Circulars / Instructions / Orders

FEMA

1. 108 - dated 11-6-2013

Export of Goods and Services - Realization and Repatriation period for units in Special Economic Zones (SEZ)

2. 109 - dated 11-6-2013

Processing and Settlement of Export related receipts facilitated by Online Payment Gateways – Enhancement of the value of transaction

Highlights / Catch Notes

Income Tax

• Authenticated Evidence Required in Capital Gains Disputes; Assessing Officer's Authority u/s 55A Not Sole Determinant.

  Case-Laws - AT : Capital gain - when the valuation has been disputed by the assessee, such authenticated evidence cannot be ignored simply for the reason that AO does not have power u/s 55A to refer the same to the DVO. - AT
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• High Court Confirms Validity of Income Tax Commissioner's Opinion on Case Transfer u/s 127.

  Case-Laws - HC : Transfer of case - section 127 - It cannot be held that the opinion formed by the Commissioner of Income-tax, Dibrugarh, is in any manner vitiated. - HC
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• Court Upholds Search and Seizure Validity; Petitioners Fail to Prove Arbitrary or Malicious Intent in Warrant Issuance.

  Case-Laws - HC : Validity of search and seizure proceedings - petitioners have not been in a position to show that the authority concerned had issued the warrants of search, arbitrarily, without following the procedures established by law or with a mala fide motive. - HC
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• High Court Upholds Penalty u/s 271(1)(c) of Income Tax Act Based on Valuer's Evidence and Circumstantial Support.

  Case-Laws - HC : Penalty u/s 271(1)(c) - The finding of the authorities based on the evidence of the valuer, which was corroborated by the circumstantial evidence - Levy of penalty confirmed - HC
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• High Court Grants Section 54 Exemption for Two Flats Converted into Single Unit Despite Separate Sale Deeds.

  Case-Laws - HC : Exemption u/s 54 - two flats are situated side by side - modified to make it as one unit - despite the fact that the flats were purchased by separate sale deeds, exemption allowed - HC
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• High Court Affirms Need for Special Auditors u/s 142(2A) of Income Tax Act Over Best Judgment Assessment.

  Case-Laws - HC : Appointment of special auditors u/s 142(2A) - Complexities - No merit in submission that in such a case it was open to the A.O. to proceed with the best judgment assessment u/s 144 - HC
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• High Court Rejects Revision Application u/s 264 for Missing Rs. 500 Fee, Allows Rectification Opportunity.

  Case-Laws - HC : Revision u/s 264 - application for revision was rejected because it was not accompanied by the requisite fee of Rs.500/- An opportunity should be given to cure the same - HC
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• High Court Rules: Losses from Penalty-Related Confiscations Not Deductible for Income Tax Purposes.

  Case-Laws - HC : Loss on account of confiscating of goods by customs authority - The loss in the nature of penalty - evasion of law can not be a trade pursuit - Not allowed to be deducted - HC
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Customs

• Secondhand digital multifunction print and copying machines not restricted; distinction made between machines and assemblies.

  Case-Laws - HC : Import of secondhand digital multifunction print and copying machines - There is a clear distinction between machines and assemblies - Not a restricted item. - HC
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Indian Laws

• Political parties must appoint Central Public Information Officers and Appellate Authorities within six weeks per RTI Act mandate.

  Case-Laws - Commission : Scope of RTI Act - Political parties - Political Parties directed to designate CPIOs and the Appellate Authorities at their headquarters in 06 weeks time. - CIC
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Service Tax

• Appellant Faces Prima Facie Case Over Service Tax on Offshore Repair and Maintenance Services.

  Case-Laws - AT : Service of repair and maintenance - According to the department, the appellant have received these services from the offshore service providers - Prima facie case is against the assessee - AT
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VAT

• Court Grants Tax Refund for Passive Infrastructure Services; Not a Sale of Goods, Rules Court.

  Case-Laws - HC : Refund of taxes paid on the activity of the provision of “passive infrastructure services“ - there is no sale of goods - writ petition allowed - HC
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Case Laws:

• Income Tax

• 2013 (6) TMI 288
  Valuation - Computation of Capital Gains - Power of AO to refer to DVO u/s 55A - Reopening of assessment - Held that:- The relevant portion of the assessment order where AO himself has written that these assessments are subject to rectification/revision on receipt of valuation report of the DVO, Mumbai which also include letter written to BMC in respect of assessment year 2009-10, have already been reproduced. Therefore, it was in the mind of AO that his calculation may vary subject to these valuations and letter from BMC. These are evidences of AO and department cannot go back from his own stand to contend that cognizance of such report cannot be taken as AO has no authority to refer the valuation under section 55A. However, the land has been valued by the DVO which has power and skill to determine such value. If the evidence is available on record then it will be inappropriate to compute capital gain without taking cognizance of that evidence just for the reason that the same is going against the revenue. It has already been pointed out that it is the evidence collected by the revenue and when the valuation has been disputed by the assessee, such authenticated evidence cannot be ignored simply for the reason that AO does not have power u/s 55A to refer the same to the DVO. Therefore, matter for both the years should be restored back to the file of AO with a direction to re-compute the capital gain in the light of valuation report received by AO for these properties and also the letter from BMC in respect of assessment year 2009-10. Appeal filed by the assessee is considered to be allowed for statistical purposes in the manner aforesaid.

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• 2013 (6) TMI 287
  Addition on account of net profit - as per AO appellant had not made qualitative detail of the diamond and N.P. has been shown very less - AO rejected books of accounts - CIT(A) deleted the addition -appellant is involved in the business of Diamond manufacturers, exporters and importers - Held that:- A.O. calculated the N.P. @ .16% which was actually 60%. The appellant has received job charges on polishing the diamond through sub contractor. The N.P., after adding the salary to the partner is more than 1%. A.O. had not pointed out any specific defect in the books of account, except not maintaining qualitative stock and increasing outstanding labour charges liability. The total turnover of the assessee is more than 23.45 crore of labour charges receipts which did not include cost of the diamond which shows that the appellant had paid labour charges monthly more than Rs.1 crore. Thus, the outstanding labour charges are resulted of the business activity. TDS on payment of labour charges has been deducted by the appellant and payments made through account payee cheque. Thus, no reason to intervene in the order of the CIT(A). Revenue’s appeal dismissed.

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• 2013 (6) TMI 286
  Valuation of products sold to the subsidiary company - Sales made to 100% subsidiary at the rates much lower than the printed price list of the products i.e., the rate at which these products were sold to the third parties - Held that:- Considering various types of expenses which as per the assessee, are not required for determining the sale price of a product sold to the subsidiary, certain adjustment of expenses do require to be made in case of sales made to the subsidiary company. However, the basis of such adjustment of expenses has to be demonstrated so far as possible on actual expenses whether they are directly or indirectly embedded in the cost of products. At the same time, it is undisputed that the assessee has under priced its sales made to the subsidiary as there cannot be a huge differential of pricing of the same product sold to the subsidiary on one hand and to the other parties on the other hand. On perusal of the orders passed by AO as well as by the Commissioner (Appeals), it is seen that no one has examined as to what is the price margin on which the sales have been made to the other parties and what is the difference between the sale price made to the subsidiary. Therefore, looking to the entirety of the facts the issue is to be remitted to the file of the AO for examining the price difference which has been sold to the third parties as per the actual sales of the products and the sale price made to the subsidiary company & verify the actual expenditure attributable to the products and the sale made to the subsidiary will take into consideration the fact that the assessee had shown cost plus 15% mark-up. Provisions for Executive Retirement Scheme (ERS) disallowed as it is only contingent liability - Held that:- AO directed to allow the said expenses on the basis of actual payment made during the relevant assessment year as business expenses. Disallowance on account of MODVAT credit - Held that:- This issue stands covered in favour of the assessee as relying on CIT v/s Indo Nippon Chemicals Co. Ltd. [ 2003 (1) TMI 8 - SUPREME Court] wherein held that view of the AO that merely because Modvat credit is an irreversible credit available to the manufacturers upon purchase of duty paid raw material, it would amount to income which is liable to be taxed under the Act, is not acceptable. Against revenue. Disallowance of foreign travel expenses incurred on the wife of the Executive Officer of the assessee - Held that:- As decided in assessee's own case as relying on case of Bhor Industries Ltd [2005 (8) TMI 75 - BOMBAY High Court] that such claim of the assessee cannot be allowed unless it is shown that the tour of the spouse of the employee was for the purpose of business. Against assessee. Exclusion of excise duty and trade discount from the total turnover for deduction under section 80HHC - Held that:- As decided in CIT v/s Lakshmi Machine Works [2007 (4) TMI 202 - SUPREME Court] the excise duty is not includible in the 'total turnover' in the formula contained in section 80HHC - in favour of assessee. Charging price over and above the amount fixed by the NPPA under Para 8 of the DPCO - appellant has violated the provisions of law and expenditure is not allowable as deduction u/s 37(1) - Held that:- After going through various notifications and relevant provisions of The Essential Commodities Act, 1955, we find that there are separate provisions for penalty and interest and the sum of Rs. 1.50 crores, which has been paid is the refund of excess price paid by the assessee to NPPA. Hence, there is no violation and infringement of any law or Government’s order. The assessee has been kept on representing before the NPPA for the justification of the cost for which no reply or order was passed by the NPPA in respect to the same. Finally, the amount was determined at Rs. 1.56 crores which only include the principal amount of the refund. Thus, the payment of Rs. 1.50 crores made on 10th December 1998, which falls in assessment year 1999-2000, is an allowable expenditure under section 37(1) and, therefore, the same is allowed as revenue expenditure.

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• 2013 (6) TMI 285
  Legal and professional charges - whether the expenditure is capital and is eligible for amortisation u/s.35D? - Assessee is a company running a hospital got amalgamated with its sister concern with the approval of Hon’ble High Court - As per AO in the absence of project wise classification, bills against which payments are made, services in specific obtained, the AO disallowed the expenditure on estimate basis - Held that:- Order of the CIT(Appeals) is silent on the real nature of expenses. Since there is no finding on the basis of the material available on record that these expenses are revenue expenses, it would be just and proper to set aside the order of the CIT(A) and remand the issue to the AO for fresh consideration. The assessee will be at liberty to substantiate its claim for deduction by filing additional evidence. Disallowance on account of interest claimed - CIT(A) deleted the addition - Held that:- The order of assessment is silent as to the basis on which the AO made the impugned disallowance. The submissions made before the CIT(A) by the assessee have not been controverted,thus it appears that the loans on which the interest was paid by the assessee were all used for the purpose of business and therefore no disallowance of interest could be made. It has not been demonstrated by the revenue that the borrowed funds on which interest was paid and claimed as deduction while computing the total income had not been used for the purpose of business of the assessee. In favour of assessee.

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• 2013 (6) TMI 284
  Prosecution /s 276CC - immunity form prosecution or not - Settlement Commission, while deciding the case has granted immunities for penalty. - held that:- In this case, the complaint has been filed under section 276CC of the Act which is related to non-filing of return, even though on different occasions, notices were given to the petitioners to file necessary return but in spite thereof, the petitioners gave no response which led to filing of the present case, whereas the issue before the Settlement Commission was with regard to different aspect of the matter, as the petitioners deposited the necessary tax and, thereafter, approached the Settlement Commission, who found the disclosure made by the petitioners to be true and the applicant was agreed to be taxed on the deposits and that was the reason for holding that the applicant cannot be made suffer for this and, accordingly, granted immunity from the penalty under the Act for all years involved in the settlement application whereas the Commission has not granted any immunity for the prosecution already launched under section 276CC of the Act. It is clear that the issue involved before the Commission was quite different whereas the prosecution that has been launched is quite different, i.e., for non-filing of the return even after the notice. In this view of the matter, the judgments relied on by the petitioners are not applicable to the present case, as explained hereinabove and the judgments that have been relied on by the respondents are by and large very near to this case and, as such, the order of cognizance cannot be held to suffer from any infirmity. - Decided against the assessee.

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• 2013 (6) TMI 283
  Transfer of case - section 127 - Grievance in the petition is that the exercise of power is ultra vires section 127(2)(a) of the Income-tax Act, 1961, as there was disagreement between the Chief Commissioner of Income tax - It was also submitted that since the case does not fall under section 127(2)(a), the power of transfer, if at all, would be exercised under section 127(2)(b) by such officers who may be specially authorized by the Chief Commissioner of Income-tax, which has not been done in this case. Held that:- it cannot be held that there was any lack of agreement between the Commissioner of Income-tax, Dibrugarh, from whose jurisdiction the case is transferred or any higher authority with the Delhi Commissioner. It cannot be held that the opinion formed by the Commissioner of Income-tax, Dibrugarh, is in any manner vitiated. There is material to show that there was a search and seizure at Delhi and there is allegation of tax evasion at Delhi which is being investigated at Delhi. It cannot be held that the order transferring the cases is beyond the scope of the statutory power under section 127 of the Act. - Decided against the assessee.

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• 2013 (6) TMI 282
  Assessee in default - payment made towards liaison services - DTAA with Mauritius - tax effect - assessee contended taht the tax effect or the actual liability has been assessed by the Assessing Officer in respect of the question that is sought to be examined by this court being only Rs. 4,50,000 as submitted by Mr. Chaitanya and Rs. 6,22,000 as determined by the Assessing Officer, is nevertheless less than Rs. 10,00,000. Hence, the appeal cannot be entertained. - Held that:- As we have noticed that a large number of appeals have been disposed of by this court on such premise, this appeal is also dismissed as not tenable, reserving liberty to the Revenue to revive the appeal in the event of success in their appeal before the hon'ble Supreme Court in the case of Ranka and Ranka.

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• 2013 (6) TMI 280
  Rectification u/s 154 - on the basis of the undisputed and admitted facts, different view was taken by the Assessing Officer while exercising jurisdiction under section 154 of the Act, 1961. - Ascertained liability or not - Deduction u/s 32AB - income on account of dividend, capital gains and the provision of excise duty written back - Held that:- reference of Parts II and III of Schedule VI to the Companies Act, 1956, in sub-section (3) of section 32AB clearly indicates that the "provisions" is in accordance with the requirement of Parts II and III of the said Schedule to the Companies Act, 1956. There was an order relating to the liability of the ascertained amount. - mere change in its liability in toto and not to quantitative only cannot be made the liability as unascertained liability, which was ascertained when demanded and in the same way, liability was contingent depending upon the ambiguity in the legal opinion which upon the judgment of the Patna High Court in the assessee's case wiped out the ascertained contingent liability of the assessee. The distinction is required to be seen in unascertained and contingent liability. In earlier years, the assessee was not entitled to get the benefit of section 32AB and, therefore, it is not a case of taking double benefit, rather to say other view will deny the benefit to the petitioner in both the years which will amount to the total denial of the benefit under section 32AB. Admittedly, the petitioner was taxed on this amount, i.e., Rs. 95.25 lakhs in the year, in which, he has claimed the allowance under section 32AB of the Act and, therefore, there cannot be two views for the purpose of taxing one income amount of Rs. 95.25 lakhs. Therefore, not only it was a case of invoking of powers under section 154 on forming a different opinion on question of law but also it was legally wrong. The matter in question could not have been decided by the Assessing Officer by invoking section 154 of the Act - Decided in favor of assessee

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• 2013 (6) TMI 279
  Penalty u/s 271(1)(c) - evidence of the valuer report - AO came to a conclusion that the real value of the machinery was concealed by claiming 100% depreciation and furnished inaccurate particulars - sham transaction - lease - Held that:- the penalty under Section 271(1)(c) is a civil liability, but it does not relieve the assessee from the liability as the object behind the enactment of the said section is to provide for a remedy for loss of revenue. It is no doubt true that in every case where the claim made by the assessee is not accepted by the Assessing Officer for any reason, the asseesee will be levied penalty is not the intend of the Legislature and it would depend upon the facts of every case. But, the aforesaid decision will not come to the aid of the assessee as in the said case no fault was found in the particulars furnished by the assessee, whereas it is not so in the case on hand. Therefore, with respect, the aforesaid cases would not apply to the facts of the present case. The Tribunal, without appreciating the facts of the case in an appropriate manner, had came to a strange conclusion that the departmental presumption is only based upon the statement given by the valuer and such valuation cannot be the basis for levy of penalty. The finding of the authorities based on the evidence of the valuer, which was corroborated by the circumstantial evidence and the background of the case, are not presumptive as has been concluded by the Tribunal. - Levy of penalty confirmed - Decided in favor of assessee.

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• 2013 (6) TMI 278
  Exemption u/s 54 - Purchase of two residential flats - AO observed that two units separated by a strong wall; that they were purchased from two different vendors under two separate sale deeds and as such the deduction under section 54 has to be restricted to only one flat. - Held that:- As held in D. Ananda Basappa's case [2008 (10) TMI 99 - KARNATAKA HIGH COURT] by the Karnataka High Court, the expression "a residential house" in section 54(1) of the Act has to be understood in a sense that the building should be of residential nature and "a" should not be understood to indicate a singular number and where an assessee had purchased two residential flats, he is entitled to exemption under section 54 in respect of capital gains on sale of its property on purchase of both the flats, more so, when the flats are situated side by side and the builder has effected modification of the flats to make it as one unit, despite the fact that the flats were purchased by separate sale deeds. - Exemption to be allowed - Decided against the revenue.

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• 2013 (6) TMI 277
  Computation of brokerage expenses - ITAT directed to AO to compute the amount of brokerage at 8.5% on Rs.23,80,000/- and this amount should be deducted from the gross commission receipt - Levy of penalty u/s 271(1)(c) - Held that:- There is no dispute in the present case that the assessee would have incurred expenditure for earning the gross commission, that is the reason why, the Assessing Officer granted only Rs.5,000/-, but the Tribunal fixed it at 8.5%. Therefore, we do not find any error in the order warranting interference - Decided in favor of assessee. Regarding penalty - Held that:- following the Supreme Court judgment in Commissioner of Income-Tax v. Gold Coin Health Food P. Ltd.,[2008 (8) TMI 5 - SUPREME COURT], we hold that penalty can be levied even, when the assessee's return of income is shown as 'loss'. In the present case, the Income Tax Appellate Tribunal merely deleted the penalty as there is no positive income. The Tribunal had not considered the case on merits whether there is violation of provision of Section 271(1)(c) of the Act. Since this Court is of the considered view that penalty can be levied even when the assessee's income of return is shown as loss, we set aside the order of the Income Tax Appellate Tribunal with a direction to the Tribunal to reconsider the matter after giving opportunity to the assesee to enable them to file explanation, whether there is violation of provision of Section 271(1)(c) of the Act and pass orders in accordance with law. - Decided in favor of revenue.

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• 2013 (6) TMI 276
  Appointment of special auditors u/s 142(2A) - Complexities - Assessment u/s 153A - period of limitation u/s 153B - extension due to appointment of auditor u/s 142(2A) - Search and seizure - Held that:- it is admitted that the limitation after its statutory curtailment to 21 months was going to expire on 31.12.2009. It is also admitted that if the powers under Section 142 (2A) are exercised, in accordance with law, the limitation would get extended under Explanation (ii) of Section 153B (1) (a), upto the period of completion of special audit and with 60 days for completing the assessment. Reason for delay - The petitioner had invoked the powers of the High Court under Art.226 of the Constitution of India in challenging the directions under Section 142 (2A) of the Act for special audit, on the ground that no reasons were given in the order. The petitioner relied on the principles of natural justice to challenge the order. The prescription of limitation by itself should not be permitted to confer an advantage on the petitioner responsible for such delay. Appointment of auditors u/s 142(2A) - Complexities of accounts - held that:- The principles on which accounts may be treated to be inaccurate or complex have been sufficiently explained in Sahara India [2008 (4) TMI 4 - Supreme Court] and do not require any reiteration. In the present case we are of the view that the petitioner companies are engaged in large scale tax evasion, and for that purpose it was adopting dubious methods in maintaining the accounts, which were examined and were found to be complex by the Assessing Officer. He made a genuine attempt to understand the method of calculation of the value of the flats, which were being changed frequently by the assessee and having failed to understand the manner and method in which accounts were maintained firstly required the petitioners to explain and having faced an uncooperative attitude directed special audit to be carried out by special auditor. We do not find any legal error in the order directing the petitioners to get their accounts audited by special audit or appointed by the Commissioner of Income Tax, for which the cost is now to be paid by the Central Government and thus the exercise would not cause any prejudice to the petitioners. No merit in submission of the petitioners that in such a case it was open to the A.O. to proceed with the best judgment assessment under Section 144 and that the submission of incomplete accounts or the refusal to disclose true and correct accounts cannot be a ground for special audit under Section 142 (2A) of the Act. The interim order was obtained by concealing relevant documents, which were indexed but were not annexed to the writ petition, and were sought to be introduced at the time of final hearing on the pretext of inadvertence. Shri Deepak Kapoor was present before the Assessing Officer on 19.11.2009 and had produced complete list of books of accounts and print outs of the books of accounts as maintained by the assessee on computer along with a letter. He did not mention about these dates either in the list of dates along with writ petition, or in the list of dates provided by him to the senior counsel at the time of hearing. Shri Deepak Kapoor is prima facie guilty of professional misconduct in misleading the Court. He also misled Mr. S.P. Gupta, a Senior Counsel of the Court, who was cautioned time and again to be more precise in his submissions. He seems to think that the time of the Court is at his mercy, and consumed almost eight hours in explaining the facts, which was full of inaccuracies and repetition. In the special facts and circumstances of the case, we impose exemplary costs of Rs.Two lacs on the petitioner in Writ Petition No.418 of 2010, and Rs.One lac in Writ Petition No.339 of 2010 to be deposited by the petitioners with the Registrar General of the Court within one month. - Decided against the assessee.

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• 2013 (6) TMI 275
  Revision u/s 264 - application for revision was rejected because it was not accompanied by the requisite fee of Rs.500/- revision in favor of assessee - held that:- non-satisfaction of the requisite fee along with the application was only a 'curable defect' and that the petitioner was not given an opportunity to cure the same. Under these circumstances, this Court finds that the decision taken by the second respondent 'on merits' without giving an opportunity of hearing to the petitioner as to the merits involved, is not correct or sustainable.

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• 2013 (6) TMI 274
  Loss on account of confiscating of goods by customs authority - whether in the nature of Penalty - deduction u/s 37(1) - held that:- the Apex Court in Maddi Venkataraman & Co. (P) Ltd's case (1997 (12) TMI 3 - SUPREME Court), delving into the issue whether the benefit of deduction under one statute where any expenditure is stated to have been incurred in violations of another statute was admissible had held that the expenditure could not be said to be wholly and exclusively laid out for the purpose of assessee's business and was inadmissible. The loss in the nature of penalty - evasion of law can not be a trade pursuit - Not allowed to be deducted - decided against the assessee.

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• Customs

• 2013 (6) TMI 273
  Import of secondhand digital multifunction print and copying machines as per the Bills of Entry - writ of Certiorarified Mandamus - penalty on each of the petitioners/importers under Section 112(a) of the Customs Act, 1962 imposed - Held that:- In the present case, there is no conflict between the Foreign Trade Policy 2009-2014 and Hand Book of Procedures V.1 2009-2014. This is evident from the fact that only in the case of spares certain conditions have been imposed for import, though falling under the restricted category under the Foreign Trade Policy 2009-2014. However, insofar as the Digital Multifunction Print and Copying Machines are concerned, no such condition has been imposed in the Hand Book of Procedures V.1 2009-2014. A conjoint reading of Para 2.33 of Hand Book of Procedures V.1 2009-2014 and Para 2.17 of Foreign Trade Policy 2009-2014, which says that imports should be in accordance with the procedure prescribed, would only mean that the Hand Book of Procedures V.1 2009-2014, which prescribes the manner of import of secondhand capital goods has to be followed and if the procedure contemplated therein is followed, then the benefit of free import should be granted to the present crop of goods, as they are freely importable. Thus he reasoning and the findings of the respondent are untenable and contrary to the law laid down by this Court a it stems from a misreading of the Foreign Trade Policy 2009-2014. Therefore, para 12(a) of the order holding that secondhand Digital Multifunction Print and Copying Machines are restricted for import under Para 2.17 of the Foreign Trade Policy 2009-2014 is contrary to law and accordingly, is liable to be set aside. There is a clear distinction between machines and assemblies. The authority failed to take note of the same. In fact, on classification of export and import items, ITC(HS) is binding on the authorities. On inspection it is clarified that imported goods are complete machines and not electrical and electronic assemblies. Since already held that Part B of Schedule III does not apply to the goods in question, the finding in para 11.7 of the order that the goods imported are electrical and electronic assemblies as per Third Sub-entry of B1110 is incorrect and a misconceived finding There is no material before the respondent to come to the conclusion that the goods in question are hazardous wastes per se. If the goods imported are found to be hazardous wastes by any competent authority on inspection, then appropriate action can be taken. To declare certain goods imported as hazardous wastes per se based on the officer's interpretation of the Rules would be preposterous and untenable in law. No hesitation to hold that the respondent has not made out a case that the goods imported would fall under the provisions of the Hazardous Wastes (Management, Handling and Transboundary Movement) Rules, 2008 or that it is a hazardous waste as per Rule 3(l)(iii) of the Hazardous Wastes (Management, Handling and Transboundary Movement) Rules, 2008. As a consequence, paragraphs 12(c) and 12(d) of the order cannot be justified. The order of confiscation of the goods under Section 111(d) of the Customs Act, 1962 read with Sections 3(2) and 11(1) of the Foreign Trade (Development and Regulation) Act, 1992 is bad. The finding with regard to prior permission from Ministry of Environment and Forest also does not apply in view of the finding that there is no material to substantiate the plea that the goods imported are hazardous waste. Admittedly, no show cause notice has been issued for confiscation or for imposition of penalty and therefore there is a statutory violation in the order confiscating the goods and imposing penalty. Hence, the procedure prescribed under Section 124 of the Customs Act, 1962 has not been followed and on that ground also the impugned order is liable to be set aside. The impugned order imposing penalty on each of the petitioners/importers under Section 112(a) of the Customs Act, 1962 is unsustainable in law.

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• 2013 (6) TMI 272
  CHA - suspension / prohibition - Regulation 21 - The allegation relates to the export of cheap material such as soap stone powder in the names of exporting firms by misdeclaring it as high value bulk drugs and their intermediates. A person by the name of Manoj Gore is alleged to have attended to the clearance of the export consignments on the strength of a CHA licence of the Petitioner. It is alleged that an employee of the Petitioner allowed the said Manoj Gore to attend to the clearance of export consignments on behalf of the CHA firm. Held that:- the Commissioner of Customs (General) was satisfied that immediate action was warranted to prevent a further misuse of the CHA licence. Counsel appearing on behalf of the Petitioner states that a representation has already been submitted on 24 January 2012 for the lifting of the prohibition. The Commissioner of Customs (General) is directed to pass orders on the representation after furnishing to the Petitioner an opportunity of being heard within a period of four weeks from today.

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• Corporate Laws

• 2013 (6) TMI 271
  Winding up petition - date on which the proceedings are deemed to be started - Held that:- The date the winding up became effective would be the date on which the BIFR formed its prima facie opinion that KIPL should be wound up. The law in this regard has been explained by in NGEF Ltd. v. Chandra Developers (P) Ltd. (2005 (9) TMI 306 - SUPREME COURT OF INDIA) wherein held that “it may be true that no formal application is required to be filed for initiating a proceeding under section 433 of the Companies Act as the recommendation therefor are made by BIFR or AAIFR, as the case may be, and thus the date on which such recommendations are made, the Company Judge applies its mind to initiate a proceeding relying on or on the basis thereof, the proceeding for winding up would be deemed to have been started”. Therefore, the date of commencement of winding up would be the date on which BIFR made the recommendation for KIPL’s winding up, i.e. 27th October 1993. As rightly pointed out by Liquidator, the agreement to sell has been signed only by Mr. Kathuria. The original of the PoA dated 17th May 2008 stated to have been issued in favour of Mr. Kathuria has not been produced. In any event there appears to be no resolution by KIPL in that behalf. Also there was no decision taken by KIPL either to sell the half portion of property at B-72, Mohalla Mahatma Gandhi Nagar, Moradabad in favour of Adarsh Kumar Agarwal and Niraj Kumar Agarwal or to sell the remaining half to Mr. Shayam Agarwal or Mr. Ashok Agarwal. The ex parte decree passed on 18th August 1993 also overlooked the mandatory requirement in the agreement to sell that exemption from the income tax authorities had to be obtained. Therefore the decree dated 18th August 1993 cannot be sustained in law. The execution proceedings for enforcement of the decree are also judicial proceedings. It is an admitted position that the sale deed dated 25th May 1995 was executed in favour of Adarsh Kumar Agarwal and Niraj Kumar Agarwal only pursuant to the order passed by the executing court and subsequent to the winding up of KIPL. The above proceedings continued without any permission being sought from the Company Court. The actual conveyance of the property i.e. one half of B-72, Mohalla Mahatma Gandhi Nagar, Moradabad in favour of Adarsh Kumar Agarwal and Niraj Kumar Agarwal was clearly hit by Sections 536(2) and 537 of the Act, therefore, no hesitation in holding that neither the ex parte decree passed by the civil court on 18th August 1993 nor the subsequent sale deed executed on 25th May 1995 can be sustained in law. They are hereby declared to be illegal and void and quashed as such. As regards the other half of B-72, Mohalla Mahatma Gandhi Nagar, Moradabad, there was only an agreement to sell which again was not expressly authorised by KIPL by a resolution. There cannot be a valid sale deed executed in favour of Mr. Ashok Agarwal after the order of winding up. There is no legal basis for permitting Mr. Ashok Agarwal to be in continued possession and occupation of the property being the other half of B-72, Mohalla Mahatma Gandhi Nagar, Moradabad.

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• Service Tax

• 2013 (6) TMI 293
  Service of repair and maintenance - According to the department, the appellant have received these services from the offshore service providers - demand of service tax - Held that:- The service of repair and maintenance has been performed wholly abroad and as such, there is no evidence adduced by the department to show that part of the maintenance and repair service had been performed in India. In view of this, so far as this service is concerned, the appellant cannot be said to have received this service in India in terms of the provisions of Rule 3(1) of Taxation of Service provided from outside and received in India Rules, 2006 and as such the service tax demand of Rs. 49.45 crores does not appear to be sustainable. Service of General Sales Agents - On perusal of the relevant clauses of the appellant's agreements with the GSAs appointed in various foreign territories for the services received by them it can be concluded that the services provided by the GSA to the appellant are covered by the definition of business auxiliary service as the GSAs appointed by the appellant not only represent the appellant abroad and provide various services on their behalf they also promote the sales of the services being provided by the appellant by undertaking various sales promotion activities. Since this service has been used by the appellant in India in relation to their business located, in India in terms of the provisions of Rule 3(1)(iii) of the Taxation of Services provided from outside India and received in India) Rules, 2006, this service has to be treated as having been provided from outside India and received in India by the appellant and, therefore, in terms of the provisions of Rule 66A of the Finance Act, 1994 read with Rule 2(1)(d)(iv) of the Taxation Rules, 1994, the appellant as service recipient would be liable to pay service tax on the same. Therefore, service tax demand of Rs. 15.53 crores is on strong footing. As the appellant have pleaded financial hardship stating that the appellant have on huge accumulated losses and are having difficulty in discharging their statutory functions appellant is directed to deposit an amount of Rs. 8 Crores within a period of 8 weeks from the date of this order.

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• 2013 (6) TMI 292
  Services rendered to SEZ units - appellants have been claiming exemption under Notification No.4/2004-ST, dated 31.03.2004 - Revenue submits that the appellant is providing logistics services and transportation of goods by sea is only one component of various activities required for providing such service. He argues that the service is appropriately classified as "Business Support Service" - Held that:- As regards ocean freight, it canoot be said as how it can be classified as "Business Support Service" and subject to levy of service tax. In the matter of services rendered to the SEZ the matter is to be looked into with reference to each of the services and how it was utilized and requires detailed examination. So it is appropriate to call for a pre-deposit of Rs.25 lakhs on this issue to be deposited within a period of six weeks from today and report compliance on 13.03.2013.

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• 2013 (6) TMI 291
  Import of service - levy of service tax prior to 18/4/2006 - held that:- it is settled law today that service tax cannot be levied from an Indian recipient of service imported from abroad for any period prior to 18/4/2006, the date of enactment of Section 66A of the Finance Act 1994. - Decided in favor of assessee.

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• 2013 (6) TMI 290
  Levy of Penalty u/s 76 - original authority has confirmed the demand of service tax and imposed penalty under Section 78 but refrained from imposing penalty under Section 76. - Held that:- It has been held by the Tribunal in the case of Opus Media and Entertainment Vs. CCE, Jaipur [2007 (4) TMI 612 - CESTAT NEW DELHI] that when Section 78 penalty is imposed, there is no justification for imposing penalty under Section 76.

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• Central Excise

• 2013 (6) TMI 270
  Recovery proceedings on expiry of the 'Cooling period' with reference to Ex.P5 Circular dated 01.01.2013 – Held that:- As appeal has been preferred by the petitioner along with I.A. for stay, which are pending before the 4th respondent, this Court finds it fit and proper to have the matter considered and finalised by the Appellate authority in accordance with the relevant provisions of law. Tribunal/4th respondent is directed to pass appropriate orders in respect of the Stay application filed by the Petitioner as expeditiously as possible and coercive proceedings, if any, shall be kept in abeyance till such time.

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• 2013 (6) TMI 269
  Interest on delayed refund of pre-deposit - selection of date - Held that:- The Tribunal has allowed the interest to the appellant immediately after three months period from passing the order of the Tribunal. The order of Tribunal was passed on 31st of March, 2000 and interest has been allowed from 1st July, 2000. Thus, the order of the Tribunal is fully in accord with the circular No. 275/37/2000-CX.8A dated 02.01.2002 as approved in Commissioner of Central Excise, Hyderabad Vs. ITC Ltd [2004 (12) TMI 90 - SUPREME COURT OF INDIA]. The submission of the appellant that he is entitled for payment of interest from the date of deposit cannot be accepted.

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• 2013 (6) TMI 268
  Legality of Committee of Commissioners working - order was authenticated by one of member Commissioner of the committee on 23.06.2005, the other member authenticated on 24.06.2005. There was no ad idem on the same date either on 23.06.2005 or 24.06.2005 - Held that:- As decided in Kundalia Industries (2012 (8) TMI 789 - DELHI HIGH COURT) the decision of committee should be by a meaningful consideration which should be reflected on the note sheets in order to comply with the requirement of section 35(2) of the Central Excise Act, 1944 in accordance with law. In the present case when the proceeding before committee of Commissioner shows no regards to law laid down by decision of Hon’ble High Court of Delhi (supra) present case suffers from legal infirmity for which Revenue appeals are dismissed.

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• 2013 (6) TMI 267
  Ex-parte order - denial of natural justice - Held that:- There has been some apparent error in the name of the party to whom communication for personal hearing was sent and this has resulted in denial of natural justice of giving personal hearing by the Commissioner (Appeals). Therefore, the impugned order is set aside and the matter is remanded back to the Commissioner (Appeals) for giving personal hearing to the appellant by giving notice at the correct name and address.

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• 2013 (6) TMI 266
  CENVAT credit against service tax paid on outdoor catering services provided by outdoor caterers in the factory premises - denial of claim - Held that:- Credit should be allowed only to the extent where the expenses have been incurred by the appellant company and on which service tax has been paid and the cost not recovered from the employees. This aspect may be verified by the adjudicating authority and the quantum of credit restricted to such expense. The matter is remanded to the adjudicating authority for deciding the quantum of credit that will be available as per the principle in the case of Ultratech Cement Ltd (2010 (10) TMI 13 - BOMBAY HIGH COURT). Also the penalty and interest also needs to be re-adjudicated.

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• CST, VAT & Sales Tax

• 2013 (6) TMI 295
  Levy of higher rate of VAT - declared goods - violation of Section 8(2) of CST Act - industrial valves - non-ferrous metals and alloys - for the turnover not covered by Form 'C', revenue levied tax at 12.5% on the ground that the petitioner-dealer itself reported and paid tax @ 12.5%. - held that:- In the present case, the petitioner has not availed of the statutory remedy of appeal against the impugned order. The grievance of the petitioner in respect of levying higher rate of tax at 12.5% instead of 4%, is a matter which has to be adjudicated before the appellate authority. The approach of the petitioner in rushing to this Court by filing this Writ Petition, challenging the order of the original authority, without even availing of the statutory remedy of appeal before the appellate authority, cannot be sustained. - matter to be placed before the appellant authority - writ petition dismissed.

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• 2013 (6) TMI 294
  Refund of taxes paid on the activity of the provision of "passive infrastructure services" - alternative to direct the said respondent to deposit the taxes paid for appropriation towards the tax liability arising out of the impugned order - Whether the provision of Passive Infrastructure Services by the Applicant to Sharing Operator's would tantamount to 'Transfer of right to use goods' as per Section 2(1)(zc)(vi) of the DVAT Act, 2004 and therefore become liable to tax under the DVAT Act - how should the sale price as per section 9(1)(zd) of the DVAT act be determined for the purpose of discharging the liability under DVAT Act? - contention of petitioner that there was no transfer of the right in any goods by the petitioner to the sharing telecom operators and therefore the levy of VAT on the assumption to the contrary was wholly erroneous and untenable - Held that:- The right to use the goods - in this case, i.e. passive infrastructure can be said to have been transferred by Indus to the sharing telecom operators only if the possession of the said infrastructure had been transferred to them. They would have the right to use the passive infrastructure if they were in lawful possession of it. There has to be, in that case, an act demonstrating the intention to part with the possession of the passive infrastructure. There is none in the present case. The passive infrastructure is shared by several telecom operators and that is why they are referred to as sharing telecom operators in the Master service agreement, MSA which merely permits access to the sharing telecom operators to the passive infrastructure to the extent it is necessary for the proper functioning of the active infrastructure. With several restrictions and curtailment of the access made available to the sharing telecom operators to the passive infrastructure and with severe penalties prescribed for failure on the part of the Indus to ensure uninterrupted and high quality service provided by the passive infrastructure, it is difficult to imagine how Indus could have intended to part with the possession of part of the infrastructure. That would have been a major impediment in the discharge of its responsibilities assumed under the MSA. The limited access made available to the sharing telecom operators is inconsistent with the notion of a "right to use" the passive infrastructure in the fullest sense of the expression. At best it can only be termed as a permissive use of the passive infrastructure for very limited purposes with very limited and strictly regulated access. It is therefore difficult to see how the arrangement could be understood as a transfer of the right to use the passive infrastructure. When Indus has not transferred the possession of the passive infrastructure to the sharing telecom operators in the manner understood in law, the limited access provided to them can only be regarded as a permissive use or a limited licence to use the same. The possession of the passive infrastructure always remained with Indus. The sharing telecom operators did not therefore, have any right to use the passive infrastructure. Thus it is declared that under the contract entered into between the parties there is no sale of goods and at any rate there is no deemed sale so as to attract levy of tax under the Karnataka Value Added Tax Act, 2003.

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• Indian Laws

• 2013 (6) TMI 289
  Scope of RTI Act - Political parties - complainant S.C. Aggarwal sought information from the Presidents/Secretaries of the Indian National Congress (INC/AICC) and the Bhartiya Janata Party (BJP) Copies of Election Menifestoes by BJP for Lok Sabha elections in the years it formed NDA government with Shri Atal Bihari Vajpayee as Prime Minister, whether all the promises made in the election manifestoes fulfilled after BJP having formed government at the Centre, if not, list of promises highlighted in BJP election manifestoes but remained unfulfilled after BJP came to power, Outline of receipts by BJP in last two years separately for each year, Outline of payments, Is it compulsory for every BJP legislature either at Centre or in States or in civic bodies etc to contribute towards party funds?, If yes, please provide complete and detailed information including also defaulters in making such contributionsin last three years, Is BJP aware of any of its legislatures involved in corrupt and other malpractices in last three years?, If yes, please provide complete details including action taken by party and others against such persons, Has B.J.P. suggested any proposals to Union government /Election Commission towards electoral reforms?, If yes, please provide complete details including reply received from concerned ones if any, File notings on movement of this RTI petition and on all aspects mentioned in this RTI petition - whether political parties being questioned here are public authorities under section 2(h) of the RTI Act - Held that:- As relying on Indian Olympic Association v. Veeresh Malik and Ors [2010 (1) TMI 978 - DELHI HIGH COURT] for a private entity to qualify to be a public authority, substantial financing does not mean majority financing. What is important is that the funding by the appropriate Government is achieving a "felt need of a section of the public or to secure larger societal goals". Large tracts of land in prime areas of Delhi have been placed at the disposal of the Political Parties in-question at exceptionally low rates. Besides, huge Government accommodations have been placed at the disposal of Political Parties at hugely cheap rates thereby bestowing financial benefits on them. The Income Tax exemptions granted and the free air time at AIR and Doordarshan at the time of elections also has substantially contributed to the financing of the Political Parties by the Central Government. Therefore, no hesitation in concluding that INC/AICC, BJP, CPI(M), CPI, NCP and BSP have been substantially financed by the Central Government and, therefore, they are held to be public authorities under section 2(h) of the RTI Act. The criticality of the role being played by these Political Parties in our democratic set up and the nature of duties performed by them also point towards their public character, bringing them in the ambit of section 2(h). The constitutional and legal provisions discussed herein above also point towards their character as public authorities. The Presidents, General/Secretaries of these Political Parties are hereby directed to designate CPIOs and the Appellate Authorities at their headquarters in 06 weeks time. The CPIOs so appointed will respond to the RTI applications extracted in this order in 04 weeks time. Besides, the Presidents/General Secretaries of the above mentioned Political Parties are also directed to comply with the provisions of section 4(1) (b) of the RTI Act by way of making voluntary disclosures on the subjects mentioned in the said clause.

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