Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
June 5, 2012
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
Articles
By: DEVKUMAR KOTHARI
Summary: The Service Tax (Settlement of Cases) Rules, 2012, draws heavily from the Central Excise Act, 1944, applying similar provisions to service tax matters. A petition for settlement can be filed after a show cause notice is issued, with conditions such as partial payment of tax and interest. Petitions are inadmissible if an appeal is pending or if the applicant has been previously debarred. The rules outline the application process, including necessary forms and fees. The Settlement Commission has discretionary power to accept or reject applications, and decisions are made by majority opinion within the commission's benches.
By: DR.MARIAPPAN GOVINDARAJAN
Summary: The Service Tax (Settlement of Cases) Rules, 2012, established under Section 94(2)(j) of the Finance Act, 1994, empower the Central Government to facilitate the settlement of service tax disputes. The Customs and Central Excise Settlement Commission holds jurisdiction over these cases. The rules outline procedures for application, verification, and submission requirements, including the need for Form SC (ST-1) and a Rs. 1000 fee. Applicants must provide detailed information about the dispute, service tax returns, and payment details. The Settlement Commission can order property attachment to secure revenue and requires a fee for report copies.
News
Summary: The Finance Minister urged officials of the Central Board of Excise and Customs (CBEC) to enhance efforts in mobilizing resources to meet the indirect tax collection target of Rs. 4,99,694 crore for 2012-13, a significant increase from the previous year. Despite economic challenges, the Minister highlighted the importance of a robust tax administration and the need for improved tax collection efficiency. He emphasized leveraging technology, facilitating trade, and ensuring timely tax payments without burdening taxpayers. The Minister also noted the positive impact of recent tax reforms, including increased service tax rates and the introduction of a Negative List for service taxation.
Summary: The Union Finance Minister will inaugurate the All India Annual Conference of Chief Commissioners and Directors General of Customs, Central Excise, and Service Tax. This two-day event will focus on indirect tax administration, discussing issues such as the Negative List of Services, Common Tax Code, automation in CBEC, and the Large Taxpayer Unit. The conference will also feature the inaugural B. N. Banerjee Memorial Lecture, with a focus on the role of customs in international relations. Key addresses will include discussions on the Indian economy's current concerns and future prospects.
Summary: The Indian government has established the Manufacturing Industry Promotion Board (MIPB) to implement the National Manufacturing Policy (NMP), chaired by the Commerce and Industry Minister. The MIPB includes various secretaries and industry representatives, tasked with reviewing the manufacturing sector's performance and resolving coordination issues between central ministries and state governments. States like Kerala and Karnataka have identified land for National Investment and Manufacturing Zones (NIMZs). Additionally, the Board of Approval and High Level Committee will oversee NIMZ proposals, while the Green Manufacturing Committee will manage the Technology Acquisition and Development Fund, promoting clean technology. The NMP aims to boost manufacturing's GDP share to 25% and create 100 million jobs.
Highlights / Catch Notes
Income Tax
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High Court to Decide on Tax Exemption for Transfer of Hotel Development Rights under Income Tax Act Sections 45 & 47(v.
Case-Laws - HC : Sale of hotel development rights - Capital gains - Section 45 read with section 47(v) - transfer of the capital assets from a wholly-owned subsidiary company to its holding company - HC
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Transfer Pricing Case Highlights Disparities in Depreciation and Asset Age, Calls for Adjustments to Ensure Fair Comparisons.
Case-Laws - AT : Transfer pricing - arm's length price - Selection of comparable - Other enterprises have claimed depreciation at much lower amounts. Size of the assets besides the age of the assets of comparables was leading to difference in the profit margins and in mean margin. - Adjustment is required to be made - AT
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Replacement or repair costs for plant and machinery are deductible as revenue expenditure if no lasting capital advantage is gained.
Case-Laws - HC : Capital expenditure vs Revenue expenditure - any expenditure on replacement or repairs to plant and machinery which does not bring into existence any enduring or permanent advantage in the capital field is allowable as revenue expenditure. - HC
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Tribunal Allows Normal and Extended Warranty Claims; High Court Confirms Rejection of Extra Warranty on Domestic Sales.
Case-Laws - HC : Additional provision for warranty Claim - Tribunal allowed normal warranty, extended warranty, however denied additional provision for warranty on domestic sales claimed by assessee considering the increase in trend of settlement of actual warranty claims in the past - Order of Tribunal confirmed. - HC
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Court Evaluates if Family Partition Assets Are Capital Assets or Stock-in-Trade for Tax Purposes.
Case-Laws - AT : Whether the assets received by the assessee at the time of partition are capital assets or stock-in-trade. - properties where held by the family as stock in trade - conversion of capital assets into stock in trade - AT
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Antique and Collectible Items Classified as Capital Assets for Tax Purposes, Not Personal Effects.
Case-Laws - AT : Capital assets vs personal effects - antique or decorative items and collectors items, cannot be classified as personal effects - AT
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Tax Deduction Denial Overturned: Section 80IC Deduction Allowed Despite Filing Delay, Prioritizing Substantial Justice Over Technicalities.
Case-Laws - AT : Deduction u/s 80IC - denial u/s 80AC on ground of delay in filing return - When the substantial question of justice involved technicalities should be ignored. Claim of the assessee cannot be denied on technicalities when the assessee is legally otherwise entitled for deduction - AT
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Revising Tribunal Orders: Supreme Court's Overruling u/s 254 Applies Retrospectively as New Legal Interpretation.
Case-Laws - HC : Legality of revision of order of Tribunal u/s 254 on ground of retrospective overruling - Judicial decision acts retrospectively. Judges do not make law they only discover or find the law. Thus, where a decision of the Supreme Court overrules an earlier decision, the views expressed in the later decision would have to be regarded as having always been the law. The overruling is, therefore, retrospective. - HC
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Section 73: "Carried On" Means Actual Conduct of Activities, Not Just Objectives in Memorandum of Association for Tax Purposes.
Case-Laws - HC : Speculation business - The words "carried on" stated in Section 73 mean actual carrying of the activity and it has to be read in context of what actually was done by the company in the relevant year, rather than what was main object in the Memorandum of Association of the company. - HC
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Section 43B Disallows Unpaid Entry Tax, Welfare Cess, Provident Fund, and Interest Before Tax Return Filing.
Case-Laws - HC : Dis-allowance u/s 43B - entry tax, welfare cess, Provident fund, Interest to public institutions - expenditure dis-allowed for want of proof that taxes have been paid before filing the return - HC
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Expenditure on Satellite Space for Qualifying Services: No Disallowance or Notional Income Deduction Allowed.
Case-Laws - HC : Deduction - no income or receipt was shown - In case the assessee incurs expenditure to buy and utilize space segment on a satellite for providing the qualifying services, the expenditure incurred cannot be disallowed and no notional income can be computed or reduced from the income earned from the qualifying service. - HC
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Vacancy Allowance Not Applicable for Non-Let Properties u/s 23(1)(c) of the Income Tax Act.
Case-Laws - AT : Income from House Property - In case the property is not let out at all during the previous year, no vacancy allowance can be given u/s 23(1)(c). - AT
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High Court examines unexplained cash credits u/s 68; stresses accurate determination of relevant "previous year" for assessment.
Case-Laws - HC : Unexplained cash credits - addition made u/s 68 of cash credits, related to the earlier previous year - The phrase "previous year" is very relevant. - HC
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Section 142 Notice Alone Doesn't Equal Cooperation if Information Isn't Provided; Section 292BB Presumption Not Applicable.
Case-Laws - AT : Mere receipt of notice u/s 142 calling for information but not furnishing information in response to the notice, cannot be said to have 'co-operated in any inquiry - provisions of Section 292BB are not attracted - AT
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Notice Sent to PAN Address Invalid u/s 143(2) as Returned by Postal Authorities; Not Sent to Return Address.
Case-Laws - AT : Valid service of notice u/s 143(2) - notice u/s 143(2) send to assessee at the address(given by assessee while applying for PAN), other than that given in the return of income for the year under consideration and earlier AYs, which was eventually returned by the postal authorities - notice is invalid - AT
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Indian Agent Not a Permanent Establishment Under Mauritius DTAA; No Habitual Contract Authority Found.
Case-Laws - AT : Dependent Agent - Permanent Establishment - On facts it cannot be said that the Indian Representative has “habitually exercises” authority to conclude contracts. - Mauritius DTAA is not attracted in this case. - AT
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Deduction for Scientific Research u/s 35(2AB) Requires Research to Be Conducted In-House Using Own Resources.
Case-Laws - AT : Expenditure on Scientific Research - deduction u/s 35(2AB) - The term "in-house" means, in the present context, that by utilizing the staff of an organization or by utilization of resources of the organization if a research is conducted within the organization; rather than utilization of external resources or staff; then it can be called as in-house research. - AT
Customs
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Appeal Rights Questioned After License Renewal Rejected: Is Tribunal Review Allowed Under CHA Regulation 11?
Case-Laws - AT : Rejection of application for renewal of license - Whether the appeal against the order of Commissioner of Customs for rejection under Regulation (11) of CHA 2004 would lie before the Tribunal - AT
Corporate Law
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Registrar's Website Error: 0.5% Stamp Duty on Increased Share Capital Not Legally Supported Without Act Amendment.
Case-Laws - HC : Mere fact that the website of the ROC indicates that stamp duty shall be 0.5 per cent of amount on increase in the authorized share capital does not lend a legal basis for such levy, in the absence of any amendment to the Act to that effect. - HC
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BIFR empowered under SICA Sections 22 and 22A to rehabilitate financially distressed companies through strategic recovery schemes.
Case-Laws - HC : Whether scheme of section 22 and section 22A empowers BIFR to take all such measures which, in opinion of Board, are necessary to bring company out of its sickness and make it viable on implementation of scheme framed by operating agency - powers of the Board under Section 22(3) of SICA - HC
Service Tax
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Cenvat Credit Denied: TR-6 Challan Not Valid for GTA Services, Outward Transportation Credit Also Disallowed.
Case-Laws - AT : GTA service - denial of cenvat credit on the ground that TR-6 challan is not proper document to avail cenvat credit and cenvat credit is not admissible on outward goods transportation service
- AT
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No Show-Cause Notice Needed for Delayed Service Tax Payment u/s 73(3); Penalties Considered Unnecessary.
Case-Laws - AT : Delayed payment of service tax - provisions of sub-section (3) of Section 73 is clearly attracted in the facts of the case and issuance of a show-cause notice for demand of service tax and imposition of penalties was not at all warranted. - AT
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Service tax credit is allowed for payments to both foreign and domestic commission agents for sales promotion.
Case-Laws - AT : Service tax credit taken on commission agent services - If the credit paid to foreign commission agents for sales promotion is admissible, naturally, service tax paid to commission agents for sales promotion within the country also would be admissible. - AT
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Assessee Not Required to Reverse 8% or 10% Credit if Input Credit on Exempted Products is Reversed.
Case-Laws - AT : If the assessee reverse the credit taken on inputs which has gone into the manufacture of the exempted final products, in that case the assessee is not required to reverse 8% or 10% of the amount of the exempted products. - AT
Central Excise
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Examining SSI Exemption Eligibility for Manufacturers Under Notification Nos. 8/99-CE & 10/99-CE in Central Excise Regulations.
Case-Laws - AT : SSI Exemption - Simultaneous availment of benefit of Notification No.8/99-CE, dt.28.2.99 and Notification No.10/99-CE, dt.28.2.99, on the clearances of excisable goods i.e. air conditioning and Hi-Fi systems - AT
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Central Excise Case: Extended Limitation Period Not Applicable Due to Revenue Neutrality Principle.
Case-Laws - AT : Extended period of limitation – Revenue neutrality - Demand set aside - AT
Case Laws:
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Income Tax
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2012 (6) TMI 65
Premium received on sale of export quota - Taxability u/s Section 28(iiia) to 28(iiic) - Exemption u/s 80HHC - whether the premium received on sale of export quota is covered by Section 28(iiia) to 28(iiic) and accordingly, has to be included while computing the deduction as per the provisos to sub-Section (3) of Section 80HHC of the Act. - held that:- premium on sale of export quota is not covered by clauses 28(iiia) to (iiie) and, therefore, the same cannot be taken into consideration. - The question of law mentioned above, therefore, is answered in negative i.e. in favour of the appellant-Revenue and against the respondent-assessee. Revision u/s 263 - held that:- The tribunal was wrong in holding that the order passed by the Commissioner of Income Tax under Section 263 was bad and contrary to the provisions of the Act. The question of law is answered in negative i.e. in favour of the Revenue and against the respondent-assessee.
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2012 (6) TMI 64
Sale of hotel development rights - Capital gains - Section 45 read with section 47(v) - transfer of the capital assets from a wholly-owned subsidiary company to its holding company - held that:- The term “subsidiary” or “wholly owned subsidiary” have not been be defined in the Act i.e. the Income Tax Act. Therefore, reference is to be made to the other Acts and in this case, the Companies Act. Effect of the violation of Section 49 and 187C of the Companies Act is one aspect but the other issue, which has to be examined, is the evidentiary value and the effect when no such declaration was initially made and the subsequent filing of the declaration is disputed and contested. As per the case of the appellant, material and evidence found during the search and subsequent enquiries had revealed that the respondent assessee was not a 100% subsidiary of Sunair Hotels Ltd. It is, therefore, the contention of the appellant that the assessment order dated 9th February, 1998 does not help or protect the respondent assessee as the said order had proceeded on the basis of premise and assumption that the respondent assessee was not a 100% subsidiary of Sunair Hotels Ltd. This aspect will be examined by the tribunal.
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2012 (6) TMI 63
Capital expenditure vs Revenue expenditure - expenditure incurred on repairing of godowns damaged in Tsunami disaster - Revenue contended the same as capital expenditure on basis of quantum of expenditure - Held that:- CIT(A) has rightly observed that no inference can be drawn from the facts of the case that new asset has been credit, neither the AO has pointed out any such creation of the new asset. It is further observed the expenditure incurred for godown maintenance for the past five years has been allowed by the revenue as revenue expenditure. Hence, the same is allowed as revenue expenditure - Decided in favor of assessee. Upfront fee for term loan - Prepayment penalty charges - assessee submitted that expenses were incurred in relation to obtaining bank loans by shifting the same from Consortium of Banks to ABN AMRO Bank against the Floating Crane on which depreciation has been claimed starting from FY 2003-04 - no new asset came into existence - Held that:- There is no need to further capitalize the upfront fee for term loan in connection with the transfer of the loans from one bank to another against prepayment penalty charges paid to the existing banks. Especially when the subsequent loan as bearing is having less rate of interest i.e. 10% as against the existing term loan of three banks which is 15% - Decided in favor of assessee.
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2012 (6) TMI 62
Kick back money - reassessment - Deduction u/s 37 disallowed on the ground that as per Volcker Committee report, the payments made to this company were “illegal payments in the nature of kick-backs, which were ultimately received by the Iraqi authorities” and “as the amounts paid by the assessee are illegal and prohibited by the law of the land, the same cannot be allowed as expenses under the Income Tax Act, 1961 - held that:- The assessee has made payment for commission and has been rendered services in consideration of the same. As a matter of fact, it is not even revenue’s case that no services have been rendered at all. The fact that services have been rendered by a party other than the agent to whom commission is paid is wholly immaterial so far as deductibility in the hands of the assessee is concerned. As for the position that the payment was highly excessive vis-à-vis the local costs, even if that be so, that aspect of the matter does not affect the deductibility in the hands of the assessee either. The assessee is concerned with commercial expediency of the said payment and not with what are the actual costs incurred in rendering the services for which the payment is made. As we have seen earlier in this order, from the extracts of the Volker Committee report itself, it was absolutely necessary for the assessee to make the impugned payments and, in any event, the commercial expediency of these payments has not even been called into question by the Assessing Officer. The case of the revenue is confined to invoking the Explanation to Section 37(1). - Decided in favor of assessee.
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2012 (6) TMI 61
Cascading effect of dis-allowance u/s 43B and 40(a)(ia) on deduction u/s 10B - Held that :- It is the well established fact recomputed profits shall be considered for the purpose of computation of deduction u/s 10B. If the assessing Officer recomputes the profit from eligible business by disallowing certain expenditure and liability u/s 40(a) (ia) and 43B, such recomputed profit shall be considered for the purpose of deduction u/s 10B - Decided in favor of assessee. Dis-allowance u/s 40(a)(ia) - Held that:- It is the well established position of law that section 40(a)(ia) has no application where the amount incurred and paid without deduction of TDS. It is applicable only when provision is made in the books of accounts and shown as payable without being deducting TDS. In present case, all the payments are being paid and none of the payments are shown as payable and hence dis-allowances made u/s 40(a)(ia) is deleted - Decided in favor of assessee. Dis-allowance of expenditure towards export business - rejection of books of account, ignoring report of special auditor reporting that there was no discrepancies in the books of accounts maintained - Held that:- When Assessing officer himself got the accounts audited from special auditors u/s 142(2A) then he cannot ignore the audit report submitted by the special auditors. If the special auditor points out any discrepancies with regard to allocation of expenditure and correctness of books of accounts, then it is open to the assessing officer to reject the books of accounts and resort to estimation. Therefore the AO is not correct in re-allocating the common expenditure on the basis of ratio of export turnover to total turnover by rejecting the books of accounts. Dis-allowance of unpaid liability u/s 43B - assessee contended that service tax, and provision for leave encashment which is future liability are not covered within the meaning of any tax or duty u/s 43B - Held that:- Section 43B covers any sum payable by way of tax, duty, cess or fee, by whatever name called, under any law for the time being in force. Therefore service tax liability is covered u/s 43B and non -payment of same within the stipulated time attracts dis-allowances. Similarly, Leave encashment is allowed as deduction on payment basis. Therefore, dis-allowance of provision for leave encashment is upheld - Decided against the assessee. Expenditure incurred for increase in authorized capital - capital or revenue expenditure - Held that:- Amount incurred for increase in authorized capital is in the nature of capital expenditure - Decided against the assessee.
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2012 (6) TMI 60
Transfer pricing - arm's length price - master software development agreement - Selection of comparable - held that:- When the assessee was mainly engaged in software development services, though in a different vertical, having regard to the overall circumstances of the case, such comparable companies selected by the TPO should be considered as comparables in this case. As regards those four companies referred to by the assessee are concerned, after discussing the factual position in respect of those companies and applying those filters adopted by him, in para 13 at page 93-94 of his order, he has clearly held that the same cannot be considered as comparables in this case. In fact, having regard to the factual findings given by the TPO in that para, his decision in rejecting those four companies as comparables, is justified. Accordingly, we reject the plea of the assessee. Regarding ALP - held that:- Other enterprises have claimed depreciation at much lower amounts. Size of the assets besides the age of the assets of comparables was leading to difference in the profit margins and in mean margin. On the contrary, claim of depreciation is eating up large chunk of profit in the case of the taxpayer. - The CIT(A) has not said a word on "asset" employed and "risks" suffered by the tested party and the comparables. Thus, material differences needing suitable adjustment were ignored and a flawed analysis was carried even in appellate proceedings. Without considering obvious material differences, the contention of the assessee to take profit without depreciation was rejected. This rejection is not sound in law. This ground is allowed.
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2012 (6) TMI 59
Capital expenditure vs Revenue expenditure - expenditure on account of replacement of moulds and dies - assessee engaged in the manufacture of die-casted components for automotive manufactures having high requirement of modules - Held that:- It has been factually found that the purchase of dies and moulds did not bring into existence any permanent or enduring advantage to the assessee. Due to continuous use they wear out fast and they have to be replaced frequently to ensure quality of the product. Moreover, the moulds have to be produced to suit the requirements of the particular customer and after the order is met, they become useless and ultimately have to be destroyed to prevent misuse. It is well settled that any expenditure on replacement or repairs to plant and machinery which does not bring into existence any enduring or permanent advantage in the capital field is allowable as revenue expenditure. Therefore, dies and tools were allowable as revenue expenditure.
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2012 (6) TMI 58
Additional provision for warranty Claim - dis-allowance - Tribunal allowed normal warranty, extended warranty, however denied additional provision for warranty on domestic sales claimed by assessee considering the increase in trend of settlement of actual warranty claims in the past - Held that:- The observations record that an assessee is entitled to compute the warranty provision on the basis of estimate every year for future warranty expenses. Such estimates may be re-assessed every year but the re-assessment has to be on some scientific method of accounting which is to be adopted by the assessee. In the present case the Tribunal has noticed that the scientific method constantly adapted and followed by the assessee was on the basis of average of last three years. In the present case the warranty provision was increased from 0.28% to 0.39% of the turnover. The assessee wants to make an additional provision of Rs. 91.70 lakhs over and above Rs. 885.28 lakhs already made. This is an increase of more than 12% in the provision for warranty as per the formula regularly adopted. The said jump is quite substantial. hence, order of the Tribunal does not call for any interference - Decided in favor of Revenue
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2012 (6) TMI 57
Issue of reassessment notice u/s 147/148 instead of issuing notice u/s 143(2) for scrutiny assessment - held that:- we do not think that the Assessing Officer is prevented and barred from recording reasons in writing and issuing fresh notice under Section 148 of the Act in view of the objections raised by the petitioner to the present proceedings or in view of the decision of this Court in Ved & Co. (2007 (2) TMI 212 (HC)). Of course, the petitioner will be entitled to question the reassessment proceedings if initiated on other grounds or reasons as per law. The respondents have agreed to and will be bound by the statement to withdraw notice under Section 147/148 dated 5th July, 2011, but will have liberty and right to issue fresh notice under Section 147/148, after recording reasons to believe. The said notice will not be barred because the respondents had not initiated proceedings by issue of notice under Section 143(2) of the Act or they had earlier issued notice under Sections 147/148 dated 5th July, 2011.
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2012 (6) TMI 56
Whether the assets received by the assessee at the time of partition are capital assets or stock-in-trade. - properties where held by the family as stock in trade - conversion of capital assets into stock in trade - held that:- the assessee was allotted the family's real estate business. - the assessee, on partition of the joint family, had received the balance capital of the family in the real estate business comprising various assets, which were in the nature of stock-in-trade and it cannot be considered that the various assets or properties received by the assessee on partition are capital assets and these capital assets were converted into stock-in-trade of the real estate when the assessee continued to carry on the business of the erstwhile joint family. Valuation - held that:- the value of the properties fixed at the time of partition or determined aliunde would be the cost to be adopted in the hands of the recipient of the properties. However, the specific provisions of section 49(1) of the Act have been enacted in the Income Tax Act, 1961, to fix the cost of the capital asset acquired on partition to be the cost at which it was acquired by the previous owner. In other words, the judgment of the Hon'ble Apex Court in Kalooram Govindram (1965 (4) TMI 15 (SC)) would not be applicable in a case of capital assets received on partition in the light of the provisions of section 49(1) of the Act. However, since the provisions of section 49(1) of the Act, does not apply to other assets, viz. stock-in-trade etc., the ratio of the judgment of the Hon'ble Apex Court would be applicable and it is the cost at which the assessee acquired the property in the partition that has to be taken.
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2012 (6) TMI 55
Issue of reassessment notice u/s 147/148 instead of issuing notice u/s 143(2) for scrutiny assessment - whether the notice issued on 30.12.2004 under Section 143(2) of the Act was validly served upon the assessee-firm on 31.12.2004 as claimed by the Assessing Officer. - held that:- Tribunal was not right in quashing the assessment proceedings. We hold that the assessee was properly served with the notice under Section 143(2) of the Act and within the statutory period prescribed by the proviso to the said sub-section. Accordingly, the substantial question of law is answered in the negative, in favour of the Revenue and against the assessee.
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Customs
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2012 (6) TMI 54
Rejection of application for renewal of license - Whether the appeal against the order of Commissioner of Customs for rejection under Regulation (11) of CHA 2004 would lie before the Tribunal – Held that:- There is a specific provision for filing of appeal to the Tribunal under Regulation, 23(8) against orders of suspension or rejection of license but there is no such provision in the case of rejection of renewal of license - the period of license is fixed under Regulation 12 and on expiry of the same license can be renewed under Regulation 11 - suspension/ revocation of licence and non-renewal of license are to be treated on different footings - right of appeal is a creature of statute and there being no provision under which a CHA could file appeal before this Tribunal against order rejecting the renewal application – on reading Regulation 9 with Regulation 11 even if an application for renewal is treated as a fresh licence, the Regulations permitted appeal only where an application is rejected under Regulation 9(3)and Regulation 11 does not so provide. Whether CHA may avail the remedy against the order of rejection of application for renewal of license under sub-regulation (5) of Regulation (9) of the said Regulation – Held that:- It is seen that when a fresh application for issuance of license is filed and the same stands rejected by the Commissioner, there is a specific provision for filing an appeal before the Chief Commissioner of Customs, in terms of clause 5 of Regulation 9 - The CHA license holder is at liberty to file an application before the Commissioner before the expiry of validity period for renewal of the license for a further period of ten years from the date of expiry- discrimination cannot be made on the ground that the application was for renewal of license and not for grant of fresh license.
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Corporate Laws
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2012 (6) TMI 66
Power of SEBI to issue circular - petitioners, all of whom are distributors and sell mutual funds to investors have challenged a policy circular laying down guidelines – Held that:- powers conferred upon SEBI vide section 11 of the Securities Exchange Board of India, Act, 1992, Section 11(1) of the Act is very widely worded and casts a duty on the Board to protect the interest of the investors; promote, develop and regulate the securities market by such measures as it deems it. circular has brought in transparency by prohibiting entry load for all mutual fund schemes. It means that the investor who subscribes Rs. 100 would be issued mutual fund units equivalent in value to Rs. 100, depending upon the prevailing unit rate of the unit of the fund. If the distributor so desires, he can negotiate with a customer and settle the commission which he would be receiving. those who render service to a large number of people would be able to cut down on overhead expenses and those who operate individually would have to incur higher expense to maintain their establishment. Being inherent to every business, it would not render the policy circular violative of any law. Appeal dismissed
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2012 (6) TMI 53
Company under liquidation - transfer and purchase of equity shares. - Since admittedly, the transfer took place after commencement of the winding up, sub-Section (2) of Section 536 states that such a transfer of share is void. In case, the transfer is made after the winding up orders passed by the Court, then it can only be validated by the Court. It means that the transfer is treated as void but the Court which has passed the winding up order has given the power to validate the transfer. Held that:- the learned Company Judge rightly observed that when the claims of the secured creditors got settled the members of Gupta family, i.e., the appellants had second thoughts. They not only withdrew the applications filed by them seeking transfer of shares in favour of the propounders, the appellants terminated the agreements thereafter. Significantly, applications were withdrawn with liberty to refile for same relief. In this backdrop, merely alleging misrepresentation on behalf of the propounders would not mean that the applicants have been able to prove the same. When we see the matter in the aforesaid perspective other arguments of the appellants stand automatically answered. We may also place on record that one of the appellants, viz., Akhilesh Gupta, even conceded that he had not revoked the MoU by virtue of which shares had been transferred to the propounders. It is more so when the appellants have been given liberty to challenge the factum of share transfer agreement prior to second motion. - Decided against the appellant with cost.
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2012 (6) TMI 52
Winding up - company unable to pay its debts – non-payment of debt on the ground of oversupply - respondent company admitted that the petitioner supplied various quantities of engineering items, spare parts of heavy equipments and industrial machinery, but denied having placed any orders - stand is also taken that the goods supplied were not utilised by the respondent as they were not as per the requirements of the respondent - petitioner in support of the petition placed reliance on the various invoices showing the despatch of materials, and the letter dated 16.2.2009 addressed to the respondent company wherein the managing director-cum-chairman of the respondent company confirmed the payments due to the petitioner – Held that:- it is proved that the debt owed to the petitioner is admitted and the respondent company is unable to pay the debt. The dispute raised by the respondent company cannot be said to be bona fide dispute, but merely an attempt to deny the admitted liability, on a false plea, which is not supported by any document. On the other hand, documentary evidence on record shows that the liability is admitted liability. Petition allowed. Winding up petition admitted - provisional liquidator appointed.
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Service Tax
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2012 (6) TMI 68
Pre-deposit - D.R. submits that when the taxable entry made clear to bring management, maintenance or repair of any property immovable or not to the fold of Section 65(105)(zzg) read with Section 65(64) Finance Act, 1994, service provided by the appellant is taxable. Held that:- document exhibits that it was obligation of lessee to pay the annual consideration to the appellant to avail certain services under that deed and appellant had duty to the lessees under law in terms of contractual obligation, Maintenance of the industrial area was obligation of the Appellant. Such prima facie observations bring the appellant to the fold of taxable entry read with aiding definition as suggested by Revenue aforesaid. appellant directed to make pre-deposit
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2012 (6) TMI 67
Waiver of pre-deposit – Whether assessee CPT was liable to pay Service Tax under 'Port Services' on royalty, upfront charges, rent on jetties and estate rentals received Royalty - Royalty charges were paid by IGTPL to develop and operate RGCT within the port premises – Held that:- This amount was paid by IGTPL to CPT for allowing it to develop and operate Rajiv Gandhi Container Terminal at the port premises. royalty received by the appellant is not a consideration for any port services rendered by CPT. If at all IGTPL pays service tax as demanded, the same will be available to it as cenvat credit, and can be used to meet its liability on services rendered by it. demand not liable to be sustained Regarding upfront charges - ownership/lease hold rights of the equipment of the appellant shall stand transferred to the licensee from the date of receipt of first instalment of the upfront payment. consideration received was accounted in the financial records of CPT as sundry debtors and the value of the assets written off at the written down value of Rs. 7.6 crores. Even if the equipment is held to have been leased to IGTPL and not sold, no tax can be levied on the consideration as it is not received towards port services rendered by CPT Regarding rental amounts collected for renting out various jetties within the port area – Held that:- assessee did not put up jetties but collected charges for licenses granted to other persons to put up structures on the waters coming within the administrative jurisdiction of CPT. These charges are collected in accordance with Cochin Port (licensing of jetties, slipways and boat pen) Regulations, 1968. these charges for licenses as not classifiable under 'port services' or taxable under that head Regarding estate rentals - these are recovered for leasing out immovable property of IGTPL for permitting it the use of the site belonging to CPT. Renting of immovable property services under which the impugned activity will be appropriately classified was introduced only on 1.6.2007 post the period of dispute. Therefore, the impugned demand under 'Port Services' is liable to be set aside Demand and penalty set aside and appeal allowed
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2012 (6) TMI 50
Condonation of delay in filing the appeal - appellants have taken over the management of appellant firm - order was received by them was sent to the outgoing management to take proper action but they failed to do so – Held that:- appellants are liable to pay liability of the appellant firm, therefore, took steps for filing the appeal which caused delay of 30 days in filing the appeal. delay are satisfactory, the application for condonation of delay in filing the is allowed Demand of service tax, penalty and interest - appellants are availing the GTA service and are not paying service tax thereon - appellants are not challenging the liability of service tax and interest – Held that:- appellants have taken the plea before the adjudicating authority due to financial crisis, they could not deposit the service tax in time and before the Commissioner (Appeals), they have taken another defence plea that as the appellant was pre-occupied with the treatment of his brother for kidney failure. The appellants are not entitled for the benefit of section 80 of Finance Act,1994. option to the appellants to pay 25% of service tax as penalty. penalty under section 78 is confirmed. The penalty under section 76 is dropped as per provision to amended section 78 of the Finance Act, 1994. appeal as well stay petition is disposed of.
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2012 (6) TMI 47
GTA service - denial of cenvat credit on the ground that TR-6 challan is not proper document to avail cenvat credit and cenvat credit is not admissible on outward goods transportation service Regarding proper document – Held that:- in the case of Gabriel India Ltd. (1991 (12) TMI 177 (Tri)) that TR-6 is an instrument showing the payment of duty. Therefore, TR-6 challan is a valid document to avail cenvat credit. Therefore, in this case, the appellants are entitled to avail cenvat credit on the strength of TR-6 challan Regarding - input service credit on outward transportation service, Hon'ble Karnataka High Court case of ABB Ltd. (2011 (3) TMI 248 (HC)) has held that the assessee is entitled for input service credit on outward transportation of the goods from the place of removal which is an activity of their regular business. appellants are entitled for input service credit on GTA service appeal is allowed
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Central Excise
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2012 (6) TMI 51
Cenvat credit – by-product – input used for manufacture of dutiable and exempted final product – assessee was paying 10% of the value of the exempted final product at the time of clearance from the factory – Held that:- when the by-product, residual and waste & scrap is arising in the course of manufacture of main product, regularly and continuously and the same being sold in the open market, the intention of the manufacturer to manufacture and sell not only the main product but also the subsidiary product, cannot be considered as erroneous. It is his submission that the process of manufacture of by-product which arises is a continuous one and is continuously sold in the market. It is his submission that the provisions of Rule 11(3) of CENVAT Credit Rules, 2004 is not at all applicable as the appellants have followed the provisions of Rule 6(3) of CENVAT Credit Rules, 2004. It is his submission that the provisions of Rule 11(3) of CENVAT Credit Rules, 2004 will be applicable to a case where the manufacturer is manufacturing "a final product", which is exempted from payment of duty. It is his submission that the appellant being a manufacturer of more than one final product and discharging duty liability on other final products and only one final product being exempted, Rule 11(3) cannot be made applicable. provisions of Rule 6(2) and Rule 6(3) read together will cover the case of the assessee inasmuch as the appellant has claimed that they have reversed an amount as indicated in the provisions of Rule 6(3) of CENVAT Credit Rules, 2004. in the case of Bharat Petroleum Corpn. Ltd. (1992 (2) TMI 250 (SC)) would cover the issue in favour of the assessee. order is set aside and the appeal is allowed
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2012 (6) TMI 49
Eligibility of the exemption Notification No.30/98 dated 1.3.1998 - Revenue demanded duty on the ground that the said product contained Niacinamide which is a vitamin B compound and therapeutically active ingredient in addition to Dexamethazone held to be not eligible for the exemption under the Notification – Held that:- The contents of Niacinamide are reported to be 20 mg per ml whereas the Prophylactic dose as per British Pharmacopoeia has to be between 5 mg to 30 mg per kg of body weight – as per these standards, the equivalent Niacinamide contents in Curadex would work out to be 20 times less than the recommended dose of Niacinamide as per BP - the exemption on such product under Notification could not be denied to the Appellants – in favour of assessee
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2012 (6) TMI 48
Duty demand on the ground that paper cess is to be taken into consideration while calculating the amount of education cess and higher education cess - appeal dismissed on the ground as there is a delay of 20 days in filing the appeal and no sufficient reason has been explained - assessee contested that in the forwarding letter of the adjudication order, it is stated that the appeal can be filed within 90 days from the receipt of the order - Held that:- In the forwarding letter it was specifically mentioned that appeal can be filed within 90 days from the receipt of the order, hence finding merit in the contention of the applicants pre-deposit of the dues is waived for hearing of the appeal - the issue is covered against the Revenue in the case of CCE vs. Sahakari Khand Udyog Mandali Ltd. [2010 (3) TMI 718 (HC)] - matter is remanded to the Commissioner (Appeals) to decide the appeal on merits without asking for any pre-deposit - in favour of assessee.
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