TMI Tax Updates - e-Newsletter
June 25, 2012

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws Service Tax Central Excise Wealth tax Indian Laws

Articles

1. NON RECEIPT OF ITR-V FORM ELECTRONICALLY FILED WITHIN TIME – VALIDITY OF RETURN?

   By: DR.MARIAPPAN GOVINDARAJAN

2. PROCESS AMOUNTING TO MANUFACTURE OR PRODUCTION OF GOODS

   By: Dr. Sanjiv Agarwal

3. CONSULTANT DOCTORS, NOT IN REGULAR EMPLOYMENT, COULD NOT BE TREATED AS ‘EMPLOYEES’ UNDER EPF ACT.

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. MCA Notification on Investor Education.

2. IKEA Applies to Invest EURO 1.5 BN in India.

Notifications

Customs

1. 53/2012 - dated 21-6-2012 - Cus (NT)

Amendments in Notification No. 44/2011-Customs (N.T.) and 40/2012-Customs (N.T.) .

VAT - Delhi

2. F.7(433)/Policy-II/VAT/2012/DSIII/461-462 - dated 21-6-2012 - DVAT

Amendments in the Delhi value Added Tax Act, 2004.

3. F.7(433)/Policy-II/VAT/2012/229 - dated 19-6-2012 - DVAT

Borlaug Institute of South Asia (BISA).

4. F.7(433)/Policy-II/VAT/2012/211-222 - dated 18-6-2012 - DVAT

Regarding Information in form T-1.

5. F.3(7)/Fin.(Rev.-1)/2012-13/SSF/93 - dated 16-6-2012 - DVAT

Date of coming into force the Delhi Value Added Tax (Third Amendment) Act, 2012 dated 15.06.2012 .

6. F.3(6)/Fin.(Rev.-1)/2012-13/SSF/92 - dated 16-6-2012 - DVAT

Date of coming into force the Delhi VAT (Second Amendment) Act, 2012 dated 15.06.2012 .

7. F.14(6)/LA-2012/cons2law/61 - dated 15-6-2012 - DVAT

Amendments by Delhi Value Added Tax (Second Amendment) Act, 2012 – Sections 2, 9, 10, 28, 36A, 38, 49, 50, 66, 70, 73, 82 and 86 .

8. F.14(4)/LA-2012/cons2law/71 - dated 15-6-2012 - DVAT

Delhi Value Added Tax (Third Amendment) Act, 2012 – Amendment of section 2 .

Highlights / Catch Notes

Income Tax

• TDS Applicability on Medical Equipment Maintenance Contracts: Section 194C vs. Section 194J of Income Tax Act.

  Case-Laws - AT : Contract to maintain operation theatre and surgical equipments, RO system, CT Scan Machine, MRI machine, Lift, Sterlisation and Medical equipments - TDS under Section 194C or 194J - AT
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• Keyman Insurance Premiums for Partners Now Deductible as Business Expenses, Boosting Financial Relief for Companies.

  Case-Laws - HC : Keyman Insurance Policy - premium paid for the partners - The premium paid on the Keyman Insurance Policy is allowed as business expenditure - HC
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• High Court Rules Typed Copy of Partnership Deed Satisfies Compliance u/s 184(2) of Income Tax Act.

  Case-Laws - HC : Partnership firm or AOP - original partnership deed was not with the assessee but was filed before the Registrar of Companies. Before the Assessing Officer a typed copy of the partnership deed duly signed by all the partners was filed. - sufficient compliance of Section 184(2) of the Act. - HC
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• Assessee Correctly Delayed Revenue Recognition for AMC to Match Income with Expenses, Ensuring Accurate Financial Reporting.

  Case-Laws - AT : Annual Maintenance Contracts - following Principle of matching concept of income and expenses, assessee was justified in not recognizing revenue for the unexpired period of AMC - AT
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• Keyman Insurance Policy: Assignee Not Taxed on Difference Between Premium Paid and Surrender Value.

  Case-Laws - AT : Keyman Insurance Policy - Therefore, the difference between premium paid and surrender value is not taxable in the hands of assignee - AT
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• Court Rules in Favor of Assessee: Excise Duty and VAT Exclusion in Closing Stock Valuation Deemed Revenue-Neutral.

  Case-Laws - AT : Valuation of Closing Stock - adjustment of excise duty and VAT - addition - assessee contended aforesaid inclusion to be revenue-neutral - Decided in favor of assessee - AT
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• Mutual Fund Investments via Bank Accounts Require Verification for Authenticity in Tax Cases: Ensure Transaction Legitimacy.

  Case-Laws - AT : Investment in Mutual Funds - merely because the transactions was put through Bank account, does not make it a genuine/bonafide transaction - AT
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Customs

• Customs Notifications 44/2011 and 40/2012 Amended: Key Updates on Tax and Customs Regulations.

  Notifications : Amendments in Notification No. 44/2011-Customs (N.T.) and 40/2012-Customs (N.T.) . - Notification
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Corporate Law

• Judicial Consistency in Compensation Cases Vital for Trust in Legal System; Inconsistencies Highlighted in Companies Law.

  Case-Laws - SC : Uniformity and consistency in decisions - If some courts grant compensation and if some other courts do not grant compensation, the inconsistency, though perfectly acceptable in the eye of law, will give rise to certain amount of uncertainty in the minds of litigants about the functioning of courts. - SC
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• Section 138 NI Act Proceedings Are Penal, Not Civil, Focused on Penalizing Cheque Dishonor, Not Just Recovery.

  Case-Laws - SC : Nature of proceedings under NI Act - Proceedings under section 138 of the Act cannot be treated as civil suits for recovery of the cheque amount with interest. - SC
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Wealth-tax

• Urban Land Valuation Method Challenged: Rule 14 & Schedule III Part 'D' Deemed Applicable; AO's Approach Unsustainable.

  Case-Laws - AT : Determining the value of urban land - the land in question is held as stock in trade a business asset and the method of valuation as laid down in rule 14 and Schedule III part ‘D’ is also applicable and on both counts the valuation adopted by AO cannot be upheld - AT
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• Assessee-Society Receives Wealth Tax Exemption for Kalyana Mandapam u/s 5(1)(i) of Wealth-tax Act.

  Case-Laws - HC : Assessee-society was exempt under section 5(1)(i) of the Wealth-tax Act in respect of its assets consisting of the land and buildings comprised in the kalyana mandapam owned by it - HC
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Service Tax

• Liability for Service Tax under GTA: Consignment Agents Responsible, Not Appellants Paying Through Agents.

  Case-Laws - AT : Person liable to pay service tax under GTA -It is not possible to hold that the appellants are paying the freight through their agents and are therefore liable to pay service tax. Consignment agents squarely fall under the category of persons who are liable to pay service tax since they have paid the freight amount themselves. - AT
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• Refund Claim Approved Without Time Bar as Payment Not Considered Tax; Decision Upheld.

  Case-Laws - AT : Refund – time bar - Commissioner (Appeals) allowed the claim without time bar after holding that the amount paid by the party did not represent any tax - order sustained. - AT
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• CENVAT Credit Denied for Stockbroker Services as 'Input Service' u/r 2(l) of CENVAT Credit Rules 2004.

  Case-Laws - AT : CENVAT credit on stockbroker's service - 'Input service' under Rule 2(l) of CCR, 2004 - credit not allowed - AT
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• Cenvat Credit Denied for Service Tax on Outward Freight for Finished Goods, Allowed for Inputs and Capital Goods.

  Case-Laws - AT : Denial of cenvat credit of service tax paid on outward freight - restriction is related to finished goods only - ST paid on outward transportation of inputs and capital goods allowed - AT
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Central Excise

• Service tax refund in export contracts: Does delivering goods abroad extend the 'place of removal' beyond India?

  Case-Laws - AT : Refund of service tax - Merely because as per the terms of export contract, the goods have to be delivered at the customer's premises abroad, can it be said that the place of removal is extended to a place outside India. - AT
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• Pre-recorded audio cassette casings qualify for SSI exemption; not marketed under 'Universal' brand, not branded goods.

  Case-Laws - AT : SSI Exemption - As the casing is not traded in the market under the brand name 'Universal' and is further used in the manufacture of pre-recorded audio cassettes, exemption allowed. - AT
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VAT

• Delhi VAT Act Amended: New Tax Rates, Filing Procedures, and Enhanced Collection Measures for Improved Compliance and Revenue.

  Notifications : Amendments in the Delhi value Added Tax Act, 2004. - Notification
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• Borlaug Institute Updates VAT and Sales Tax Regulations: Key Highlights and Compliance Notes for Stakeholders

  Notifications : Borlaug Institute of South Asia (BISA). - Notification
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• New Form T-1 guidelines introduced to streamline VAT and sales tax submissions, improve compliance, and enhance reporting accuracy.

  Notifications : Regarding Information in form T-1. - Notification
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Case Laws:

• Income Tax

• 2012 (6) TMI 549
  Validity of Revisionary order u/s 263 - dispute regarding valuation of goodwill - Held that:- AO has taken only the average of the five years' profit as the value of the goodwill. The regular method accepted is to multiply the average profit with a suitable factor of three years or so, depending upon the nature and circumstances of the business transferred. If no multiplier is adopted, it was necessary on the part of the AO to explain the grounds of not applying the same. Further, assessing authority has not examined important aspects such as justification for the sister concern for paying any non compete fee to the assessee company - consideration paid for the transfer of intellectual property rights - deduction claimed by the assessee in respect of ESOP scheme. Therefore, CIT is justified in holding that the order of the AO is erroneous and prejudicial to the interests of the Revenue - Decided against the assessee. Validity of Revisionary order u/s 263 - transfer of software technology division to sister concern - No amount attributed towards goodwill, however was attributed towards non compete fee, sale of brand name, sale of IPR - AY 2000-01 - Held that:- CIT has rightly pointed that assessee has made an attempt to suppress the true colour of the payment towards the goodwill by stating that payments were made towards non compete fee, IPR on brand/brand value, etc. Hence, factum and valuation of goodwill is confirmed. However the same cannot be treated as short-term capital gains, since assessee was in the business for more than five years. The goodwill is a self generated asset and generates along-with the commencement of the business, especially in the field of software technology. The capital gains must be treated as long-term capital gains and taxed accordingly - Decided partly in favor of assessee. Interest income earned on fixed deposit made for margin money - business income or income from other sources - deduction u/s 10B - Held that:- The interest received by the assessee on margin money deposits were not generated out of export activity. Therefore, the assessee is not entitled to treat the interest income as business income eligible for deduction u/s 10B. However, if the assessee proves that some expenditure is incurred for earning that bank interest, that expenditure may be deducted while computing the income from other sources - Decided partly in favor of assessee Amount received on renting out of computers, insurance claims on damage to computers, sale of scrap and reimbursement of expenses incurred for agents abroad - business income or income from other sources - Held that:- Incidental income arising from use of computers, insurance claims on damage to computers, etc. needs to be treated as operational income in the nature of business income since the same are installed for the purpose of carrying on business. This is the case with the sale of scrap as well. Also, reimbursement of expenses reduces the cost and results in overall increase in business income. Hence, aforesaid to be treated as business income - Decided in favor of assessee Rent received from employees occupying quarters of the assessee - recovery is reduced from staff welfare expenses - Held that:- Since it reduces the business expenditure, hence rent recoveries are to be treated as business income - Decided in favor of assessee Exemption u/s 10B - denial in respect of trade advances written off - Held that:- AO may verify the nature of advances made by the assessee and if they were trade advances, the same shall form part of the business income on writing back. If so, the assessee is entitled for deduction u/s 10B. Exemption u/s 10B - denial in respect of gain arising out of transfer of division to sister concern - assessee contended that upto the AY 2000-01, entire income earned by the STP undertaking is exempt u/s 10B as a tax holiday - Held that:- The tax holiday benefit applies only to the income earned out of export of articles or things or computer software. Income arising out of sale of a business division and other items, etc. does not qualify for deduction u/s 10B - Decided in favor of Revenue On contention of Revenue of application of section 50 and capital gains to be treated as short-term capital gains it is held that Section 50 does not automatically apply to an asset only because of the reason that the asset is a depreciable asset. In the present case, there was no occasion to give any allowance of depreciation on the goodwill computed in the hands of the assessee. The assessee has been in business for a period of more than three years - Decided against Revenue

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• 2012 (6) TMI 548
  Period of limitation - Revisionary order passed u/s 263 on ground of erroneous deduction u/s 10B - order u/s 263 passed on 02.03.09 in respect of AY 97-98 of which assessment u/s 143(3) has been completed on 29.03.2000, which after litigation, reassessment and rectification proceedings attained finality on 04.05.2006 - Held that:- CIT has revised the assessment order passed on 4-5-2006. It is to be seen that the matters pointed out by the CIT for the purpose of revising the assessment order have already reached finality in the order dated 29-3-2000 passed u/s 143(3) and in the order passed to give effect to the order of the CIT (Appeals) on 2-7-2002. The order of the CIT (Appeals) was dated 23-5-2002. Thereafter, the issues pointed out by the CIT were never raised in any of the proceedings. Therefore, as far as these issues are concerned, the relevant assessment order is the order passed on 29-3-2000. It is thereafter, on 24-11-2008, that the notice u/s 263 was issued and the order u/s 263 was passed on 2-3-2009. It is very clear that the revision order passed by the Commissioner of Income-tax is time barred - Decided against the Revenue.

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• 2012 (6) TMI 547
  Validity of revisionary power exercised by DIT u/s 263 - composite contract of providing material and services - order revised on ground that composite contract cannot be segregated to tax a part of it u/s 44BB and part of it as FTS u/s 9(1)(i) - assessee contended change of opinion - Held that:- This was a case of composite work contract which cannot be considered in parts for the purpose of taxation. Assessee has opted for working out the taxable income as per the provisions of section 44BB. Very objection of introducing the fiction of income u/s 44BB is to avoid all complications in determining the liability of an assessee coming under that provision. If an exercise is to be conducted in each assessee's case to ascertain the liability of taxation, then the very purpose of the section will be defeated. hence, there was no two views possible on this issue and the Assessing Officer has committed a mistake which has rendered the order erroneous and prejudicial to the interest of revenue. Further, DIT has rightly held that provisions of sections 197 and 195 are interim and provisional proceedings in nature. These are only for the purpose of making withholding taxes. The real taxability of the receipts or any sum on which the tax has been deducted can be determined only in regular assessment proceedings. DIT has not substituted his own view to the Assessing Officer's view. The Assessing Officer has not applied his mind in view of the provision of law. DIT was justified in exercising revisionary powers - Decided against the assessee.

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• 2012 (6) TMI 546
  Contract to maintain operation theatre and surgical equipments, RO system, CT Scan Machine, MRI machine, Lift, Sterlisation and Medical equipments - applicability of Section 194C or 194J - Held that:- Aforesaid contracts cannot be the contracts in a routine or normal manner but for which technical service has been rendered and provisions of section 194J r.w.s. 9(1) of Explanation-2 are attracted, r.w.s. 201(1) and 201(1A), which the AO has rightly applied. Reliance also placed on CBDT Circular 715 dated 8.8.1995 - Decided in favor of Revenue Contract for Anti-termite treatment - Held that:- This treatment though does not require technical expertise but it requires professional skill, in the absence of which there can be a loss to the life of the human being living therein. hence, Section 194J is applicable in such contracts - Decided in favor of Revenue Contract for supply of Bread and Butter and supply of security and personnel - Held that:- In present contract, no technical part or technical services as per facts is available on record. Hence Section 194C is applicable in such contracts - Decided in favor of assessee.

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• 2012 (6) TMI 545
  Deletion of addition by ITAT on account of non-production of books of accounts - Held that:- During original assessment proceedings the AO himself had accepted the position that the assessee had maintained quantitative details and that the general profit was on the higher side and in remand report also could not justify the lump-sum addition other than making a short statement that addition was justified on books, vouchers, etc. as produced before him - against revenue. Deletion of disallowance of speculation loss by ITAT - Held that:- As the AO did not deny the fact that the assessee is a bullion merchant and has a terminal of MCX as a member, it also appears from the record that the loss arose on account of dealing in commodities ordinarily dealt in by the assessee in its business - as these transactions were of an integrated nature could not be said to be a speculation loss - against revenue. Deletion of addition by ITAT u/s 68 as unexplained cash credit - Held that:- The remand report of the AO depicts that in respect of addition of Rs. 5 lac from two of the parties, AO received direct confirmations in response to inquiries that both the parties have filed their return, bank statement and balance sheet, and in those, the loans to the assessee are reflected - against assessee.

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• 2012 (6) TMI 544
  Keyman Insurance Policy - premium paid for the partners was a revenue expenditure deductible under Section 37 or not - Held that:- In computing the total income of a previous year of any person as per Section 10(10)D any sum received under a Keyman insurance policy is not to be included - "Keyman insurance policy" means a life insurance policy taken by a person on the life of another person who is or was the employee of the first-mentioned person or is or was connected in any manner whatsoever with the business of the first-mentioned person and going through the Explanation given in the said section the partner definitely comes within the purview of the person who is connected with in any manner whatsoever with the business of the firm - The premium paid on the Keyman Insurance Policy is allowed as business expenditure as the amendment had taken effect from October 1, 1996 - in favour of assessee.

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• 2012 (6) TMI 543
  Setting aside the best judgment assessment by CIT(A) u/s 263 - directing the succeeding Assessing Authority to make another best judgment - tax audit report annexed to the return of income confirmed that the assessee had not deducted tax at source out of payment made on account of freight charges, loading & unloading and hiring charges - Held that:- The show cause notice issued u/s 263 were based on audit objection and there is no independent application of mind by the CIT - the assessee had not produced the books of account and the AO with application of his mind had completed the assessment under section 144 r.w.s. 143(3) and computed the income in view of the provisions of section 44AE of the Act, and the CIT sent back the matter to the AO to re-determine the income of the assessee by applying a rate other than the rate applied by the Assessing Officer, being without jurisdiction, is not tenable in law. The provisions of section 263 are clear and absolute that the power is to be exercised by the CIT from the examination of the records of the proceedings under the Act. The explanation under section 263 of the Act defines 'records' as all records relating to any proceedings under the Act available at the time of examination by the Commissioner and the audit objections under no circumstances can be called as record empowering the CIT to exercise jurisdiction under section 263 - set aside the order passed by the CIT - decided in favour of assessee.

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• 2012 (6) TMI 542
  Addition of income from undisclosed sources - assessee claimed to have received corpus donation of 39,27,845 - Revenue appeal as against ITAT who deleted addition - Held that:- The judgment in the case of DIT (Exemption) v. Keshav Social 61,52,545/- including 4,00,000/-deposited in cash and the credit amount of 61,52,545/- did not explain the corpus donation of 88,32,845/- and also did not explain the source of payment for the purchase of land and the expenses incurred towards professional payment AND considering the bank statement of M/s CGS Mani Charitable Trust depicts that they did not have sufficient funds and an amount of 49,39,926/- was received by way of pay order dated 2.7.2002 and an amount of 49,00,000/- was allegedly paid as donation to the assessee on the same date - Findings recorded by the Tribunal in the impugned order are partly factually incorrect and cannot be sustained - the order of the tribunal is bereft of reasoning, consideration and is cryptic - in favour of the appellant-Revenue

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• 2012 (6) TMI 541
  Partnership firm or AOP - during the course of assessment proceedings he could not produce the certified copy of the Partnership Deed as required to have been filed under Section 184(2) of the Act – AO denied the assessee the status of the firm and assessed it in the status of Association of Persons (AOP). As a result he disallowed deductions of salary and interest paid to the partners – Held that:- original partnership deed was not with the assessee but was filed before the Registrar of Companies. Before the Assessing Officer a typed copy of the partnership deed duly signed by all the partners was filed. During assessment proceedings a notarized copy of the partnership deed was filed, in the circumstances the CIT(A) has not committed any error in holding that there was sufficient compliance of Section 184(2) of the Act. appeal fails and is hereby dismissed

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• 2012 (6) TMI 540
  Leasehold property - Whether expenditure incurred by the assessee by way of electrical work, civil work and interior decoration is in the nature of the revenue expenditure - assessee contended that the expenditure incurred are in respect of leased properties and they do not give to the assessee the benefit of enduring nature and the amount spent was for business purpose and not for acquisition of the capital asset – Held that:- for the purpose of section 32, which provides for depreciation, if the condition No. 1 is satisfied by a legal fiction, the lessee becomes the owner of the structure constructed on lease premises. Therefore any expenditure incurred for civil work by a lessee in respect of the lease premises, without any further proof cannot be said to be a capital expenditure or revenue expenditure. it is necessary to find out the nature of construction put-up, the purpose of construction and the use to which the said construction is put-up and also if it is a case of repair, replacement, addition or improvement has to be gone into. assessee has not stated the nature of civil works constructed, the nature of interior decoration made to the leasehold premises and also the nature of electrical work undertaken. Tribunal without going into the question as to the nature of civil work, electrical work and interior decoration done to the lease premises has proceeded on the assumption that it constitutes a revenue expenditure. matter is remanded to the assessing authority to consider whether the said expenditure is revenue expenditure or capital expenditure

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• 2012 (6) TMI 539
  Income from house property - Determination of annual value - self occupied property - Whether HUF can claim benefit of self occupancy u/s 23(2) - held that:- (i) the benefit of section 23(2) is available if the house is in occupation of the owner for the purpose of his own residence ; and (ii) a partnership firm, which is a fictional entity, cannot physically reside and so a partnership firm cannot claim the benefit of the provision, which is available to an assessable entity only. The question arises as to, whether a Hindu undivided family can be held to be a fictional entity? The answer will be in the negative. A Hindu undi- vided family is nothing but a group of individuals related to each other by blood relations, or in a certain manner. A Hindu undivided family can be seen being a family of a group of natural persons. There is no dispute that the said family can reside in the house, which belongs to the Hindu undi- vided family. A family cannot consist of artificial persons. HUF is entitled for benefit of Section 23(2) in respect of self occupied property.

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• 2012 (6) TMI 538
  Re-opening of assessment –jurisdiction - assessing authority over-ruling the objections passed the reassessment order - appellate Commissioner set aside the said order and remanded the matter back to the assessing authority. Again after such remand, the assessing authority passed the assessment order which was again challenged by the assessee before the Appellate Commissioner who set aside the order on merits but did not go into the question of correctness of the re-opening of the assessment under Section 147 of the Act – Held that:- As the reassessment order has been set aside on merits and it has attained finality, the appellant cannot be said to be an aggrieved person who is entitled to prefer an appeal merely on the ground that the ground of jurisdiction has been held against the assessee. appeal dismissed.

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• 2012 (6) TMI 537
  Re-opening of its assessment - change of opinion by the Assessing Officer - assessment having been completed in the first instance u/s. 143(3) of the Act by examining all the relevant aspects; the 'profit and loss account' as well as the 'tax audit report' u/s. 44AB of the Act, filed along with the return of income, duly disclosing both the interest received from the bank as well as the quantum of remuneration allowed to the partners, i.e., the two facts which constitute the basis of the re-opening of the assessment - held that:- the assessment stands re-opened within four years of the commencement of the relevant assessment year, so that the assessee's insistence on proper disclosure would not be of any relevance. Interest received from the bank - Applicability of section 40(b)(v) - remuneration of working partner - book profit - held that:- it would be entitled to deduction qua remuneration allowed to working partner/s by considering the said income as part of the 'book profit' under Explanation 3 to s. 40(b)(v). Book profit - consideration of income chargeable under the head income from other sources - held that:- The deduction qua the partner's remuneration is being claimed and, therefore, would stand to be allowed only in determining the income assessable u/c. IV-D, in which case it would automatically fall to be included in the 'book profit', and the assessee allowed its claim for remuneration allowed to the working partner/s with reference thereto - at the claimed/exigible amount, else not. The condition with reference to 'book profit', it may be appreciated, does not lay down any qualitative test, but only a quantitative one, so that the deduction, being in respect of expenditure to persons constituting the firm itself, is sought to be regulated by the Act. - The question as to whether 'book profit' would include income assessable under head of income other than that assessable Chapter IV-D, thus, does not arise for consideration, and the assessee's alternate ground is misconceived and misdirected.

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• 2012 (6) TMI 536
  Addition towards other heads of expenditure debited to the profit and loss a/c – Held that:- once the books of accounts were rejected, the very same books of accounts cannot be a basis for making any addition in the case of Indwell Constructions (1998 - TMI - 17056 - ANDHRA PRADESH High Court - Income Tax) when the profit is estimated by rejecting the books of account, all the expenditure including other heads of expenditure deem to be allowed. Therefore, once the profit is estimated, there should not be any further addition on this count. Cross Objection filed by the assessee stands allowed.

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• 2012 (6) TMI 535
  Whether Commissioner of Income-tax (Appeals) has erred in confirming the action of Assessing Officer in making disallowance of expenditure of Rs. 71,00,339/- u/s. 40(a)(ia) of the I.T. Act – Held that:- peculiarity of this case is that the sub-contract which was assigned to this assessee was not further sub-contracted to the lorry owners. In a sub-contract, a prudent contractor generally include the clauses of liability which were undertaken by him while accepting the execution of the work from the main contractor. condition of passing of the liability cannot exhaustive and cannot be said to be the only criteria to decide whether there was an existence of contract or sub-contract. The catalog of criterion must include certain other clauses as well, yet in this case this criteria can be determinative considering the nature of work assigned by the assessee to transporters. in the absence of transfer or pass-over of any contractual responsibility to transporters as a sub-contractor, the assessee being an individual was not responsible for the deduction of tax at source as prescribed u/s. 194C(2) of the IT Act. Consequence thereupon the provisions of section 40(a)(ia) of the Act were incorrectly invoked, hence the view taken by the authorities below are hereby reversed. Ground is allowed Whether Commissioner of Income-tax (Appeals) has erred in confirming the action of Assessing Officer in making disallowance of Rs. 45,275/- being 20% of telephone expenses and 10% of other expenses - under the head "miscellaneous expenses", staff welfare expenses, telephone expenses, travelling expenses, etc. a total sum of Rs. 3,87,801/- was debited out of which the AO has made disallowance at 20% amounting to Rs. 77,560 - Held that:- When it was contested before the ld. CIT(A), the disallowance in respect of telephone expenses @ 20% was upheld. However, the disallowance in respect of other heads it was restricted to 10%. On hearing the submissions of both the sides and considering the nature of business as also the size of the business, we hereby hold that only 5% disallowance should suffice to cover up the expenditure alleged to be made towards personal use by the assessee. appeal of the assessee is partly allowed

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• 2012 (6) TMI 534
  Refund of tuition fees - assessee is refunding the tuition fee to those students who are not keen to pursue the coaching in the institute - AO made enquiries u/s 133(6) from these students on test check basis. He alleged that in some of the cases the notices sent u/s 133(6) were received back with the remark of the postal authorities that the persons are not available or incomplete addresses and in 7 cases he alleged that either the students or their parents to whom tuition fees has been refunded in cash, denied to have received any such refund from the assessee – Held that:- in case of students coming from outstation, guardians do not always accompany their wards especially at the time of leaving the institute. When such students are refunded fee, they might, for obvious reasons, not disclose the same to their guardians/parents. This will obviously result in mismatch of information. AO however, proceeded in a hasty manner by making a casual enquiry and based on a faulty and insufficient sample drew his conclusion, away from the human probabilities, practical difficulties, business policy need, past history, the other similar trade practices etc. Hence, the ld. CIT (A) rightly deleted the disallowance Onus of proof - Instead of claiming expenditure, the assessee was in receipt of tuition fees (net of refund). To allege a receipt as income of the assessee, onus always lay upon the Revenue. Therefore, it was for the AO to prove the correct amount of receipt to compute income Advertisement expenses - expenses incurred on advertisement and banners – AO disallowed Payment to cricket club, Payment to ABVP, Payment on account of donation etc. – Held that:- payments were advertising the name of the Institutes at all places which will be frequented by target group (young students). Obviously, the best place/time would be the Sport Events or the events where students in general would participate. The AO has not alleged any personal element in these payments nor has the payment been doubted. Obviously, all the payments are either by cheque or are acknowledged by the concerned person. Since alt the above payments were made for the purposes of the business and were for advertising Institute. Since the expenses have been incurred on advertisement and banners are also a mode of advertisement, hence the ld. CIT(A) was justified in deleting the disallowance. Decided in favor of assessee Addition on account of printing and stationary – part of such expense have been incurred in cash, that too without any bills, etc., and the vouchers have also been prepared by the assessee himself – Held that:- appellant submitted that this work was got done through casual and part-time workers, whose “signatures were obtained on periodical basis. The letter containing these submissions was made available to the assessing officer, who did not make any adverse comment. No addition is justified. Decided in favor of assessee Addition out of building and maintenance account - certain expenses, which have been incurred in cash and which are not supported by the bills – Held that:- from time to time petty works become necessary and these have to be carried out through small-time, illiterate masons and contractors, who do not carry bill books and seek payments in cash. Disallowance cannot be made on the ground that payments were made in cash. No evidence is collected to suggest that payments were not genuine. The AO could have examined the person who made the payment and verified the vouchers. CIT(A) was justified in deleting the disallowance. Decided in favor of assessee Disallowance out of telephone and vehicle expenses – Personal use – Held that:- disallowances for personal use, at 1/5, should apply only to 3 mobiles used by him and 2 land lines installed at his residence and also only to the two cars used exclusively by the appellant. telephones installed at business premises cannot be considered for personal use. The ld. CIT(A) has rightly reduced the disallowance. Revenue appeal partly allowed Copy checking expenses – assessee paid amount to M/s SRK Associates on account of copy checking – Whether proprietor of SRK Associates was wife of the appellant is good reason for invoking section 40A (2)(b) of the IT Act – Held that:- in the case of Edward Keventer (P) Ltd. (1978 (8) TMI 1 (SC)) AO must not apply provisions of Section 40A(2)(b) [in the old Act as Section 10(4A) capriciously as a matter of routine and Section is to be applied judiciously. The legitimate business needs must be judged from the viewpoint of a prudent business man. The benefit derived or occurring must also be considered from the angle of a prudent businessman. When the AO has accepted the genuineness of payment then there must be some material to suggest that fair market value of services rendered by a concern covered u/s 40A(2)(b) is less as compared to actual payment. Hence, in absence of evidence collected by the AO, CIT(A) was justified in deleting the addition. Decided in favor of asseessee Addition out of computer expenses - AO noted that payments were prima-facie of capital nature as new items/assets were purchased by the assessee – Held that:- motherboard is a component of the computer and expenditure on its replacement cannot be treated as a “capital cost”. On the other hand, the UPS, though necessary for a computer, is a separate component and decision of the assessing officer to treat its cost, as capital cost is in order. CIT(A) was justified in deleting the expenses. Appeal partly allowed. Staff welfare expenses - random verification during the course of assessment proceedings, it was found that most of these expenses have been incurred in cash and also that part of the expenses are claim on the basis of self made vouchers – Held that:- assessee has not given the details of services rendered. The paper book also do not contain copy of such vouchers. The AO has mentioned that some expenses are not supported by authentic bills. We therefore, feel that AO was justified in disallowing part of the expenditure. The disallowance is excessive and hence is restricted to 35,000. Decided in favor of revenue Interest free payment - assessee has paid interest to bank against loan and overdraft for 10,99,099/- and such interest payment was reduced from the bank interest for FDR - On perusal of Schedule- VIII of the Balance sheet, it was found that the assessee has made interest free advances – Held that:- Since interst free advances are less than the capital and the AO has not brought on record any nexus of interest bearing loans being used the AO could not have disallowed the interest. There is no onus on the assessee to establish that interest free advances are out of interest bering advances if non-interest bearing funds are more. AO was not justified in making any disallowance. Hence, disallowance is deleted. appeal of the Revenue and cross objection of the assessee are partly allowed

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• 2012 (6) TMI 518
  Admissibility of petition for revision of order of Tribunal beyond period of 4 years from date of the order - appeal filed on 04.04.2012 against ex-parte order dated 23.02.07 rendered in respect of AY 97-98 - assessee contending limitation of period from date of service of order - Held that:- U/s 254(2), the Statute has chosen not to compute the period of limitation from the date when an ITAT order is served, but the Statute has chosen to compute the time within four years from the date of the order. Although another four years has further been granted for filing a petition u/s.254(2) by the Statute, but on assessee having reasonable cause for non-filing of appeal. In present case, appeals filed in 2003, remained pending, until decided on 23/02/2007 ex-parte. Appellant has never enquired in the said four years between 2003 to 2007 about the fate of his appeals. After the lapse of 8 years, undisputedly a long gap, now this assessee is seeking a favourable decision which may tantamount to re-writing the Statute. Therefore, condonation as sought through these petitions is beyond jurisdiction, hence rejected.

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• 2012 (6) TMI 517
  Search & Seizure - Block assessment - Period of limitation - search conducted at bhatta premises of the assessee vide first authorization dated 17.12.2002 of which panchnamas was drawn on 20.12.02, 21.12.02(order u/s 132(3)), and 03.01.03 and search conducted at office premises vide last authorisation dated 20.12.2002 of which panchnama was drawn on 27.12.2002 - assessee contended that search was concluded on 21.12.2002 itself and panchnama dated 3.1.2003 was merely for revocation of order u/s 132(3) - Held that:- In the present case panchnama dated 3.1.2003 is not a panchnama which finds mentioned in Explanation 2 to section 158BE. Hence, the limitation cannot be governed by the said panchnama. The search essentially was concluded and completed vide panchnama dated 21.12.2002, when order under the second proviso to section 132(1) was passed for deemed seizure of stock of goods, statement of one person was recorded and a restrain order u/s 132 was passed. Panchnama dated 21.12.2002 was the last panchnama as described in Explanation 2 to section 158BE and, therefore, the limitation has to be commenced from the said panchnama, rendering time limit to frame assessment u/s 158BC to be 31.12.2004. As against that, the impugned assessment is passed on 31.1.2005 which is not passed within the limitation described in section 158BE. The assessment, therefore, is bad in law and has to be quashed. It is also held that the point of time of issue of authorization will not have any relevance but it is a point of time when last panchnama is drawn in respect of authorization whether it is first authorization or it is last authorization. “Last panchnama” as relevant for Explanation 2 to Section 158BE will be the panchnama which show the conclusion of the search. Hence, assessment is barred by limitation and is not a valid assessment in the eyes of law - Decided against the Revenue.

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• 2012 (6) TMI 516
  Unexpired value of Annual Maintenance Contracts - addition - Held that:- Undisputedly, said amount pertained to unexpired period of AMC falling outside the end of the relevant previous year. The clients of the assessee could at any point cancel the contract and get a refund for the unexpired period. This itself meant that the amount received by the assessee at the point of time it entered into an AMC was nothing but an advance, which on the progress of each day got converted into revenue. Therefore, following Principle of matching concept of income and expenses, assessee was justified in not recognizing revenue for the unexpired period of AMC - Decided in favor of assessee. DTAA between India and Mauritius - payment made to Mauritius company for conducting market survey for exploring Opportunities in Asia for Electronics - Revenue contended the same to be FTS and dis-allowed expenditure u/s 40(a)(ia) on account of non-deduction of tax at source - Held that:- Since, such a "market survey" definitely involved exercise of technical knowledge and skill by the persons, therefore, by virtue of Explanation 2 to Section 9(1)(vii), the type of service received was nothing but fees for technical services. However, Chapter III of DTAA between India and Mauritius did not provide for taxing any fees paid for technical services. Only for a reason that DTAA is silent on a particular type of income, such income will not automatically become business income of the recipient. Hence, when DTAA is silent on an aspect, the provisions of the Act has to be considered and applied. Therefore, matter remitted back to A.O. for consideration afresh.

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• 2012 (6) TMI 515
  Renewal of exemption u/s 80G(5) - rejection by CIT(A) without issuance of SCN - assessee Trust, established on 17.1.2002, had been granted registration u/s 12A as well as exemption u/s 80G - last exemption granted for the period from 1.4.2008 to 31.3.2011 - Held that:- In view of omission of proviso to Section 80G(5)(vi) w.e.f.01.10.2009, approval once granted u/s 80G(5)(vi) shall continue in perpetuity. Further, Circular No. 5 being "Explanatory circular for Finance (No. 2) Act, 2009" is in favour of the assessee and even if the assessee by ignorance or inadvertently filed an application for renewal, the CIT was required to decide the same in accordance with the amended provisions. therefore, we set aside the impugned order and hold that approval u/s 80G(5) already granted to the assessee shall continue unless and until the concerned authority takes appropriate action in accordance with law. See Association for Advocacy and Legal Initiatives v. CIT (2011 (2) TMI 315 (Tri)) - Decided in favor of assessee.

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• 2012 (6) TMI 514
  Keyman Insurance Policy - taxability of difference between the premium paid by employer and surrender value paid by employee to employer at time of assignment of same to employee - Held that:- Hight court in case of CIT Vs Rajan Nanda(2011 (12) TMI 392 (HC)), held that it was only the surrender value of the policy at the time of assignment or the sum received by an individual at the time of retirement, which is taxable. Insofar as assignment is concerned, at that time surrender value was paid by the employee and therefore, nothing could be taxed. Therefore, the difference between premium paid and surrender value is not taxable in the hands of assignee - Decided in favor of assessee. It is noteworthy that Keyman insurance policies becomes ordinary insurance policies at the time of assignment, hence, amount received on maturity of keyman insurance policy is to be treated as exempt u/s 10(10D).

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• 2012 (6) TMI 513
  Valuation of Closing Stock - adjustment of excise duty and VAT - addition - assessee contended aforesaid inclusion to be revenue-neutral - Held that:- It is not appropriate to include the closing Modvat in the figure of closing stock without modifying the figures of purchases, sales and opening stock. Hence, keeping in view that the assessee is following consistent method of accounting and Tribunal in assessee’s own case for AY 2005-06 and 2006-07 has decided in favor of assessee. Hence, CIT(A) was fully justified in deleting the addition. Deduction u/s 80IB - dis-allowance in respect of interest income on ground that same cannot be said to have been derived from industrial undertaking - interest income assessed under the head 'income from other sources' - Held that:- Since the interest income has been assessed under the head income from other sources, therefore, the assessee is entitled to the deductions u/ 57(iii). Software expenses, Website expenses - Revenue or Capital expenditure - Held that:- Expenditure incurred on software and website are allowable as revenue expenditure. Loss incurred on discontinuation of assignment for installation of software system - business loss or capital loss - Held that:- Since aforesaid expenditure has been incurred for installation of software system (ERP) which was discontinued due to commercial expediency as going on ahead with such system may not be in line with the company’s requirement, therefore, the loss incurred by the assessee is allowable as a business loss. Export incentives - Revenue contended the same to be shown as separate income rather reducing it from cost of purchases of materials - Held that:- CIT(A) has rightly observed that consumption of raw material and packing has been increased by the provisions of export incentives of Rs.(13,142,053). Thus, deduction u/s 80IB stands reduced accordingly and AO has erred in treating the aforesaid expenses as income. In absence of any contrary finding, order of CIT(A) is upheld. Foreign exchange rate difference loss on account of conversion of CC limit to FCNRB (DL) working capital loan - business loss or capital loss - Held that:- Foreign currency exchange loss relates to the working capital loan and thus, allowable as business loss. Dis-allowance deleted.

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• 2012 (6) TMI 512
  Write off of obsolete Stock - consequent write back of liability of foreign creditor and offering the same for taxation - dis-allowance of loss on ground that there were no details to show that the assessee was under instructions by the foreign party to write off the liability - Held that:- How a negative fact can be proved when the assessee submits that they have imported the goods and the same could not sold in so many years and with the consent of Commercial Tax authorities destroyed the goods, the fact of which was accepted by the other authority. The books of account also represents the same situation. Also, it is on record that assessee wrote back the liability in the P/L Account and offered for taxation. claim of loss of stock is genuine and hence allowed - Decided in favor of assessee. Dis-allowance of 50% of the expenditure on the reason that the assessee does not have any business activity - Held that:- Since the assessee has been in the business during the year and has other income and claimed a meagre amount of Rs.1,64,828/- as expenditure, which is just enough even for maintaining its corporate identity, we are of the opinion that disallowing 50% of the amount is not warranted and is arbitrary. Penalty u/s 271(1)(c) - Held that:- There is no reason for levy of penalty as the basis for levy of penalty was disallowance of the claim which was allowed therein - Decided in favor of assessee.

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• 2012 (6) TMI 511
  Application for Interim stay of the order of Assessing officer, during the pendency of the appeal - rejection by Appellate Authority expressing reservation about his powers to grant the interim order - Held that:- In present case, Appellate Authority has not proceeded to appreciate the points raised by the petitioners in support of his prayer for grant of interim order based on materials available before him. Instead, he has ventured into discussions which are irrelevant and impermissible having regard to the binding precedent in the form of a direction issued by the Division Bench. Appellate authority shall consider the application for stay filed by the assessee on merits and in accordance with law. It is made clear that he has inherent power to grant or not to grant stay though such power is expressly conferred on him u/s 246-A. Impugned orders are quashed. Writ petitions allowed.

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• 2012 (6) TMI 510
  Initiating re-assessment proceedings u/s. 263 – SCN issued as AO did not assess the amount received by the assessee as repairs of machinery charges and contract receipts for assessment year 2002-03 – on submissions by the assessee in reply to SCN CIT remitted the matter to the file of the AO that the claim of the assessee requires verification - Held that:- The impugned revision order is not sustainable as the grounds on which order was subjected to revision are different, vis-à-vis the grounds on which revision proceedings were actually initiated as in the show-cause notice CIT states that the order passed by the AO was erroneous and prejudicial to the interest of revenue because he did not assess the amount of 55 lakhs received by the assessee as repairs of machinery charges and did not assess a sum of 2,41,81,436/- being contract receipts for A.Y. 2002- 03”, whereas in the revision order, learned Commissioner abundance this stand and merely directs the Assessing Officer “to call for the original vouchers as well as the original ledger containing the sales account as well other sub-accounts in which the assessee claims to have made entries regarding such income - there was a shift in the stand of the Commissioner as to whether it was a case for revision on the ground that income as stated was required to be added to the income assessed or whether it was a case for revision on the ground that the AO did not make necessary verification about the related transactions – as the revision order is passed on the ground other than the grounds for which revision proceedings are initiated, the same cannot be sustainable in law – in favour of assessee.

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• 2012 (6) TMI 509
  Professional fees receipts - CIT(A) deleted the addition made by AO – AO contested that the profit and loss account does not tally the amount as revealed in TDS certificates – Held that:- The returns filed for the Assessment Years 2003-04 and 2005-06 are less than the professional receipts as per the TDS certificates. However, for the Assessment Years 2004-05 and 2006-07 the professional receipts admitted in the P&L A/c, accounts are more than the receipts as per TDS certificates, and the receipts during Assessment Year 2005-06 may not tally with the bills raised during the previous year because the receipt during the year include amounts for which bills were raised in the earlier previous year also – as the receipts admitted by the appellant, for the Assessment Years 2004-05 and 2006-07, in their P&L A/c are more than the receipts as per TDS certificates, it cannot be concluded that the appellant has suppressed the professional receipts – against revenue. Investment in Mutual Funds admittedly made out of disclosed bank account of the assessee – Held that:- As the assessee failed to explain the source, nature and mode of payment of such investments along with supporting papers and documents such an investment is treated as unexplained - merely because the transactions was put through Bank account, does not make it a genuine/bonafide transaction – against assessee. Annulation of Order passed in pursuance of Notice issued u/s 148 – Held that:- As original assessment in this case has been made u/s 143(1) evident from the assessment order itself the additional ground raised by assessee dismissed.

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• 2012 (6) TMI 508
  Claim of loss of stock in trade - allowed by Tribunal - Held that:- Following the view taken in T.A. Quereshi (Dr.) v. Commissioner of Income Tax [2006 (12) TMI 91 (SC)] that if the stock in trade was seized and confiscated, it has to be allowed as a business loss the Tribunal held that the confiscation of the pharmaceutical drugs exported by the assessee must be treated as a loss of stock in trade - no substantial question of law arises for consideration

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• 2012 (6) TMI 507
  Interest u/s 206C(7) - Tax collected at source paid by deductees (Contractors) - Evidence placed on record in reply to SCN - Held that:- Considering the provision contained in section 206C(7) and Circular dated 29.01.1997 it is clear that even if the deductees (Contractors) pay tax, the liability of the deductor (appellant) with regard to charging of interest will continue till the date of payment of taxes by the deductees (contractors)- if the person responsible for collecting tax does not collect the tax or after collecting the tax fails to pay it as required under this section, he shall be liable to pay simple interest at the rate of one per cent per month or part thereof on the amount of such tax from the date on which such tax was collectible to the date on which the tax was actually paid - no substantial question of law is involved - against assessee.

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• 2012 (6) TMI 506
  Non-inclusion of TDS deductions in assessment - CIT deleted the AO's Order - Held that:- The order of the A.O. was erroneous insofar as it was prejudicial to the interests of Revenue. Assessee might have submitted some details before AO, but looking at the said details itself shows that the assessee has claimed a number of payments as not liable for deduction of tax at source since the payments did not exceed Rs.20,000/50,000 and had also claimed that part of charges were arising only out of sub-contract - as theses aspects were never examined by the A.O. CIT exercised his power under Section 263 rightly set aside the order of A.O. considering it erroneous - against assessee.

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• 2012 (6) TMI 505
  Block assessment - validity and legality of the search - Power of the tribunal – Held that:- An appeal can be filed by assessee challenging the block assessment order to contend that this foundation for block assessment is an illegal search - it is obligatory on the part of the Tribunal first to go into the jurisdictional aspect and satisfy itself that the said search was valid and legal. It is only then it can go into the correctness of the order of block assessment - C. Ramaiah Reddy Versus Assistant Commissioner of Income-tax (IMV) - the matter is remitted back to the Tribunal for fresh consideration – in favour of assessee.

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• 2012 (6) TMI 504
  Block assessment - validity and legality of the search - Power of the tribunal – Held that:- An appeal can be filed by assessee challenging the block assessment order to contend that this foundation for block assessment is an illegal search - it is obligatory on the part of the Tribunal first to go into the jurisdictional aspect and satisfy itself that the said search was valid and legal. It is only then it can go into the correctness of the order of block assessment - C. Ramaiah Reddy Versus Assistant Commissioner of Income-tax (IMV) - the matter is remitted back to the Tribunal for fresh consideration – in favour of assessee.

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• 2012 (6) TMI 503
  Proceedings under s. 132A - seizure of the cash - petitioner was travelling allegedly in a jeep hired by him in District, Bhopal. The jeep was seized by the Station House Officer, Khajuri Sadak District—Bhopal and cash amounting to Rs. 6.5 lacs was seized from the vehicle in which the petitioner was travelling - petitioner made certain allegations against the police officer who had seized the vehicle and the cash, and petitioner has tried to indicate that the police officer was trying to extract a bribe of Rs. 1 lac – Held that:- These amounts are received by the petitioner on 3rd June, 1994, 11th March, 1997 and on 7th Jan., 2001 and it is not known as to how and under what circumstances the amount received by the petitioner during the period of more than six years is kept by him or he is carrying the same amount along with him wherever he is going or was with him on 23rd Jan., 2001. The petitioner has to give a convincing explanation for the cash found in his person on 23rd Jan., 2001 and if the explanation is not convincing enough then no prima facie case is made out in the matter and interference into the matter by a Writ Court is not warranted. finding no merit in the claim made by the petitioner, the petition is dismissed

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• 2012 (6) TMI 502
  Determination of export profit eligible for deduction - assessee's invoice value on exports got reduced by the value of components supplied by the foreign buyer which made payment of only the net amount - reassessment proceedings - AO adopted gross invoice value on the exports as export turnover forming part of total turnover and adopted it as the denominator in the determination of eligible export profit for deduction under Section 10B(4) of the Act – Held that:- total turnover is the gross turnover which comprises of the turnover of business done domestically and the export business. For numerator and denominator export turnover has to be one and the same and the Department is bound to treat only actual export turnover which is received in convertible foreign exchange by the assessee as forming part of total turnover. In other words, the export turnover should be the same amount both as numerator and forming part of total turnover being the denominator for determining export profits under Section 10B(4) of the Act. appeal filed by the Revenue is dismissed.

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• 2012 (6) TMI 501
  Whether Tribunal was justified in deleting the addition made under section 41(1) of the Income-tax Act - Tribunal while deleting the additions, held that there is no infirmity in the method followed by the assessee and moreover, the balance refund amount has been offered to tax in the subsequent assessment years which the Department has accepted. no reason to entertain this appeal. appeal is accordingly dismissed

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• 2012 (6) TMI 500
  Applicability of section 36(1)(viii) to banks - financial corporation - public company and a Government Company - held that:- . The assessee is a financial corporation "within the meaning of Sec. 36(1)(viii) since it is Govt. company. However the deduction available under this section will be restricted to the amount transferred to Special reserve subject to the limit of prescribed percentage of profits derived from providing long term finance for the approved purposes mentioned in sec 36(1)(viii). Disallowance of expenditure for non-deduction of TDS at Sikkim - Held that:- if the income is not taxable under the Indian Income tax Act, the payer is not under any obligation to deduct tax and the payment cannot be disallowed for non-deduction of Tax. disallowance on account of non-deduction/ payment of TDS deleted Applicability of the provisions of sec. 115JB - appellant is not a company under Companies Act but is only deemed to be a company as per the provisions of sec. 11 of the Banking Companies (Acquisition and Transfer of Undertaking) Act, 1970 - provisions of sec. 115JB do not apply to the assessee, and, as such, the AO was in error in concluding that income had escaped assessment in the hands of the assessee Prior period expenses - expenditure disallowed as in the nature of rent, municipal taxes etc, where usually the amounts are paid after detailed negotiations and receipt of demand of the arrears amount from the parties. - held that:- even though they are treated technically as prior period expenses, it relates to a continuous flow of expenditure. Therefore, there is no justification in disallowing the expenditure, otherwise normally eligible for deduction Taxability of reversal of unrealized interest - assessee had been following similar method of accounting and the same had been accepted by the department in the earlier years. Therefore, the non-recognition of income for the year under consideration in respect of non-performing assets cannot be accepted. assessee's appeal allowed Allowability of non-rural bad debts written off - credit balance in the provision for bad and doubtful debts allowed u/s. 36(1)(viiia) exceeds the bad debts written off - The provision of section 36(1)(viia) does not apply to bad debts written off to advances made by non-rural branches. Bad debts written off by advances made by non-rural branches should be allowed in full without any restrictions or limitations. provisions of sec. 36(1)(viia) does not apply to bad debts written off to advances made by non rural branches Change in method of valuation of such securities held as stock-in-trade, by no stretch of imagination, can be said to be not bona fide. - In fact, ignoring the loss would result in distortion of the real income of the assessee during the year under appeal. The representative of the assessee also confirmed that the changed method of valuation of securities has consistently been followed in all subsequent years. We, therefore, approve the change in the method of valuation of securities held as stock-in-trade. appeal filed by the assessee is partly allowed for statistical purpose and the appeal filed by the Revenue is dismissed.

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• Customs

• 2012 (6) TMI 533
  Demand for not discharging export obligation - Held that:- As the assessee has produced EODCs issued by DGFT which were not considered by the lower authorities - the matter is remanded back to the original adjudicating authority to verify the EODCs produced.

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• 2012 (6) TMI 498
  Application for waiver of pre - deposit of duties and penalties - Held that:- Following the ratio of the Tribunal's decision in the appellants own case and after waiving the requirement of pre deposit, the matter is remanded to Ld. Commissioner to decide the case afresh as the assessee have only made a claim for benefit of Notification but have not produced any evidence in support of their claim satisfying the condition of the Notification.

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• Corporate Laws

• 2012 (6) TMI 550
  Challenging the constitutional validity of Rule 8(5) of the Security Interest (Enforcement) Rules, 2002 - according to the Petitioners the authorized officer is empowered in consultation with the secured creditor to fix the reserve price, Rule 8(5) does not contemplate that the borrower should be consulted and the Rule is ultra vires - Held that:- The object of giving a notice to the borrower under sub-rule(6) of Rule 8 is not only to enable the borrower to exercise the option which is conferred upon him of paying the dues of the secured creditor together with the costs, charges and expenses incurred but,on receipt of the notice can also raise objections to the valuation submitted under Rule 8(5) - upholding the constitutional validity of Rule 8(5) of the Rules of 2002 that Rule 8(6) of the Rules of 2002 protects the interest of the borrower giving thirty days' clear notice to the borrower regarding the sale of the mortgaged property giving him an opportunity to redress any grievance as regards the fixation of the valuation of the property and the upset price.

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• 2012 (6) TMI 532
  Application filed by the Official Liquidator - declare the sale made by the first respondent as null and void – Held that:- As the sale has been made as permitted by the Debt Recoveries Tribunal and a transparent procedure has been followed whereby the Official Liquidator had also been notified and as such the issue of declaring the sale as null and void does not arise - challenge to the sale cannot be maintained at this stage, since the Official Liquidator had been involved in the process by issue of notice and the purchaser has not been made a party to the instant proceedings - as the sale is stated to have been conducted on 28.07.2004 and nearly 8 years have elapsed as on today – against official liquidator. Direct the secured creditors to transfer their respective sale proceeds to the Official Liquidator along with accrued interest – Held that:- When the total value of the assets realised is known to the Official Liquidator and the manner of appropriation by the secured creditors is also known, the question of the secured creditors redepositing the amount would arise only if the Official Liquidator entertains the claims in respect of the Company - in-liquidation and in that regard, if it is found that the amounts are due and payable to any other secured creditor or to the workmen of the Company-in-liquidation - in order to enable the Official Liquidator to adjudicate the claims secured creditors herein shall also file their claims - amount is due to workmen, the secured creditor would be bound in law to deposit such portion of the amount with the Official Liquidator.

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• 2012 (6) TMI 531
  Appeal - appeal was not accompanied by any application for condonation of delay - appeal had been dismissed as time barred - order of the BIFR was never received by the appellant company and the appellant company derived knowledge from one of the secured creditors - it is claimed that the appeal is filed within a period of 45 days – Held that:- Order of BIFR, sent to appellant-company, was returned back undelivered by Post Office and envelope was lying with Post Office - Application seeking recall of impugned order of AAIFR had also been dismissed on ground that AAIFR has no power of review and/or recall an order - relief sought for by company was really not in nature of review but to correct an error which had come into being while AAIFR passed order and, therefore, AAIFR like any other authority or Tribunal had incidental and/or ancillary powers to correct such errors.

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• 2012 (6) TMI 497
  Winding up petition - denial - respondent Company set up a case of adjustment and stated that M/s RMP Fabrics, being a sister concern of the appellant owed monies to M/s Indian Handicrafts, a sister concern of the respondent Company - appellant contended said defence to be highly improbable, unbelievable and a sham - Held that:- It is found that RMP Fabrics has filed petition against Indian Handicrafts for recovery of money and in which the respondent Company has also been impleaded as a defendant, for recovery of the amounts. RMP Fabrics also argued that the said defence was sham and amounted to an admission. It is undisputed that said application was dismissed and which order has attained finality. Hence, once the Suit Court has negatived the plea of the sister concern of the appellant, of the defence of Indian Handicrafts and the respondent Company being sham and amounting to admission, and which order had attained finality, no contrary view could be taken in the company petition - Petition dismissed.

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• 2012 (6) TMI 496
  Meetings - Quorum - plaintiff has contended that there was no quorum upon she having left the board meeting and, hence, no business could be transacted – Held that:- plaintiff did attend the board meeting on 6-8-2009. Having attended the board meeting, it was the plaintiff’s bounden duty as a director and consequently as an agent of the company to go through the businesses which were sought to be transacted thereat. The plaintiff would have then been entitled to vote against the resolution sought to be passed and the resolution could not have been passed by a unanimous vote as required by the Articles of Association of the company. The plaintiff has called upon the Court to do what she could have done but failed to do. business transacted cannot be challenged Alternative director - defendant No. 12 who was the other Director present at the meeting could not have remained present as director. He was an alternate to the defendant No. 2. He was appointed when defendant No. 2 was to leave India. Defendant No. 2 is stated to be carrying on business in Singapore. After his appointment, defendant No. 2 returned to India, but had not attended any board meetings thereafter – Held that:- provision in section 313 with regard to the absence of the director from the State in which the meetings of the board are ordinarily held until the director returns to the State in which the meetings of the Board are ordinarily held as set out in sub-sections (1) and (2) thereof respectively would show not only a temporary return, but an intention to stay in that State so as to able him to transact the business of the company in the State where board meetings are ordinarily held. If a director such as defendant No. 2 merely comes to the State and leaves India again he would not be able to transact business. Hence, the alternate director would require to continue until the director appointing him would have continued. In instant case it would be permanently or until defendant No. 2 resigns or is removed is as director or otherwise vacates office under section 283. even if defendant No. 2 came to India for a week on his holiday or to visit his family, the defendant No. 12 would ipso facto vacate his office is wholly unacceptable.

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• Service Tax

• 2012 (6) TMI 555
  Service Tax demand and penalty - the activity of marketing of loan schemes from various banks, financial institution, the appellant has provided services falling under the category of Business Auxiliary services - Held that:- Since show cause notice stands issued on 7.2.2007 for the period 1.7.03 to 31.8.04, thus invoking the longer period of limitation to be decided in favour of the assesses and as such has held the demand to be barred by limitation -BRIJ MOTORS PVT. LTD. Versus COMMISSIONER OF CENTRAL EXCISE, KANPUR [2011 (11) TMI 410 (Tri) ] - as demand in this case can be sustained only to the extent covered in the normal period of limitation in such a situation penalties are not imposable either - in favour of assessee.

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• 2012 (6) TMI 554
  Penalty under Section 78 - service tax liability on the commission received - Held that:- Appellant could have entertained a bonafide belief that there is no liability for services rendered during the relevant period - invoking the discretion given under provisions of Section 80 the appellant has given a justifiable reason for setting aside the penalty imposed under Section 78 - in favour of assessee.

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• 2012 (6) TMI 553
  Penalty - short payment due to calculation mistakes - there was excess payment in respect of three years and the short levy was only during one year namely 2006-07 – Held that:- it was not a fit case for invoking Section 78 of the Finance Act implying that there was no intention to evade service tax - Appellants have paid the service tax along with interest though the same appears to be time barred. Provisions of Section 80 invoked and penalty under Section 76 set aside - Appeal is allowed by setting aside the penalty under Section 76 of the Finance Act.

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• 2012 (6) TMI 552
  Person liable to pay service tax under GTA - consignment agents are agents of the appellants engaged in the business of selling paper and paper boards on behalf of the appellants - freight amounts are paid by the consignment agents and are deducted from the sale proceeds received from the ultimate buyers of the paper and paper boards – Held that:- It is not possible to hold that the appellants are paying the freight through their agents and are therefore liable to pay service tax. Consignment agents squarely fall under the category of persons who are liable to pay service tax since they have paid the freight amount themselves. - Demands raised against the appellants cannot be sustained - Orders are set aside and all the five appeals are allowed.

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• 2012 (6) TMI 551
  Cenvat credit – service tax paid on ‘outdoor catering service' - for supply of food in the factory canteen to the factory workers/ employees – Held that:- matter remanded to the original authority for proper verification of the relevant facts. Direction to original authority to grant the benefit of CENVAT credit if they produce evidence of (a) strength of the factory workers being above 250 in each factory and (b) no recovery from workers towards cost of service.

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• 2012 (6) TMI 524
  Waiver of pre-deposit – Manpower Supply service - receipt of manpower supply from the holding company - M/s. Bain & Company , USA – Held that:- in case of supply of manpower by an agency, the persons supplied are the employees of the supply agency who receive their salaries/wages and other allowances from such agency and not from the clients - Persons loaned by the holding company to the appellants were receiving their salaries and allowances from the appellants in foreign exchange and only their P.F. Contribution in foreign exchange was being remitted to the holding company as they were earlier working for the holding company - Persons, who are alleged to have been supplied by the holding company to the appellant can not be said to be the employees of the holding company - No services of "manpower recruitment or supply agency" has been received by the appellant from their holding company. Stay application is allowed.

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• 2012 (6) TMI 522
  Denial of the benefit of Notification 1/2006 Dated 01.03.20062006 as the appellant has availed CENVAT credit - the appellant are engaged in providing construction services – Held that:- As the appellant has reversed the CENVAT credit availed by them, along with interest, same shall be interpreted as if appellant has not availed input service credit after introduction of notification 1/06 – in favour of assessee. Availment of CENVAT credit on outward transportation services – Held that:- As decided in COMMISSIONER OF CENTRAL EXCISE & SERVICE TAX, BANGALORE Versus M/s ABB LTD. and others[2011 (3) TMI 248 (HC)] that prior to 01.04.2008, the assessee is entitled to take CENVAT credit of outward transport agency service – in favour of assessee.

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• 2012 (6) TMI 521
  Refund – time bar - Commissioner (Appeals) allowed the claim without time bar after holding that the amount paid by the party did not represent any tax - Commissioner (Appeals), in this connection, relied on the Board's Circular No. B/11/1/2002-TRU dated 01.08.2002 - – Held that:- no manner of challenge against the reliance placed by learned Commissioner (Appeals) on the Board's circular - application is dismissed.

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• 2012 (6) TMI 520
  Waiver of pre-deposit - 'Franchise Service' - appellants getting branded alcoholic beverages manufactured from different contract bottling units (CBUs) on contract basis - activity of the applicants for the subsequent period, in the applicants own case, the Commissioner has dropped the demand holding that the activity undertaken by the applicants does not fall under the 'Franchise Service'. He further submitted that prior to 16.6.2005, under the exhaustive definition, it was held by the Commissioner that activity does not fall under 'Franchise Service' – Held that:- activity undertaken by the applicants cannot be covered under the restricted definition of 'Franchise Service'. Further, the issue is debatable and interpretation of law under which category the activity undertaken by the applicants shall be covered and from whom the Service Tax is to be recovered is also in jeopardy. Waiver of pre-deposit of entire demand of Service Tax, interest and various penalties granted.

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• 2012 (6) TMI 494
  Denial of CENVAT credit on stockbroker's service - 'Input service under Rule 2(l) of CCR, 2004 - stockbroker's service used for the purpose of disposal of the shares held in another company – Held that:- The activity of sale of shares had any nexus with the business of the appellant would depend on how the sale proceeds were applied and the Working Director's affidavit does not bring out a clear picture as it contains only general averments - neither in the affidavit nor in the MOA is there anything to indicate that the shares held in another company were sold for accomplishing any purpose integrally connected with the business of the appellant – denial of CENVAT credit on stockbroker's service as service was not used in or in relation to the manufacture of goods, the burden lay on the noticee to establish that the said service was covered by the inclusive part of the input service, if not by the main part - that the expression "such as" in the definition of input service is exhaustive and is restricted to the services named therein – against assessee.

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• 2012 (6) TMI 493
  Denial of cenvat credit of service tax paid on outward freight - Held that:- The definition of 'input service' contains both the word 'means' and 'includes', the portion of the definition to which the word ‘means’ applies has to be construed restrictively as it is exhaustive and ‘ includes’ has to be construed liberally as it is extensive - the exhaustive portion of the definition of 'input service' deals with service used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products, it also includes clearance of final products from the place of removal till it reaches its destination falls within the definition of input, service - the word transportation is included in the phrase 'clearance of final products from the place of removal' after the final products has reached the place of removal - in the later portion of the definition the words 'activities relating to business’ is used to expand the meaning of the word 'input service'- while dealing with outward transportation two words inputs' or 'capital goods' are conspicuously missing as after inward transportation of inputs or capital goods into the factory premises, if a final product emerges, that final product has to be transported from the factory premises till the godown before it is removed for being delivered to the customer, therefore, 'input service' includes not only the inward transportation of inputs or capital goods but also outward transportation – in favour of assessee.

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• 2012 (6) TMI 492
  Denial of cenvat credit of service tax paid on outward freight - Held that:- The definition of 'input service' contains both the word 'means' and 'includes', the portion of the definition to which the word ‘means’ applies has to be construed restrictively as it is exhaustive and ‘ includes’ has to be construed liberally as it is extensive - the exhaustive portion of the definition of 'input service' deals with service used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products, it also includes clearance of final products from the place of removal till it reaches its destination falls within the definition of input, service - the word transportation is included in the phrase 'clearance of final products from the place of removal' after the final products has reached the place of removal - in the later portion of the definition the words 'activities relating to business’ is used to expand the meaning of the word 'input service'- while dealing with outward transportation two words inputs' or 'capital goods' are conspicuously missing as after inward transportation of inputs or capital goods into the factory premises, if a final product emerges, that final product has to be transported from the factory premises till the godown before it is removed for being delivered to the customer, therefore, 'input service' includes not only the inward transportation of inputs or capital goods but also outward transportation – in favour of assessee.

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• Central Excise

• 2012 (6) TMI 530
  Duty demand on fabrication of nitrogen/oxygen plant as it amounts to manufacture - assessee contested to grant of exemption in view of the provisions of Notification no. 67/95-CE - Held that:- As the Nitrogen/oxygen plants are assembled at the customers place i.e factory of the manufacturer the Notification no. 67/95-CE dt. 16.03.1995 provides exemption from payment of excise duty in respect of capital goods as defined in the Cenvat Credit Rules manufactured in the factory and used in the factory of production if the same are used in the manufacture of excisable goods - the applicants had made out a strong case in their favour in view of the provisions of Notification no. 67/95-CE - the pre-deposit of dues are waived and recovery of the same is stayed during the pendency of the appeal

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• 2012 (6) TMI 529
  Plea for waiver of pre-deposit - export of goods manufactured - denial of Cenvat Credit availed towards service tax paid on air freight on ground that place of removal is the factory gate and the air freight is incurred after removal from the factory gate - Held that:- As per section 1(2) of the Central Excise Act, 1944, the said Act extends to the whole of India. It that be so, the place of removal for the purposes of levy of excise duty has to be in India and not anywhere else. Therefore, merely because as per the terms of export contract, the goods have to be delivered at the customer's premises abroad, can it be said that the place of removal is extended to a place outside India. Therefore, air freight incurred for delivery to the buyer's premises cannot be deemed to be ‘input service'. Appellant directed to make pre-deposit of 50% of the duty adjudged within 4 weeks - Decided against assessee.

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• 2012 (6) TMI 528
  Notification No. 24/2009-CE u/s 11C - manufacture of printed cartons and catch covers - duty demand on printed catch covers bearing brand name/trade name of another person - invoking extended period of limitation - Held that:- Section 11C notification was issued in respect of similar products for the period from 1.10.1987 to 31.8.2008 clearly indicates that there was a general trade practice wherein exemption was availed in respect of packing materials bearing brand name of another person under the Small Scale Notifications. Therefore, in the case of printed catch covers also, the same belief could have been entertained bona fide - the extended period of time could not have been invoked in the instant case for confirming the duty demand - pre-deposit of Rupees Nine thousand only within stipulated time for the normal period of limitation.

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• 2012 (6) TMI 527
  Refund of duty - Notification No. 39/2001-C.E., dated 31-7-01 - cut-off date prescribed in the notification, for being entitled to the same is 31-12-05 i.e. the commercial production in the unit must start before 31-12-05 - Held that:- appellant had admittedly installed a new second tube mill after 31-12-05, though in the same factory, which was earlier enjoying the exemption - benefit of the notification would not be available to the appellant in as much as the object of the notification was to invite investors for promotion of the Kutch area and to complete such investments before 31-12-05 - Appeals are rejected.

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• 2012 (6) TMI 526
  SSI Exemption - Denial of benefit exemption - goods are manufactured with the brand name 'Universal' which belongs to M/s. Universal (India) Pvt. Ltd. - Held that:- As the casing is not traded in the market under the brand name 'Universal' and is further used in the manufacture of pre-recorded audio cassettes no infirmity in the impugned order.

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• 2012 (6) TMI 495
  Valuation of goods - assessee, engaged in the business of manufacture and sale of various cosmetics products - Revenue contended taxability of Technical Professional Products, sold only to salon for their exclusive internal in-salon use, u/s 4 instead of Section 4A of the Central Excise Act, 1944 on ground that they are neither intended nor offered for retail sale - Commissioner (Appeals) dropped the demand in respect of aforesaid - Held that:- It is found that products under Professional product Division have been divided by the assessee into two categories, namely (i) Technical Products, (ii) Retail Products. The dispute as seen from the SCN relates only to Technical Products. However, the Commissioner has proceeded on the wrong footing that the dispute relates to both the products and accordingly Commissioner has arrived at the conclusion. In these circumstances, we set aside the impugned order and send the matter back to Commissioner with the direction that the Commissioner shall give specific findings only with respect to Technical Professional Products having regard to the provisions of Standards of Weights and Measures (Packaged Commodities) Rules, 1977 both pre and post 13.01.2007. The Commissioner shall also give finding on limitation.

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• Wealth tax

• 2012 (6) TMI 525
  Determining the value of urban land - valuation to be determined based on the market value – Ignorance of agreement entered between assesse and DLF as it is self serving – Held that:- The valuation to be determined based on the market value cannot be accepted as the agreement ordains that all the transactions of sale of land are fixed at cost + Rs.2,000/- per acre, the module has been held by ITAT and by department to be at the arms’ length year after year - AO was not justified in treating the said agreement as self-serving document and should not be held as a void for wealth tax purposes, as the department itself has held it to be a valid agreement in income-tax proceedings - business assets embedded in the urban land became liable to tax with effect from 1.4.1993 and it cannot be said that this agreement, even though valid for all other purposes is void for the purposes of the Wealth Tax Act by application of this section and the value of the asset cannot be determined ignoring the agreement of 25.10.1983 - the land in question is held as stock in trade a business asset and the method of valuation as laid down in rule 14 and Schedule III part ‘D’ is also applicable and on both counts the valuation adopted by AO cannot be upheld - no scope to determine the valuation as adopted by the WTO/CWT(A) – in favour of assessee.

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• 2012 (6) TMI 499
  Whether Tribunal was right in holding that the assessee-society was exempt under section 5(1)(i) of the Wealth-tax Act in respect of its assets consisting of the land and buildings comprised in the kalyana mandapam owned by it - assets held under trust or other legal obligation for a public purpose - a charitable or religious nature - held that:- There is absolutely no dispute on the proposition of law that the provisions under the Income-tax Act and the Wealth-tax Act are totally different. Given the fact that the income from the kalyana mandapam is treated as income from property and that the property had been admittedly held by the assessee under trust for public purpose of a charitable nature, one need not advert to the applicability of the provision herein to the facts of the case. It is not the case of the Revenue that the case of the assessee falls under section 11(4A) of the Income-tax Act, a plea which the Revenue cannot take at this stage, having regard to the income-tax assessment granting exemption under section 11 of the Income-tax Act. - , the income by letting out the kalyana mandapam as income from the property is also binding on the Revenue and it is not now open to the Revenue to take a different view.

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• Indian Laws

• 2012 (6) TMI 519
  Complaint under section 138 of the Negotiable Instruments Act, 1881 - repayment of a loan - Dishonor of cheque - Compensation under S. 357(3) - held that:- Though a complaint under section 138 of the Act is in regard to criminal liability for the offence of dishonouring the cheque and not for the recovery of the cheque amount, (which strictly speaking, has to be enforced by a civil suit), in practice once the criminal complaint is lodged under section 138 of the Act, a civil suit is seldom filed to recover the amount of the cheque. A stage has reached when most of the complainants, in particular the financing institutions (particularly private financiers) view the proceedings under section 138 of the Act, as a proceeding for the recovery of the cheque amount, the punishment of the drawer of the cheque for the offence of dishonour, becoming secondary. As the provisions of Chapter XVII of the Act strongly lean towards grant of reimbursement of the loss by way of compensation, the courts should, unless there are special circumstances, in all cases of conviction, uniformly exercise the power to levy fine upto twice the cheque amount (keeping in view the cheque amount and the simple interest thereon at 9% per annum as the reasonable quantum of loss) and direct payment of such amount as compensation. Nature of proceedings under NI Act - Proceedings under section 138 of the Act cannot be treated as civil suits for recovery of the cheque amount with interest. Uniformity and consistency in decisions - If some courts grant compensation and if some other courts do not grant compensation, the inconsistency, though perfectly acceptable in the eye of law, will give rise to certain amount of uncertainty in the minds of litigants about the functioning of courts. Citizens will not be able to arrange or regulate their affairs in a proper manner as they will not know whether they should simultaneously file a civil suit or not. The problem is aggravated having regard to the fact that in spite of section 143(3) of the Act requiring the complaints in regard to cheque dishonour cases under section 138 of the Act to be concluded within six months from the date of the filing of the complaint, such cases seldom reach finality before three or four years let alone six months. These cases give rise to complications where civil suits have not been filed within three years on account of the pendency of the criminal cases. While it is not the duty of criminal courts to ensure that successful complainants get the cheque amount also, it is their duty to have uniformity and consistency, with other courts dealing with similar cases.

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