TMI Tax Updates - e-Newsletter
June 16, 2012

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws Service Tax Central Excise

Articles

1. Services becoming taxable w.e.f. 01.07.2012- advisable to pay and to receive evidence of payment before 30.06.2012 to avoid extra liability, contingency and disputes.

   By: DEVKUMAR KOTHARI

2. NEWSWEEK, OUTLOOK AND PLACE OF PROVISION OF SERVICE RULES, 2012

   By: Jayaprakash Gopinathan

3. LAW OF LIMITATION BINDS EVERYBODY INCLUDING GOVERNMENT.

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. India- Brazil to Strengthen Cooperation in Making Drugs and Medicines: Anand Sharma.

2. RBI monthly Bulletin

3. Data on ECB/FCCB for the month of April 2012

4. Export Stood at US $ 25.68 Billion in May 2012.

5. CCI issues Order against Chemist & Druggist Association, Goa for following anti-competitive practices.

6. Index Numbers of Wholesale Prices in India (Base: 2004-05=100) Review for the month of May, 2012 .

7. Text of the Speech of the Union Finance Minister Delivered During his Meeting with the Chairmen of Public Sector Insurance Companies.

Notifications

Customs

1. 41/2012 - dated 14-6-2012 - Cus

Seeks to amend Notification No. 39/96-customs - Exchange rates for export goods - Amendment to Notification No. 30/96-Cus. (N.T.).

2. 40/2012 - dated 14-6-2012 - Cus

Inclusion of Inland Container Depot (ICD) Tondiarpet (TNPM), Chennai in the list of ports permitted for exports and imports under Export Promotion.

Income Tax

3. 22/2012 - dated 14-6-2012 - IT

Exemption under Section 10(48) - Notified Foreign oil Company selling crude oil in India

4. 21/2012 - dated 13-6-2012 - IT

No Deduction of tax at source (TDS) on Software

Service Tax

5. Order No. 1/2012 - dated 15-6-2012 - ST

Service Tax (Removal of Difficulty) Order, 2012 - Amends section 68 of the Finance Act, 1994 – Consequential Amendment

Circulars / Instructions / Orders

DGFT

1. 05 (RE:2012)/2009-2014 - dated 14-6-2012

Amendment of SION E-125 under Food Product Group.

Customs

2. 16/2012 - dated 13-6-2012

Procedure followed for import of Indian vessels and filing of Import General Manifest, Bill of Entry – regarding.

Highlights / Catch Notes

Income Tax

• Foreign Oil Company Exempt from Income Tax on Crude Oil Sales in India u/s 10(48) of Income Tax Act.

  Notifications : Exemption under Section 10(48) - Notified Foreign oil Company selling crude oil in India - Notification
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• New TDS Rules Issued for Software Payments: Key Changes Affecting Software Transactions and Tax Compliance.

  Notifications : Deduction of tax at source (TDS) on Software - Notification
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• Loan Processing Fees Examined as Interest Under Income Tax Act Sections 2(28A) and 194A; TDS Non-Compliance Triggers Section 40(a)(ia) Consequences.

  Case-Laws - AT : Loan Processing fees - whether considered as interest for purpose of Section 2(28A) and 194A - assessee was obliged to deduct tax at source which it had not done so. Rigours of Section 40(a)(ia) is attracted - AT
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• Royalty Income Taxed on Cash Basis Under India-USA DTAA, Regardless of Accounting System Used.

  Case-Laws - AT : DTAA between India and USA - Royalty income - irrespective of the system of accounting, royalties are taxable on cash basis. - AT
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• Denial of Registration u/ss 12A and 80-G Due to Extravagant Expenses, Despite No Ban on Luxury Conferences.

  Case-Laws - AT : Registration u/s 12A and 80-G - denial on ground that there was extravagance of expenses - there is no ban or embargo whether conference can be held in five star hotel or not. - AT
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• India-Japan DTAA: Liaison Office Not a Permanent Establishment Unless Activities Exceed Permitted Functions or Show Business Conduct.

  Case-Laws - AT : DTAA between India and Japan - Whether Liasion Office constitutes its Permanent Establishment - LO cannot be taken to be a PE unless its activities exceed the permitted activities or the department lays hand on any concrete material or evidence to state that any substantive business activity has been carried on from this place. - AT
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• Tax Dispute: Co-op Housing Society Challenges Expense Disallowance, Cites Mutuality Principle for Hall Rentals and Services Income.

  Case-Laws - HC : Principle of Mutuality - Co-operative Housing Society, deriving income for hiring of hall, catering services, commission etc - dis-allowance of expenses on ground that income is derived from “other sources” - dis-allowance of transfer fee - HC
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• Amalgamation Reserve Transfer Not Taxable as Benefit or Perquisite u/s 28(iv) of Income-tax Act.

  Case-Laws - AT : Income taxable under section 28(iv) – amalgamation - treatment of sum transferred by the assessee to its General Reserve - not in the nature of any benefit or perquisite and thus, not taxable u/s 28(iv) of the Income-tax Act, 1961. - AT
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• Court Rules Demolition and Repairing Charges Are Admissible as Revenue Expenditure for Assessee.

  Case-Laws - HC : Revenue or capital expenditure - "demolition charges" and the "repairing charges", were held to be admissible to the assessee.- HC
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• Section 40A(2)(a) of Income Tax Act Unjustly Invoked Without Evidence of Tax Avoidance Intent in Sister Concern Purchases.

  Case-Laws - AT : Purchases from sister concern - applicability of section 40(A)(2)(a) of the Act - The AO has not been able to bring any material on record to show as to how and in what manner the assessee intended to avoid payment of tax before invoking the provisions of Section 40A(2)(a) of the Act. - AT
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Customs

• Chennai's ICD Tondiarpet Added to Authorized Ports List for Export-Import Operations to Boost Trade Efficiency.

  Notifications : Inclusion of Inland Container Depot (ICD) Tondiarpet (TNPM), Chennai in the list of ports permitted for exports and imports under Export Promotion. - Notification
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• Proposed Amendments to Notification No. 39/96-Customs Update Exchange Rates for Export Transactions to Reflect Current Market Conditions.

  Notifications : Seeks to amend Notification No. 39/96-customs - Exchange rates for export goods - Amendment to Notification No. 30/96-Cus. (N.T.). - Notification
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• Importing Indian Vessels: File Import General Manifest & Bill of Entry for Customs Compliance and Smooth Clearance.

  Circulars : Procedure followed for import of Indian vessels and filing of Import General Manifest, Bill of Entry – regarding. - Circular
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DGFT

• DGFT Announces Amendment to SION E-125 for Food Products, Streamlining Export Input-Output Calculations.

  Circulars : Amendment of SION E-125 under Food Product Group. - Public Notice
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Corporate Law

• Limitation Period for Offenses Under Companies Act: Six Months from Offense or Awareness Date Per Section 469(1)(b).

  Case-Laws - HC : Offense under companies act - period of limitation of six months - period of limitation for an offence starts on the date of the offence or where the date is unknown from the date the person aggrieved by the offence acquires knowledge of such offence (section 469(1)(b)). - HC
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Indian Laws

• Service Tax Amendment Corrects Reference Error in Section 68 to Section 66B with 2012 Order.

  Act-Rules : While introducing negative list under Service Tax the reference to Section 66 in Section 68 was not amended in Finance Act, 2012, now this error is corrected section 68 amended vide Service Tax (Removal of Difficulty) Order, 2012 dated 15-6-2012 to make reference to Section 66B.
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• Government Raises MSP: 16% Increase for Paddy, Up to 37% for Pulses and Oilseeds.

  None : Govt hikes paddy MSP by 16pc; pulses, oilseeds by up to 37pc
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• India's exports in May decreased by 4.16% to USD 25.68 billion.

  None : India's May exports declined by 4.16 per cent to USD 25.68 billion.
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• Delhi High Court affirms citizens' right to access info on President's donations under RTI Act.

  None : Under RTI Act, every citizen is entitled to know the donations given by the President of India. – Delhi HC
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Service Tax

• Rebate Denied for Non-Filing of Declaration Under Notification No. 12/2005 ST Despite Being Procedural.

  Case-Laws - AT : Rebate claim - notification No. 12/2005 ST - was not filed - even though non filing of declaration is only procedural, rebate will not be admissible. - AT
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• Appellant's Belief in Non-Taxability of Petrol Bunk Construction Rejected; Deemed 'Commercial Construction Service' Under Tax Rules.

  Case-Laws - AT : Demand of service tax - construction of petrol bunks - claim of the appellant is that they were under bona fide belief that their activities did not fall under 'Commercial or Industrial Construction Service' appears not acceptable. - AT
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• Third-party toll collection for NHAI is taxed under Business Auxiliary Services as per service tax rules.

  Case-Laws - AT : Business Auxiliary Services - business of toll collection - if NHAI engages somebody else to collect toll charges on its behalf and pays them remuneration, the service so rendered would appear to merit classification under 'Business Auxiliary Service'. - AT
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• Amendment to Rule 6(3) of Service Tax Rules, 1994: Excess Tax Payments Can Offset Future Liabilities.

  Case-Laws - AT : Adjustment of excess payment of service tax - Sub-rule (3) of Rule 6 of the Service Tax Rules, 1994 have been amended providing for adjustment of excess payment against future tax liability under rule 6(4A) and 6(4B) of the Service Tax Rules, 1994. - AT
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Central Excise

• Refining and Minting Precious Metals Like Gold and Silver Classified as Manufacturing for Excise and Tax Purposes.

  Case-Laws - AAR : 'Manufacture' - process for refining and minting of products of precious metals namely gold, silver and platinum as per the specifications of customers - process amounts to manufacture - AAR
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• PVC Crates Used for Transporting Aerated Water Bottles Qualify for CENVAT Credit as Inputs or Capital Goods.

  Case-Laws - AT : CENVAT Credit on PVC crates used for transporting aerated water in bottles - circumstances the PVC crates being used as inputs/capital goods in the manufacture of aerated waters accordingly CENVAT Credit is admissible on the same - AT
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• CENVAT Credit Eligibility Unaffected by Freight Bifurcation for Domestic and Export Clearances; Applies Up to Place of Removal.

  Case-Laws - AT : Bifurcation of Freight paid in respect of domestic clearances and export clearances for CENVAT credit - it makes no difference for allowing Cenvat credit whether the goods are cleared for export purpose or for domestic purpose up to the place of removal - AT
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• Order Copy Must Be Served to Assessee via Registered Post, Not Speed Post, Per Section 37C(1)(a) Requirements.

  Case-Laws - HC : As per Section 37C(1)(a), it was mandatory to serve a copy of the order of Commissioner (Appeals) by registered post with acknowledgment due to the assessee. - delivery by speed post is not enough - HC
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• Timely Duty Payment Crucial: Non-Compliance u/r 8 (3A) May Lead to Seizure and Confiscation of Goods.

  Case-Laws - AT : Default in payment of duty - Rule 8 (3A) of C.E. Rules, 2002 - The major consequence is that such goods would have been liable to seizure and confiscation under Rule 25 of C. E. Rules. - AT
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Case Laws:

• Income Tax

• 2012 (6) TMI 328
  DTAA between India and USA - Royalty income - taxability on gross basis or net basis - assessee opted for the provision contained under article 12 of DTAA contemplating taxation @ 15% of the "gross amounts" of royalties - Held that:- Term "Gross amounts" has not been defined in the treaty. In common parlance, these words mean the amount received alongwith tax deducted etc. at source. Also, section 198, provides that all sums deducted in accordance with the provisions of chapter XVII shall be deemed to be income received for computing the income of an assessee. Thus, expression 'gross amount' includes within its ambit the actual payment and tax deducted at source. Therefore, CIT(A) erred in taxing the net amount @ 15% under the DTAA - Decided in favor of Revenue. Whether, the income by way of royalty is taxable on cash basis or mercantile basis - Held that:- Initial point of taxation is the arising of the royalty in India, but it is finally taxed on the basis of amount of royalty paid to the non-resident. Therefore, irrespective of the system of accounting, royalties are taxable on cash basis. Accordingly it is held that the amount provided by the licensee in its books of account but not paid to the assessee is not taxable. Matter restored to the file of AO to decide about chargeability of interest u/s 234B & 234C.

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• 2012 (6) TMI 327
  Registration u/s 12A and 80-G - denial on ground that there was extravagance of expenses by holding conference of Doctors at five star hotel and there is no benefit to the common public, also, donors are pharmaceutical companies and some of them have deducted TDS - assessee, registered charitable trust, created by eminent cardiologists with object of research in the field of medicines in general and cardiac medicines - Held that:- If the objects of the trust are duly incorporated and charitable in nature and conform to the various rules and regulations; the assessee trust maintains its books of account and the genuineness of the account is established by the society, in normal circumstances the registration should be granted to the Trust u/s 12AA and 80-G. In the given facts and circumstances the conference organized by the assessee is authorized by the objects of the Trust; there is no ban or embargo whether conference can be held in five star hotel or not. Therefore, the adverse inference drawn by the DIT(E) is not proper inasmuch as the trustees will have a discretion to organize the conference at a place and in the manner which is befitting into the participants and objects. Donations presumed as Commercial receipt - Held that:- Only because donors are pharmaceutical companies and they deducted TDS, will not convert a donation into a commercial receipt on the basis of presumptive inferences. As long as the assessee has credited the amount as donations and issued donation receipts, in our view, the same cannot be held to be commercial receipt. We hold that the assessee is eligible for registration u/s 12AA and 80-G, which is granted - Decided in favor of assessee.

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• 2012 (6) TMI 325
  Unexplained expenditure - addition - source and veracity of expenditure stands explained by assessee - Held that:- CIT(A) has rightly held that provisions of Sec.69C will not be applicable as the Assessee has explained the source of the expenditure debited in the P/L A/c which was the amount adjusted payable to SG Takshila Enterprise Company Pvt.Ltd. which the latter agreed to be treated as contribution towards monies payable for acquiring shares of the assessee. Further, AO, after verifying the bills produced by assessee has failed to bring on record any material to suggest that any of such expenditure was bogus or not for the purpose of setting up of the business. Also, once the nature of the expenses is found to be in relation to the business then the quantum of such expenses cannot be as a general rule be enquired into by the AO. Dis-allowance u/s 40(a)(ia) - pre-operative expenses - Held that:- Once it is accepted that the payments were reimbursements and were at actual then the question of deduction of tax at source will not arise. Copies of the quarterly TDS returns reveal that requisite TDS has been deducted and paid wherever required. Dis-allowance stand deleted. Dis-allowance u/s 40A(3) - Held that:- Provisions of Sec.40A(3) were also not applicable as the payments were made by the assessee by cheques - Decided in favor of assessee

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• 2012 (6) TMI 324
  Charitable trust - alleged violation of provisions of Section 13(1)(c) r.w.s. 13(2) - assessee, charitable trust registered u/s 12A, one of the group trust managed by Ansal group, having main objects to promote and encourage educational activities - alleged motivation on the part of Ansal Properties and Infrastructure Ltd. to clandestinely divert Trust Funds for its personal use - agreement to sale of plot by APIL to Trust and its consequent cancellation contended to be colorable device by Revenue - Held that:- It is found that there is no change in Trust's objects and agreements to sale of reserved plots of APIL with group educational trust do not carry any element of primary suspicion. On the basis of contemporaneous evidence, it is observed that presumption cannot be drawn that APIL diverted the funds without proper justification for its use. Before the agreements and after the termination of agreements APIL had interest free credit balance with assessee and it has been providing monetary support to trust now and then. Ground of Revenue dismissed. Non collection of rent and interest from APIL - APIL contended that actual payments made were more than rent and interest and proper entries not made in books of trust - Held that:- What is due in books from AIPL was not money lent or advanced to APIL. It was caused by unadjusted balances of interest on debts already discharged prior to 2001. In fact as at 31.3.2006, APIL had a credit balance of more than Rs. 80 lakhs - No merit in the ground of Revenue Advance to Charanjiv Educational Society not registered u/s 12A, meant for establishing an educational institution at Chhattisgarh - Held that:- Assessee in furtherance of its objects formed this charitable society with same objects and trustees and incurred the expenses which are shown as advance to CEC. In our view, even if the same amount was donated to CEC in place of advance, in that eventuality also it would have been allowed as application to objects. Corpus donations received from HCL & Blue bird - benefit u/s 11(1)(d) - Held that:- Since assesse did not violate any provisions of Sec 13, besides it emerges from the record that both the donors confirmed the corpus donations. CIT(A) was right in deleting these additions. Unexplained credit u/s 68 - corpus donation received from S Jagjit Singh, who though first confirmed such donations, later denied some contents - Held that:- Such addition cannot be made u/s 68 as unexplained cash credit as it is held that there is no violation of Sec. 13. Besides, the name of creditor and identity is accepted by AO. The transaction is through DLF pay order which was donated to assessee, on behalf of JS, to resolve a land dispute. Therefore genuineness and creditworthiness is proved. Also, donors may retract statement, but it can not take away the original nature of corpus donation, which has been used accordingly by assessee. Thus legally this addition can not be made u/s 68. In respect of other donations, assessee having discharged the primary onus of leading evidence for identity, donor and his creditworthiness, assessee trust can not be saddled with this addition u/s 68 which is deleted. Apropos development fund charges directly credited to balance sheet - Held that:- Amount has been rightly held by the lower authorities to be the income of the assessee. Depreciation on assets acquired by the application of trust income - dis-allowance - Held that:- In view of decision in case of DIT v Vishwa Jagriti Mission (2012 (4) TMI 289 (HC)), we allow the claim of depreciation on such asset.

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• 2012 (6) TMI 323
  Loan Processing fees - whether considered as interest for purpose of Section 2(28A) and 194A - Held that:- Definition of Section 2(28A) clarifies that it includes all the charges in respect of moneys borrowed or debt incurred or in respect of any credit facility whether it has been utilized or not. Therefore, such loan processing fee fell within the said definition. Also, unless context otherwise requires "interest" mentioned, in Section 194A has to be understood in accordance with the definition of "interest" given u/s 2(28A). Therefore, assessee was obliged to deduct tax at source which it had not done so. Rigours of Section 40(a)(ia) is attracted - Decided in favor of Revenue Dis-allowance u/s 14A - assessee considered pro rata interest on investments made to earn dividend income on ground that borrowed money was invested in various companies and shares were not allotted in some of such companies, hence, interest could not be attributed to earning of any dividend income on such investments - Held that:- Intention of the assessee for earning dividend income could not be attributed to the amounts invested in share application money, unless and until there is a commitment brought on record by the concerned company for allotment of shares, and the share application money can at the best be considered only as a loan given by the assessee to the said company. We remit the issue back to the AO for fresh consideration in accordance with law.

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• 2012 (6) TMI 322
  Interest payable on the picture under production – whether it will be allowable business expenditure u/s 36(1)(iii) and not forming a part of cost of production under Rule 9A – Held that:- The interest attributable to the borrowings utilized in the production of film will be added to the cost of production for being allowed under Rule 9A and the interest on borrowings used for other purposes will be allowed as a deduction for the current year u/s 36(1)(iii) – no point in ignoring the applicability of Rule 9 on interest on borrowings used for the production of the film when other normal expenses otherwise allowable under other sections like 36, 37 etc are capitalized under Rule 9A - determination of the extent of actual amount of borrowing used for the purpose of production of film the matter is remitted back to the file of the AO to determine the same – in favour of revenue for statistical purpose. Capital gains - Transfer of the property on the basis of joint development agreement - purview of section 2(47) r.w.s. 53A of the Transfer of Properties Act – assessee contention that the assessee has received the right to receive consideration on a later date – Held that:- Mere accrual of the consideration received in the subsequent years does not defer the taxability of the capital gains – as property was handed over in part performance under S.53A of the Transfer of Property Act, and it could not be said that the transaction was without consideration - date on which possession was handed over to the developer is relevant for determination of the year in which the capital gains are assessable to tax - the possession of the land having been handed over to the developer in the assessment year under consideration, the transfer takes place in the assessment year under consideration only, and consequently the assessee is liable to be assessed to tax in relation to the capital gains in the year under consideration itself – against assessee.

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• 2012 (6) TMI 321
  Challenging the taxability of mobilization fee received outside India for the voyage carried out outside India u/s 44BB – Held that:- Minority view that the amount liable to be considered for section 44BB(2) would be the one which is received or receivable on account of supply of machinery, including the hire charges as relatable to the territorial waters outside India – As decided in CIT Dehradun & another Versus Sundowner Offshore International (Burmuda) Ltd. [2009 (2) TMI 46 (HC)] that the mobilization charges received by the assessee attributable to transportation of rig from outside India have to be taken into account for the purpose of computing income u/s 44BB – against assessee. Treatment of disputed, unrealized and unpaid service tax u/s 44BB – the assessee agreed to receive US$ 3.14 million towards outstanding service tax dues in full and final settlement of the claim of US$5.28 million – claim of Service tax on US$ 2.27 million Held that:- As acknowledgement of liability by Hardy to the tune of US$ 3.01 million is received for event to took place in the subsequent year no question of adding the remaining amount in the current year by holding that the assessee acquired any right to receive the amount - the assessee had not acquired any right to receive US$ 2.27 million on account of service tax, being the first step therefore need not embark upon the second step, being its inclusion or otherwise in the receipts for the purposes of section 44BB – in favour of assessee. Challenge charging of interest u/s 234B – Held that:- As decided in case of DIT (International Taxation) v. NGC Network Asia LLC [2009 (1) TMI 174 (HC)] that when the duty is cast on the payer to deduct tax at source, on failure of the payer to do so, no interest can be charged from the payee assessee u/s 234B – in favour of assessee.

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• 2012 (6) TMI 320
  CIT(A) deleting the addition made by the AO admitting the additional evidence of the assessee – assessee is covered by exceptions provided in Rule 46A - AO did not provide an opportunity to the assessee to submit relevant evidence and documents regarding clarifications asked by the AO himself before passing the assessment order - Held that:- The pre-conditions prescribed in Rule 46A must be shown to exist before additional evidence is admitted and every procedural requirement mentioned in the Rule has to be strictly complied with so that the rule is meaningfully exercised - nothing in the order of ld. CIT(A) to show that the AO was confronted with the additional evidence and asked for comment as per statutory requirement of Rule 46A(3) - the error committed by the ld. CIT(A) is that he proceeded to mix up his powers under sub-section (4) of Section 250 of the Act with the powers vested in him under Rule 46A - matter is restored to the file of the ld. CIT(A) to comply with the requirements of Rule 46A .

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• 2012 (6) TMI 319
  Disallowance of deduction u/s. 80IB (10) - housing project constructed by the assessee - condition for completion of the project within four years was not met – Held that:- Cluster of 16 buildings as per the sanctioned layout plan satisfied all the conditions of section 80IB(10) as the first building plan of the assessee was passed before the introduction of this condition in section 80IB(10) and hence, the condition for completion of the project within four years was not applicable in this case - assessee had completed 11 buildings construction on a portion of land occupying more than one acre - no definition of the term 'Project' in section 80IB(10) and the same could not be equated with the entire sanctioned layout - the decision taken on an identical issue under similar facts and circumstances of the case in the appeal for the A.Y. 2006-07 had accepted the assessee is very much entitled to the claimed deduction u/s. 80IB (10) of the Act during the current year – in favour of assessee

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• 2012 (6) TMI 318
  Whether Commissioner of Income-tax has erred in directing the Assessing Officer to treat the warehousing charges as part of Container Freight Station income eligible for deduction u/s 80IA of the Act – Held that:- warehousing facilities alone may not get any deduction but when they are part of CFS as a necessary infrastructure and such CFSs can come into existence and operate only if it provides minimum infrastructure facility as only then sanction for the CFS status is granted then such warehousing facility is different from the stand alone warehousing facility operated outside CFS, warehousing income to be a part of CFS income allowed and hold it eligible for deduction under section 80-IA, appeals filed by the Revenue are dismissed

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• 2012 (6) TMI 317
  100% EOU - deduction under section 80HHC - assessee has two units - assessee claimed deduction under section 80HHC in respect of the Bangalore unit - Assessing Officer aggregated the profit in respect of the two units and computed the relief under section 80HHC in respect of the net income - assessee contending that when the profits from the export unit at Bangalore was identifiable, the assessee would be entitled to 100 per cent. deduction for the said profits – Held that:- each of the unit had maintained their accounts independently and there was no inter- dependency or interlacing of funds to treat them as one consolidated unit, income earned from the export goods from the Bangalore unit merited to be considered for 100 per cent. relief, as one falling under section 80HHC(3)(a) of the Act, so long as the export details of the unit engaged in exports are separately maintained, the assessee could not be denied of the benefit in respect of section 80HHC with reference to the export unit, decision in favour of the assessee, tax case appeal is allowed [L. M. Chhabda and Sons (1967 (3) TMI 10 - SUPREME CourtSUPREME Court - Income Tax) ]

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• 2012 (6) TMI 316
  Deduction u/s 80-IA - whether all the three conditions embodied in S.80-IA(4)(i) were required to be simultaneously fulfilled - assesse mentioned that the assessee is a contractor/developer and claimed deduction under section 80-IA(4) of the Income-tax Act Held that:- in the case of an enterprise carrying on business or developing which is the case of the assessee, all the conditions referred to clause (i) of section 80IA (4) should refer to the conditions as applicable to the developer. developer who is only developing the infrastructure facilities since he does not operate and maintain Infrastructural facilities, cannot be expected to fulfill the condition at subclause (c) which is an impossibility and the requirements to fulfill the said condition shall amount to absurdity and therefore uncalled for. appeals of the assessee are allowed

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• 2012 (6) TMI 315
  Reassessment - limitation - wrong application of rate of tax - held that:- According to the Assessing Officer, the assessed income has been wrongly taxed at 15 per cent whereas it should have been taxed at 20 per cent. Application of rate of tax on assessed income cannot in any way be the result of the failure of the assessee to disclose fully and truly all material facts necessary for assessment. The Assessing Officer is an adjudicating authority for the purpose of levy of rate of tax on particular type of income and in case when there is no dispute regarding the assessable amount, then, it is only the Assessing Officer who has to determine that what rate of tax is payable by the assessee on a particular income. It is a case where first proviso to section 147 is clearly applicable. The initiation of reassessment proceeding is bad in law, hence, the impugned assessments are quashed on the legal ground that initiation of reassessment proceedings is bad in law.

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• 2012 (6) TMI 314
  Recall/rectification of order - typographical error - TDS – assessee in default - held that:- In the light of the conclusion in the preceding sentence, the usage of the word 'NOT' in the above sentence appears to be a typographical error. Accordingly the last two sentences of paragraph 103 at page 66 of the Tribunal order are substituted. Mistake relating to issue the 'offshore' - held that:- The Board circular admits the existence of doubts indicating the possibility of duality of opinions. When duality of opinions exists, there cannot be said to arise a mistake apparent from records. Mistake in view of retrospective amendment - held that:- a retrospective amendment to law does not entitle the filing of maintaining of a miscellaneous petition under section 254(2) of the Act.

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• 2012 (6) TMI 298
  Dis-allowance of bad debts - difference in accounting methodology - bad debts of 7.5 crores adjusted against available balance of 1.81 crore in provision for bad debts and balance directly to P/L/ a/c - Revenue dis-allowed claim on ground that whole bad debts should have routed through Provision for Bad debts - Held that:- Contention of assessee that as per sec. 36(2)(v), the bad debts can be debited only to the extent of the available balance in the Provision account, is accepted as the same is in accordance with the accounting principles. Even if methodology suggested by AO is accepted, net effect would have been same. Hence CIT(A) has rightly deleted the dis-allowance - Decided in favor of assessee. Reduction of excess provision back - partial dis-allowance u/s 14A - dividend income - Held that:- Matter restored to file of AO for fresh examination.

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• 2012 (6) TMI 297
  Dis-allowance u/s 14A - depreciation and other related expenses dis-allowed by apportioning them in the ratio of exempt share income from firm u/s 10(2A) to taxable income - Held that:- Instant case is that of the partner and therefore what is to be examined is whether the share income is excluded from his total income. The answer is obviously in the affirmative. In such a situation, provision contained in section 14A will come into operation and any expenditure other than depreciation incurred in earning the share income will have to be disallowed - Decided against the assessee. Depreciation being an expenditure or not? - Section 14A deals only with the expenditure and not any statutory allowance admissible to the assessee. A statutory allowance u/s 32 is not an expenditure, hence it cannot be subject matter of dis-allowance u/s 14A. See Hoshang D. Nanavati (2011 (3) TMI 89 (Tri)) - Decided in favor of assessee.

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• 2012 (6) TMI 296
  Whether amendment made to the provisions of section 40a(ia) by the Finance Act,2010, would apply with retrospective effect from 1.4.2005 or w.e.f 1.4.2010 - Held that:- Amendment to the provisions of Sec.40(a)(ia), by the Finance Act, 2010 is applicable retrospectively from 1.4.2005. Consequently, any payment of tax deducted at source on or before the due date for filing return of income u/s 139(1), can not be disallowed in terms of provisions of Section 40a(ia) - Decided against Revenue.

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• 2012 (6) TMI 295
  Capital Loss vs Business loss - loss on sale of Government securities treated as business loss - assessee, Co-operative bank registered under Gujarat Co-operative Societies Act and RBI, engaged in banking business had however considered the investments made in the securities as "Investments" and not as "stock in trade" - Held that:- It is undisputed that assessee has been treating for all intents and purposes the securities as its investments right from the date of its acquisition and it continues to treat it as investments. The C.B.D.T. Circular No.599 dt. 24.4.1991 has clarified that the securities held by Bank must be regarded as "stock in trade" meaning thereby "regarded" by whom i.e. by the Bank itself. Undisputedly in the present case the Bank in question has not regarded the "investment" as "stock in trade" but as "investment.", therefore loss on sale of investments has to be taken as capital loss and not business loss - Decided in favor of Revenue.

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• 2012 (6) TMI 294
  DTAA between India and Japan - Whether Liasion Office maintained in India under approval of RBI constitutes its Permanent Establishment in terms of Article 5 of said DTAA - assessee submitted that office was carrying on preparatory or auxiliary work but not undertaking any core revenue generating activity - Held that:- There is no dispute that India office is a fixed place. The dispute is whether the business of the assessee is being partly carried on through this office and in absence of any evidence on record with regard to commercial activity having been done by the assessee in India, the LO cannot be considered to be a PE. Further, income which otherwise neither arose nor accrued in India cannot be deemed to accrue or arise in India by looking merely an exclusionary clause (e). Once an activity is construed as being subsidiary or in aid or support of main activity, it would fall within the exclusionary clause. In view of the AAR ruling in case of K.T. Corporation, Korea(2009 (5) TMI 37 (AAR)) it is held that LO cannot be taken to be a PE unless its activities exceed the permitted activities or the department lays hand on any concrete material or evidence to state that any substantive business activity has been carried on from this place. Since no income accrues or arises to the assessee in India, no income can be deemed to accrue or arise to the assessee in India by invoking exclusionary sub-paragraph (e) - Decided against the Revenue

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• 2012 (6) TMI 293
  Dis-allowance u/s 40(a)(ia) - belated deduction of tax from April 2007 to February, 2008 in the month of March 2008 and deposit of same before the due date for filing the return u/s.139(1) - Held that:- It is not in dispute that that the assessee deducted TDS which was not paid to the account of Central Govt. within the prescribed time, however, it was paid before the due date of filing the return specified in section 139(1) of the Act. On a similar issue, the Calcutta High Court held that amendment in sec. 40(a)(ia) is having retrospective operation in the case of CIT v. Virgin Creations(2011 (11) TMI 348 (HC)). Therefore, CIT(A) has rightly deleted addition on account of such dis-allowance - Decided in favor of assessee.

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• 2012 (6) TMI 292
  Principle of Mutuality - Co-operative Housing Society, deriving income for hiring of hall, catering services, commission etc - dis-allowance of expenses on ground that income is derived from “other sources” - dis-allowance of transfer fee - Held that:- Act recognizes the principle of mutuality and has excluded all businesses involving such principle from the purview of the Act, except those mentioned in clause (vii) of that section. The three conditions, the existence of which establishes the doctrine of mutuality are (1) the identity of the contributors to the fund and the recipients from the fund, (2) the treatment of the company, though incorporated as a mere entity for the convenience of the members, in other words, as an instrument obedient to their mandate, and (3) the impossibility that contributors should derive profits from contributions made by themselves to a fund which could only be expended or returned to themselves. By applying the aforesaid principles to the facts of the present case, it is held that dis-allowance of transfer fees stand deleted and since no part of other expenditure are in nature of capital expenditure, hence 100% of expenses are allowed as deduction. Also, net surplus of income over expenditure will not be taxable because the income of the assessee by way of interest from co-operative bank is exempt u/s 80P[ii] - Decided against the Revenue

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• 2012 (6) TMI 291
  Penalty u/s 271(1)(c) - foreign bank - dis-allowance of loss on ready forward transactions on ground of them being illegal - alleged concealment of income - Held that:- Dis-allowance made as speculative loss cannot be considered alone as concealment of income for considering the penalty u/s 271(1)(c) when the same amount can be set off to speculation profits as directed by the CIT (A) and the ITAT, the direction which was not complied by the Assessing Officer. Since all the particulars are furnished by assessee from out of the records and the Assessing Officer having not disturbed any of the computations as furnished by assessee, it cannot be stated that penalty was levied for furnishing inaccurate particulars. Also, at the relevant point of time, inspite of having the directions/circulars of the RBI, most of the Banks (not only the foreign banks but Indian scheduled banks including PSU Banks) were routinely and regularly involved in these transactions till the scam broke out. It cannot be stated that the assessee deliberately concealed the particulars. Thus, considering only the amount of speculation loss for quantification as concealed income is not correct according to the law. Limitation - As per the record, the ITAT order was dated 15/2/2007. Therefore, six months time limit for passing penalty order expires on 30/09/2007. The penalty order passed on 31/08/2009 was certainly barred by limitation. Also, limitation prescribed u/s 275(1)(a) does not extend the time limit till miscellaneous application was disposed off. Hence, both on merits of the case as well as on the ground of limitation, the order of the penalty cannot be sustained - Decided in favor of assessee

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• 2012 (6) TMI 290
  Percentage of completion method of accounting – Held that:- The assessee revised its basis of accounting from the invoicing schedule method to the percentage of completion method for computing revenues arising from the project management and onshore supply contract with effect from assessment year 1998-99 - the facts of this ground for the current year are mutatis mutandis similar to those of immediately preceding year wherein such ground has been decided by the Tribunal in assessee's favour, thus following the precedent uphold the impugned order on this issue – in favour of assessee. Profit in respect of offshore supplies – CIT held it not to be taxed in India – Held that:- It is a case of an offshore supply of equipment on CIF basis outside India for which payment was also made outside India and hence no income accrued or arose in India – in favour of assessee. Revenues from Project Management Contract – CIT(A) considered it to be taxed on net income basis - AO contested that the assessee was not engaged in any construction activity but only in providing services and hence the revenues from PMCs were liable to be considered u/s 9(1)(vii) being fees for technical services – Held that:- From the nature of services rendered by the assessee to MRPL, HPL and CFCL, it can be seen that the same are not at all related with the direct construction/ erection of units, the assessee's services are in the nature of managing or supervising the construction/erection of units and not directly entering into such activity - parties are residents of India and the amounts have been paid by them to the assessee, a non-resident which is in the nature of fees for technical services and such services have been utilized by them in business carried on in India or for earning any income from any source in India, thus the amount received by the assessee falls u/s 9(1)(vii) and hence will be deemed to accrue or arise in India - since revenues are found to be covered u/s 9(1)(vii), the natural consequence would be the attraction of section 44D - admittedly the assessee, a non-resident, is tax resident of Japan position under DTAA need to be examined - as such the expenses so claimed by the assessee have remained unverified in terms of Article 7 read with paras 7 and 8 of Protocol the impugned order is set aside and the matter is restored to the file of AO. Challenge charging of interest u/s 234B – Held that:- As decided in case of DIT (International Taxation) v. NGC Network Asia LLC [2009 (1) TMI 174 (HC)] that when the duty is cast on the payer to deduct tax at source, on failure of the payer to do so, no interest can be charged from the payee assessee u/s 234B – in favour of assessee.

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• 2012 (6) TMI 289
  Revision under section 263 by CIT(A) - period of limitation – Held that:- CIT(A) has rightly reckoned the period of limitation from the date of passing of the income-escaping assessment order under section 143(3), read with section 147 - as per the provisions of section 263(1), where an original order is rectified by an order of rectification, it ceases to exist and a rectified order comes into existence. - After the date of rectification, there remains no original order in existence - the assessment was made for the first time u/s 143(3) r.w.s 147 and there was no occasion before that to scrutinize the return and section 263(2) makes it clear that order passed u/s 143(3) r.w.s 147 can be revised. So, it becomes amply clear that the limitation will start from the date of assessment made u/s 143(3) r.w.s 147 i.e 24.12.2008 in this case and not from the date of intimation as has been claimed by the assessee-company - the revision order passed by the Commissioner of Income-tax is within the period of limitation. Income taxable under section 28(iv) – amalgamation - treatment of sum transferred by the assessee to its General Reserve - Held that:- The amount of Rs. 2,899.68 lakhs transferred by the assessee to its General Reserve was not generated out of trading operations. The surplus in fact arose out of acquisition of capital assets. - It was a transaction in the capital segment. In fact, there is no surplus. It was only an accounting notion. It was necessarily to be reflected in the accounts so as to tally the balance sheet. - Even if the surplus is attributed to a capital transaction, there again section 47(vi) provides that any surplus arising in such cases of amalgamation cannot be brought to capital gains tax, as the act of amalgamation is not treated as 'transfer' for the purposes of section 45. - The sum of Rs. 2,899.68 lakhs is not in the nature of any benefit or perquisite and thus, not taxable u/s 28(iv) of the Income-tax Act, 1961.

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• 2012 (6) TMI 288
  Capital gains - Valuation of plot as on 1.4.1981 - held that:- The CIT(A) and the Tribunal after noticing that there was transaction of sale of land by the Improvement Trust on 1.6.1981 and other comparable sale instances had accepted the fair market value of the land at Rs. 330/- per square yard as on 1.4.1981. Learned counsel for the revenue was unable to point out any error in the aforesaid finding which may warrant interference by this Court. - Decided in favor of assessee. Revenue or capital expenditure - Expenses incurred as "demolition charges" - held that:- the business of the assessee had continued till 31.3.1995 as the Assessing Officer himself had allowed business expenses till that date. - the assessee had to spend "demolition charges" in respect of structure that had caught fire and for which major repair was undertaken. - Therefore, the "demolition charges" and the "repairing charges", were held to be admissible to the assessee. - Decided in favor of assessee.

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• 2012 (6) TMI 287
  Purchases from sister concern - applicability of section 40(A)(2)(a) of the Act - held that:- The AO has not pointed out that the purchases made by the assessee from PIH were excessive having regard to the fair market value of the goods. He has also not disputed the rate at which the sales were made by the assessee. The fact that assessee provided discount by way of extra cases to its customers has also not been found to be false by the AO. The AO has also not been able to bring any material on record to show as to how and in what manner the assessee intended to avoid payment of tax before invoking the provisions of Section 40A(2)(a) of the Act. - Decided in favor of assessee. Rejection of book of accounts on the ground of declaration of loss - estimation of gross profit - held that:- The conclusion arrived at by the learned CIT(A) that the assessee company has been roped in merely to transfer the losses of the holding company is not based on any evidence or material. The learned CIT(A) further relied upon the rate of profit shown by other group companies but that cannot be a sole criteria to reject the assessee's books of account and then to invoke Section 40A(2)(a) for the purpose of disallowing expenses of purchases. - any estimation of gross profit at the rate of 13.73% is unwarranted. - Decided in favor of assessee.

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• 2012 (6) TMI 286
  Transfer pricing - Computing operating-margin (OP) - eimbursement of advertisement expenses - held that:- reimbursement of advertisement expenses by the AEs constitutes the OP to be included for the purpose of determining operating margin. Making adjustment to the arm's length price in respect of difference in functions performed, risks undertaken and the assets employed. - ad-hoc adjustment. - held that:- deduction by 20% is a reasonably accurate adjustment. Deduction u/s 35DDA - expenditure on Voluntary Retirement Scheme (the VRS) - held that:- the assessee has not discharged the burden that all the units constituted only one business. - it has not been proved that the closed business of manufacturing goods was a part and parcel of the overall business of the assessee. - the assessee is entitled to deduction of one-fifth of the expenditure u/s 35DDA as claimed. Legal and professional charges - Capital or revenue expenditure - held that:- although the expenditure grants benefit of enduring nature but it does not lead to creation of an asset and, therefore, it should be allowed in five years, as done in the case of the VRS payments. The AO is directed to allow 1/5th of the expenses in this year and balance in next four years in equal installments. Depreciation of assets - closer of the unit - held that:- neither the building nor the machinery or plant in Dharuhera unit were owned by the assessee or used by it on account of closure of the unit and transfer of the assets in this year. - the provisions contained in section 32 regarding ownership and user come into play. As the assessee is neither the owner of the assets nor the assets have been used in the business of the assessee, the assessee is not entitled to deduct depreciation. Advertisement and sales promotion expenses. - held that:- there is no allegation that any part of the expenditure relates to products in which the assessee is not dealing in the normal course of its business. The expenses by way of advertisement and sales promotion are revenue in nature. Addition on account of deposit of sales-tax under protest – Held that:- CIT (Appeals) was right in granting relief to the assessee Provision made by the assessee for import duty payable - held that:- this is merely a book entry. - the provision should be excluded for working out the OP in the case of the assessee.

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• 2012 (6) TMI 285
  Whether in a case where the Assessing Officer drops a proceeding under Section 147/148 of the Income Tax Act, 1961 after filing of return and on the basis of return then refund claimed in that return is required to be allowed to the assessee – Held that:- order passed by the Assessing Officer clearly indicates that the proceeding was dropped by the Assessing Officer on the basis of return submitted by the assessee and that return has duly been accepted by the Assessing Officer, Assessing Officer has not rejected the claim of assessee for refund while passing the impugned order, Revenue is required to refund the amount, the excess deposit of tax by the assessee, Commissioner of Income Tax committed error of law, in view of the fact that it failed to take note of the reason given in the order passed by the Assessing Officer and proceeded to decide the application of the assessee on assumption that it is a case of mere dropping of the proceeding, ignoring the fact why it has been dropped, writ petition is allowed and the respondents are directed to refund

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• Customs

• 2012 (6) TMI 313
  Importation of plastic scrap - Revenue entertained a view that the plastic scrap importation was contrary to the provisions of Foreign Trade Policy relating to plastic scrap - confiscation and order of re-export of goods - redemption fine and penalty imposed - Held that:- What emerges from CIPET's report is that except for quantity with stickers, balance quantity can be considered as a virgin plastic waste or otherwise and they are not in a position to certify the same. In view of the fact that there was no deliberate intention to import hazardous waste into the country as it emerges from the records, substantial reduction in the redemption fine and penalty would meet the ends of justice for both sides. Accordingly, the redemption fine on the goods is reduced to Rs. 40,000/- penalty on the importer is reduced to Rs. 25,000/- and penalty on the CHA is reduced to Rs. 10,000/-.

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• 2012 (6) TMI 284
  Non-fulfillment of export obligation in respect of advance licenses - demand of interest on duty liability arising on the goods, imported duty free under the advance licenses - Held that:- It is observed that appellant has moved to High Court against the order of Settlement Commission remanding case back to adjudicating authority. Since, High Court dismissed the petition while upholding interest liability, therefore, it is held that appellant is liable to pay the interest as directed by High Court - Decided against the assessee.

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• 2012 (6) TMI 283
  Classification - Indicating panel 4 zone with LCD, CTEC indicating panel with LCD I Loop Apollo Protocol (Non-expandable), Indicating panel with LCD Repeater - these have been classified by the authorities as fire alarm under Heading 8531 10 20 applying Interpretative Rule 2 – Held that:- no recourse can be taken to Interpretative Rule 2 when there is a specific entry in the Tariff according to which any goods can be classified applying Interpretative Rule 1 itself. Heading 8531 20 00 comes under the broad category of electric sound or visual signaling apparatus as specified against the main heading 8531 itself. Appeal allowed Classification - Ionization Smoke Detector - appellants have claimed classification under Heading 9027 80 10 – Held that:- process of ionization itself is based on principle of radiation and that radiation has to be naturally among one of the alpha, beta or gamma rays. The product is described by the appellant in their pamphlet as a smoke alarm and not as an instrument or apparatus for smoke analysis. Hence based on the exclusion notes given in Chapter notes to Chapter 85.31 and specific notes appended to Chapter 90.22, the above said goods will be squarely covered under CTH 90.22.90. ionized smoke detectors are appropriately classifiable under heading 9022 90 and not under Heading 9027 80 10 as claimed by the appellants

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• Corporate Laws

• 2012 (6) TMI 312
  Sanction to a Scheme of Arrangement in the nature of Amalgamation - certain disclosures not in consonance with AS-14 and directions to change the Appointed Date- the petitioner Transferor Company is a wholly owned subsidiary of the Transferee Company - Held that:- The compliance of the AS-14, if not made while passing the accounting entries, the petitioner hereby undertakes to abide by the directions that the Court may issue with regard to the said disclosures to be made in the first financial statements of the Transferee Company after the Scheme being sanctioned - in order to meet the working capital requirements and other financial requirements, both the companies have provided the consolidated financial results since 1st January 2008 to various banks for availing their facilities, it has been specifically asserted by the petitioner Company that since both the companies have been profit making companies, the scheme sanctioned with Appointed Date of 1st April 2008 shall not result in any special tax benefit to the company or any loss of revenue to the Government, thus it is not necessary to issue the directions to change the Appointed Date - Present scheme of arrangement is in the interest of its stakeholders viz. Shareholders, Creditors as well as in the public interest as amalgamation is proposed to achieve synergic benefits, administrative convenience and economies of scale and the same deserves to be sanctioned.

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• 2012 (6) TMI 311
  Violation - period of limitation - More than six months after the notice, the first show-cause notice was issued by the office of the Registrar of Companies – Held that:- period of limitation for an offence starts on the date of the offence or where the date is unknown from the date the person aggrieved by the offence acquires knowledge of such offence (section 469(1)(b)). Computation of period of limitation - held that:- The exact date on which the investigation and inspection by the inspecting officer was carried out under section 209A of the Companies Act, 1956, is not available from the record. The inspection report is also not available in the record. - the date the inspection is ordered can be taken as the date when the Central Government has knowledge of the alleged offence The explanation furnished explaining distribution of dividend is more than acceptable and does not suggest any violation. The principle taken into account for calculating or disregarding depreciation of the above machinery is an acceptable practice or an arguably tenable practice. There is also assertion of existence of the remuneration committee to justify remuneration paid to the directors. In this kind of a proceeding it should always be the endeavour of the court to come to a finding on For the above reason that is the ground of limitation and non-existence of an offence I relieve the petitioners by discharging them. This application is accordingly, allowed.

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• 2012 (6) TMI 282
  Petition for winding up u/s 433(e) r.w.s. 434 and 439 of the Companies Act, 1956 stating that the respondent is unable to pay its debts of US$ 300,000 - said amount has been advanced to duly authorized representative of company to arrange for stage show of particular film star which became due for refund on account of non-participation of said celebrity - Held that:- It is apparent that there are issues which require to be adjudicated in the presence of Mr. Farhath Hussain( representative). The defense set out by the respondent in the reply to the winding up proceedings cannot be said to be a moonshine or sham. However following the principle that "detailed investigation and adjudication of the dispute should be avoided", present petition and pending application are dismissed with liberty to the petitioner to raise its claim if not earlier raised in the already pending civil suit between the parties.

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• 2012 (6) TMI 281
  Winding up - application seeking to create charge over the Lease Hold rights of the property in favor of ICICI Bank ltd. - prior to the commencement of winding up proceedings, Mysore Kirloskar Limited (a company under liquidation) had leased 6 acres 29 guntas of land to the applicant – Held that:- without the permission of the Official Liquidator or the Lessor, the building is being constructed in violation of clause 14 of the lease agreement. The building can be constructed only with the prior intimation to the Official Liquidator or the Lessor. Further, clause 11 of the lease agreement provides for using of sports facilities like cricket ground, tennis court, squash court, golf course was permitted to use by the Lessee. Further, Lessee may also reside in the staff quarters within the residential colony. The intention of the applicant-society is to grab to maximum extent of the land. there is no bona fide in the claim made by the society and the applicant is not entitled for any reliefs in this application. Lease deed also appears to be contrary to section 531A of the Act. The transaction between the Lessor and Lessee is tainted with element of dishonesty. Company Application is dismissed.

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• Service Tax

• 2012 (6) TMI 333
  GTA service - service tax abatement denied for the period January 2005 to March 2009 on the ground that the consignment notes did not have the declaration that the GTA service provider had not availed the benefit of Notification No. 12/2003 and had not taken cenvat credit - Held that:- There are several decisions wherein a view has been taken that it is not essential such a declaration has to be given in the consignment notes but separate declaration would also serve the purpose. Also after 01.3.2008, notification was amended and the requirement of declaration was taken away. Matter remanded to original adjudicating authority for fresh adjudication.

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• 2012 (6) TMI 332
  Rebate claim - rejection on the ground that declaration, required under notification No. 12/2005 was not filed - rejection of portion of the claim on the ground of rebate claim being filed beyond the time limit prescribed u/s 11B - Held that:- Purpose of filing declaration is to prevent evasion of duty by receipt of rebate. Tribunal in case of Wipro BPO Solutions Limited (2011 (10) TMI 261 (Tri))took a view that even though non filing of declaration is only procedural, rebate will not be admissible. Hence, rejection of the claim on this ground has to be upheld. Applicability of Section 11B of Central Excise Act, 1944 - Held that:- Claims under notification No. 12/2005-ST also are required to be considered as per the provisions of Section 11B, made applicable to service tax matters vide Section 83 of Finance Act, 1994. In this case the claim is for rebate of duty paid on services utilized in export of services and it is similar to rebate claim which are granted under Rule 18 of Central Excise Rules, 2002, in which case, the time limit u/s 11B would be applicable - Decided against the assessee.

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• 2012 (6) TMI 331
  Refund claim of service tax paid on GTA services rejected - export under Notification No.41/2007-ST rejected as the consignment note did not contain the details of export invoice and container number etc. and on the LR these details were written by the staff of the appellant company and not by the issuer of the LR - Held that:- The invoice issued by the transporters contains all the details and from the records it appears that the transporters are following a practice of issuing the LRs which is for the purpose of transportation only and the invoice issued which is in reality, a consignment note and also is a document for the purpose of transaction between the transporter and the appellant - Since LR and the invoice issued together contain all the details the fact that in the LR certain details have been written by the appellant s staff should not be treated as manipulation and consequently the refund claim is to be allowed - in favour of assessee.

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• 2012 (6) TMI 330
  Demand of service tax - construction of petrol bunks - works contract service - applicant was under the bona fide belief that their activities did not fall under "Commercial or Industrial Construction Service" and therefore, did not take registration and pay service tax – Held that:- activities undertaken by them clearly relates to 'Commercial or Industrial Construction Service' - claim of the appellant is that they were under bona fide belief that their activities did not fall under 'Commercial or Industrial Construction Service' appears not acceptable.

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• 2012 (6) TMI 329
  CENVAT credit on Outdoor Catering service used by them to provide food to their employees - 25% of the cost of service was recovered by the respondent from the employees – Held that:- in Ultratech Cement (2010 (10) TMI 13 (HC) ) original authority directed to quantify the amount of CENVAT credit that would be granted to them after taking into account the extent to which the cost of Catering service was recovered from their employees/workers. The quantum of CENVAT credit admissible to the respondent should be worked out in terms of the Hon'ble High Court's ruling. appeal is disposed of

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• 2012 (6) TMI 303
  Commercial Training or Coaching Centre - assessee contended that definition excludes many institutes or establishment which issues any certificate or diploma or degree or any educational qualification recognized by law for the time being in force and their case fall within the exclusion clause - non-production of documents - Held that:- Since the documents now produced by the appellants were not before the original authority, they are required to be given a second chance to go before the adjudicating Commissioner and prove their case that they fall under the exclusion clause in the definition of Commercial Training or Coaching Centre. Accordingly, we set aside the impugned order and remand the matter to the adjudicating Commissioner.

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• 2012 (6) TMI 302
  Storage and warehousing service - non-payment of Service tax on storage and warehousing service rendered in relation to empty containers on ground of reasonable belief that applicants are not required to pay Service Tax on handling of empty containers - Held that:- Service Tax on storage and warehousing service was introduced in the year 2003. It is not in dispute that they were paying Service Tax on handling and storage of loaded containers. However, due to reasonable belief they could not pay Service Tax on empty containers and they did not have any mala fide intention to avoid/evade Service Tax which is supported by order of adjudicating authority. Appellants are able to show that there was reasonable cause for the failure to pay Service Tax on empty containers. Therefore the penalty imposed u/s 76 is set aside and appeal is allowed with consequential relief.

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• 2012 (6) TMI 301
  Demand of service tax - Business Auxiliary Services - business of toll collection on behalf of M/s. National Highway Authority of India (NHAI), in respect of the services rendered they received a fixed remuneration –Held that:- in the case of P.C. Paulose, Sparkway Enterprises (2011 (1) TMI 11 (SC)) activity would get covered under Section 65 clause 105(zzm) of the Finance Act, 1994. The provisions relating to constitution of Airport Authority of India and its collection of entry fees at the airport are more or less similar to the constitution of NHAI and its collection of toll charges. Therefore, if NHAI engages somebody else to collect toll charges on its behalf and pays them remuneration, the service so rendered would appear to merit classification under 'Business Auxiliary Service'. appellant directed to make a pre-deposit

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• 2012 (6) TMI 300
  Admissibility of input credit of service tax paid on the outward transportation of the goods – Held that:- in the case of ABB Ltd. (2011 (3) TMI 248 (HC))credit of service tax paid on transportation up to place of sale is admissible. sale is on FOR destination basis. Revenue's appeal rejected

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• 2012 (6) TMI 299
  Adjustment of excess payment made for one period in respect of tax liability for future period – Held that:- Sub-rule (3) of Rule 6 of the Service Tax Rules, 1994 have been amended providing for adjustment of excess payment against future tax liability under rule 6(4A) and 6(4B) of the Service Tax Rules, 1994. Even though these rules were not in force at the material time and therefore are not applicable to the case at hence, considering the spirit of the amended rules and the fact that the appellant is a public sector unit and the entire amount of tax has been paid by adjustment. However, appellant public sector unit is cautioned that they should follow the legal provisions strictly in future and any contravention will be seriously viewed. Appeal is allowed

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• Central Excise

• 2012 (6) TMI 334
  'Manufacture' - Whether process proposed to be employed by the Applicant for refining and minting of products of precious metals namely gold, silver and platinum as per the specifications of customers amounts to manufacture or job work - Held that:- It is clear that the processes undertaken by the applicant result in the emergence of goods which have their own distinct character, identity and use. The activities of the applicant, therefore, clearly meet the definition of manufacture. However premise of applicant that if an activity is undertaken on job work basis, it would be precluded from being considered as manufacturing appears to us to be unfounded. It is not as though the two are mutually exclusive. If in a given transaction, the raw material is supplied by the customer and the applicant charges only its making charges, it could well be a case of manufacture on job work basis. Hence, process amounts to manufacture for the purpose of Central Excise Act, 1944 and goods in question would be liable to duties of excise at the appropriate rate(s) as specified in the Central Excise Tariff Act, 1985.

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• 2012 (6) TMI 310
  CENVAT Credit on PVC crates used for transporting aerated water in bottles - appellants, engaged in the manufacture of non-alcoholic beverages - Revenue denied credit on ground that appellants are collecting deposits from the customers on the PVC crates - Held that:- CENVAT Credit is admissible once it satisfies the definition of input and such input is used in or in relation to the manufacture of the final product. In the instant case the appellants had explained the use of such crates during the process of manufacture and disastrous consequence of non-use of such crates. In these circumstances the PVC crates being used as inputs/capital goods in the manufacture of aerated waters accordingly CENVAT Credit is admissible on the same - Decided in favor of assessee.

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• 2012 (6) TMI 309
  Plea for waiver of pre-deposit of duty and penalty of equal amount u/s 11AC - dismissal of appeal by Commissioner(Appeals) for non-compliance with the provisions of section 35F - assessee contended that the order for predeposit of 50% of all dues was passed without granting them personal hearing - Held that:- After waiving the requirement of pre-deposit, it is held that since Commissioner(Appeals) has not decided the issues on merits. Therefore the case is remanded to Commissioner(Appeals) for deciding the issue on its merits without insisting for any further pre-deposit.

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• 2012 (6) TMI 308
  Plea for waiver of pre-deposit of 50% of duty and penalty of equal amount u/s 11AC - dismissal of appeal by Commissioner(Appeals) for non-compliance with the provisions of section 35F - assessee offered to make pre-deposit of 25% of duty - Held that:- Applicants are directed to deposit 25% of duty within eight weeks and report compliance on stipulated date directly to Commissioner(Appeals). After waiving the requirement of pre-deposit of balance amount, it is held that since Commissioner(Appeals) has not decided the issues on merits. Therefore the case is remanded to Commissioner(Appeals) for deciding the issue on its merits without insisting for any further pre-deposit.

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• 2012 (6) TMI 307
  Quantification of demand - Simultaneous claim of cenvat credit on the central excise duty on the capital goods and availed depreciation also - Held that:- As Commissioner (Appeals) while passing the order has not quantified the amount as required under Section 11A(2) and at the same time he has not remanded the matter also the submission that the appellant themselves can quantify and pay the amount since they are aware of all the facts cannot be accepted - the matter is required to be remanded to the original adjudicating authority who has to re-quantify the amount of demand as per the orders of the Commissioner (Appeals)

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• 2012 (6) TMI 306
  Claim of Cenvat credit for GTA service availed to delivery the goods at the buyer's end - Held that:- Tax must have been paid against the invoices giving description of the goods and the destination - unless core examination as to receipt of goods at the buyer's end, actual delivery thereof and cost of freight incurred is done, no Cenvat credit is admissible - matter is remanded to the adjudicating authority to examine the evidence on record and pass appropriate order.

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• 2012 (6) TMI 305
  Bifurcation of Freight paid in respect of domestic clearances and export clearances for CENVAT credit - Held that:- Outward transport service used by the manufacturers for transportation of finished goods from the place of removal upto the premises of the purchaser is covered within the definition of input service provided in Rule 2(1) of the CRR - it makes no difference for allowing Cenvat credit whether the goods are cleared for export purpose or for domestic purpose up to the place of removal - against revenue.

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• 2012 (6) TMI 304
  Maintainability of appeal – limitation – whether once a copy of the order was forwarded by speed post, the requirement of Section 37C of the Central Excise Act, 1944 were complied and, therefore, the appeal filed by the assessee is beyond time - Held that:- As per Section 37C(1)(a), it was mandatory on the part of the Revenue to serve a copy of the order of Commissioner of Central Excise (Appeals) by registered post with acknowledgment due to the assessee. Admittedly in the present case, a copy of the order has not been sent by registered post. it could not be said that the requirement of Section 37C has been complied with. appeal filed by the assessee was time¬barred cannot be sustained. Decided in favor of assessee.

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• 2012 (6) TMI 280
  Plea for waiver of pre-deposit of duty - demands being raised for fabricated steel structural which has been contended by revenue as the parts of stoplock gate - assessee contended that recently issue has been decided in favor of assessee - Held that:- It is found that that the Commissioner (Appeals), vide its impugned Orders dated 12.01.10 decided the issue in the Department's favour, whereas in his recent Order dated 04.04.12 he has decided the issue in favour of the Applicant. Therefore, the issue is debatable. Thus, prima facie, the case is in favour of the Applicant. Therefore, the requirement of predeposit is waived and recovery thereof, is stayed during the pendency of the Appeals.

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• 2012 (6) TMI 279
  Clandestine removal of goods - confirmation of demand on the basis of shortages of raw material and the hypothetical calculations of production of final product and clandestine clearances of the same - demand dropped by Commissioner(Appeals) on ground that charges of clandestine removal cannot be established on the basis of presumptions - Held that:- In view of difference in opinion of the members regarding whether the case of clandestine removal made out by Revenue is to be upheld or dropped, matter referred to Larger bench.

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• 2012 (6) TMI 278
  Application for compounding of offence rejected as there are demonstrable contradictions or inconsistencies or incompleteness –Held that:- Before the compounding of offence takes place, the penalty imposed is liable to be paid and the basic principle while filing application for compounding of offence is that the offence is admitted - Just because the appellant took a different ground in reply to show cause notice while making the application, it cannot be said that he has failed to disclose the material facts – as at the time of giving statement and at the time of replying to the show cause notice the appellant was working with the Company under the directions of same Company and the common thread as observed that the appellant acted as per the directions of the Managing Director thus it cannot be said that there was deliberate suppression of facts or non-disclosure of material facts. Rectification of mistake (ROM) before the Tribunal against final order – Held that:- If the appellant were to pursue the ROM, it would be for his benefit and the fact of filing of ROM and non-consideration of the same by the Tribunal has affected the appellant adversely and in no way benefitted him - non-pursuing of the ROM application and non-mentioning the fact of filing of application, cannot be said to be non-declaration of material fact or suppression and such non declaration or suppression in no way would benefit the appellant. Submission that the order passed by the Chief Commissioner was an administrative order and therefore is not appealable – Held that:- As decided in DHARAMPAL SATYAPAL LTD. Versus COMMR. OF C. EX., SHILLONG [2008 (3) TMI 86 (Tri)] since the Chief Commissioner will be exercising the power of the Commissioner while adjudicating the matter, there would be normally no dispute about the Appellate Tribunal hearing an appeal against such an Order. Moreover, we note that Section 35B(l)(c) of the Central Excise Act, 1944 provides an appeal to this Tribunal against an Order passed by the Central Board of Excise and Customs, which is a higher authority than the Chief Commissioner. Rejection of the request for compounding of offense on these grounds cannot be sustained - the impugned order is set-aside and the matter is remanded to the Chief Commissioner to decide the matter afresh.

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• 2012 (6) TMI 277
  Plea for waiver of pre-deposit of duty of Rs 2.03 lacs, penalty of Rs 8.31 lacs and penalty of Rs 1 lacs on Director - assessee contended that they have already paid a sum of Rs 7 lacs at the time of visit of the officers of DGCEI and could not deposit 50% amount of penalty directed by the Commissioner(Appeals), who dismissed their appeal for non-compliance with the provisions of section 35F - Held that:- It is found that Commissioner(Appeals) has not decided the issues on merits. Therefore the case is remanded to Commissioner(Appeals) for deciding the issue on its merits without insisting for any further pre-deposit.

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• 2012 (6) TMI 276
  Waiver of pre-deposit - whether debiting amount in the Cenvat Credit Account as pre-deposit cannot be accepted as a compliance with the condition of stay order – Held that:- in the case of Manak Moti Forgings (2010 (10) TMI 279 (Tri)) pre-deposit of duty amount by way of debit in the Cenvat Account is accepted as sufficient compliance with the provisions of Section 35F of the Central Excise Act, 1944. as the applicant has already paid the duty demand, pre-deposit of interest and penalty is waived and recovery thereof stayed. Commissioner (Appeals) has not decided the appeal on merits. Hence the impugned order is set aside and the matter is remanded to the Commissioner (Appeals). appeal is allowed by way of remand.

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• 2012 (6) TMI 275
  Demand of duty, interest and penalty - default in payment of duty remained continue beyond 30 days - party has paid an amount through PLA and through cenvat credit account as Central Excise duty - contravention to the provisions of Rule 8(3A) – Held that:- Actually Rule 8 (3A) says that the goods will be deemed to be cleared without payment of duty and all the consequences under "these Rules" will follow. The reference is only to the C. E. rules and not to the Cenvat Credit Rules, 2004. The deeming fiction will apply only for applying penal consequences under Central Excise Rules 2002. The major consequence is that such goods would have been liable to seizure and confiscation under Rule 25 of C. E. Rules. In fact Rule 8(3A) is drafted to enable this as a means to compel the assesse to pay his declared dues promptly by the due date or at least within thirty days thereafter. Non-payment of excise duty arises often in administration of excise levy. Show Cause Notices are issued in such cases as per provisions of Section 11A of the Central Excise Act to recover duty short paid. Normally such short-payment can be made good by paying duty through Cenvat credit as authorized by Central Excise Rules, 2002 and Cenvat Credit Rules, 2004. So there should be a reason why such payment cannot be accepted in this case. The reason being quoted is that this is a situation covered by Rule 8(3A) and the Rule prescribes that so long as the assessee is in default for any previous month payment through Cenvat credit is not a proper discharge of duty liability. This prohibition gets lifted the moment the default is made good along with appropriate interest on defaulted amount and normal situation is restored. Imposition of penalty under Rule 25 - In view of the decision of Gujarat High Court in the case of CCE Vs. Saurashtra Cement Ltd (2010 (9) TMI 422 (HC) ) penalty under Rule 27 is the appropriate penalty and reduce the penalty on the Appellants to Rs.5,000/-. Appeal is thus partially allowed by setting aside the duty demanded and reducing the penalty to Rs.5,000/-.

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