TMI Tax Updates - e-Newsletter
June 16, 2013

Case Laws in this Newsletter:

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

Articles

1. TDS BY BUYER OF PROPERTY

   By: DEVKUMAR KOTHARI

Notifications

Central Excise

1. 21/2013 - dated 13-6-2013 - CE

Amends Notification No. 30/2012-Central Excise dated the 9th July, 2012

Customs

2. 32/2013 - dated 13-6-2013 - Cus

Amends Notification No. 93/2009-Customs, dated the 11th September, 2009

3. 62/2013 - dated 14-6-2013 - Cus (NT)

Amends Notification No. 36/2001-Customs (N.T.), dated the 3rd August, 2001

Service Tax

4. 11/2013 - dated 13-6-2013 - ST

Amendments in the notification of the Government of India in the Ministry of Finance (Department of Revenue) No.6/2013-Service Tax, dated the 18th April, 2013

Circulars / Instructions / Orders

FEMA

1. Notice - dated 10-5-2013

Format for seeking clarifications on the FDI policy issues

Highlights / Catch Notes

Income Tax

• Penalty Confirmed for Late Tax Filing and Audit Report Submission u/s 271B Due to E-Filing Delays.

  Case-Laws - AT : Penalty u/s 271B - delay in filing return - E-filing - non furnishing of tax audit report before the specified date - Penalty confirmed - AT
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• Court Affirms Retrospective Applicability of Section 92CA(2B), Strengthening Assessing Officer and TPO Authority in Tax Cases.

  Case-Laws - AT : TP - retrospective applicability of sec. 92CA(2B) - powers of assessing officer to make such reference and the powers of TPO to furnish report - decided against the assessee - AT
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• Settlement and custody fees by NSDL and CDSL are managerial remuneration, subject to TDS u/s 194J of Income Tax Act.

  Case-Laws - AT : TDS - Technical services provided by the NSDL and CDSL - Settlement and Custody Fees - Held as managerial remuneration liable for TDS u/s 194J - AT
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• Three-Year License Written Off as Revenue Benefit, Despite Enduring Advantage for Assessee.

  Case-Laws - AT : Quota written off - Licence / quota which was for a limited period of three years - though assessee had obtained enduring benefit, held as revenue in nature - AT
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• Exemption Denied: Construction Not Habitable u/s 54, Fails to Qualify as Residential House for Tax Purposes.

  Case-Laws - AT : Exemption u/s. 54 denied - A construction in inhabitable position cannot be equated with a residential house. If a person cannot live in a premises, then such premises cannot be considered as a residential house - AT
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Customs

• Court Upholds Action Against Importer for Wrongful Duty Exemption u/s 124; No Legal Block on Proceedings.

  Case-Laws - HC : As there is no prohibition u/s 124 not to proceed against the importer, who has availed wrongful exemption of duty, this Court cannot restrain the respondents from proceedings further, unless there is anything contrary to law. - HC
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• Court Rules Cutting and Slitting Does Not Affect SAD Refund Entitlement Under Notification No. 102/2007 Cus.

  Case-Laws - HC : Refund of SAD - Notification No.102/2007 Cus - sale of goods after processing of cutting and slitting - It certainly does not loose its correlation with the goods imported when sold in the domestic market. - HC
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• Gold Confiscation: Appellant Must Prove Non-Foreign Origin or Valid Purchase u/s 123(1) Burden of Proof.

  Case-Laws - HC : Confiscation of Gold - gold with foreign marks - illicit nature of the gold - onus to prove - burden u/s 123 (1) was on the appellant to prove that the goods were either non-foreign origin or were validly purchased. - HC
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Corporate Law

• High Court Affirms Secured Creditor's Right to File for Company Winding Up Without Relinquishing Security Interest.

  Case-Laws - HC : Winding up petition - whether a secured creditor was within its right to maintain a petition for winding up without giving up its security - Held yes - HC
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Service Tax

• Tax Credit Denied: Lack of Direct Link Between Coupon Purchases and Freight Business Activities.

  Case-Laws - AT : ISD - Freight Business Auxiliary - The appellant purchases coupons and issue to their employees - appellant failed to prove nexus - small amount - credit disallowed - AT
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• Court Orders 50% Pre-Deposit for Cenvat Credit Claim Violation u/r 4(7) of Cenvat Credit Rules.

  Case-Laws - AT : Cenvat Credit on input services availed without actually paying for the input services received in violation of the provisions of Rule 4(7) of CCR - pre deposit ordered equal to 50% interest amount. - AT
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• Support Service Businesses Not Liable for Service Tax on Car Registration Fees Collected for RTO Submissions.

  Case-Laws - AT : Business Support Services - No service tax on amount collected from customers to undertook the activity of registration of the car their behalf with the RTO authorities - AT
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Central Excise

• Dealers Overcharging on TVs Beyond Manufacturer's MRP; No Legal Action Against Manufacturer Possible.

  Case-Laws - AT : MRP based valuation - some of the dealers were ultimately selling these television sets on MRP higher than affixed by the assessee - no demand can be made against the assessee - AT
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• CENVAT Credit Approved for Sulphuric Acid in Gaseous Effluent Treatment as Crucial to Chemical Manufacturing Process.

  Case-Laws - AT : CENVAT credit on sulphuric acid used for treating the effluents - treatment of gases effluents is essential part of manufacturing of these chemicals. - credit allowed - AT
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VAT

• Court Rules Retrospective Levy with Interest on Incentive Schemes Valid, Penalties Only Apply Prospectively for VAT & Sales Tax.

  Case-Laws - HC : Reasonableness of retrospective legislation - Package schemes of incentive - retrospective levy with interest upheld - penalty would be prospective only - HC
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Case Laws:

• Income Tax

• 2013 (6) TMI 360
  MAT - Provision of leave encashment - whether an ascertained liability & need not to be added back to the book profits u/s 115 JB as held by CIT(A) - Minimum alternate tax - Held that:- The principles laid down in Metal Box Company of India Ltd. V Their Workmen [1968 (8) TMI 53 - SUPREME Court] are relevant for our purpose to understand whether such provision for leave encashment would constitute ascertained liability or not which clearly show that the provision for leave encashment would constitute a liability and if the same has been determined on the basis of actuarial valuation then same cannot be considered as unascertained liability. Accordingly nothing wrong in the order of the CIT(A) and confirm the same. In favour of assessee. Provision for staff incentive - whether an unascertained liability or not? - MAT - Held that:- As decided in assessee's own case wherein no evidence has been filed before AO in respect of particular policy followed by the assessee- company in respect of staff incentive. The copy of scheme has also not been filed. However, at the same time the AO also rejected the issue summarily without asking for the scheme for incentive claimed from the assessee and the CIT(A) allowed the relief without examining the scheme. Therefore remand the matter back to the file of AO with a direction to re-examine the issue after obtaining the scheme of staff incentive from the assessee. In favour of revenue for statistical purposes. Provision for gratuity - whether an unascertained liability or not? - MAT provisions - Held that:- Once a particular liability is determined on the basis of actuarial valuation then same can not be treated as unascertained liability. Secondly as decided in J.C.I.T. (OSD) V. Shreyans Industries Ltd. (2012 (7) TMI 150 - ITAT CHANDIGARH) in view of insertion of clause (i) in Explanation 1 to section 115JB (2) with retrospective effective from 1.4.2001, Assessing Officer was not justified in his action in treating it as unascertained liability. In favour of assessee.

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• 2013 (6) TMI 359
  Profit on sale/transfer of land - capital gains v/s business income - Held that:- There is no material filed by the Revenue to rebut the CIT(A)'s findings that the assessee is yet to part with its possession and consideration has not been received as on 31.03.2007. In principle, the contention of the Revenue is that the 'MOU' gives rise to 'business income' instead of 'capital gains' as claimed by the assessee. In this background, the present case involves a single transaction in question. There is no evidence or any cogent material produced which could prove that the property in question held by the assessee for more than five decades has ever been converted into stock-in-trade. Thus unable to accept the contention of the Revenue. Further in the absence of any evidence to the contrary to prove that the 'MOU' in question is not proved as an instance of adventurous trading, CIT (A) has rightly treated income from the transaction in question under the head 'capital gains' instead of 'business' income as done by the AO. In favour of assessee.

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• 2013 (6) TMI 358
  Cessation of liability appearing in the name of Shri Amit Kumar, Prop Singla Trading Co. - CIT(A) deleted the addition made u/s 41(1) - assessment was completed u/s 144 - Held that:- CIT(A) has adjudicated the issue correctly because some legal heirs may later on make the claim against the receivables by Singla Trading Co. Moreover the assessee may be liable to pay to the bank and in any case the assessee has not written off the amount during the year, therefore, the liability cannot be said to have ceased. Thus nothing wrong in the order of the CIT(A). Against revenue. Addition in the income on account of gross profit by increasing gross profit ratio by CIT(A) - Held that:- Nothing wrong with the order of the CIT(A) though it was claimed that the assessee had loss in basmati paddy but in the details submitted before CIT(A) the assessee has himself shown gross profit @ 21.35% on trading of basmati. Further gross profit in the immediately preceding year was 7.76%. In case no books of account are produced and the AO is required to estimate the profit, he is duty bound to estimate such profits in a judicial fashion. No better yard stick can be available to the AO then the trading results of the assessee shown in the earlier years. AO has been more than reasonable to estimate the gross profit at 5% despite the fact that in the immediately preceding year the gross profit declared by the assessee was 7.76%. No infirmity in the order of the CIT(A) and confirm the same. Against assessee. Addition on account of cessation of liability towards M/s Lachhi Ram Ramesh Chand by CIT(A) - Held that:- Nothing wrong with the order of the CIT(A) as nobody would show the receipt of cash because that would mean that such party is forgoing the claim, therefore, it is clear that the assessee himself has paid the cash and liability ceased to exist. Against assessee.

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• 2013 (6) TMI 357
  Penalty u/s 271B - delay in filing return - non furnishing of tax audit report before the specified date - Held that:- Interpretation given by CIT(A) is correct because if return is filed late then requirement for non filing the audit report cannot be read into such E-filing. In such situation the assessee should have furnished tax audit report with the AO before the due date of filing the return in view of Section 44AB which clearly provides that the assessee has to get his accounts audited and such audit report is required to be furnished by the specified date i.e. due date for furnishing of return by a particular assessee. Therefore, in a case where return is filed within time then it can be pleaded that since no documents are required to be attached with the return, therefore, tax audit report should be deemed to have been furnished. This plea cannot be made when the return has not been filed within due date. Penalty confirmed - in favour of revenue. Addition made u/s 40(a)(ia) - non deduction of TDS - TDS was deducted in the subsequent Financial Year and was deposited on 31.3.2009 - Held that:- This issue is now decided against the assessee by the decision of CIT V. Sikandar Khan [2013 (5) TMI 457 - GUJARAT HIGH COURT] in which the decision of Special Bench in case of ACIT V. Merilyn Shipping & Transport (2012 (4) TMI 290 - ITAT VISAKHAPATNAM) has been overruled and held that the provisions of section 40(a)(ia) is applicable even where amount remains payable or has been paid during the year. Against assessee. PF deduction - Held that:- As during the assessment proceedings it was noticed by the AO that the assessee has shown payment received from Abhir Infrastructure Pvt Ltd. at Rs. 1,38,32,139/- & from the copy of account which was filed by the assessee it shows Rs. 1,52,29,385/-. Thus difference of Rs. 13,97,246/- was added to the income of the assessee as the assessee has shown lesser receipts. Since the total amount receivable from Abhir infrastructure Pvt Ltd. has been considered by the AO, therefore, there is no justification for a separate addition amounting to Rs. 1,12,274/- and accordingly deleted this addition because the mat stands covered by the above addition. In favour of assessee.

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• 2013 (6) TMI 356
  Penalty u/.s. 271(1)(b) - CIT(A) deleted the penalty - Held that:- CIT(A) has taken into consideration the fact that the AO has never refuted the plea of the assessee that the appellant had filed first return on a provisional account and it was beyond the control of the corporation to influence the CAG to complete the audit before the due date of filing the return. Reopening had been done only for a small issue of depreciation, which was taken from the Form 3CD filed by the assessee on the basis of the original provisional return. Admittedly, in the return in response to the notice u/s. 148 much higher income was disclosed which is on the basis of CAG report, which was not even in the knowledge of the AO. Further as for both the assessment years the assessment has been passed u/s. 143(3), thus once, an assessment order is passed u/s. 143(3) that too accepting the returned income, it is presumed that the AO has condoned the action of the delay in furnishing of the returns in response to notice u/s. 148 - cancellation of penalty confirmed. In favour of assessee. Penalty u/s 271(1)(c) - CIT(A) deleted the penalty - Held that:- CIT(A) in his order also recognized the fact that the assessee has after completion of the statutory audit by the CAG had truthfully come forward and had filed the details of the true income and even before filing of the return the corresponding taxes have been paid. Perusal of the assessment order clearly shows that the income returned by the assessee in its return in response to the notice u/s. 148 has also been accepted by the AO without any tinkering thereto. Thus it cannot be said that the assessee has concealed any particulars of its income or has furnished any inaccurate particulars of income. Cancellation of penalty confirmed. In favour of assessee.

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• 2013 (6) TMI 355
  Invocation of provisions of section 40A(3) - Addition u/s 69 - Held that:- A perusal of the assessment order shows that in respect of the difference between the rough cash book and the ledger, the AO has been repeatedly claiming that the bills and vouchers had not been produced by assessee. In fact, the main ground for the disallowance is non-production of bills and vouchers by the assessee. In respect of the excess claim under different heads, though the assessee says that no bills and vouchers were demanded by the AO, the fact that the AO has mentioned that none of the bills and vouchers has been produced as also on account of the fact that before the CIT(A) also the assessee has not produced any of the bills and vouchers, this issue would have to be restored to the file of the AO for readjudication after granting the assessee adequate opportunity to produce all such evidence as are required to substantiate its claim. Difference between the payments made to the partners as per the statement recorded in the course of survey and as recorded in the regular books of account, this issue is also restored to the file of the AO for readjudication. If the payments have been offered to tax in the hands of the partners no disallowance to this extent shall be made in the hands of the firm. Appeal of the assessee partly allowed for statistical purposes.

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• 2013 (6) TMI 354
  Repairs and maintenance expenditure incurred on leasehold property disallowed - Held that:- Finding of the CIT(A) cannot be faulted with as being satisfied with the reasoning and the finding qua the issue agitated in the Revenue’s appeal, no good reason in the absence of any specific argument on facts on behalf of the department to interfere with the finding arrived at. The expenses for maintenance and upkeep of leased premises and make them useable as assessee’s office premises and similarly the leased premises for assessee’s expatriate employees as rent-free accommodation perquisite value of which has admittedly been offered for tax, similarly expenses for pest control, AMC for electrical fittings are correctly considered Revenue expenditure in the peculiar facts of the case. No fault in referring to vouchers and documentation has been pointed out by the department. Accordingly the same is dismissed. Considering the assessee’s ground, it is seen as per the narrations given by the assessee some of the expenses of repair, maintenance etc. appear to be Revenue in nature however the specific vouchers relatable the expenses need to be considered, AR contended that the Tribunal could itself decide the issue after considering the bills and vouchers. Thus agreeing with the said prayer of the assessee restore the issue to the AO for verification. Advances and deposits written off - Disallowance considering the same to be not laid or expended for the purpose of business - Held that:- The arguments advanced on behalf of the assessee namely that making of samples is expensive business and the assessee has entered into an arrangement that incase the sample keeping the brand image of the assessee is not as per mark the same does not receive any further orders and the amount advanced is forfeited and the party entrusted for providing the sample can utilize it as the cost incurred for creating the sample. The possibility and the feasibility of the argument of entering into such an arrangement cannot be faulted with as it appears to be a prudent arrangement. However documentation qua the said arrangement has not been addressed. The relevance of discussing case law will arise only after facts are addressed. Arguments dehors facts cannot be accepted. Ld. AR in the course of the arguments was required to demonstrate and support his arguments which he was not able to. Accordingly, it is considered appropriate that the issue should be is restored to the AO for consideration de-novo.

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• 2013 (6) TMI 353
  Transfer pricing adjustment - retrospective applicability of sec. 92CA(2B) - powers of assessing officer to make such reference and the powers of TPO to furnish report in this behalf - Held that:- respectfully following the Special Bench judgment in the case of L.G. Electronics India (2013 (6) TMI 217 - ITAT DELHI), we decide these legal grounds against the assessee as a consequence thereof, the relevant grounds raised in the memo of appeal, touching these legal aspects stand dismissed. Nature and scope of AMP expenses as elucidated by the Special Bench. The quantification thereof and the bench marking of the AMP expenses which is to be subjected to TP adjustments applying the ALP methodology by the TPO and DRP. - Held that:- Merit in the argument of assessee as there being no objection or adverse comment in respect thereof coming from any of the lower authorities i.e. AO/ TPO, DRP and also ld. CIT(DR), there is no justification in setting aside these expenses for verification again to AO/TPO as supported by judgment in the case of M/s Glaxo Smitkline Consumer Healthcare Ltd. (2012 (4) TMI 279 - ITAT CHANDIGARH) and Canon India Ltd. - Consequently, only the figures supplied by assessee excluding the items like trade discounts, cash discounts, subsidy etc. which are to be excluded by Special Bench should be verified by AO because no adverse comments are offered by lower authorities on these details. Thus only such details of expenses are set aside back to the file of AO/TPO to decide the issue of AMP expenses by applying the proper comparables after hearing the assessee and keeping in view the Special Bench directions in this behalf - grounds about TP adjustments in respect of AMP expenses are partly allowed for statistical purposes. V.R.S.- whether for purpose of claiming deduction u/s 35DDA, scheme of voluntary retirement need not comply with conditions laid down in section 10(10C) r.w.r. 2BA and SID is eligible to claim deduction of 1/5th of the expense incurred on VRS under section 35DDA - Held that:- Rule 2BA is in the form of guidelines for the purpose of Section 10(10C), which relates to taxation of income/amount received by an employee under VRS scheme. The said Rule does not deal with the expenditure incurred by the employer when the assessee makes payment under the VRS scheme formulated by them. The treatment of expenditure or outgoing of the employer has to be dealt with under Section 35DDA and the prescribed rules, if applicable. Rule 2BA, which is applicable to the recipient i.e. the employee, cannot be applied. No substantial question of law arises for consideration. Depreciation on printers, scanners, UPS and switches etc. - 60% or 15% - Held that:- As decided in CIT v. BSES Yamuna Power Ltd. [2010 (8) TMI 58 - DELHI HIGH COURT] computer accessories and peripherals form an integral part of a computer system and therefore, depreciation has to be allowed at the rate of 60%. Disallowance of part of advertisement and selling expense - Held that:- This issue has been decided in favour of the assessee in view of the decision of CIT vs. Salora International Limited (2008 (8) TMI 138 - DELHI HIGH COURT) wherein held that there was a direct nexus between the advertising expenditure and the business of the assessee and that unless the assessee made its products known to the market, its business would suffer, therefore, entire expenditure on advertising to be of a revenue nature Disallowance of depreciation on software license fees at 60% - Held that:- "License" is an intangible asset as per Part-B of Appendix-I, in which the rate of depreciation on all intangible assets has been prescribed @ 25 per cent. Therefore, excess claim of 35 per cent was disallowed. No particular argument has been made by the assessee. Part-B of Appendix-I in respect of "intangible assets" provides depreciation at uniform rate of 25 per cent and "licenses" have been included therein. Accordingly no error in the order of DRP. Miscellaneous income incidental and inextricably linked to the business of the undertaking considered for computing deductions u/s 10A and 10B - Held that:- Since the complete details of ancillary income have not been referred to no reasons to interfere with the findings of DRP and AO. This ground of the assessee is dismissed. Assessee's appeals are partly allowed for statistical purposes

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• 2013 (6) TMI 352
  Technical services provided by the NSDL and CDSL - whether will fall under the head of "Settlement and Custody Fees" as professional/technical services u/s. 194J - Disallowance u/s. 40(a)(ia) for failure to deduct TDS as confirmed by AO - Held that:- The judgement of Kotak Securities Ltd. (2011 (10) TMI 24 - Bombay High Court) squarely applies to the facts of the assessee's case and the assessee is availing managerial services from NSDL/CDSL for which the assessee paid the fees. Being so, the assessee is liable to deduct TDS on the payment made to the NSDL/CDSL as the assessee not deducted TDS on the impugned payment. The disallowance made by the Assessing Officer u/s 40(a)(ia) is justified. As assessee submitted that in para 32 of the Bombay High Court judgement cited supra, it was held that since both Revenue and assessee are in bona-fide belief for merely a decade that tax is not deductible at source on payments on transaction charges, no fault can be found with the assessee in not deduction tax at source in the assessment year under consideration and consequently disallowance made by the AO u/s. 40(a)(ia) in respect of transaction charges cannot be sustained. This finding of the Hon’ble High Court in that case is on the basis of peculiar facts of that case. In the case at hand, those peculiar facts are missing. Being Revenue appeal allowed.

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• 2013 (6) TMI 351
  Deduction u/s 80IA denied - whether deduction u/s 80IA is admissible to those assessee who develop, operate and maintain any infrastructure facility? - assessee company was allotted a contract for execution of the work by the Airport Authority of India to undertake the work of extension of runway with shoulders, turning paid, stop way, construction of isolation bay, box culvert, perimeter road and allied works - Held that:- Section 80IA(4) does not require that there should be a direct agreement between the transferee enterprises and the specified authority. As decided in Ayush Ajay Construction Ltd. vs. ITO (2000 (7) TMI 225 - ITAT INDORE) assessee company having obtained a contract for construction of a bridge from the original tenderer through its promoter by a valid assignment and executed the construction work stepping into the shoes of said tenderer with the approval of the State Governmentis entitled to deduction u/s 80-IA. Also in Chetak Enterprises [2005 (1) TMI 338 - ITAT JODHPUR] that the erstwhile firm which had obtained the contract for construction of road and completed the work having been converted into a company under Part IX of the Companies Act whereby the latter acquired all the assets, rights and liabilities of the erstwhile firm, assessee-company fulfilled all the conditions laid down in s. 80-IA(4)(i) and is entitled to claim. Thus in the present case the annual report of the assessee company that does not speak that the assessee is a developer. Moreover, the AO has not brought on record any material to suggest that the assessee is not a developer. The deduction is available to the infrastructure facilities and the assessee has to develop infrastructure and not to operate the same. The assessee having fulfilled all the conditions as laid down in section 80-IA therefore, is eligible for deduction. In favour of assessee. Quota written off - revenue v/s capital - Held that:- Said quota is a license quota which is a tradable commodity and which has to be utilized within a period of three years and third year was ending in 2004 falling in the impugned year, since the assessee’s export business is of ready made garments and the balance lying in the Quota account has been written off, the assessee had purchased Quota which was for a limited period of three years and without purchasing this quota, it was not possible for the assessee to do business and make trading. Even if, the findings of the authorities below are agreed the assessee had obtained enduring benefit for three years, the same cannot be a conclusive test to be applied blindly and mechanically. Since the assessee had incurred expenditure, which advantage consists facilitation of trading operations of the assessee for enabling the assessee to make the export it is to be treated as revenue expenditure as relying on Empire Jute Co. Ltd. vs. CIT [1980 (5) TMI 1 - SUPREME Court].In favour of assessee. Disallowance being the amounts written off - Held that:- The assessee is obliged to give advance to labours and suppliers of the material during the course of business, which is sometime left over and is not recoverable and these advances have been left over and had been written off during the year. Even as per section 36(1)(vii), such expenses, when written off by the assessee unilaterally in the post amendment in the Act, has to be allowed, as expenditure and otherwise also this is business expenditure to be allowed under section 36(1)(vii). No disallowance on this account can be made. In favour of assessee.

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• 2013 (6) TMI 350
  Deduction claimed u/s. 54 denied - AO concluded that what was constructed by the assessee was not a residential house as envisaged in sec. 54 & as the assessee did not come forward with any evidence to prove the existence of the house with a built up area of 600 sq. ft., assessee had accepted his conclusion that the house transferred through the sale deed was not in existence at all as on date - Held that:- The assessee taken a plea before the lower authorities that this construction was used by servants as their residence. However, the Assessing Officer brought on record that the said construction was not fit for human habitation and also there is no evidence of carrying out any improvement after purchasing the property by the assessee. It is also brought on record that the assessee failed to substantiate the claim that some servants are staying in that construction. Before us, the assessee repeated the arguments as made before the lower authorities but has not placed necessary evidence in support of the claim of whatsoever to show that the said construction is in habitable condition. A construction in inhabitable position cannot be equated with a residential house. If a person cannot live in a premises, then such premises cannot be considered as a residential house. Thus investment in the construction would be complete as a house only when such house becomes habitable as supported by the decision of Saleem Fazelbhoy vs. DCIT (2006 (6) TMI 139 - ITAT BOMBAY-G). The evidence brought on record by the Assessing Officer clearly shows that the property purchased by the assessee would not fall within the description of residential house. Being so, the claim of the assessee cannot be allowed u/s. 54F. Also see Smt. Rohini Reddy [2008 (4) TMI 363 - ITAT HYDERABAD-B]. Against assessee. Claim for construction expenditure denied - Held that:- The assessee not placed before the Assessing Officer the required information like the details from whom the assessee purchased construction material. Further it is also brought on record by the Assessing Officer that the contractors to whom payments were made withdrew the amount from their accounts in a short time and closed the accounts within a few months. The evidence brought on record by the Assessing Officer shows that the alleged improvements or construction made by the assessee is false. Being so, we are inclined to uphold the argument of the DR and dismiss the ground taken by the assessee.Against assessee. Addition u/s. 68 - Held that:- The assessee only provided address of parties. Genuineness of the transaction and capacity of the parties are not proved. It is the burden cast on the assessee u/s. 68 to prove the genuineness of the transaction and capacity of the parties is not discharged by the assessee. The transaction is in the form of cash. Being so, there is heavy burden on the assessee to prove that the transaction is genuine. See R.B. Mittal vs. CIT (2000 (8) TMI 54 - ANDHRA PRADESH High Court) wherein similar view has been taken, thus inclined to confirm the addition made u/s. 68. Against assessee.

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• 2013 (6) TMI 349
  Bogus accommodation entry received in the garb of sale of shares - addition made u/s 68 - CIT(A) deleted the addition - Held that:- Agreeing with the submission of assessee if sale consideration was actually Rs. 6.98 per share, the AO ought to have given reduction in the sale proceeds computed at this rate before making any addition of the alleged over-stating the sale price by Rs. 3.02 per share. If this correct method had been followed, no addition would have resulted in the case of the assessee. No error in the finding of the CIT(Appeals). In favour of assessee.

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• Customs

• 2013 (6) TMI 348
  Import of prohibited goods - denial of the Customs duty concessions under Indo-Thailand Free Trade Agreement - Unbranded gold jewellery seized - demand from the petitioner-Company of differential Customs Duty, proposing to levy interest u/s 28AA and proposing to confiscate the seized gold jewellery - petitioner alleged to be wrongly availing the benefit of exemption under the Custom's Notification No.85/2004-Cus. dated 31.08.2004 read with Custom's Notification No.101/204-Cus.(N.T.) dated 31.08.2004 and thereby had been evading the payment of appropriate duty - Held that:- A perusal of the impugned Show Cause Notice would reveal that the respondents have proceeded against the petitioner on evading payment of Basic Customs Duty on the import made by the petitioner by wrongfully availing exemption on the basis of the Certificate issued by the Kingdom of Thailand. Though the impugned Show Cause Notice is issued under Section 124 of the Customs Act, the relief sought by the petitioner is only for the issuance of a Writ of Prohibition prohibiting the respondents from proceeding with the adjudication of the said Show Cause Notice. In the instant case, it is admitted that the Government of India has written to the Kingdom of Thailand about the issuance of Certificate to the petitioner for availing exemption and the respondents are awaiting reply from the Kingdom of Thailand. Notwithstanding the outcome of the decision of the sovereign authority, namely, the Kingdom of Thailand, the respondents have got power to initiate proceedings against the petitioner. A reading of Section 124 of the Customs Act would make it clear that the respondents are empowered to issue show cause notice and proceed against the person alleged to have committed fraud, stating the ground on which they have initiated the proceedings. The respondents have substantiated that there was wrongful availment of exemption by the petitioner contrary to the law of our country and therefore, they have invoked Section 124 to issue the impugned show cause notice. When such things are substantiated, as there is no prohibition in the said provision not to proceed against the importer, who has availed wrongful exemption of duty, this Court cannot restrain the respondents from proceedings further, unless there is anything contrary to law. Therefore, it is for the petitioner to go before the respondents, explain the case and request them to stall the proceedings, till a decision is taken by the government authorities of the Kingdom of Thailand. Section 124(a) of the Customs Act contemplates that no order confiscating any goods or imposing any penalty on any person shall be made under the Chapter unless the owner of the goods or such person is given a notice in writing with the prior approval of the Officer of Customs not below the rank of an Assistant Commissioner of Customs, informing him of the grounds on which it is proposed to confiscate the goods or to impose a penalty. Such a provision has been followed by the authorities in this case. Therefore, there is no scope to prohibit the respondents from proceeding further. Accordingly, the petitioner is directed to submit his explanation to the impugned show cause notice, dated 14.11.2012, within a period of four weeks from today, in which event, the respondents, viz., the authorities concerned shall look into the same, but not take any final decision thereon. Also the respondents shall maintain status quo as on date till the conclusion of the proceedings.

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• 2013 (6) TMI 347
  Refund of SAD - Notification No.102/2007 Cus - sale of goods after processing of cutting and slitting - Prime cold rolled steel (in coil), electrical steel (in coil), stainless steel (in coil), flat hot/cold rolled coil of iron, non alloy, other alloy steel, etc. - correlation between the goods imported and sold - held that:- objective is to create level playing field for the domestic manufacturers and the importer. As rightly noted by the Tribunal, domestic manufacturers are not affected by SAD as they can always avail the Cenvat Credit. The importer who sells the goods without any manufacturing process would not get any benefit of credit. Therefore, by availing the benefit of exemption, such importer was required to be refunded SAD. The commodity in the instant case, subjected to processing continue to retain its distinct and original character as well as identity and this process of cutting and slitting would not amount to manufacturing. Such process is undertaken for the purpose of requirement of domestic market and by such process of cutting and slitting, merely because tariff head is changed, that would not ipso facto make the imported goods a new article with distinct name or character. It certainly does not loose its correlation with the goods imported when sold in the domestic market. - decided in favor of assessee.

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• 2013 (6) TMI 346
  Confiscation of Gold - gold with foreign marks - illicit nature of the gold - onus to prove - Held that:- The scope of Section 123 of the Customs Act, 1962 was discussed by the Supreme Court in Union of India & Ors. v. Rajendra Prabhu & Anr., [2001 (3) TMI 97 - SUPREME COURT OF INDIA]. It was held that where the authorities on the basis of materials on record, which may be sufficient in the circumstances of the case came to conclusion that gold biscuits have been in possession of the respondents were liable for confiscation and respondents committed offence under Section 112, even without taking option of presumption under Section 123, the department could have directed confiscation as the burden in such case falls upon the person from whose possession such gold biscuits of foreign markings were seized. Regarding 16 pieces of gold comprising of eight gold biscuits recovered from beneath the grass of the lawn attached to the premises, the suspicion of the authorities cannot be doubted. The concealment of these gold pieces with foreign markings were sufficient to create reasonable believe that the gold being of foreign origin, in the absence of any evidence of their valid import was smuggled gold. The burden thus under Section 123 (1) was on the appellant to prove that the goods were either non-foreign origin or were validly purchased. - Decided against assessee.

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• Corporate Laws

• 2013 (6) TMI 345
  Winding up petition - whether a secured creditor was within its right to maintain a petition for winding up without giving up its security and without pleading that the security they had, would be insufficient to satisfy their claim. - held that:- A creditor who has unpaid dues could only be reasonably satisfied if company has means to pay. When the creditor serves the notice upon the company asking them to pay off the dues the company has option either to pay off or dispute the same. Even if the company has means to pay and does not pay without any reasonable cause it would be liable to be wound up. However, this question may not be relevant here as the record shows, the company was in involved circumstances due to its precarious financial condition. The right of a creditor, secured or unsecured, to maintain the winding up petition would lie both under section 434 (1) (a) as well as 433 (e) and (f). The petition by a creditor would be maintainable on both counts. Once the creditor established his right to claim the amount more than Rs 500/- the onus would shift on the company to rebut such claim by raising bona fide dispute. Once the bona fide dispute is raised it would weaken the chance to have admission of the winding up petition, otherwise admission is an obvious consequence. - The judgement and order of His Lordship to the extent it declined to admit the winding up petition, is set aside. Winding up petition is remanded back to His Lordship for necessary direction with regard to admission and advertisement.

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• Service Tax

• 2013 (6) TMI 369
  Sale of SIM Cards - bonafide belief - Held that:- Considering above fair proposition of appellant and also looking to the journey the litigations have traveled to reach to the finality, it would not be proper to impose penalty for disputed question of law involved in the appeal. Accordingly, this appeal is allowed partly confirming the tax demand followed by interest to be payable as that shall be applicable during relevant time waiving the penalty imposed in adjudication.

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• 2013 (6) TMI 368
  Appeal before commissioner appeals - delay in filing an appeal - Held that:- It is now well settled that the lower appellate authority has no power to condone the delay in filing the appeal if such delay is beyond the condonable period, which in respect of service tax appeal is 6 months (3 months + 3 months) vide Singh Enterprises Vs CCE Jamshedpur [2007 (12) TMI 11 - SUPREME COURT OF INDIA] - Decided against the assessee.

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• 2013 (6) TMI 367
  ISD - Input service distributor - The credit has been taken in respect of services like Group Insurance of Employees, Health Insurance of employees, Rent-a-cab services, Air Travel Services, etc. Revenue was of the view that these services did not have nexus with the manufacturing activity and they proposed to deny credit on such services - Held that:- The argument of Revenue that the services are not directly related to the manufacturing activity is not a sound argument because of the intangible nature of services in general and definition of input services at Rule 2 (l). The definition has given a very broad definition specifically including services which are usually availed at the Head Office like accounting, auditing, financing etc. - credit allowed in respect of Insurance Premium on Group Mediclaim Policy and Accident Insurance . Regarding Freight Business Auxiliary - The appellant purchases coupons and issue to their employees. - Held that:- . It is not easy to establish that this has been utilized in furtherance of any processes of the company and not in furtherance of the personal needs of the employees and since nexus cannot be established CENVAT credit cannot be allowed. - cenvat credit denied against the coupons - Partly decided in favor of assessee.

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• 2013 (6) TMI 366
  Cenvat Credit on input services availed without actually paying for the input services received in violation of the provisions of Rule 4(7) of the CENVAT Credit Rules, 2004. - Non payment of interest on delayed payment of service tax - Removal of capital goods as such - Rule 14 of CCR - Held that:- following the decision in the case of Ind-Swift Laboratories [2011 (2) TMI 6 - Supreme Court], prima case found against the assessee - pre deposit ordered equal to 50% interest amount.

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• 2013 (6) TMI 361
  Business Support Services - collected of excess amount to undertook the activity of registration of the car on behalf of the buyers with the RTO authorities - Dealer of Maruti Cars - Held that:- To qualify within this definition of “Support services of business or commerce” the activity undertaken as described should be in relation to business or commerce. When a customer purchases a car from dealers and services are rendered in relation thereto, it cannot be said that the services has been rendered in relation to business or commerce. Therefore Service Tax demand under the category of ‘Business Support Services' is not sustainable in law. Assessee granted waiver from pre-deposit of the dues adjudged and stay recovery thereof during pendency of the appeal.

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• Central Excise

• 2013 (6) TMI 365
  Appeal before Commissioner (Appeals) - Co-applicants - Commissioner (Appeals) vide his order dated 31.3.2010 has rejected the present appeal on the ground of not maintainability by observing that vide order in appeal dated 31.3.2010 he has already set aside the impugned order while allowing the appeal of M/s Ravindra Kumar Agarwal and as such, inasmuch as the impugned order is already set aside by him and has become non-est, he has rejected the present appeal as not maintainable. Held that:- The applicant in the Miscellaneous Application filed by Asha Agarwal is given liberty to air her grievances before Commissioner (Appeals) by way of filing application before Commissioner (Appeals). Appellate authority shall also examine the facts while deciding the miscellaneous application that whether any separate appeal was filed against the order in appeal by Asha Agarwal. The appeal was required to be filed by her when order was issued to Sarita Agarwal separately. - matter restored back to commissioner (Appeals)

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• 2013 (6) TMI 364
  MRP based valuation - Revenue’s contention is that some of the dealers were ultimately selling these television sets on MRP higher than affixed by the respondent. - The contention of the appellant is that out of 100 dealers and clearance of about 1000 TVs, only 40-45 TVs were sold only by two dealers in reference by charging higher price than MRP, the same cannot be made a leading evidence to conclude that appellant is charging higher price than MRP, and the amount charged in excess by dealer has never been passed to the appellant which has not been alleged in the order in original. Held that:- This case is squarely covered in the case of M/s Videocon International Ltd. vs. C.C.E. [2004 (3) TMI 111 - CESTAT, MUMBAI] held that the six instances cannot be made the leading evidence so as to conclude that the appellant was charging more prices from their customers than the one declared by them when there were around more than 12,000 dealers. The Hon’ble Tribunal further observed that there are no averment in Show Cause Notice that the extra amount collected by the dealer has flown back to the appellant. - Demand set aside - Decided in favor of assessee.

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• 2013 (6) TMI 363
  Recovery of erroneous refund - Held that:- the main contention of the learned counsel is that the Commissioner (Appeals) passed the order without considering the order of the Tribunal. In this context, the learned AR submits that the departmental appeal before the Hon’ble High Court is still pending and the show-cause notice was kept in call book and therefore the adjudication order should not have been passed, which has no serious objection on the part of the appellant. - demand set aside - matter remanded to original authority.

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• 2013 (6) TMI 344
  CENVAT credit on sulphuric acid used for treating the effluents in the effluent treatment plant - denial of claim on the premise that the effluent treatment has taken place after the completion of the manufacturing activity and same does not have nexus with the final product - Held that:- As per Central Pollution Control Board, a manufacturer of these chemicals is essentially required to install effluent treatment plant at their unit. Without installing effluent treatment plant and treating the gases effluents which emerges during the manufacture of these chemicals, the manufacturing process cannot take place. Therefore, treatment of gases effluents is essential part of manufacturing of these chemicals. As appellant has used sulphuric acid as input for treatment of these gases effluents in the effluent treatment plant, which is a process of manufacturing of final product (directly or indirectly), therefore, same is entitled for input credit as per Rule 2(K) of the CENVAT Credit Rules, 2004. In favour of assessee.

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• CST, VAT & Sales Tax

• 2013 (6) TMI 362
  Retrospective legislation - Withdrawal of benefit - Constitutional validity - reasonableness - amendment in Package schemes of incentive - whether validating enactment only legalizes a levy already imposed, but does not impose a fresh tax - Maharashtra Value Added Tax (Levy, Amendment and Validation) Act, 2009 - urged on behalf of the Petitioners that the Amending Act of 2009 amounts to the imposition of a new levy and that the imposition of a fresh levy with retrospective effect is violative of Article 14 & the introduction of the mandate of proportionality by the amendment to Section 93 in 2009 would be violative of Article 19(1)(g) of the Constitution Held that:- Unable to accede to the submission of appellant as Section 41BB of the Bombay Sales Tax Act, 1959 was introduced into the statute in 2001 which was prefaced by a non-obstante provision which was to operate notwithstanding anything to the contrary contained in any Package Scheme of Incentives. Section 41BB provided that any eligible unit to whom an eligibility certificate has been granted shall be eligible to draw benefits only on that part of its turnover of sales or purchases as may be arrived at by applying the ratio as may be prescribed by the State Government to the total turnover of sales or purchases of the unit in that year. Section 41BB was not an enabling provision, but enacted a restriction to the effect that notwithstanding anything contained in any Package Scheme of Incentives, an eligible unit holding an eligibility certificate shall be eligible to draw benefits only on that part of its turnover of sales and purchases as would be arrived at by applying the ratio which was to be prescribed by the State Government. Section 41BB, however, left it to the government to prescribe the ratio on the basis of which only a part of the turnover of sales and purchases would qualify for incentives. When the Maharashtra Value Added Tax Act, 2002 was enacted, a specific provision was incorporated in Section 93(1) described in its heading as providing for proportionate incentives to an eligible unit in certain contingencies & also made the legislative intent clear which was that an eligible unit would be eligible to draw benefits only on a proportional part of its turnover of sales or purchases as would be arrived at by applying the ratio which was to be prescribed by the State Government. Both Section 41BB of the erstwhile Bombay Sales Tax Act, 1959 and Section 93(1) as enacted in the MVAT Act, 2002 disclosed a legislative intent to allow the benefits only on a proportionate part of the turnover. The validating legislation and the amendment lay down the manner in which proportionate incentives would be computed. Such a course of action is legitimately open and cannot be regarded as being arbitrary or as violative of Articles 14 or 19(1)(g) of the Constitution. The principle of allowing pro rata incentives subserves the object of the legislation. If the legislature has, as in the present case, determined that the purpose of the Package Schemes of Incentives should or would be achieved by allowing incentives to be computed on a proportional basis, that legislative assessment cannot be regarded as unconstitutional. Thus there is no merit in the challenge to the constitutional validity of Maharashtra Act 22 of 2009 by which inter alia the provisions of sub-sections (1), (1A) and (1B) came to be substituted by way of an amendment to Section 93. The legislature has not transgressed the limitations on its constitutional power while enacting the validating legislation. Sub-section (2) of Section 93 has enacted that the benefit, if any, availed of by an eligible unit in contravention of sub-section (1) shall be and shall be deemed to have been withdrawn and the unit would be liable to pay tax, including penalty and interest, if any, in respect of the turnover of the sales and purchases in excess of the turnover arrived at under sub-section (1). The retrospective operation of the penalty with effect from 1 April 2005 would, be harsh. A penalty is in the nature of a penal or quasi penal exaction. A penalty cannot be imposed merely because it is lawful to do so. The imposition of a penalty for the period prior to the amendment of Section 93 with retrospective effect would be arbitrary. No merit in the challenge to the liability to pay interest. An assessee who has retained or availed of benefits to which he is not entitled in law, can legitimately be required to pay interest by the terms of a fiscal enactment. Thus the provisions of Section 93(2) to the extent to which they contemplate the imposition of a penalty with retrospective effect would to that extent be arbitrary. The provision in regard to the imposition of a penalty under Section 93(2) would consequently operate only prospectively. Accordingly dispose of the Petitions by upholding the constitutional validity of Maharashtra Act 22 of 2009, save and except for the imposition of a penalty under Section 93(2) which will take prospective effect. The Petitions are accordingly disposed of. There shall be no order as to costs.

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