TMI Tax Updates - e-Newsletter
June 5, 2013

Case Laws in this Newsletter:

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

TMI SMS

• Work contract services - in respect of Railways - no service tax shall be leviable under Section 66 of the Act on the value of such services. - HC

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• Revenue or capital -The fact that the subsidy was not meant for repaying the loan cannot be a ground to hold that subsidy receipt was on revenue account -HC

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• Deduction u/s 80IA -revenue can not disregard the profits of Unit only on the basis that the profits were significantly higher than profits from other units -HC

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News

1. Foreign Direct investment Policy – definition of ‘group company’

2. Review of the policy on foreign direct investment in the Multi Brand Retail Trading Sector- amendment of paragraph 6.2.16.5(2) of 'Circular 1 of 2013-Consolidated FDI Policy'

3. RBI releases clarifications to the queries on the Guidelines for Licensing of New Banks in the Private Sector

Notifications

Income Tax

1. 39/2013 - dated 31-5-2013 - IT

Simplification of Procedure for deposit of tax and furnishing of information relating to Tax Deducted at Source (TDS) under section 194-IA (Payment on transfer of certain immovable property other than rural agricultural land) and revision of Form No.24Q.

Circulars / Instructions / Orders

FEMA

1. 107 - dated 4-6-2013

Import of Gold by Nominated Banks /Agencies

DGFT

2. 15(RE 2013)/2009-2014 - dated 3-6-2013

Amendments in Appendix 5 of the Handbook of Procedures (Vol.I)

Highlights / Catch Notes

Income Tax

• Assessees can claim depreciation u/s 32 even after prior deductions, ensuring entitlement remains intact.

  Case-Laws - HC : Double deduction - Explanation 5 to section 32 specifically provides that the assessee shall be entitled for depreciation in spite of the fact that the assessee had claimed the deduction in respect of depreciation in computing his total income or not. - HC
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• High Court Dismisses Revenue's Writ Petitions, Affirms AAR's Decision on Advance Ruling Applications.

  Case-Laws - HC : Order of AAR - Revenue failed to substantiate the infringement of legal right conferred on them under the statute while allowing the applications for advance ruling. The writ petitions dismissed - HC
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• Subsidy for Multiplex Construction Not Revenue: Non-use for Loan Repayment Doesn't Define Its Nature.

  Case-Laws - HC : Revenue or capital - entertainment duty subsidy - The fact that the subsidy was not meant for repaying the loan taken for construction of multiplexes cannot be a ground to hold that subsidy receipt was on revenue account - HC
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• ITAT Tribunal Can Admit New Evidence u/r 29 for Substantial Cause to Ensure Fair Decisions.

  Case-Laws - HC : Admission of fresh evidences - Rule 29 of the ITAT Rules categorically permits the Tribunal to allow such documents to be produced for any substantial cause. - HC
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• Court Rules Unit 4's High Profits Don't Justify Denial of Deductions u/ss 80-IA and 80-IB.

  Case-Laws - HC : Deduction u/s 80-IA & 80-IB - revenue can not disregard the profits of Unit 4 only on the basis that the profits were significantly higher than profits earned from other undertakings. - HC
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• High Court Confirms ITAT's Decision: Unit Nos. 2 and 3 Qualify for Tax Deductions u/s 80-I of Income Tax Act.

  Case-Laws - HC : Deductions u/s 80-I - whether ITAT was right in holding that Unit Nos. 2 & 3 are industrial undertakings for purposes of Sec. 80-I - Held yes - HC
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• High Court rejects tribunal's decision; disallows interest claim on investment in shares due to improper set-off.

  Case-Laws - HC : Interest on account of investment in shares disallowed - set off of interest received with interest paid - Order of the tribunal deleting the addition cannot be sustained - HC
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• High Court Invalidates CIT's Decision to Drop Section 12A Registration Cancellation Due to Lack of Stated Reasons.

  Case-Laws - HC : Registration u/s 12A - It is shocking to note that CIT has dropped the proceedings for cancellation without assigning any reason - The order being bereft of reasons, is no order in the eyes of law - HC
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Customs

• Court Denies Appellant's Request to Excuse 697-Day Delay, Ineligible for Section 14 Limitation Act Benefits.

  Case-Laws - HC : Condonation of delay - delay of 697 days - The appellant is not entitled to the benefit of Section 14 of the Limitation Act. - HC
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• Dispute Over Marble Slabs Import Under ISFTA: Authorities Urged to Amend Agreement Instead of Undermining Its Effectiveness.

  Case-Laws - HC : Import of marble slabs - ISFTA - Revenue, if at all aggrieved from inclusion of marble/marble products in ISFTA is to have the same excluded therefrom, rather than to make it unworkable in the manner done. - HC
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Corporate Law

• High Court Denies Voluntary Winding Up Application Due to Lack of Creditor Recovery Actions Despite Company Losses.

  Case-Laws - HC : Voluntary winding up - huge loss - no steps taken by any of the creditors for recovery of their dues - Application for voluntary winding up rejected. - HC
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Indian Laws

• Apex Court Upholds SARFAESI Act, Except Section 17(12), Impacting Debt Recovery for Financial Institutions in India.

  Case-Laws - HC : Debts Recovery - action under SARFAESI Act - Apex Court has upheld the validity of the Act except that of Section 17(12). - HC
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Service Tax

• Penalty Imposed for Late Service Tax Payment After Show Cause Notice Issued.

  Case-Laws - AT : Penalty - payment of service tax before issuance of show cause notice (SCN) - it is evident that he has paid the amount only after the issuance of show cause notice - penalty confirmed - AT
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• Railway Work Contracts Exempt from Service Tax u/s 66 of the Act.

  Case-Laws - HC : Work contract services - in respect of Railways - no service tax shall be leviable under Section 66 of the Act on the value of such services. - HC
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• Tribunal's Rs. 50 lakh pre-deposit order quashed; appeal to be heard on merits without pre-deposit condition.

  Case-Laws - HC : Stay order - revenue neutral - Order of the Tribunal directing pre-deposit of Rs. 50 lakhs is quashed and set aside and the tribunal is directed to hear the appeal on merits without insisting on pre-deposit. - HC
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Central Excise

• Tribunal Orders 50% Pre-Deposit in Central Excise Dispute; Decision Upheld as Fair and Reasonable.

  Case-Laws - HC : Stay - Tribunal directed to pre deposit 50% - Tribunal has exercised its jurisdiction fairly and reasonably. - HC
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• High Court Clarifies Use of Section 142 of Customs Act in Central Excise Matters for Efficient Legal Integration.

  Case-Laws - HC : Ultr vires - Application of provisions of Section 142 of the Customs Act to the Central Excise - It is not uncommon for a statute to adopt by reference the provisions of other statute in so far as the incidental matters are concerned. - HC
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• High Court Overrules CESTAT's Dismissal of Appeals for Non-Compliance with Stay Order; Decision Deemed Indefensible.

  Case-Laws - HC : Stay - non compliance of stay order by one party - CESTAT dismissed the appeal for all parties in connected matters - this approach of the Tribunal is indefensible. - HC
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VAT

• Pre-Deposit Under KGST Act Section 17D(5) Only Covers Tax, Not Interest, Says High Court.

  Case-Laws - HC : Stay - requirement of pre-deposit - whether to deposit tax with interest etc. or only the tax portion alone - Section 17D(5) of KGST Act - interest is not included - HC
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• Telecom Infrastructure Services Exempt from VAT; No Sale of Goods Under KVAT Act, Affecting Tax Applicability.

  Case-Laws - HC : Passive Infrastructure Services to mobile phone operators - Telecommunication infrastructure - right to use - there is no sale of goods and at any rate there is no deemed sale under KVAT Act - HC
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Case Laws:

• Income Tax

• 2013 (6) TMI 75
  Double deduction - depreciation on fixed assets - entire expenditure incurred towards purchase of fixed assets has already been claimed in entirety earlier - held that:- Explanation 5 to section 32 specifically provides that the assessee shall be entitled for depreciation in spite of the fact that the assessee had claimed the deduction in respect of depreciation in computing his total income or not. - Tribunal has rightly allowed the depreciation in respect of the assets of the respondent. - Decided in favor of assessee. Payment towards pension fund when no liability of revenue nature was determined - held that:- under Rule 10 of the Madhya Pradesh Krishi Upaj Mandi (State Marketing Development Fund) Rules, 2000, the Krishi Upaj Mandi has to create a Reserve Fund, which is a statutory liability and the aforesaid fund is to be created for the payment of pension to the members of the Board. - In view of the statutory liability of the Krishi Upaj Mandi, if the Income Tax Appellate Tribunal has allowed the deduction of aforesaid contribution, no fault is found. - decided in favor of assessee.

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• 2013 (6) TMI 74
  Order of AAR - Whether the hon'ble Authority for Advance Rulings, is required to pass a detailed reasoned order, while allowing (admitting) an application for advance ruling made under section 245Q of the Income-tax Act, 1961 and whether it is not substantial statutory compliance with the Authority for Advance Rulings to consider the question of bar under clauses (i) and (ii) of the first proviso to section 245R(2) of the Act at the time of pronouncing the ruling? Held that:- The entire exercise to be undertaken by the Authority for Advance Rulings under the Act and the Rules for allowing the application is only to verify the records called for whether an advance ruling on the question specified in the application is required to be made or not. There is a clear dichotomy between the threshold stage of allowing the application for advance ruling and pronouncing of advance ruling. If the Authority for Advance Rulings admits the application for pronouncing an advance ruling recording of reasons at that stage is not at all required nor hearing is contemplated to the Commissioner or his authorised representative. Only on such admission before pronouncing its advance ruling hearing of the Commissioner or his authorised representative is provided if the Authority for Advance Rulings considers necessary to hear but not at the threshold stage of admitting the application. The questions are accordingly answered against the petitioners. It is well settled that while exercising the jurisdiction under article 226 of the Constitution of India, if the High Court is of the opinion that there is no other convenient or efficacious remedy open to the petitioner, it will proceed to investigate the case on its merits and if the court finds that there is an infringement of the petitioner's legal rights, it will grant relief, otherwise relief should be rejected. The petitioners failed to substantiate the infringement of legal right conferred on them under the statute while allowing the applications for advance ruling. The writ petitions are devoid of merit and are accordingly dismissed. - Decided against the revenue.

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• 2013 (6) TMI 73
  Revenue receipt or capital receipt - entertainment duty subsidy - applicability of decision in Sahney Steel and Press Works Ltd. v. CIT [1997 (9) TMI 3 - SUPREME Court] - held that:- Since the object of subsidy was to promote construction of multiplex theatre complexes, in our opinion, receipt of subsidy would be on capital account. The fact that the subsidy was not meant for repaying the loan taken for construction of multiplexes cannot be a ground to hold that subsidy receipt was on revenue account, because, if the object of the scheme was to promote cinema houses by constructing multiplex theatres, then irrespective of the fact that the multiplexes have been constructed out of own funds or borrowed funds, the receipt of subsidy would be on capital account. - capital in nature - decided in favor of assessee.

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• 2013 (6) TMI 72
  Admission of fresh evidences by the ITAT under rule 29 - Diversion of income - management expenses paid to group companies - applicability of section 52(2) - held that:- The fact remains that it is not the Tribunal, while hearing the case, which asked for the production of these documents of its own. On the contrary, the Tribunal acted upon the application preferred by the assessee. That would clearly mean that it has allowed the assessee, i.e., the party to the appeal to produce the evidence. Calcutta High Court in ITO v. B. N. Bhattacharya [1976 (12) TMI 24 - CALCUTTA High Court] observed that, There might well be cases where even though the court found that it was able to pronounce judgment on the state of record as it was, and so it could not strictly say that it required additional evidence to enable it to pronounce judgment, it still considered that in the interest of justice something which remained obscure should be filled up so that it could pronounce its judgment in a more satisfactory manner. Such a case would be one for allowing additional evidence for any other substantial cause under rule 27(1)(b) of Order 41 of the Code. The aforesaid case law clearly lays down a neat principle of law that discretion lies with the Tribunal to admit additional evidence in the interest of justice once the Tribunal affirms the opinion that doing so would be necessary for proper adjudication of the matter. - Once it is found that the party intending to lead evidence before the Tribunal for the first time was prevented by sufficient cause to lead such an evidence and that this evidence would have material bearing on the issue which needs to be decided by the Tribunal and the ends of justice demand admission of such an evidence, the Tribunal can pass an order to that effect. In the present case, the reason which was given by the assessee in support of its plea for admission of additional evidence was that the assessee could not produce these records before the lower authorities due to non-retrievability of e-mail on the date because of technological difficulties. This reason was specifically mentioned in the application filed. No reply to this application was filed refuting this averment, though the Departmental representative had opposed the admission of the additional evidence. The ground pleaded by the assessee was not confronted. - Rule 29 of the Income-tax (Appellate Tribunal) Rules categorically permits the Tribunal to allow such documents to be produced for any substantial cause. - Decided in favor of assessee.

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• 2013 (6) TMI 71
  Deduction u/s 80-IA & 80-IB - AO found that whereas assessee had earned a profit margin of 62.31% in respect of Unit no. 4, the overall margin of the assessee was only 9.92%. The Assessing Officer concluded that this represented a serious inconsistency in drawing up the accounts. - publication and printing of newspapers and periodicals - Job work for other units - whether the expenses allocated to Unit No.1 are to be taken into account for determining the eligible profits from Unit No.1? - Held that:- It is not in dispute that the printing charges charged by Unit No.4 to Unit No.1 were comparable to the market rates. It is a matter of record that during the period relevant to the assessment years 1997-1998 and 1999-2000 Unit No.4 was charging 77 paise per sheet for printing work done for third parties and 70 paise per sheet for printing done for Unit No.1. AO has also not found any manipulation or defect in the separate books maintained for Unit No.4. As there is no material to support the view that the job work charges charged by Unit No.4 from Unit No.1 were not at market rates it is in agreement with the view taken by the Tribunal that in absence of any defect or manipulation found by the AO in the books maintained for Unit No.4 and in absence of any material to indicate that the amount charged by Unit No.4 from Unit No.1 was not at comparable market rates, it would not be open for the revenue to disregard the profits of Unit No.4 as disclosed by the assessee only on the basis that the profits were significantly higher than profits earned by the assessee from other undertakings. Given the fact that Unit No.4 carries on job work of printing only, the expenses attributable to Unit No.1 which relate to the publishing business cannot be allocated to Unit No.4. Only those expenses which relate to the printing work carried on by the assessee in Unit No.4 are liable to be deducted from the job charges to arrive at the profits eligible for deduction under Section 80-IA of the Act or 80-IB of the Act as the case may be. Thus Tribunal was correct in relying upon the orders passed in the preceding years for disposing of the appeals relating to the assessment year 2004-2005 as attention has not been drawn on any material change that has occurred in this period. Thus assessee is entitled to deduction u/s 80-IA and 80-IB on the book profits of Unit No.4 as disclosed by the assessee - in favour of the assessee.

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• 2013 (6) TMI 70
  Deductions under Section 80-I - ITAT allowed the claim - whether ITAT was right in holding that Unit Nos. 2 & 3 are industrial undertakings for purposes of Sec. 80-I - Held that:- Unable to accept the contention of the revenue that there is no material to indicate that the integrity of the business carried out by Unit No.1 or the integrity of Unit had been broken in any manner. Admittedly, Unit No.1 continues to function and carry on the business even after Unit Nos.2 & 3 were established. As it is not disputed that Unit Nos. 2 & 3 were established in addition to the existing Unit and were not formed by transfer of any asset from Unit No.1. Unit No. 1 was mainly engaged in publication and also carried on the job of composing, processing and printing of sheet fed presses. Merely, because the activity of printing was carried on by Unit No.1 also and the Unit No.1 was utilising the capabilities of Unit Nos.2 & 3 by getting job work done from them does not lead to the conclusion that Unit Nos.2 & 3 had been formed by splitting of the business of Unit No.1. The test whether industrial undertaking fulfills the condition as imposed under Section 80-I(2)(i) is not whether some part of the business of an assessee is carried on by the newly established undertaking but whether the newly established undertakings are formed by splitting up or reconstruction of the business of the existing Unit. Considering the case of Textile Machinery Corporation Ltd [1977 (1) TMI 3 - SUPREME Court] & Indian Aluminium Company Limited [1977 (1) TMI 5 - SUPREME Court] unable to find any material from the records to support the contention that Unit Nos.2 & 3 have been formed by splitting up of the business of the assessee and thus, the condition under Section 80-I(2)(i) has not been met. Admittedly, the activities being carried on by the assessee in Unit No.1 have not been discontinued and the Unit Nos.2 & 3 were established in addition to Unit No.1. It has been admitted that neither any machinery nor any equipment were transferred from Unit No. 1 to Unit Nos.2 & 3. Thus not inclined to entertain the contention of revenue that Unit Nos.2 & 3 fail to fulfill the condition under Section 80-I(2)(i). Whether it was open for AO to deny the benefit of Section 80-I to the assessee having allowed benefit to the assessee in the preceding three years - Held that:- AO over a period of three years being assessment years 1988-89, 1989-1990 and 1990-1991 have consistently accepted the claim of the assessee for deduction under 80-I and it would not be open him to deny the deduction on the ground of non fulfillment of the conditions under 80-I(2 without disturbing the assessment for the assessment years relevant to the previous year in which the Unit Nos.2 & 3 were established. See Saurashtra Cement & Chemical Industries v. CIT [1979 (2) TMI 21 - GUJARAT High Court] & CIT Tax v. Paul Brothers [1992 (10) TMI 5 - BOMBAY High Court] wherein held that where relief of a tax holiday had been granted to an assessee in an initial assessment year in which the conditions for grant of tax holiday had to be examined, denial of relief in the subsequent years would not be permissible without disturbing the assessment in the initial assessment year. In favour of assessee.

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• 2013 (6) TMI 69
  Interest on account of investment in shares disallowed - set off of interest received with interest paid - business purpose - AO found that amount borrowed is not used for business purpose but used to lend the money to directors - ITAT allowed the claim - Held that:- A perusal of the entire order of the tribunal demonstrates that it had proceeded on wrong assumption of fact that the assessee is in the business of investment in shares and there is no dispute that the purchase of shares of Rs.2 crores of Agmo Tex Ltd. was for the purpose of its business. On the aforesaid wrong assumption of facts, the Tribunal had proceeded to place reliance on certain judgements of the Apex Court and of this court and had thereafter jumped to the conclusion that even if the investment in shares had not yielded any income, the interest payable on the borrowed amount is to be allowed as business expenditure u/s. 36(1)(iii). It is clear that the entire approach of the Tribunal is manifestly illegal as it wrongly assumed that the assessee is in the business of investment in shares with not referring to any material in this regard. There is no finding that in the previous years, the assessee has ever made investments in shares of any company, or had earned profit or loss therefrom. Tribunal had totally glossed over the main controversy between the parties & failed to notice the reasoning given by the AO and CIT(A) in holding that the investment by the assessee in the shares of M/s. Agmo Tex Ltd. is not in connection with its own business but to extend financial support to it in which the assessee himself is the Managing Director. Order of the tribunal deleting the addition cannot be sustained - question of law answered in favour of the revenue.

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• 2013 (6) TMI 68
  Penalty u/s 271(1)(c) - whether penalty order had been passed within the limitation period? - interest on the FDR calculated for a separate source of income and addition also made by computing the net profit rate @ 8% u/s 44 AD - Held that:- As nothing was concealed by the assessee. It was the A.O. who has rejected the books of account in the second round and applied the 8% net profit rate prescribed u/s 44 AD. As the turnover is more than 40 lacs, so Section 44 AD is not applicable, nonetheless the A.O. has inspired with the provision of Section 44 AD and made the addition by estimating the net profit rate @ 8%. Rejection of the books of account allowed the A.O. to make the addition on estimate basis. When the addition is made on estimate basis, no penalty under Section 271 (1)(c) can be imposed as per the ratio laid down in C.I.T. vs. Arjun Prasad Ajit Kumar, (2008 (1) TMI 821 - ALLAHABAD HIGH COURT) As no finding of deliberate concealment of income was brought in the instant case as the assessee has never suppressed the interest income from FDRs. Interest income from FDR was duly shown. It was for the A.O. to treat this income as business income or income from other sources. But the fact remains that there is no concealment on the part of assessee. So, no penalty leviable - in favour of the assessee.

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• 2013 (6) TMI 67
  Reassessment - charitable trust - registration u/s 12A - Held that:- It is shocking to note that the Commissioner of Income Tax, Muzaffarnagar who passed the order has dropped the proceedings for cancellation of registration without assigning any reason. The order being bereft of any reason cannot be treated an order in the eyes of law. One fails to understand what impelled him to do so. It is a case where the then AO, Add. CIT - CIT, Muzaffarnagar have abdicated their duties. - The Court in the exercise of supervisory jurisdiction under Articles 226 and 227 of the Constitution of India cannot be a mute spectator. Such actions on the part of the department not only bring disrepute to the department but also encourages the dishonest assessees and promotes the nefarious activities which not only causes loss to revenue but also promotes dishonestly. An honest tax payer feels cheated. Let the matter be examined by the Chief Commissioner of Income Tax and appropriate departmental proceedings may be taken out against the erring officials. Order of Commissioner dropping proceeding under section 12AA (3), being bereft of reasons, is no order in the eyes of law and therefore it is liable to be ignored. The Commissioner of Income Tax is directed to pass fresh reasoned order after hearing the petitioner. - writ petition dismissed with cost of Rs.10,000/- payable by the petitioner within a period of one month. - Decided against the assessee.

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• 2013 (6) TMI 66
  Unexplained cash deposits in CC account - CIT (A) deleted the addition by accepting the additional evidence - Held that:- Though the revenue has claimed large number of questions as substantial questions of law for the opinion of this court, but the issue lies is in narrow compass as entry of Rs. 30,00,000 is on account of counter sales reflected in the current account of the assessee. The assessee has explained the nature of such transaction in appeal. CIT (A) has taken into consideration additional evidence after providing opportunity to the revenue with CIT (A) returning a finding that the assessee has explained the counter sales to the extent of Rs. 1.33 crores which is inclusive of sale of Rs. 30 lacs. Such finding is a finding of fact which does not give rise to any substantial question of law. In favour of assessee.

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• 2013 (6) TMI 56
  Transfer pricing adjustment - determination of Arms Length Price (ALP) - reduction of the amount of telecommunication and travel expenses incurred in foreign currency for providing technical services attributable to delivery of software outside India as provided u/s 10A and without simultaneously reducing the said amount from total turnover - Held that:- As decided in CIT v Tata Elxsi Ltd. [2011 (8) TMI 782 - KARNATAKA HIGH COURT] when the expenses are reduced from the export turnover while computing deduction under section 10A the same should also be reduced from the total turnover in order to maintain parity between the numerator and the denominator. Thus AO directed to reduce the said sum from the export turnover as well as from the total turnover while computing deduction under section 10A. Inappropriate filters in process of selecting the comparable companies under TNMM - assessee had adopted CPM/CUP method by comparing the man hour rates charged by major software companies in India with the rates charged by the assessee, whereas the TPO adopted the TNMM - Held that:- An identical issue to that of the present one had cropped up in the assessee’s own case for the AY 2006-07 wherein after due consideration of the issue in detail, directed the assessing officer/TPO to consider (1) whether CPM/CUP is the most appropriate method to determine the ALP of the assessee’s international transaction and (ii) whether the foreign exchange gain/loss is arising in the normal course of the business and whether it should be considered as part of operating in nature for both the assessee as well as for the comparable companies. Thus this issue is restored on the files of AO/TPO for fresh consideration. In conformity with the findings of the case of Trilogy E-Business [2013 (1) TMI 672 - ITAT BANGALORE] we are of the considered view that (i) Accel Transmatic Ltd (Seg); (ii) Avani Cimcon Technologies Ltd; (iii) Celestial Labs. Ltd., & (iv) KALS Information Systems Ltd (seg) cannot qualify as comparables in the case of the assessee under consideration. Lucid Software Limited - Held that:- As following the order of the Tribunal in the case of Telcordia Technologies India (P.) Ltd. (2012 (6) TMI 388 - ITAT MUMBAI) direct the Assessing Officer/TPO not to include Lucid Software Limited as a comparable. After excluding from the TPO's list of comparables, the companies having turnover exceeding Rs. 200 crores and five companies which are functional dissimilar to that of the assessee, the following thirteen companies in TPO list are retained as comparables Datamatics Limited, E Zest Solutions Limited, Geometric Ltd. (seg), Helios & Matheson Information Technology Ltd, IshirInfotech Ltd, LGS Global Ltd (Lanco Global Solutions Ltd), Mediasoft Solutions Pvt. Ltd, Megasoft Ltd (Seg), Quintegra Solutions Ltd, R S Software (India) Ltd, R Systems International Ltd (Seg), SIP Technologies & Exports Ltd, Thirdware Solutions Ltd (Seg. Megasoft Ltd - Held that:- In conformity with the findings of the earlier Bench in the case of Trilogy E-Business Software India (P.) Ltd.'s (supra), we are of the considered view that the TPO was justified in selecting M/s. Megasoft Ltd as comparable. However, the AO/TPO is directed to take segmental margins of 23.11% for comparability. It is ordered accordingly. Ishir InfoTech Limited - Held that:- The issue is restored to the file of the AO/TPO to examine whether professional fees paid in the case of Ishir Info Tech is for the work outsourced. If the said amount is paid for the work outsourced, Ishir Infotech will not qualify 25% employee cost filter as salary paid, excluding the professional fee paid as compared to operating revenue. It is ordered accordingly. Foreign Exchange gains/Loss impact - Held that:- Direct the AO/TPO to consider the foreign exchange gain or loss as part of the operating cost or revenue, as the case may be, for both the assessee as well for the comparable companies. Incorrect margin computation of comparable margin - Held that:- It was the contention of the assessee that the working capital adjustment has been wrongly worked out by the TPO which requires reconciliation. Since the assessee’s allegation requires to be reconciled at the AO/ TPO’s level, the issue is remitted back on the files of the AO/TPO with a direction to verify the veracity of the assessee’s claim and to rectify the same, if it so warrants. Risk adjustment - Held that:- AO/TPO is directed to work out the ALP of the assessee and if found that the differential in the margin of the assessee and the comparable is beyond 5% bandwidth recognized in proviso to section 92C (2) then adjustment is required to be made to the reported value of the assessee's transaction with its AE.

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• Customs

• 2013 (6) TMI 65
  Condonation of delay - delay of 697 days - benefit of Section 14 of the Limitation Act. - Held that:- the appellant was assisted and had the services of the counsel's, who are expert in the central excise and customs cases. They first filed a writ petition, and then without converting it into appeal obtained an interim order. They kept on getting the matter adjourned and thereafter inspite of specific objection taken, citing the relevant case law, which is well known, took time to study the matter. Thereafter, they took more than one year and three months, to study the matter to withdraw the appeal. They took a chance, which apparently looking to the facts in Ketan V. Parekh's case [2011 (11) TMI 62 - SUPREME COURT OF INDIA] and this case appear to be the practice of the counsels appearing in such matters at Delhi High Court and succeeded in getting interim orders. The Supreme Court [2011 (11) TMI 62 - SUPREME COURT OF INDIA] has strongly deprecated such practice of forum shopping. In this case also there is no pleading that the writ petition and thereafter appeal was filed in Delhi High Court, under bonafide belief that it had jurisdiction to hear the appeal and that the appellant was pursuing the remedies in wrong court with due diligence. The appellant, thereafter, caused a further delay of 20 days in filing this appeal, which he has not explained. The appellant is not entitled to the benefit of Section 14 of the Limitation Act. This appeal is barred by limitation by 697 days, which has not been sufficiently explained by the appellant. - decided against the assessee.

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• 2013 (6) TMI 64
  Import of marble slabs - ISFTA - trade between India and Sri Lanka - restrictive import policy for marble on account of concerns for the domestic producers/processors of marble - held that:- In view GOPAL LAL SARDA Versus UNION OF INDIA [2008 (10) TMI 373 - BOMBAY HIGH COURT] it was held that, The Government could have, if it was so advised, withdrawn the concession given in the Customs Tariff Act or it could have gone in for amendment of the Treaty between India and Sri Lanka. In our opinion, the object which is specified in the affidavit defeats both the notification issued under the Customs Tariff Act, as also the provisions of the India Sri Lanka Treaty and, therefore, it cannot be said that the purpose of issuing the notification is legitimate and therefore, in our opinion, it cannot be said that the notification impugned in the present petition has been issued in public interest, because what is opposed to law cannot be said to be in public interest. If at all aggrieved from inclusion of marble/marble products in ISFTA is to have the same excluded therefrom, rather than to make it unworkable in the manner done. - set aside/quash the condition aforesaid restricting the import through the Port at Calcutta only. - Decided in favor of assessee.

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• Corporate Laws

• 2013 (6) TMI 63
  Voluntary winding up - huge loss - no steps taken by any of the creditors for recovery of their dues - Even though the counsel for the appellant Company has offered to give up the counter claim against Prasar Bharti and further offered that the ex-management will continue to contest the claim of Prasar Bharti against the appellant Company and not burden the Official Liquidator with the same but in the entirety of the facts aforesaid we are suspicious of the motives of the appellant Company in seeking its winding up when there does not appear to be an apparent reason therefor. The possibility of the appellant Company seeking winding up for other oblique reasons which are not visible to this Court and of the management of the appellant Company seeking the winding up to remove a blemish from their own record and which may be coming in the way of their other ventures, cannot be ruled out. Application for voluntary winding up rejected.

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• Service Tax

• 2013 (6) TMI 80
  Penalty - payment of service tax before issuance of show cause notice (SCN) - section 73(3) - held that:- Show cause notice was issued to the appellant on 13.03.09 which is undisputed. Since the appellants only claim before the Tribunal is that he has paid the amount of service tax liability, interest thereof before the issuance of show cause notice, he should get the benefit of Section 73(3), does not stand the test of the law, as it is evident that he has paid the amount only after the issuance of show cause notice. - penalty confirmed - decided against the assessee.

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• 2013 (6) TMI 79
  Rate of service tax - rate applicable as on the date of service rendered or date on which payment is received - held that:- issue is already settled by the Tribunal where it was held that the rate of tax applicable is rate applicable on the date of providing taxable service.

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• 2013 (6) TMI 78
  Work contract services - in respect of Railways - held that:- A reading of the provisions of section 65(105)(zzzza) and 66 would show that any service rendered in relation to the execution of a works contract in respect of Railways which is excluded under clause (zzzza) referred to above will fall outside the definition of taxable service and consequently no service tax shall be leviable under Section 66 of the Act on the value of such services. With this clarification, the writ petition stands disposed of.

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• 2013 (6) TMI 77
  Stay order - revenue neutral - tribunal directed to make pre deposit of Rs. 50 lakhs - services under the category of man power recruitment and supply agency services - held that:- The submission of the appellants is that assuming that the appellants are held liable to pay Service Tax, in view of the fact that the customer who is entitled to take credit of Service Tax would be entitled to refund as excise duty has been paid on the final products in cash without availing the credit and therefore the demand is in fact revenue neutral. It is, however, contended on behalf of the revenue that it is not a fit case for 100% waiver of the pre-deposit. In our opinion, in the facts of the present case, the duty demand be a case of revenue neutral, it would be just and proper to hear the appeal on merits without insisting pre-deposit. Order of the Tribunal directing pre-deposit of Rs. 50 lakhs is quashed and set aside and the tribunal is directed to hear the appeal on merits without insisting on pre-deposit. - Decided in favor of assessee.

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• Central Excise

• 2013 (6) TMI 83
  Default in payment of duty - penalty - mandatory requirement to pay in Cash - restriction on utilization of credit - Rule 8(3) - held that:- There is a clear contravention of sub-rule (4) of Rule (8) of the Rules. However, in the facts of the present case, resort could not have been made to Rule 25 of the Rules. The relevant rule would be Rule 27 of the Rules, which makes provision for “General penalty” under which the maximum penalty is five thousand rupees. Having regard to the facts and circumstances of the case, after this length of time, considering the smallness of the amount involved, even while answering the question in the affirmative, that is in favour of the revenue and against the assessee, this court does not deem it fit to disturb the order passed by the Tribunal. - Decided against the revenue.

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• 2013 (6) TMI 62
  Stay - Tribunal directed to pre deposit 50% - goods produced in India are supplied against International Competitive Bidding. - exemption Notification No.21/2002-Cus - procedural lapse - held that:- In the absence of clear finding that the same goods are exempt under the Notification No.6 of 2006 CE, the production of the essentiality certificate cannot be taken as a mere procedural lapse. The essentiality certificate was necessary for availing the exemption. In the present case Tribunal has exercised its discretion on the consideration of the prima facie case and found justification to direct deposit of 50% of the duty demand confirmed against the appellant - Tribunal has exercised its jurisdiction fairly and reasonably. The appellant will get relief, if he succeeds finally in the appeal. - decided against the assessee.

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• 2013 (6) TMI 61
  Levy of penalty in erstwhile Rule 96ZQ of Central Excise Rules, 1944? - Compounded levy of duty - production capacity - held that:- Tribunal wrongly relied on the ratio of Beauty Dyers v. Union of India (2001 (12) TMI 94 - HIGH COURT OF JUDICATURE AT MADRAS) decided by the Madras High Court. The question whether the penalty can be levied and whether there is any discretion in levy of penalty, stand covered by the judgment of this Court in Commissioner of Customs & Central Excise v. M/s Majestic Auto Ltd. (2013 (3) TMI 338 - ALLAHABAD HIGH COURT). - The authorities have no discretion in fixing the quantum of penalty and penalty equal to the duty must be imposed once section 11Ac is made applicable. - Decided in favor of revenue.

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• 2013 (6) TMI 60
  Appeal by revenue - authorization u/s 35B to avoid filing of frivolous appeals and unnecessary appeals - Whether it was correct and proper for the CESTAT to dismiss revenue appeal on presumption that since the members of the Committee of Commissioners have singed the note put up by subordinate officers for review of the Order-in-Appeal Nos. 20, 21 & 22-CE/APPL/KNP/2009 dated 10-2-2009 in a mechanical manner without any specific findings and signed Review Order on different dates, therefore, such review order also not get sanction in the eye of law?

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• 2013 (6) TMI 59
  Ultr vires - attachment, recovery and auction - Application of provisions of Section 142 (b) and 142 (c) (ii) of the Customs Act to the Central Excise Act - Section 12 of the Central Excise Act - recoverable Cenvat / Modvat credit wrongly availed - held that:- we do not find any good ground to interfere in the matter. This Court did not grant any interim order against the attachment and sale to recover the amount. It is not uncommon for a statute to adopt by reference the provisions of other statute in so far as the incidental matters are concerned. In the present case, the provision of Section 142 of the Customs Act are duly adopted by Section 12 of the Central Excise Act, 1944 for the purposes of recovery of excise duty by attachment and sale. Consequently the provisions of the Customs (Attachment of Property of Defaulters for Recovery of Government Dues) Rules, 1995 are applicable for attachment of the property for its sale. - Decided against the assessee.

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• 2013 (6) TMI 58
  Stay - whether the Tribunal fell into error in holding that the failure to deposit an amount directed automatically resulted in adverse condition as far as appellants are concerned, disentitling them to make their contentions on merits? - held that:- without first dealing with the merits of the individual appellant’s case for stay, the Tribunal ought not to have mechanically assumed default and dismissed the appeal. - This Court in previous order [2013 (5) TMI 700 - DELHI HIGH COURT] and the connected matters dealt with the case other than the present one i.e. Ravi Singhal, Supreme Road Transport Pvt. Ltd. and Supreme Trading Co. and observed that this approach of the Tribunal is indefensible. Matter restored before CESTAT for rehearing.

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• 2013 (6) TMI 57
  Cenvat / Modvat Credit - inputs - Wire Mesh and Felt used by the assessee in the manufacture of paper - held that:- since the decision of the Tribunal is based upon its earlier decision and no decision of the Supreme Court or High Court is cited either way and therefore, the questions proposed are referable questions of law with a view to examine as to whether the view taken by the Tribunal in Union Carbide case (1996 (6) TMI 308 - CEGAT, NEW DELHI) is just and proper or it requires any modification. In other words, the questions proposed are questions of law and being referable one to this Court, the application made by the applicant-Revenue deserves to be and is, accordingly, allowed. - matter required to be referred to the high court.

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• CST, VAT & Sales Tax

• 2013 (6) TMI 82
  Stay - requirement of pre-deposit - whether to deposit tax with interest etc. or only the tax portion alone - Section 17D(5) of KGST Act - held that:- The proviso to sub-section (5) of Section 17D categorically stipulates that the appeal will lie, if the dealer has paid the entire tax amount and the provision does not make any suggestion to the contrary, so as to have included the interest portion as well. The 'tax amount', as per order being a sum of Rs. 2,55,111/-, which in turn has been demanded to be satisfied. The said liability has been satisfied by the petitioner and there is no case for the respondents that the tax amount has not been satisfied, but for the interest portion. Matter restored before the tribunal to consider the same on merits, passing appropriate orders, in accordance with law, as expeditiously as possible. - Decided in favor of assessee.

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• 2013 (6) TMI 81
  Passive Infrastructure Services to mobile phone operators - Telecommunication infrastructure - whether the activity of leasing the telecommunication towers to various mobile telephone operator be deemed as a sale within the meaning of Section 2(29)(d) of the KVAT Act, 2003? - Transfer of right to use passive telecommunication infrastructure, viz. towers, DG sets, air conditioners, power management systems etc., by provider of these services to mobile operator - Held that:- It is well settled that, whether the transaction amounts to transfer of right or not cannot be determined with reference to a particular word or clause in the agreement. The agreement has to be read as a whole to determine the nature of the transfer. Thus from a close reading of all the clauses in the agreement it appears that under the terms of the contract there is no transfer of right to use the passive infrastructure conferred on the sharing operator/mobile operator. What is permitted under the contract is, a permission in the nature of a licence to have access to the passive infrastructure and permission to keep the equipments of the mobile operator in the pre-fabricated shelter with permission to have ingress and egress only to the authorised representatives of the mobile operator. It is because an owner of a property has a bundle of rights, namely right to possess, right to use and enjoy, right to usufruct, right to consume, to destroy, to alienate or transfer, etc.. Therefore, to constitute a deemed sale under Article 366(29A)(d) having regard to the object with the 46th Constitutional Amendment was inserted, it is clear the right that is transferred under a contract should be a bundle of rights minus right to title. Therefore, in deciding whether a transaction falls within Article 366(29A)(d) so as to constitute a deemed sale, the purpose of the 46th Amendment, the mischief sought to be remedied and the object sought to be achieved by the said provision cannot be lost sight of. Thus in the facts of this case, looking into the various terms of the agreement it is clear under the contract, the assessee has not transferred any right in the passive infrastructure to the mobile operators. The right that is conferred on the mobile operator is a permission to have access to the passive infrastructure, a permission to keep the active infrastructure in the site belonging to the assessee, a permission to mount the antennae on the tower erected by the assessee and to have the benefit of a particular temperature so as to operate the equipments belonging to the mobile operator. No sale of goods or transfer is involved in the transaction in question. Therefore, it does not fall within the mischief of Article 366(29A)(d) of the Constitution. Therefore, the impugned order passed by the learned single Judge as well as the assessing authority cannot be sustained. It is declared that under the contract entered into between the parties there is no sale of goods and at any rate there is no deemed sale so as to attract levy of tax under the Karnataka Value Added Tax Act, 2003. The payments made by the assessees either in terms of the order of the assessment order or in terms of any interim order passed in the Writ Petitions or in pursuance of the final order shall be refunded to the assessees within three months from the date of receipt of a copy of this order, failing which the said amount to be refunded would carry simple interest at 9% after the expiry of 90 days till the date of payment.

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• Indian Laws

• 2013 (6) TMI 76
  Debts Recovery - action under SARFAESI Act - stay - held that:- requirement of deposit of 75% of amount claimed before entertaining an appeal (petition) under Section 17 of the Act is an oppressive, onerous and arbitrary condition against all the canons of reasonableness. Such a condition is invalid and it is liable to be struck down. After a detailed examination of the whole issues, the Apex Court in Mardia Chemicals Ltd. Versus Union of India [2004 (4) TMI 294 - SUPREME COURT OF INDIA] has upheld the validity of the Act except that of Section 17(12). - Despite this, counsel contended that the issues raised by the petitioners in these writ petitions were not considered by the Apex Court and therefore, according to him, this Court should go into the validity of the provisions of the Act once again. - This judgment is a complete answer to the contentions raised by the learned counsel for the petitioners.

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