TMI Tax Updates - e-Newsletter
June 29, 2012

Case Laws in this Newsletter:

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

Articles

1. Delhi VAT has struck it Again

   By: CARahul Jain

2. GENERAL EXEMPTIONS AND ABATEMENTS IN SERVICE TAX

   By: Dr. Sanjiv Agarwal

3. RETROSPECTIVE EXEMPTIONS IN SERVICE TAX

   By: Dr. Sanjiv Agarwal

4. Dismissal of appeal of revenue by Bombay High Court about disallowance under Section 14A in case of Delite Enterprises - need proper understanding- an analysis.

   By: DEVKUMAR KOTHARI

Notifications

Central Excise

1. 28/2012 - dated 27-6-2012 - CE

Amends notification no. 12/2012-Central Excise - Prescribes effective rate of duty on goods falling under chapter 1 to 96.

Customs

2. 43/2012 - dated 27-6-2012 - Cus

Amends Notification 12/2012 – Customs - Prescribes effective rate of duty on import of goods.

3. F.No. 437/32/2012-Cus. IV - dated 26-6-2012 - Cus (NT)

Appointment of Common Adjudicating Authority in Respect of M/s Eastern Silk Industries Ltd., Kolkata .

Circulars / Instructions / Orders

DGFT

1. 07 (RE-2012)/2009-14 - dated 26-6-2012

Amendments in the Vishesh Krishi and Gram Udyog Yojana (VKGUY) and Focus Product Scheme (FPS) of Chapter 3 of Foreign Trade Policy 2009-14 - Appendix 37A and Appendix 37D of Handbook of Procedures (Vol. I).

Highlights / Catch Notes

Income Tax

• Tax Exemption Extended: Assessee Benefits from 10-Year Holiday u/s 10A After 1999 Amendment.

  Case-Laws - HC : Extended benefit of exemption u/s 10A - assessee enjoyed the benefit of 5 years from 1993-94 to 1997-98 - amended provision came into force on 1-4-1999 - benefit of extension from 5 years to 10 years tax holiday allowed - HC
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• High Court Rules: Closing Stock Must Be Valued at Cost Price in Firm-to-Company Conversion.

  Case-Laws - HC : Evaluation of closing stock - at Cost price or market price - conversion of partnership firm into a private limited company - closing stock of the erstwhile firm cannot be valued at the market price - HC
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• Trust Registration u/s 12AA Valid Despite Preference to Lineal Descendants, If Charitable Objectives Retained.

  Case-Laws - AT : Whether a preference given to lineal descendants over the general Parsis is sufficient enough to mar the registration of a trust whose objects are otherwise charitable - registration can not be denied u/s 12AA - AT
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• Unabsorbed business losses can only be carried forward if calculated from a return filed on time u/s 139(1).

  Case-Laws - HC : Unabsorbed business loss – carry forward of losses - assessee shall be entitled to carry forward unabsorbed business loss only if such loss is computed based on a return filed within the statutory period provided under section 139(1). - HC
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• Does Rental Income from Industrial Park Buildings Qualify for Deduction u/s 80IA of Income Tax Act?

  Case-Laws - AT : Deduction u/s 80IA - Rental income - letting out of Industrial park buildings - Income from House Property or of business income - AT
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• Valuation of TV News Programs at 'Nil' Post-Exploitation Deemed Bona Fide by Assessee.

  Case-Laws - AT : Valuation of TV serials – the valuation of a news programmes done by the assessee subsequent to the first exploitation at 'nil' is a bonafide valuation. - AT
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• Understanding Penalties u/s 271(1)(c) of Income Tax Act: Importance of Genuine Disclosure and Explanation in Tax Compliance.

  Case-Laws - AT : Explanation versus bona finde explanation versus proper disclosure - Penalty under section 271(1)(c) - AT
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• Conversion of Partnership to Company Without Dissolution: No Capital Gain Under Income Tax Act Section 45(4) Applies.

  Case-Laws - HC : Partnership firm has been converted into company - no dissolution of the erstwhile firm and the company has been formed with the same partners as its shareholders - no capital gain under section 45(4) - HC
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• Income from Land Sale by Real Estate Developer Classified as Business Income, Not Capital Gains.

  Case-Laws - AT : Income form sale of land - Business Income or Capital gains - assessee, engaged in the business of real estate, constructing flats, sale of land - considered as income from business. - AT
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• Deduction Entitlement u/s 10A Upheld for STPI Unit Despite Organizational Change; Assessing Officer's Position Overruled.

  Case-Laws - AT : Deduction u/s 10A - STPI undertaking - a mere organizational change was not a ground for the AO to hold that the assessee was not entitled for deduction u/s. 10A within the meaning of section 10A(2) - AT
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• Interest u/s 244A to Include Self-Assessment Tax Paid u/s 140A in Calculations.

  Case-Laws - AT : Interest u/s.244A - self assessment tax paid u/s.140A should also be taken into consideration while determining the interest u/s.244A. - AT
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• Section 271(1)(c) Penalty Applies for Undeclared Income Beyond Section 139(1) Deadline; No Penalty Immunity Available.

  Case-Laws - AT : Penalty under section 271(1)(c) - penalty immunity - if income has not been declared before the expiry of time under sub-section (1) of section 139, then immunity is not available. - AT
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• High Court Rules Royalty Payments for Know-How as Revenue Expenditure, Allowing Tax Deductions for Businesses.

  Case-Laws - HC : Royalty payment - in the nature of expenditure incurred for carrying on business with available know-how - revenue expenditure - HC
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• Assessees Can Claim TDS Credit Based on Certificates for the Year Income is Assessed.

  Case-Laws - HC : TDS – credit of tax - the assessees are entitled to credit of tax based on the very same TDS certificates in the year in respect of which the subject-matter of deduction of tax is assessed. - HC
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• Books of accounts rejected for errors; AO's decision u/s 145(3) upheld; Section 10A deduction estimation required.

  Case-Laws - AT : Rejection of books of accounts - estimation of deduction u/s 10A - there is undisputed and excess mistakes in the accounts. - AO has rightly rejected the books as per the provisions of section 145(3) of the Act. - AT
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• Court Rules No Interest on Tax Arrears Due to Retrospective Amendment u/ss 234B and 234C of Income Tax Act.

  Case-Laws - HC : Levy on interest u/s 234B, 234C on arrears of tax payable due to retrospective amendment - amendment to Section 115JB of the Act - not liable to pay interest on the amount due as per the amended provision - HC
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• Court Rules Referral Commissions to Private Doctors Illegal; Not Deductible as Business Expenses Under Tax Law.

  Case-Laws - HC : Illegal payment – commission paid to private doctors for referring patients for diagnosis could not be allowed as a business expenditure. - HC
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Customs

• Customs Notification 12/2012 Amended to Update Import Duty Rates for Compliance with Current Trade Regulations.

  Notifications : Amends Notification 12/2012 – Customs - Prescribes effective rate of duty on import of goods. - Notification
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DGFT

• Foreign Trade Policy 2009-14 Updates: Changes to VKGUY and FPS in Appendices 37A and 37D for Better Export Incentives.

  Circulars : Amendments in the Vishesh Krishi and Gram Udyog Yojana (VKGUY) and Focus Product Scheme (FPS) of Chapter 3 of Foreign Trade Policy 2009-14 - Appendix 37A and Appendix 37D of Handbook of Procedures (Vol. I). - Public Notice
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Indian Laws

• Service Tax Relief: Key Exemptions and Abatement Criteria Under Indian Law for Eligible Service Providers.

  Articles : GENERAL EXEMPTIONS AND ABATEMENTS IN SERVICE TAX - Article
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• Exploring Retrospective Service Tax Exemptions: Balancing Taxpayer Relief with Government Revenue Challenges in India

  Articles : RETROSPECTIVE EXEMPTIONS IN SERVICE TAX - Article
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• Bombay High Court Dismisses Revenue Appeal on Section 14A Disallowance in Delite Enterprises Case, Clarifies Tax Provision Application.

  Articles : Dismissal of appeal of revenue by Bombay High Court about disallowance under Section 14A in case of Delite Enterprises - need proper understanding- an analysis. - Article
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Service Tax

• Club Services to Members Not Taxable Due to Mutuality Principle; No Separate Legal Entity Involved.

  Case-Laws - HC : Club or Association Services - in view of the mutuality and in view of the activities of the club, if club provides any service to its members may be in any form including as mandap keeper, then it is not a service by one to another as foundational facts of existence of two legal entities in such transaction is missing - HC
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• Full Service Tax Credit Allowed on Specified Input Services u/r 6(5) CENVAT, Overriding 20% Limit.

  Case-Laws - AT : CENVAT credit - Rule 6 - Even if sub-rule (3) prescribes a limit of 20% for availment of service tax credit, sub-rule (5) provides for whole of the service tax credit in respect of the specified input services - sub-rule (5) prevails over sub-rules (1),(2) and (3) - AT
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Central Excise

• Central Excise Notification Amended: Updated Duty Rates for Goods in Chapters 1-96 to Align with Latest Regulations.

  Notifications : Amends notification no. 12/2012-Central Excise - Prescribes effective rate of duty on goods falling under chapter 1 to 96. - Notification
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• Court Rules No Duty on Scrap from Pipe Replacement; Respondents Not Liable for Manufacture Charges.

  Case-Laws - AT : Demand of duty on scrap - the scrap has arisen on account of cutting of new sheets, plates, pipes for the purpose of replacing worn out pipes and it cannot be said that the respondents have manufactured the scrap so as to pay duty on the same - AT
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• Court Questions Legitimacy of Cenvat Credit Claim Due to Unfeasible Transport of Goods by Motorcycle.

  Case-Laws - AT : Paper transaction to claim Cenvat credit - carrying such a huge quantity by motor cycle or scooter is inconceivable - AT
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• Extended Limitation Period Applies Once Facts Are Established; One-Year Initiation Rule Becomes Irrelevant.

  Case-Laws - HC : Extended period of limitation – once the facts necessary to permit the department extended period of limitation are established on record, thereafter, the question of initiating proceedings within one year from the date of knowledge of the department, is not relevant - HC
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Case Laws:

• Income Tax

• 2012 (6) TMI 660
  Extended benefit of exemption u/s 10A - Applicability of amendment - condition to be fulfilled is ten consecutive assessment years beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture – Held that:- assessee has commenced production in the year 1993-94 - He enjoyed the benefit of 5 years from 1993-94 to 1997-98 - amended provision came into force on 1-4-1999 - denial of the benefit runs canteen to the sprit of Section 10B and it would negate the object with which the amended provision was brought in. - The assessee is entitled to the benefit of extension from 5 years to 10 years tax holiday as provided under the amended provision for 10 consecutive years from the date of commencement of production – In favor of assessee

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• 2012 (6) TMI 659
  Non-compete fees - capital gains or business income – Held that:- Considering the provisions of proviso to section 28(va)(a), i.e. income chargeable to income-tax under the head "profits and gains of business or profession and the clauses of the agreement that the assessee has not only transferred its entire business to TSIL but also agreed not to carry on any business in any capacity in India which competes with the business of Saffolin-DS, CIT(A) rightly held that the A.O. has not correctly appreciated the facts and the provisions of law before disallowing the claim of the assessee - when the assessee has transferred the entire business and has thereby transferred its right to manufacture or produce or process the product namely Saffolin -DS, the consideration so received has to be taxed under the head "capital gains" and not under the head "profits and gains of business or profession"- against revenue. Compensation from multilateral Fund under the Montreal Protocol for phasing out the production of Chlorinated Rubber and supply of Carbon Tetra Chloride to non feed stock sector - revenue receipt or capital receipt – Held that:- Considering the details furnished by the assessee that the compensation received by the assessee was for phasing out the use of CTC as the Govt. of India issued a memorandum to all companies which were producing or consuming 85% of Carbon Tetra Chloride, requesting them to phase out the consumption as required under the multilateral fund of the Montreal Protocol the provisions of the second proviso to section 28(va) have been fulfilled and therefore the assessee is entitled to the benefit - although the assessee has not filed full details as alleged by the A.O. in the body of the assessment order, we find the assessee filed full details before the ld. CIT(A) – compensation was not liable to be taxed as income as proposed by AO - against revenue. Disallowance towards expenses attributable to the earning of dividend income – Held that:- As the assessment year involved is 2006-07, the case is to be restored to the file of the A.O. for fresh adjudication in the light of the ratio laid down by the GODREJ AND BOYCE MFG. CO. LTD. Versus DEPUTY COMMISSIONER OF INCOME-TAX AND ANOTHER [2010 (8) TMI 77 (HC)] stating that Rule 8D is applicable from Assessment Year 2008-09 and not retrospective – in favour of assessee for statistical purpose. Treatment of the repairs and maintenance expenditure on roads - capital expenditure or as revenue expenditure – Held that: - As expenditure incurred is for repairs of existing road or construction of new roads and full facts are not coming out of the records it is proper to restore the issue to the file of the A.O. with a direction to verify as to whether there was existence of road in the past - If there was road earlier and if the expenditure is incurred for repair of the existing road then of course the assessee is entitled to claim the same as revenue expenditure - in favour of assessee for statistical purpose. Treatment of the product development expenditure - capital expenditure or as revenue expenditure – Held that:- Assessee has made only legal arguments without giving any factual data as nothing was brought to notice to establish that the consultancy charges have been paid for new products for existing business of the assessee - the consultancy charges have been paid to find out some new area for existing business is also a mere submission without any documentary evidence – against assessee. Non deletion of entire ad-hoc disallowance in respect of foreign travel expenses – Held that:-The questionnaire issued by the A.O during the course of the assessment has not called for any details under the head foreign travel expenses - since the CIT(A) without going through the assessment records did not accept the additional evidence filed before him in the interests of justice restore the issue to the file of the A.O. with a direction to decide the issue afresh - in favour of assessee for statistical purpose.

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• 2012 (6) TMI 658
  Evaluation of closing stock - at Cost price or market price - conversion of partnership firm into a private limited company - Held that:- Considering the case of Commissioner Of Income-Tax Versus S. Koder [1996 (9) TMI 21 (HC)]the assets and liabilities of the erstwhile firm were taken over by the company with the same persons as shareholders, therefore, it was a case of succession of business in its entirety by another entity the question whether the assessee-firm, upon the transfer of its business to a limited company, was obliged to value the stocks as per the market value was answered in the negative. The assets of the erstwhile firm vested in the company and as such there was no transfer of assets by way of distribution - provisions of section 45(1) and 45(4) of the Act were not attracted even though there was a "transfer" of assets from the firm to a newly constituted com- pany on conversion of the firm to a company under Chapter IX of the Companies Act. The shareholding of the erstwhile partnership firm remained the same upon conversion of the firm into a company as there was no transfer of assets of the firm to the company it is only that the business was taken over by the company, thus the closing stock of the erstwhile firm cannot be valued at the market price - in favour of assessee.

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• 2012 (6) TMI 657
  Suppression of sale proceeds and estimation of undisclosed income - sale consideration as per the sale deed did not tally with the actual payments made by the purchasers - assessee's contention that the receipt of on-money should be held in the name of two partners and not against the firm - additional ground of assessee that the expenditure incurred was not considered by the Revenue - Held that:- The provisions Chapter XIV-B, i.e. limit the inquiry by the Assessing Officer to those materials found during the search and seizure operation are not applicable to proceedings under Sections 153A/153C mentioning that the AO can take into consideration material other than what was available during the search and seizure operation for making an assessment of the undisclosed income of the assessee - Consequently, the principles of Section 158BB of the Act cannot be imported for the purposes of interpreting Section 153A/153C - as the interpretation of Sections 153A/153C of the Act is quite clear, no substantial question of law arises for consideration. no evidence before the AO to conclude that on-money was received by Ahura Holdings (firm) in respect of all the sale transactions - Held that:- There was adequate material before the Assessing Officer in the form of eight sale deeds and in the form of replies given by assessee to questions posed to him with regard to receipt of on-money to enable AO to come to an informed conclusion in this regard. Appreciation of the available material is within the domain of the Assessing Officer and this does not lead to any substantial question of law, unless the conclusions arrived at are perverse - CIT (Appeals) agreed with the assessee that disallowance on the cost of land was not justified and as regards legal fees and some development expenses etc., the AO was directed to have a fresh look into the matterNo substantial question of law arises nor there is any occasion to interfere with the view taken concurrently by all the authorities - against assessee.

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• 2012 (6) TMI 656
  Whether a preference given to lineal descendants over the general Parsis is sufficient enough to mar the registration of a trust whose objects are otherwise charitable – Held that:- if the income does not enure for the benefit of the public or under clause (c) of section 13(1) where any part of such income is applied directly or indirectly for the benefit of persons referred to in sub-section (3) of section 13, that is, the author of the trust or any person who has made a substantial contribution to the trust or where author of trust is a HUF, then a member of the family or any relative of such author or any trustee of the trust or any relative of any such author, founder or any concern in which any of the above persons has a substantial interest. final amount of income exempt is the one which is determined by adding the income under section 11 with that under section 12 as reduced by the income or its such part as is covered under section 13. Registration cannot be denied. Exemption – charitable trust - in order to claim exemption of income under sections 11 and 12 as reduced by that under section 13, it is sina qua non that, inter alia, the trust must be registered under section 12AA. The sequence of events is thus, evident that the person claiming exemption must firstly apply for and get the trust or institution registered under section 12AA, then return is filed for the relevant previous year and on the basis of such registration and other relevant factors, the Assessing Officer considers the applicability or otherwise of sections 11, 12 and 13. Registration under section 12AA - after the death of the settlor, the income from the trust property is to be used for charitable purposes, which are covered under section 2(15) of the Act - It was specifically claimed that not even a single paisa was applied for the benefit of any lineal descendants of the father of the settler – Held that:- Commissioner, despite the availability of audited accounts before him for the last three years, failed to point out any single instance in which the income of the trust was not utilized for the charitable purposes set out in the trust deed or the money was applied for the lineal descendants of the father of the settlor. Even if any amount is actually spent on the relatives of the settlors, then there is section 13(3) enabling the Assessing Officer to refuse exemption under section 11 read with section 13 to that extent and that too in the year in which such amount is spent. It cannot be a reason to refuse registration under section 12AA. Commissioner was not justified in refusing the registration. Decided in favor of assessee.

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• 2012 (6) TMI 655
  Unabsorbed business loss – carry forward of losses - belated return – Held that:- According to provisions of section 139(3) and section 80 that the assessee shall be entitled to carry forward unabsorbed business loss only if such loss is computed based on a return filed within the statutory period provided under section 139(1). Decided in favor of Revenue.

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• 2012 (6) TMI 654
  Justification in setting aside the assessment in exercise of powers under section 263 by Commissioner - Held that:- The prerequisite to the exercise of jurisdiction by the Commissioner is that the order of the Income-tax Officer is erroneous in so far as it is prejudicial to the interest of the Revenue - the AO has passed a single order for six assessment years in question under section 148, initiating the proceedings on the basis of differences as found in the investment shown by the assessee and as per property valued by the departmental valuer - the AO shows complete non application of mind as he has not discussed as to what was the difference between the value estimated by the departmental valuer as also given by the assessee's valuer and what was the reason for determining the income at such a low figure - Tribunal had committed error in holding that the assessment order in so far as it ignored difference in the two values of two different valuers was not erroneous or prejudicial to the interests of the Revenue - against assessee.

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• 2012 (6) TMI 653
  Deduction u/s 80IA - Rental income - letting out of Industrial park buildings - Income from House Property or of business income – Held that:- when various amenities provided by an industrial park or software technology park is predominant in letting out of the housing unit, then the rental income is to be assessed under the head "profit and gains of business or profession" and in a case where letting out of building is predominant and the other amenities are merely incidental to such letting out then the rental income is to be assessed under the head "income from house property". From the facts available on record, it is not clear that whether the letting out of the building was predominant in the transaction between the assessee and the tenants or whether predominant was of the industrial park comprised of various amenities and letting out of a building, as such park was merely incidental. Matter remanded to Assessing Officer for proper verification.

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• 2012 (6) TMI 652
  Writ petitions – condonation of delay in selling the company shares - CBDT rejected the petitions filed by the petitioner on the ground that it has no power to condone the delay - Held that:- CBDT has sufficient powers under section 119(2)(b) of the Income-tax Act, 1961, to consider the desirability or expediency of granting relief under the Act, even after the expiry of the period of limitation provided under any specific provision and dispose of the matter on the merits in accordance with law. Writ petitions allowed.

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• 2012 (6) TMI 651
  Block assessment – search - unaccounted gold was recovered – Held that:- Assessee's attempt to prove the source of the gold seized through the 27 goldsmiths miserably failed before the 3 authorities, namely the Assessment Officer, the first appellate authority as well as the Tribunal. No reason to interfere with the findings of the Tribunal on the additions made based on recovery of gold, the source of which could not be explained by the assessee.

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• 2012 (6) TMI 650
  Transfer pricing - arm's length price (ALP) - selection of comparable - set-off of unabsorbed depreciation - held that:- If the findings of ld. CIT(A) are taken into consideration, which in our humble view remained uncontroverted, then the mean profit on the basis of 8 companies mentioned above are not applicable on the facts of the present case. Therefore, arm length price adopted by ld. TPO on international transactions were not correct. On application under section 154, the ld. CIT(A) has held that an addition of 40 lacs has to be sustained which is on account of opening stock and by rectifying order under section 154 has reduced the deletion by 40 lacs or odd. The issue in respect to deletion reduced by 40 lacs or odd has been restored by us to the file of ld. CIT(A) to decide the same afresh after affording reasonable opportunity of being heard to the assessee as, as per order of ld. CIT(A), no opportunity was provided to the assessee. Therefore, we hold that the order of ld. CIT(A) deleting the addition of 1 crore or odd was correct and we confirm the order to that extent. The AO disallowed depreciation for the reason that the same cannot be allowed to be set off of brought forward unabsorbed depreciation against current year's income from other sources. The ld. CIT(A) allowed the issue in favour of the assessee - brought forward unabsorbed depreciation can be allowed from the current year's income from other sources. - Decided in favor of assessee.

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• 2012 (6) TMI 649
  Addition on account of change in the method of valuation of closing stock - valuation of TV serials – assessee, after first exploitation, has expended 90% and valued the closing stock @ 10%. After second exploitation, the assessee was valuing the TV serials @ nil - valuation is changed and the assessee has come to a conclusion that after the second exploitation, the valuation of the TV serial should be @ 3.33% - Held that:- assessee is continuing to follow the same recognized method of accounting - What is changed is the value that has to be assigned to a particular product i.e., a news programme or TV serials subsequent to exploitation of the same - there is no such undervaluation and the assessee had undertaken a bonafide exercise – the valuation of a news programmes done by the assessee subsequent to the first exploitation at 'nil' is a bonafide valuation. - In favor of assessee. Disallowance made under section 14A – stated by the appellant with evidence that the borrowed money has not been utilized for the purpose of the investment in shraes - ACIT had failed to prove that there was nexus between the borrowed money and the investment – Held that:- Disallowance made under section 14A, deleted and the ground raised by the assessee is allowed. Employees contribution of PF and employer’s contribution to PF - payments were made before the due date of filing the return – Held that:- payments are not only before the close of accounting financial year but also much before the due date for filing the return of income - in the case of employees’ contribution towards provident fund, the same should be allowed even though it is paid beyond the grace period, if the same is paid before the time allowed for filing the return of income – In favor of assessee.

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• 2012 (6) TMI 648
  Penalty under section 271(1)(c) - explanation versus bona finde explanation versus proper disclosure - held that:- assessee claimed deduction for 33.63 crores in its Profit and loss account towards the amount paid to NOPL for use and occupation of the property. The claim was made on actual payment and the assessee did offer the explanation in support of the claim. If the claim had been not been genuine or the assessee had not offered any explanation, the case would have been covered in clause (A) of Expl. 1 itself. The Assessing Officer was not convinced with the claim and disallowed the deduction. It shows that the assessee offered an explanation about the claim of deduction but could not satisfy the Assessing Officer as to its allowability. First condition is that the assessee offers an explanation, which he is not able to substantiate or prove. It divulges that condition (i) is satisfied in this case. Penalty under section 271(1)(c) - bona fide explanation - held that:- A claim shall lack bona fide if the facts are manufactured to give a colour of genuineness to the deduction; or if there is not even a far-flung possibility of forming a legally sustainable opinion about the deduction either because of the facts prevailing in a particular case or because no judicial precedent in favour of allowability of such deduction or if an issue is still virgin and had not received attention of the Courts so far, then simple and plain interpretation of the provision leaves no chance to a reasonably prudent person to form an opinion that such a deduction is allowable. These are only some of the instances in which a claim for deduction shall be short of bona fide. - by no standard the claim of the assessee for deduction of 33.63 crores can be categorized as not bona fide in any manner. Penalty under section 271(1)(c) - proper disclosure - held that:- when the disclosure made by the assessee in its Profit and loss account and by way of Note in the Balance sheet is considered in the backdrop of ongoing litigation of the assessee with the Department for last three years on the same point, no hesitation in coming to the conclusion that the assessee made a proper disclosure of the facts material to this claim. In accordance with the opinion of the majority of members, we hold that on the facts and circumstances of the case penalty u/s. 271(1)( c) of the Act is not leviable.

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• 2012 (6) TMI 647
  Whether Tribunal was right in law in holding that taking over of the assets of the firm by a company and allotting shares to the partners of the firm as per their holding in the firm does not give rise to profit chargeable to capital gain under section 45(4) of the Act - partnership firm has been converted into company - no dissolution of the erstwhile firm and the company has been formed with the same partners as its shareholders – Held that:- section 45(4) is not attracted as the very first condition of transfer by way of distribution of capital assets is not satisfied - no capital gain under section 45(4) of the Act would be attracted in the present case – In favor of assessee Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in allowing depreciation to the firm which stood dissolved on March 31, 1995 – Held that:- Assessee-respondent was entitled to claim depreciation on the assets for the period up to March 31, 1995, relating to the assessment year 1995-96- In favor of assessee

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• 2012 (6) TMI 646
  Unexplained investment – during the course of survey an unexplained cash and unexplained stock have been discovered - appellant-assessee failed to submit cogent explanation – Held that:- ingredients of sections 69, 69A, 69B and 69C were satisfied in the present case because in all these provisions what is provided is that if an assessee is found to be the owner of any money, jewellery or any other valuable articles not recorded in the books of account and fails to offer any explanation about the nature and source thereof or in case any such explanation, if offered, is not satisfactory in the opinion of the Assessing Officer, then this may be deemed to be the income of the assessee for such financial year – In favor of Revenue

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• 2012 (6) TMI 645
  TDS – payment to sub-contractors - assessee is an individual deriving income from hiring of vehicles - assessee contended in writing that the assessee is not liable to deduct TDS as there is no written or oral contract and that the assessee is not liable under section 194C as individual charges for private service vehicle will not exceed Rs. 20,000 – Held that:- material on record discloses that total amount paid towards transportation charges is roughly about Rs. 79,45,225. In the absence of any particulars, it cannot be said that there was no liability to deduct tax on that score – Assessee should have deduvted deducted TDS - authorities were justified in disallowing the said deduction and treating the said amount as the income of the assessee and claiming tax on that amount – In favor of Revenue

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• 2012 (6) TMI 633
  Income form sale of land - Business Income or Capital gains - assessee, engaged in the business of real estate, constructing flats, sale of land - Held that:- In the present case, property has been committed to a trade and the assessee earned profit in the course of carrying on the business. Assessee never intended to be owner of the land in question and it was not a simple purchase and sale transaction. Rather, the assessee facilitated the development and sale of land in question apart from taking responsibility of getting the process of disputes with respect to the land settled expedited. Therefore, it is clear that the assessee was carrying on business with the above business objectives in mind. Hence, having regard to the nature of activities carried on by the assessee it has to be construed as trading activity of the assessee and the income emerged from this transaction has to be considered as income from business. Non-allocation of indirect expenditure other than interest to the projects under construction - 84% of the work of the company during the year related to the projects under construction - Revenue apportioned indirect expenditure to to Work-in-progress - Held that:- Non allocation of the indirect expenses to the work-in-progress truly affects correct reflection of the profit and loss of the assessee-company. Being so, AO is justified in reallocating the indirect expenses to the capital project of the assessee. Depreciation of centring material - dis-allowance - Held that:- The assessee claimed all this depreciation is relating to the project under construction. The project under construction being the capital asset, depreciation cannot be allowed - Decided in favor of Revenue

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• 2012 (6) TMI 632
  Deduction u/s 10A - denial on ground of non-satisfcation of conditions of Section 10A - change in organization status of STPI undertaking - assessee company entirely held by M/s. Samsung Electronics Company Ltd., South Korea (SECL), engaged in the business of software development for its parent company - Held that:- Assessee undertaking existed in the same place, form and substance and did carry on the same business before and after the change in the legal character of the form of the organization. Formerly it was a branch establishment of a non-resident company/foreign company, but later on it was converted into a subsidiary company. However, for the above change of organization status, same unit continued to function throughout the time and even Software Technology Parks of India (STPI) authority gave the approval for transfer of STP activities of M/s. SECL to the assessee w.e.f. 01.12.2005. Therefore a mere organizational change was not a ground for the AO to hold that the assessee was not entitled for deduction u/s. 10A within the meaning of section 10A(2) - Decided in favor of assessee. For the purpose of computation of deduction u/s. 10A, if any expenditure is excluded from the export turnover, the same has to be excluded from the total turnover also.

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• 2012 (6) TMI 631
  Whether CIT(A) is right in allowing interest u/s.244A of the Act where refund arose on account of payment of self-assessment tax without appreciating that the words “in any other case” occurring in section 244A(1)(b) cannot be construed to include in clause (a) of section 244A(1) of the Act – Held that:- in the case of CIT vs. SIV Industries Ltd. (2007 (2) TMI 130 (HC)) held that self assessment tax paid u/s.140A should also be taken into consideration while determining the interest u/s.244A. order of ld. CIT(A) confirmed. Whether CIT(A) is right in holding that no interest u/s. 234D is chargeable for A.Y. 2001-02 - DR submitted that there was no provision in the Act for allowance of interest on interest – Held that:- in the case of Sandvik Asia Ltd.( 2006 (1) TMI 55 (SC)) has clearly held that when amounts are wrongfully retained by the Government, then, on general principle, interest has to be paid. AO directed to allow interest on interest in accordance with the decision of Hon’ble Supreme Court in the case of Sandvik Asia Ltd. (supra).

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• 2012 (6) TMI 630
  Block assessment – search – undisclosed income - assessment orders under section 158BC were passed in these cases on 6-7-2007 - satisfaction note/letter was written on 13.7.2007 - Revenue has placed no material on record to show any undisclosed income – Held that:- in the case of Mukta Metal Works (2011 (2) TMI 250 (HC)) was held that according to the provisions of section 158BD of the Act the satisfaction has to be recorded between the initiation of the proceedings u/s 158BC and before completion of block assessment u/s 158BC of the Act in the case of person searched. It could not be after the conclusion of the block assessment as there was no occasion for an AO to examine the seized material or documents of the person searched when the block assessment proceedings had concluded and no other proceedings were pending before him. order passed was contrary to the provisions of section 158BD of the Act and needs to be quashed. Decided in favor of assessee.

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• 2012 (6) TMI 629
  Validity of revisionary order passed u/s 263 - Asset Management Company - initial issue/launch expenses - revenue expenditure or capital expenditure - Held that:- It is found that SCN u/s 263 was specific and related to the question as to whether the expenditure was capital or revenue. However, while passing the order u/s.263, the CIT proceeded on a totally different directions by treating the expenditure as revenue expenditure and further examined the question as to whether the they can be claimed in one year or have to be amortized as contemplated by the SEBI Regulations and decision in case of Madras Industrial Investment Corporation. No opportunity being given to assessee to explain its stand on amortization of initiation expenses. The action of the CIT in revising the order of the AO on this basis cannot be sustained. Further, as to whether the decision in case of Madras Industrial Investment Corporation (1997 (4) TMI 5 (SC)) will be relevant in the context of an AMC which manage funds on behalf of mutual fund companies and derives income from managing a fund in the form of fee for managing the fund, is again debatable. On such debatable issues where two views are possible jurisdiction u/s.263 is not to be exercised. We accordingly hold that exercise of jurisdiction u/s.263 could not have been made. In the result the order u/s. 263 of the Act, in so far as it relates to the initial issue expenses, are hereby quashed - Decided in favor of assessee.

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• 2012 (6) TMI 628
  Penalty under section 271(1)(c) - unaccounted sale of raw-material - addition was made on estimate basis - Held that:- It is well settled that the addition made purely by way of estimate should not be made the basis for levy of penalty for concealment of income. It is not the case of the revenue that the assessee has not disclosed the material facts relevant to the assessment. The issue of burning loss and consequential consumption of raw-material was worked out on estimation only to determine the unaccounted sale of raw material and the estimation differed at different levels of the revenue authorities. Assessing Officer has not pin-pointed any discrepancy or irregularity in the records. The possibility of sale of raw material outside the books was not based upon any material evidence but on suspicion which was created on account of non-availability of certain specific record. Mere possibility or suspicion or difference of opinion on some issue is not sufficient to impose penalty for concealment of income or filing of inaccurate particulars of income. No penalty under section 271(1)(c) was leviable on addition made on account of unaccounted sale of raw-material. Regarding penalty levied for diversion of income by sale to sister concern - addition was made due to the reason that the assessee-firm had disclosed lower profit on sale made to sister concern - Held that:- There is no definite finding that the transaction of sale made to 'ME' was a sham transaction. The figures of sale made to 'ME' (sister concern) were disclosed in the accounts statement and those figures had not been disputed by the department. The conduct of the assessee was bona fide. Material particulars with regard to the sale made to 'ME' were disclosed by the assessee, at the time of filing of its return of income with the department. Facts of the case may justify the addition made on account of low rate of profit on sale made to the sister concern but were not sufficient to sustain the penalty imposed under section 271(1)(c).

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• 2012 (6) TMI 627
  Penalty under section 271(1)(c) - penalty immunity - search - assessee had already enhanced the income declared which was disclosed during the search to purchase peace of mind and avoid litigation – Held that:- Explanation 5 to section 271(1)(c) clearly shows that if income has not been declared before the expiry of time under sub-section (1) of section 139, then immunity is not available. Provisions of section 153A clearly show that rule of abatment applies to an assessment or re-assessment which is pending on the date of initiation of the search. This means all the returns filed earlier will not abate but only in cases where assessments are still pending would abate. Despite search, assessee did not want to disclose the concealed income which was found during the course of search. Legal principles are clearly applicable to the facts of the case because during the search certain bundles of bills were found which pertained to undisclosed sales which were not recorded in the books of account and this fact was admitted during the search and, therefore, offence of concealment was complete. Therefore, penalty on additional incomes declared in the returns is clearly leviable. Penalties levied by the Assessing Officer are confirmed. Revenue's appeals are allowed. Decided in favour of revenue.

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• 2012 (6) TMI 626
  Royalty payment - in the nature of revenue expenditure or capital expenditure - Held that:- Considering the terms of the Technical Assistance Agreement entered between the assessee and MMB entitlement to use the know-how supplied by MMB for the manufacture of the products. The know-how and information received by the assessee directly or indirectly was to be kept strictly confidential and was entitled to use the trade mark "Golden Eagle" of MMB. The payment of royalty was, therefore, in the nature of expenditure incurred for carrying on business with available know-how rather than for accretion to the capital base or gain an advantage in the capital field of the assessee - in favour of assessee.

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• 2012 (6) TMI 624
  TDS – denial credit of tax based on TDS certificates – Held that:- respondents-assessee are not entitled to credit of tax on the interest income based on TDS certificates issued by the banks, the assessees are entitled to credit of tax based on the very same TDS certificates in the year in respect of which the subject-matter of deduction of tax is assessed. Decided in favour of revenue.

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• 2012 (6) TMI 623
  Deduction of interest - Investment of interest free funds - commercial expediency - held that:- it is clear that no interest bearing funds were utilized by the assessee for the purpose of subscribing to the share capital of its subsidiary company. So long as the interest bearing funds are used for the business purpose, whether for investment in fixed or circulating capital, the amount of interest shall be allowed as deduction. If answer to stage (a) turns out to be in negative, only then the question of examining the stage (b) arises as to whether investment for non-business purpose was made out of interest free funds. If such investment for non-business purposes is out of interest free funds, then there cannot be disallowance of interest and vice versa. The second stage arises for consideration on the assessee's failure to succeed in the first. As in the instant case, the assessee failed to amply prove the business purpose in terms of S.A. Builders Ltd. [2006 (12) TMI 82 (SC)], but succeeded in proving that interest free funds were utilized for subscribing to the share capital of its subsidiary company, in my considered opinion the addition cannot be sustained. - Decided in favor of assessee. - Third member bench decision.

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• 2012 (6) TMI 622
  Rejection of books of accounts - estimation of deduction u/s 10A - there is undisputed and excess mistakes in the accounts. - It is a fact the said inaccuracy amounts to 124.04 lakhs and works out to nearly 6% of the profits and the assessee describes the same as trivial and ignorable. Stand of revenue in this regard is that the AO has only to establish the inaccuracy in the books of accounts maintained by the assessee and the triviality of otherwise is not the issue. - held that:- the triviality of the default is no excuse as per the amended provisions of section 145 of the Act. Further, the default, which is quantified to be around 1.24 cr in our opinion, cannot described trivial in this case as it is the case of exemption u/s 10A of the Act and the assessee is expected to be extremely responsible in matters of maintenance of the books of such exempt undertakings. Without going into the reasons, whether bona fide or otherwise, we are of the considered opinion, the AO has rightly rejected the books as per the provisions of section 145(3) of the Act. Best judgement assessment - Estimation of Profits of the STP Units - held that:- the AO and the CIT(A) have not done the best judgment in the manner provided in section 144 of the Act. There are large number of judicial precedents in operation on the issue of 'best judgment' referred to in section 144 of the Act. In principle, the best judgment does not mean wild and unreasonable estimations. The very expression 'best judgment assessment' imply the judgment of the AO and the said judgment must be supported by the material or data gathered by him for this purpose both from internal as well as the external sources. Thus, we can not approve the 'best judgment assessment' made by the AO and sustained by the CIT(A) in the present form. Therefore, we are of the considered opinion, the AO must make 'best judgment assessment' as per the manner provided in section 144 of the Act and for this we have decided to set aside the order of the CIT(A) for this limited purpose. It goes without saying that the AO must grant reasonable opportunity of being heard to the assessee.

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• 2012 (6) TMI 621
  Levy on interest u/s 234B, 234C on arrears of tax payable due to retrospective amendment - amendment to Section 115JB of the Act - held that:- liability to pay interest would only arise on default and it is in the nature of a quasi-punishment. - Such liability although created retrospectively could not entail punishment by payment of interest with retrospective effect. such a liability could be created retrospectively, when such a liability is retrospectively created, the assessee cannot be accused of committing default and he cannot be charged with interest for such default. As the assessee was under no obligation on the date of the alleged default to pay tax at that particular rate, he cannot be accused of having committed default and made to pay interest as compensating the revenue for having not paid the money. assessee is liable to pay advance tax as per the amended provisions of Section 115JB for the relevant period. However, he is not liable to pay interest on the amount due as per the amended provision. no liability to pay interest on the difference in the tax paid. - Decided in favour of the assessee and against the Revenue

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• 2012 (6) TMI 620
  Commission paid by the assessee to the doctors - illegal payment – Held that:- commission paid to private doctors for referring patients for diagnosis could not be allowed as a business expenditure. The amount which can be allowed as business expenditure has to be legitimate and not unlawful and against public policy - In favour of the Revenue

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• 2012 (6) TMI 619
  Bad debt – disallowance of deduction - assessee had created a provision for bad and doubtful debts under section 36(1)(viia) of the Act – Held that:- Assessee is entitled to the deduction of any bad debt which is written off in its books of account to the extent it exceeds the credit balance in the provision for bad and doubtful debts accounts - Provision created by the assessee and claimed as deduction under section 36(1)(viia) will also be considered while computing the deduction under section 36(1)(vii) – In favor of Revenue

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• 2012 (6) TMI 618
  Reassessment - Search and seizure – undisclosed income – tuition work - additional income not been declaring in the return of income – Held that:- Seized document, annexure A 20, it is clear that the assessee had been carrying on tuition work at a large scale - submission of the assessee that he undertook such work for coaching some brilliant students is without any merit - assessee had undisclosed income from tuition work and the additions to the extent noticed in the order on that account was justified.

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• 2012 (6) TMI 617
  Powers of Commissioner under section 263 of the Act - condition precedent for exercise of power - Commissioner did not reach any firm conclusion about evasion of tax - Commissioner called for record – Held that:- Nothing in section 263(1) to show that before passing the final order under that section, the Commissioner must necessarily and in all cases record final conclusions about the points in controversy before him - assessment was to be freshly made by the Income-tax Officer, the only proper course for the Commissioner was not to express any final opinion as regards the controversial points - In favour of the Revenue

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• 2012 (6) TMI 616
  Reassessment – income escaped assessment under section 147 of the Act – Addition subsequently in the course of assessment proceedings – Held that:- Explanation 3 to section 147 clearly depicts that the Assessing Officer has power to make additions even on the ground on which reassessment notice might not have been issued in case during the reassessment proceedings, he arrives at a conclusion that some other income has escaped assessment which comes to his notice during the course of proceedings for reassessment under section 148 of the Act. The provision no where postulates or contemplates that it is only when there is some addition on the ground on which reassessment had been initiated, that the Assessing Officer can make additions on any other ground on the basis of which income may have escaped assessment – Against Assessee.

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• 2012 (6) TMI 615
  Deduction u/s 37 - Expenditure incurred on account of commercial expediency - illegal gratification - Commission paid to directors for awarding construction contract - Seizure of books of account by the Department Income-tax Officer disallowed the said claim for commission - expression commercial expediency - doctrine or rule of pari delicto - Maxim pari delicto portior est conditio possidentis . HELD THAT:- It is a case of return of the advantage which he obtained under the contract, to the person who is lawfully entitled to the same. Instead of restoring the advantage to the company which paid him the amount, he has repaid the said amount to the directors of the company. The said payment is not made for any services rendered by them. Therefore, the said amount cannot be construed as commission or expenditure incurred under section 37 of the Act so as to be eligible for being deducted in arriving at income of the assessee under the head Profits and gains of business or profession because it is not an expenditure laid out or expended fully and exclusively for the purpose of business. Another way of looking at things is, there is a clear case of collusion between the directors of the company and the assessee. In the tender which is floated, they have submitted prices which are higher than the normal price. Accordingly, the payment is made. After awarding the contract, they have reduced the price and agreed to receive the difference of price in their name. The assessee has obliged them. It is obvious that it is a kick back or bribe. It is an illegal gratification. It is a scheme adopted to siphon out the money belonging to the company. They want to lend respectability to it by calling it as a commission . Therefore, seen from any angle, it cannot be construed as an expenditure at all, let alone commission. The doctrine or rule of pari delicto is the embodiment of the principle that the courts will refuse to enforce an illegal agreement at the instance of a person who is himself a party to an illegality or fraud. It is a maxim of taw established not for the benefit of either of the parties to the litigation but is founded on the principles of public policy, which will not assist a party who has paid over money, or handed over property, in pursuance of an illegal or immoral contract to recover it back; for the courts will not assist an illegal transaction in any respect . The maxim is, therefore, intimately connected with the more comprehensive rule of law, ex turpi causa non oritur actio on account of which no court will allow itself to be made the instrument of enforcing obligations alleged to arise out of a contract, or transaction which is illegal, and the maxim may be said to be a branch of that comprehensive rule. If he requires aid from the illegal transaction to establish his case, the court will not entertain his claim. Expenditure incurred in such immoral acts cannot be construed as expenditure incurred for the purpose of profits and gains of business or profession and the benefit of deduction or allowance under Parliamentary legislation cannot be extended to such persons or to such expenditure - commission not deductible u/s 37 - appeals are dismissed.

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• Customs

• 2012 (6) TMI 644
  Indo Sri Lanka Free Trade Agreement - Duty free clearances - Notification No.2/07-Cus dated 5.1.2007 - non-confirmation to the standard specified in the PFA ACT - Redemption fine of Rs.10 lakhs and penalty of Rs.5 lakh - Held that:- On being intimated about the discrepancies appellant immediately contacted foreign suppler who accepted the re-export of the same, thus the imposition of penalty upon the importer is not justified - reduce the redemption fine in the present case to Rs.3.5 lakhs considering subject matter of earlier proceedings in respect of the same appellant.

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• 2012 (6) TMI 614
  Appeal against reduction of redemption fine and penalty by Commissioner (Appeals) - assessee alleged of violating provisions of Rule 23 of the Drugs and Cosmetics Rules, 1945 - permission to re-export goods stands granted - Held that:- Issue stands rejected by the Tribunal in case of same assessee earlier AY wherein it was held that finding of Commissioner that there is no malafide on the part of the importer does not stand rebutted by the Revenue. Need to re-export of the impugned goods arose only because the importer could not get licence from the Drugs Controller of India. There is no dispute that the goods were correctly declared by the by the appellant. Following the earlier decision, we find no infirmity in the impugned order of reducing redemption fine and penalty - Appeal rejected.

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• Corporate Laws

• 2012 (6) TMI 643
  Petition for Winding Up – outstanding repair, erection and commissioning charges of Gantry cranes – petitioner raised 3 invoices – respondent contested that they entrustment of work of repair and erection to a third party as the petitioner did not complete the work successfully and to the satisfaction - Held that:- Looking at the dates and events it emerges that the respondent has not brought on record any material to demonstrate that during the aforesaid period i.e. starting from 26.02.2008 when the first invoice was issued until 23.04.2010 when the last of the aforesaid communications was forwarded by the petitioner to it 30.08.2009 any grievance with regard to the petitioner's performance of contract work about any alleged delay in executing the work or unsatisfactory performance of work - though in the interregnum the respondent company issued work order in favour of the said agency on 20th October, 2009, the respondent company does not appear to have given any notice or any intimation to the petitioner about the said development as before assigning work to any other agency during operation of the contract, the principal/employer would intimate the contractor that because of its default or negligence or delay or such other reason it is compelled to award contract to other agency- Respondent’s reply to the statutory notice has not mentioned the details about the extent of work executed by the petitioner and the extent of the work left out/left incomplete - the grounds of defense raised by the respondent are "some ingenious mask invented to deprive a creditor (in present case the petitioner) of its bonafide claim" – the respondent has come out with an afterthought dispute evident from the fact that the respondent has availed CENVAT & VAT credit - arbitration clause in the LOI also would not act as a restriction or obstacle or prohibition in maintaining a winding up petition - direction to Respondent to deposit the invoice amount covered in 3 invoices raised by petitioner within 4 weeks time - in favour of petitioner.

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• 2012 (6) TMI 642
  Amalgamation - application for recalling the order – appellants are majority shareholders – Applicants shareholders of respondent did not attend the meeting nor they received any notice of the meeting – Held that:- There is also no determination of non-service of the notices personally on the shareholders, advertisement in inconspicuous newspapers to prevent shareholders from attending the meetings, attendance by unauthorised persons, voting by unauthorised persons and the attendance register showing attendance by dead persons - since order sanctioning scheme and follow up action pursuant thereto, had become final in proceedings wherein some of present applicants were not only present but participated, same could not be agitated once again and, therefore, action of appellants was hit by principle of res judicata - even otherwise since all appellants had accepted scheme of amalgamation and companies against whom relief was sought for were no longer in existence, they could not be reverted back to their earlier position

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• 2012 (6) TMI 613
  Scheme of arrangement - Petitioners herein are the creditors of the Company-in-liquidation - all creditors have approved the scheme of arrangement, but on the other hand, the two shareholders have voted against the scheme - Held that:- One of the shareholders of the company in liquidation is the first petitioner in this company petition who has identified the second petitioner to revive the company in liquidation. This clearly shows that he is not the propounder of the scheme of arrangement for revival of the company. The second petitioner is neither a member nor a creditor of the company. He is willing to settle the claims of the creditors of the company with a view to revive the company in liquidation, provided the entire share capital of the company is transferred in his favour and his nominees. In order to attract section 391 it is necessary that a compromise or arrangement between a company and its creditors or any class of them, or between the company or its members or class of them should propose a compromise or arrangement, which was not present here. The petitioners herein are not the actual propounders of the scheme so as to revive the company for the benefit of the company or its members. The petitioners being few among the investors for purchase of flats, thereby having become the creditors as they have not been allotted the flats have lent their names to a propounds who does not qualify under section 391 - Mere settling the outstandings of certain class of persons to the detriment of the company or its members is not the object. In any event, the recovery and disbursement would be done in the process of winding up - prayer made by the petitioners is therefore rejected.

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• 2012 (6) TMI 612
  Winding up - dispute in respect of goods supplied - non-payment – Held that:- company did not raise any dispute contemporaneously in respect of demand raised by winding up petitioner - details of the description of the goods/materials supplied by the petitioner to the consignee are mentioned in the name of the respondent-company is shown as consignor and the said delivery notes are said to have been signed in acknowledgment of the receipt-delivery of the goods by the representative of the respondent-company - document at annexure E, i.e., copy of the Form C supplied by the petitioner supports the petitioner's contention - petition seeking winding up of respondent-company was to be admitted

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• Service Tax

• 2012 (6) TMI 667
  Service tax demand on supervision, sampling and analysis services - agreement entered - Held that:- As the service tax has been paid on supervision, sampling and analysis charges, KPCL,no demand is sustainable against the appellant - as the appellant has failed to produce the invoices raised by the KPCL wherein the service tax has already been paid the matter needs re-examination at the end of the lower authorities.

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• 2012 (6) TMI 666
  Stay Petition for waiver of the duty confirmed – Revenue has sought Service Tax under the category of Business Auxiliary Service – assessee stated that Service Tax liability for the first year needs to be computed after giving them the benefit of small scale exemption and in the second year, the amount which has not been included by them in the Service Tax returns was in respect of the services rendered on behalf of the client and that also in relation to agriculture – Held that:-As first adjudicating authority while disposing the issue of eligibility of small scale exemption, specifically records that the appellant is eligible for small scale exemption, but includes the said amount for confirmation of demand - as regards the claim in respect of the services rendered in relation to agriculture on perusal of the definition and the related notification on the tax liability under Business Auxiliary Service the appellant may be eligible for the benefit of exemption notification as regards services provided in relation to agriculture - set aside the impugned order and remand the matter back to adjudicating authority to reconsider the issue afresh, after following the principles of natural justice – in favour of assessee.

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• 2012 (6) TMI 665
  Waiver of predeposit of service tax - Consulting Engineering Services – reimbursement amount received by their service engineers who were rendering the services of erection and commissioning of textile machineries – Held that:- Services would fall under the category of Erection, Commissioning and Installation Service and not under the category of “Consulting Engineering Services”. Pre-deposit waived.

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• 2012 (6) TMI 664
  Waiver of pre-deposit – CENVAT Credit – Denial of credit on invoices issued by five star hotels for renting out conference rooms on the ground that invoices did not contain details as per Rule 4A of Service Tax Rules, 1994 read with Rule 9 of CENVAT Credit Rules, 2004 – Held that:- Service of providing conference rooms comes within the purview of Mandap Keeper service and aggregate value of such services is the amount received by the Mandap keeper for such service – If the amount indicates the value of food separately, the service provider is eligible for claiming rebate and if they have not claimed such rebate, Revenue cannot force such a service provider to claim abatement – Invoice for an amount of Rs. 8722 issued in the name of director doubtful, pre-deposit ordered Denial of credit on invoices issued by telecom service providers – missing details furnished subsequently - no sufficient reason to call for pre-deposit – Pre-deposit waived

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• 2012 (6) TMI 663
  Waiver of pre-deposit – tour operator service – Held that:- appellant did not have service tax liability prior to 16.05.2008, the date on which Section 65(115) of the Finance Act 1994 was amended to widen the definition of “tour operator”. Pre-deposit waived.

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• 2012 (6) TMI 662
  Waiver of pre-deposit – CENVAT Credit on Share Registry Services – Held that:- assessees have made out a strong prime facie case for unconditional waiver as ‘Share Registry Service' is one of the specified services in the second part of the definition of “Input Service”, the credit appears to have been availed in accordance with law.

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• 2012 (6) TMI 637
  Imposing of penalty u/s 76 - assessee contested that entire amount of service tax liability, interest thereof stands paid by the appellant before the issuance of show cause notice - Held that:- As decided in COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX Versus M/s ADECCO FLEXIONE WORKFORCE SOLUTIONS LTD [2011 (9) TMI 114 (HC)]that Sub-Sec.(3) of Sec. 73 of the Finance Act, 1994 categorically states that after the payment of service tax and interest is made and the said information is furnished to the authorities, then the authorities shall not serve any notice under Sub-Sec.(1) in respect of the amount so paid - Therefore, authorities have no authority to initiate proceedings for recovery of penalty u/s 76 - in favour of assessee.

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• 2012 (6) TMI 636
  Denial of liability to pay service tax under "Mandap Keeper's Services" or under the 'Club or Association Services" by assessee, i.e.Club - The petitioner is giving service to its members but the club is formed on the principle of mutuality - Held that:- As considered by the Hon'ble Supreme Court in the case of Joint Commercial Tax Officer, Harbour Division, II-Madras v. The Young Men's Indian Association[1970 (2) TMI 87 (SC)]that in spite of the definition contained in Section 2(n)of the Madras General Sales Tax Act, 1959 read with Explanation I of the Act if there is no transfer of property from one to another there is no sale which would be exigible to tax. If the club even though a distinct legal entity is only acting as an agent for its members in matter of supply of various preparations to them no sale would be involved as the element of transfer would be completely absent. This position has been rightly accepted even in the previous decision of this Court. Members' clubs to which category the clubs in the present case belong cannot be made subject to the provisions of the Licensing Acts concerning sale because the members are joint owners of all the club property including the excisable liquor. The supply of liquor to a member at a fixed price by the club cannot be regarded to be a sale - Where such a club has all the characteristics of a members' club consistent with its incorporation, where every member is a shareholder and every shareholder is a member, no licence need to be taken out if liquor is supplied only to the members. sale and service are different but the basic feature common in both transaction requires existence of the two parties - in view of the mutuality and in view of the activities of the club, if club provides any service to its members may be in any form including as mandap keeper, then it is not a service by one to another as foundational facts of existence of two legal entities in such transaction is missing - in favour of assessee.

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• 2012 (6) TMI 635
  Refund of unutilized CENVAT credit availed on input services - original authority rejected the refund claims in toto holding that the services which were claimed by the parties to be input services did not have any nexus with the export of output services - Board s Circular dated 19.1.2010 required those who claimed refunds of the kind involved in these cases, to produce Chartered Accountant s certificate in support of such claim Held that:- Original authorities will have to re-examine the question whether the refund-claimants have been able to establish a nexus between the input services and the output services - parties need to be given a reasonable opportunity of producing Chartered Accountant s certificates and the original authorities should examine the same in the light of the Board s Circular - orders are set aside and all these appeals are allowed by way of remand

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• 2012 (6) TMI 634
  Input services - Recovery of excess of CENVAT credit availed - Held that:- Even if sub-rule (3) prescribes a limit of 20% for availment of service tax credit, sub-rule (5) provides for whole of the service tax credit in respect of the specified input services - sub-rule (5) prevails over sub-rules (1),(2) and (3) - in favour of assessee.

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• Central Excise

• 2012 (6) TMI 641
  Revalidating the issuance of SCNs - Wrong Classification of goods – Revenue allegation that the goods are classifiable under Heading 8537.00 and denial of benefit of Notification No.52/93-CE dt. 28.2.93 - the Commissioner quantified the demand by classifying the goods under Heading 8537 to be adopted only from 14.7.94 and would have only prospective effect - Held that:- As there was no suppression of facts the proviso to Section 11A(1) cannot be invoked for demand of duty - Revenue s prayer for confirmation of entire duty by invoking the extended period cannot be accepted as the earlier order of the Tribunal had categorically held that extended period is not available to the Revenue and demand should be restricted to six months period - Having held that the earlier order, in clear terms, restricts the demand to a period of 6 months, we need not examine the intention of the Members writing the judgement - Revenue's appeal is allowed and the matter is remanded for quantification of duty for a period of 6 months in respect of each SCNs issued to the respondents.

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• 2012 (6) TMI 640
  Demand of duty on scrap - scrap arising in the course of cutting the new plates, pipes etc. for being replaced in the place of corroded portion of the plant, pipe, vessel - Held that:- The only work undertaken with respect to the new metal plates and pipes is process of cutting them to the required size - the Asst. Commissioner erred in assuming that the remnants in the process of cutting has arisen due to mechanical working of metals - The Asst. commissioner has not given any reason as to why he considered such scrap as arising from mechanical working as there can be no mechanical working when the new plates and pipes are cut and used as a replacement for the worn out and corroded portion of the vessels, pipes etc. - the scrap has arisen on account of cutting of new sheets, plates, pipes for the purpose of replacing worn out pipes and it cannot be said that the respondents have manufactured the scrap so as to pay duty on the same – in favour of assessee.

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• 2012 (6) TMI 639
  Entitlement to Cenvat credit on catering service received - Held that:- Since Revenue has not placed a copy of show cause notice while filing its appeal and once the authority is satisfied that the invoices placed by learned Counsel relates to discharge of obligation under Factories Act, there shall not be difficulty to resolve the dispute - in view of the ratio laid down in COMMR. OF C. EX., AHMEDABAD-I Versus FERROMATIK MILACRON INDIA LTD [2010 (4) TMI 649 (HC)]the service tax paid on outdoor catering services by the canteen located in the respondent’s manufacturing premises has to be considered as an input service relating to business and that CENVAT credit is admissible the appellant deserves hearing - matter is remanded to the Adjudicating Authority to consider the issue in accordance with law laid down .

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• 2012 (6) TMI 638
  Paper transaction to claim Cenvat credit - Held that:- Mode of transportation claimed by the appellants was false as the goods in question claimed to have been transported and the quantities transported shows that the same ranges from 7.180 M.T. to 20.190 M.T as carrying such a huge quantity by motor cycle or scooter is inconceivable - as no offender be allowed to retain undue benefit made at the cost of public first appellate order is reversed and the adjudication order is restored and all the five appeals are allowed in favour of Revenue - in favour of revenue.

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• 2012 (6) TMI 611
  Delay in payment of duty,interest and penalty – Revenue appeal that the Commissioner had no authority or power to accept the payment made beyond the period of one month from the date of communication of the order – assessee contested that the bankers did not accept the payment because there was no registration number and there was delay in giving temporary registration number by the Assistant commissioner - Held that:- As there is no provision in the law u/s 11AC to condone the delay in payment of duty, interest and penalty for whatever reason by any authority, therefore Commissioner (Appeals) has clearly travelled beyond his powers vested in him under the law – as the OIO clearly mentions the assessee’s registration number, his written submission have not explained what happened to the registration number they already had and on what date they approached the Assistant Commissioner and what date temporary registration number was given to them – as there is one year of delay in payment of duty, no question of condoning the delay arise – in favour of assessee.

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• 2012 (6) TMI 610
  Penalty imposed under Rule 25(1)(b) – revenue stand that appellant has knowingly received goods which did not suffer of central excise duty and did not account for the same even though he was a registered dealer – Held that:- In the absence of any evidence to show that cenvat credit has been passed on in respect of these goods and there was an intention to pass on cenvat credit, merely because the appellant received the goods which were not duty paid, imposition of such harsh penalty is not justifiable - the submission of appellant that no proceedings were initiated against the manufacturer also would provoke for a lenient view as regards penalty - as no allegations of improper maintenance of accounts or improper passing on cenvat credit against the appellant who is a registered dealer the penalty imposed equal to the duty is very harsh and is reduced to Rs 10,000.

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• 2012 (6) TMI 609
  Dismissal of appeal by first appellate authority - non-compliance of the Stay Order directing to deposit 50% of the penalties imposed - appellant have filed application declaring their unit as a sick unit - Held that:- As decided in the case of CCE Vs. Saurashtra Cement Ltd.[2010 (9) TMI 422 (HC)] it is settled law that unless the first appellate authority records some findings on the merits of the case, Tribunal should not venture into the merits of the case - as appellant company has filed an application for being declared as a sick unit, pre-deposit of any amount would create undue hardship to the appellants - appeals are remanded back to the first appellate authority, to reconsider the issue afresh without insisting upon any further pre-deposit, as the appellants have already deposited entire amount of duty along with interest.

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• 2012 (6) TMI 608
  Extended period of limitation – respondents filed an application for amendment in the registration certificate - respondents also filed return with the department which showed that appellants had cleared goods at a concessional rate of duty and in view of the fact that registration certificate had been amended, department cannot be said to be unaware of the fact of clearance of Stock manufactured prior to 17-4-1997 - Held that:- Even after the visit of the officers on 8-5-1997 for preventive checks, the show cause notice could have definitely been issued within one year or six months – extended period of limitation was not available to the department In case of Neminath Fabrics Pvt. Ltd. (2010 (4) TMI 631 (HC) ), once the facts necessary to permit the department extended period of limitation are established on record, thereafter, the question of initiating proceedings within six months/one year from the date of knowledge of the department, is not relevant

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• Wealth tax

• 2012 (6) TMI 668
  Exemption under wealth tax - assets u/s 2(ea) - Valuation of assets under WT Act - leasehold property - commercial complex let out on rent – Held that - By an amendment in clause (ea) of section 2, commercial buildings, which are not occupied by the assessee for the purpose of his business or profession, other than the business of letting out properties, shall be brought to tax under the Wealth-tax Act, 1957 - said amended section was in force only for two years by the Finance Act (No. 2), 1998. It is clear from the Explanatory Notes, the Central Board of Direct Taxes circular and the subsequent action of further amending the said section, that the intention was not to tax business assets used by the assessee for the purpose of his business or profession and also the business assets which are let out, if the assessee is in the business of letting out properties. All other types of commercial properties were brought to tax under the Wealth-tax Act. Assessee was justified in claiming the exclusion of the properties which are the subject of the matter of the proceedings, from wealth-tax – In favor of assessee

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• Indian Laws

• 2012 (6) TMI 661
  RTI - Evaluation of mark sheet - re-evaluation / re-verification - Whether the instructions and solutions to questions (if any) given by ICAI to examiners and moderators, are intellectual property of the ICAI, disclosure of which would harm the competitive position of third parties and therefore exempted under section 8(1)(d) of the RTI Act? - held that:- section 8(1)(d) of the RTI Act does not bar or prohibit the disclosure of question papers, model answers (solutions to questions) and instructions if any given to the examiners and moderators after the examination and after the evaluation of answer scripts is completed, as at that stage they will not harm the competitive position of any third party. We therefore reject the contention of the appellant that if an information is exempt at any given point of time, it continues to be exempt for all time to come. Whether providing access to the information sought (that is instructions and solutions to questions issued by ICAI to examiners and moderators) would involve an infringement of the copyright and therefore the request for information is liable to be rejected under section 9 of the RTI Act? - held that:- The information sought is a material in which ICAI claims a copyright. It is not the case of ICAI that anyone else has a copyright in such material. In fact it has specifically pleaded that even if the question papers, solutions/model answers, or other instructions are prepared by any third party for ICAI, the copyright therein is assigned in favour of ICAI. Providing access to information in respect of which ICAI holds a copyright, does not involve infringement of a copyright subsisting in a person other than the State. Therefore ICAI is not entitled to claim protection against disclosure under section 9 of the RTI Act. Whether the instructions and solutions to questions are information made available to examiners and moderators in their fiduciary capacity and therefore exempted under section 8(1)(e) of the RTI Act? - held that:- nformation sought under queries (3) and (5) were exempted under section 8(1)(e) and that there was no larger public interest requiring denial of the statutory exemption regarding such information. The High Court fell into an error in holding that the information sought under queries (3) and (5) was not exempted. Whether the High Court was justified in directing the appellant to furnish to the first respondent five items of information sought (in query No. 13) relating to Regulation 39(2) of Chartered Accountants Regulations, 1988? - held that:- it is necessary to make a distinction in regard to information intended to bring transparency, to improve accountability and to reduce corruption, falling under section 4(1)(b) and (c) and other information which may not have a bearing on accountability or reducing corruption. The competent authorities under the RTI Act will have to maintain a proper balance so that while achieving transparency, the demand for information does not reach unmanageable proportions affecting other public interests, which include efficient operation of public authorities and Government, preservation of confidentiality of sensitive information and optimum use of limited fiscal resources. Appeal is allowed in part and the order of the High Court is set aside and the order of the CIC is restored, subject to one modification in regard to query (13): ICAI to disclose to the first respondent, the standard criteria, if any, relating to moderation, employed by it, for the purpose of making revisions under Regulation 39(2).

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