TMI Tax Updates - e-Newsletter
July 10, 2012

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws Service Tax Central Excise

Articles

1. EXEMPTION TO TRANSPORT OF PASSENGERS SERVICES.

   By: Dr. Sanjiv Agarwal

2. Clarification on Point of Taxation for Works Contract Services & open issues

   By: Bimal jain

News

1. Net Direct Tax Collections During April-June 2012 up by 47.16%.

2. Election of CCI Chairperson as Chair of UNCTAD's IGE on Competition law and policy.

3. Jyotiraditya M Scindia Calls for Closer Economic Engagements with Colombia Columbia Assures Early Ratification of DTAARaises Issues Faced by ONGC Videsh and Indian it CompaniesUnveils a Bust of Gurudev Rabindranath Tagore in Bogota.

Highlights / Catch Notes

Income Tax

• Section 80IB: Shared Processes Don't Disqualify Separate Industrial Undertakings for Tax Deductions.

  Case-Laws - AT : Deduction u/s 80IB - Unit-2 & Unit-3 - The same product or same location, common procurement, manufacturing and common employees cannot be the basis to hold that the assessee was not an industrial undertaking viable and separate undertaking. - AT
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• Income Addition Due to Non-Production of Bills and Supplier Non-Appearance u/s 133(6) of Income Tax Act.

  Case-Laws - AT : Addition on account of non production of bills and non appearance of suppliers u/s 133(6) - un-served notice with the remarks “party left” means that earlier this party was there - AT
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• ICAI Accounting Standards Must Be Strictly Followed for Accurate Income Tax Accounting Practices.

  Case-Laws - AT : Method of accounting - accounting standards reflecting the views of a professional body, viz., the ICAI are entitled to the highest respect and have to be followed and applied. - AT
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• Windmill Projects: No TDS on Composite Work Contracts for Supply and Installation u/s 194C.

  Case-Laws - AT : TDS u/s 194C - supply of plant and machinery of windmill, for civil/electrical works and erection and commission of windmill, is a composite work contract - No TDS - AT
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• Section 40A(3) of Income Tax Act: Cash Payments Over Rs. 20,000 Restricted, Bearer Cheques Not a Justification.

  Case-Laws - AT : Applicability of provisions of sec. 40A(3) - cash payments exceeding Rs.20,000 - hardship or inconvenience - payments made by bearer cheques which had to be encashed in the banks only and, therefore, the argument that the payment had to be made in cash to the agriculturists is not acceptable. - AT
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Customs

• Court Rules Bagging Charges Excluded from Bills of Entry; Decision Favors Assessee in Customs Dispute.

  Case-Laws - AT : Non inclusion of cost of bagging charges in the Bills of Entry - bagging has been done before out of charge in the Customs area - decided in favour of assessee - AT
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• High Court Rules Zircon is "Ore," Allowing Duty-Free Importation; Impacts Zircon Classification and Taxation on Imports.

  Case-Laws - HC : Import of Zircon - Whether Zircon is “Ore“ - Zircon Ore and Concentrate - Permission to clear goods in question without payment of CVD - permission granted - HC
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Service Tax

• Appellant Manufacturer Entitled to CENVAT Credit; No Duty Evasion Intent, Extended Recovery Period Not Invoked.

  Case-Laws - AT : When the situation is revenue neutral and the appellant manufacturer is entitled to CENVAT Credit, it cannot be said that there was an intention to evade duty and extended period can be invoked - AT
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• Refunds Under Notification No 41/2007 Shouldn't Be Denied for Technical Errors if Substantively Justified.

  Case-Laws - AT : Refund of the service tax, - Notification No 41/2007 - Grant of refund of duty or any other sum due to an assessee should not be denied for mere technical or procedural lapses if it is otherwise due substantively on merits - AT
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• TDS Amount Must Be Included in Gross Value for Service Tax When Payer Bears TDS Burden.

  Case-Laws - AT : Valuation under service tax - inclusion of TDS (withholding tax) where burden born by the recipient (payer) in the gross value - Amount of TDS is required to be included in gross value - AT
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Central Excise

• State-Owned Manufacturing Unit Qualifies for SSI Exemption Under Notification No. 8/2002, Explanation (E) Supports Classification.

  Case-Laws - AT : SSI Exemption - Notification No.8/2002 - Since, respondent is a manufacturing unit owned and controlled by the State Government, hence respondent is squarely covered under Explanation (E) to the above referred Notifications - AT
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Case Laws:

• Income Tax

• 2012 (7) TMI 190
  Constitutional validity of insertion of conditions in the third and the forth provisos to Section 80 HHC(3) by amendment of Taxation Laws (Second Amendment) Act, 2005 with retrospective effect - petitioner contended such amendment to be violative of Article 14 of the Constitution of India as it is arbitrary and unreasonable on ground that two assessees of similar description having export turnover of more than Rs.10 Crore are discriminated inasmuch as the assessees whose assessments have become final is not required to comply with the two conditions and would avail deduction u/s. 80 HHC as against the assessees whose assessments are pending and who would be required to comply with the two conditions - Held that:- In the matter of completion of assessment, the assessees have little role to pay. After the assessees have submitted their returns within the time fixed by law, if for any reason the respondent delays in making the assessment, taking advantage of their own delay, the Revenue cannot deprive a class of the assessees of the benefit whereas other assessees of the same class whose assessment have already been completed would get the benefit. Therefore, discrimination based on two classes, first, whose assessments have become final and secondly, whose assessment are pending, definitely violates Article 14 of the Constitution of India as there is no rationale nexus with the object of the amendment, and, therefore, such classification fails the test of Article 14 of the Constitution, being a case of ‘palpable arbitrariness’. Further, Revenue has failed to discharge that burden by pointing out the reason for making classification based on the above two aspects which have no reasonable connection with the object of amendment. Legislature is not bound by the doctrine of promissory estoppel and thus proposed amendment cannot be struck down on the ground that the same is violative of principles of promissory estoppel although individually an assessee can take the plea of promissory estoppel if the amended provision adversely affects such an assessee. Substantive amendment cannot be made with retrospective operation - Held that:- Present amendment has been made at a point of time when the application of section 80HHC has already been exhausted and the same was not even in the statute book. In such situation, it is not permissible to take away the benefit already granted through a concluded scheme by introducing fresh amendment by virtue of which an expired scheme has been revived with benefit conferred upon only a limited section and snatching the same from some other sections. Hence, impugned amendment is quashed only to this extent that the operation of the said section could be given effect from the date of amendment and not in respect of earlier assessment years of the assessees whose export turnover is above Rs. 10 Crore. In other words, the retrospective amendment should not be detrimental to any of the assesses.

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• 2012 (7) TMI 189
  Transfer of Capital asset u/s 2(47)(v) - land given to developer for development - assessee contended non-chargeability of capital gains in respect of the land, which was not 'transferred' but only given for development, hence not coming within preview of Section 2(47)(v) - Held that:- In instant case, owners have entered into an agreement for development of the property and certain rights were assigned to the developer who in turn had made the substantial payment and consequently entered into the property and thereafter if the transferee has taken any steps in relation to construction of the flats, then it is to be considered as transfer u/s. 2(47)(v). The fact that the legal ownership continued with the owners to be transferred to the developer at a future distant date really does not affect the applicability of s. 2(47)(v) since definition of "transfer" not merely prescribes allowing of possession but to be retained in part performance of a contract of the nature referred in s. 53A of the Transfer of Property Act. Thus, if the possession and control of the property is already vested with the transferee and the impugned development agreement has not been duly cancelled and it is still in operation, it has to be decided that there is a transfer u/s. 2(47)(v). In our opinion, the real intention of the parties herein to be seen, accordingly, issue is set aside to file of the CIT(A) to decide the same afresh in light of the above observations and decision in case of Chaturbhuj Dwarkadas Kapadia v. CIT (2003 (2) TMI 62 (HC)) and Dr. Maya Shenoy v. ACIT (2008 (10) TMI 262 (Tri)) - Appeal allowed for statistical purposes.

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• 2012 (7) TMI 188
  Deduction u/s 80IB - dis-allowance on ground that Unit-2 & Unit-3 were not separate and independent industrial undertakings and it was the case of extension of business of Unit-1 for which deduction u/s 80IB is not available being eleventh year of operation u/s 80IB - assessee engaged in the business of manufacturing of Pesticides and Agro Products at its three units which are based at Jammu - Held that:- Expansion of an industrial undertaking is not a bar for claim of deduction u/s 80IB. The same product or same location, common procurement, manufacturing and common employees cannot be the basis to hold that the assessee was not an industrial undertaking viable and separate undertaking. What is important is that there must be a set up of independent and separate viable undertaking. In this regard, the assessee has placed on record that it has made separate investment in the plant & machinery account and the building. Provisions of Section 80IB do not provide in any way separate registration or maintenance of separate records for claiming deduction. The requirement u/s 80IB(1), 80IB(2) and 80IB(4) is that profit must derive from an industrial undertaking. Therefore, it cannot be held that undertakings are not eligible to claim deduction u/s 80IB. Refund of excise duty - Revenue contended ineligibility for deduction u/s 80IB on ground that same being income 'not derived from the industrial undertaking' but the income attributable to the receipt of excise duty refund from the industrial undertaking - Held that:- Issue stands covered by the decision in the case of Shree Balaji Allows v. CIT [2011 (1) TMI 394 (HC)] wherein it has been held that the Excise Duty Refund is to be treated as 'capital receipt' and not liable to be taxed. Depreciation - dis-allowance on ground that construction material used comes within preview of building and no P&M - Held that:- Once the said expenditure is part of the plant and machinery, which is not under dispute, such expenditure necessarily has to be part of plant and machinery and depreciation as claimed has to be allowed. Dis-allowance u/s 43B - employees contribution to Provident Fund - payment before due date of filing return - omission [deletion] of the second proviso to Section 43-B - Held that:- In view of decision in case of CIT v. Alom Extrusions Ltd. [2009 (11) TMI 27 (SC)], the entire employees contributions to provident fund paid during the year, which is under dispute, has to be allowed. Interest u/s 234B - assessee contended non-levy of interest as per Notification No.275/12/2007 dated 26.04.07 providing waiver of interest u/s 234B upto the AY 2007-08 in respect of the assessee residing in Kashmir and having their principal place of business in the Kashmir Valley - Held that:- Such interest u/s 234B in the present case cannot be levied. Set off of a loss of 100% EOU, against the income arising from other units under the same head of profits and gains of business - Held that:- In view of decision in case of CIT v. Galaxy Surfactants Ltd. reported in [2012 (3) TMI 101 (HC)] it is evident that the assessee is entitled to set off of loss 100% EOU with the profits of other undertaking - Decided in favor of assessee.

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• 2012 (7) TMI 187
  Dis-allowance u/s 40(a)(ia) - failure to deduct tax at source u/s 194C - amounts stood paid during the instant year itself - Held that:- Provisions of Section 40(a)(ia) are applicable only to the amounts of expenditure which are payable as on the date 31st March of every year and it cannot be invoked to disallow which had been actually paid during the previous year, without deduction of TDS. See Merilyn Shipping & Transports vs. ACIT (2012 (4) TMI 290 (Tri)) - Decided in favor of assessee.

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• 2012 (7) TMI 186
  Justification to allow deduction u/s 40(a)(ia) being 25% of the royalty paid - AO stated that as the assessee fails to comply its liability to TDS u/s. 194J the entire amount paid as royalty warrants disallowance - Held that:- As the payment in question was made by the assessee for obtaining certain rights over the film Boa and Passion including rights of distribution and exhibition of cinematographic films and also satellite TV protecting rights. In view of the specific provisions of Explanation 2, clause (v) of section 9(1)(vi) consideration for distribution or exhibition of cinematographic films are excluded from the purview of definition of royalty. The CIT(A) bifurcated the value of the rights acquired by the assessee and has attributed 25% of the payments made as attributable to TV rights which would be royalty taxable in the hands of the non-resident in India - in favour of assessee. Additions on Payment made on Studio Hire Charges - CIT(A)deleted additions made by AO - Held that:- As the assessee had utilized the services of dubbing studio by using their equipments as well as the artists who were working for Studio, the assessee had thus carried out the work of dubbing by engaging services and the same was of the nature of getting work done through a sub-contractor - that the provisions of section 194C were applicable and the assessee has rightly deducted tax at source at 2% treating the payment as a payment to subcontractor for carrying out a work - in favour of assessee.

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• 2012 (7) TMI 185
  Computation of deduction u/s 10A - AO excluded the interest income,disposal of assets and miscellaneous income from the profit of business - Held that:- Regarding profit on disposal of assets and interest on bank deposit in the computation of income these incomes were already reduced by assessee for calculation of exempt income, therefore, these cannot be reduced again As regards misc. income AO had not given any finding about the nature of income credited under the head misc. income as the inclusion or exclusion of misc. income in the exempt income u/s 10A will depend upon the nature of misc. income - remit the case to the file of AO on this point to first give a finding on the nature of misc. income and allow it accordingly as per law - partly in favour of assessee.

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• 2012 (7) TMI 184
  Addition on account of non production of purchase bills & vouchers - CIT(A) deleted the additions - Held that:- it is seen that the Assessing Officer had made the addition because of one point and i.e. non production of bills and non appearance of suppliers u/s 133(6) and CIT(A) has rightly observed that un-served notice with the remarks “party left” means that earlier this party was there - AO in his assessment order has ignored to note That the payment of purchases were made through Account Payee cheques only,there was certificate from site In-charge certifying utilization of material and that out of six suppliers which were summoned u/s 133(6) only one supplier did not appear - if the information u/s 133(6) is not furnished, the claim of deduction cannot be denied only on the ground - in favour of assessee. Addition of Rs.3,00,000 on account of labour charges and verifiable expenses - Held that:- AO had not made any specific finding to reach at the figure of disallowance as the addition is an ad hoc addition and while making the addition he had ignored the fact that percentage of labour charges to gross turnover had come down to 13.73% as against 16.99% in the preceding year - CIT(A) has rightly restricted the disallowance to 1.00,000 - in favour of assessee. Addition on account of random checking of vouchers from which he found that payments for an amount of Rs. 90,537/- were not available. The assessee had explained that due to work at various sites these might have been lost. The Assessing Officer had made a finding in respect of Rs. 90,567/- only in which the vouchers were not available. Therefore, Ld CIT(A) had rightly restricted the disallowance to Rs. 90,537 - in favour of assessee.

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• 2012 (7) TMI 183
  Dis allowance of Prior Period Expenses - Held that:- the assessee is following mercantile system of accounting. It is well settled that accrual of a statutory liability depends upon the terms of the relevant statute and the quantification or ascertainment cannot postpone its accrual to the extent of admitted liability - the assessee did not furnish any evidence before the AO or CIT(A) that the liability for the expenses shown as prior period expenses crystallized in the respective years under consideration. In the absence of any basis dis allowance is warranted - against assessee. Disallowance of an amount of Rs. 34.31 lakhs debited to P/L a/c & Rs. 5,34,79,358/- included in the inventories - Held that:- As the amount of Rs. 534.79 lakhs was included in the closing stock for the year under consideration as detailed in the impugned order, thus the plea of the DR on this aspect is devoid of any merit - As regards amount of Rs.34.31 lakhs mentioned in the audit observation neither any evidence was furnished before the AO nor CIT(A) in support of this amount, thus in the absence of any reconciliation or evidence in support of the amount the amount is need to be disallowed - against assessee. Disallowance for want of reconciliation - Accounts with Indian Airlines Ltd., the parent company, have neither been reconciled nor confirmed - Held that:- Since no reconciliation has been submitted either before the AO or before the CIT(A), in the absence of any basis, no alternative left but to uphold the findings of the ld. CIT(A)to warrant disallowance - against assessee. Addition on account of grant received - AO has taken the entire grant received for the year as the revenue of the assessee, which has been vehemently contested - Held that:- It is not in dispute that the grant given to the assessee was Rs. 35 crores for the year which was based on the MOU between the assessee and NEC (North Eastern Council). As per the MOU, the total sanction from the government was Rs. 175 crores over a period of 5 years for improving air connectivity in the north east region - the assessee has been following the accounting standards as prescribed by ICAI which cannot be faulted for this. It is not a matter of dispute here is that the government grant given to the assessee was based on operations from which a net expenditure/income had to be arrived at after deducting the expenditure. In such circumstance, if the assessee has shown only an amount of Rs. 7.29 crores, the same has to be sustained. The amount cannot be the total receipt of Rs. 35 crores or the figure of Rs. 27.71 crores - in favour of assessee. Disallowance of aircraft lease handling and maintenance charges to its holding company - Held that:- Assessee did not furnish any explanation whatsoever before the AO nor the CIT(A). Thus in view of the aforesaid observations of CAG pointing out that excessive payment had been made to Indian Airlines to the extent of Rs.3.92 crores, the CIT(A) upheld the disallowance and in the absence of any basis, especially not even evidence or explanation was placed before the AO or the CIT(A) no alternative but to uphold the findings of the CIT(A) - against assessee. Addition on a/c of change in the method of accounting - Held that:- As there is nothing to suggest that the change made in the method of inventory valuation by the assessee was not with a bona fide intention it is thus apparent that only with a bona fide intention the assessee changed the method of stock valuation in the light of relevant accounting standard prescribed by ICAI. As a result of the change made in the method of stock valuation, the income of the assessee has reduced as any change in any method of stock valuation is bound to make some change in the taxable income. Simply because, by virtue of the change introduced by the assessee, the income has been reduced, by no stretch of imagination, it can be said that the assessee had an intention to deliberately undervalue its stock so as to reduce its tax burden - against revenue. Disallowance of insurance reserve - Held that:- The assessee is consistently following the prescribed accounting policy by crediting the reserve account on account uninsured risk and this method has been accepted earlier by the Revenue. The CIT(A) found that the assessee made the provision on the basis of actuarial valuation and DR did not place any material suggesting that the liability was contingent in nature - in favour of assessee.

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• 2012 (7) TMI 182
  Disallowance under section 14A - indirect expense incurred in earning the dividend income claimed exempt u/s 10(34)- CIT(A)restricting the to Rs.1,00,000/- as against the disallowance of Rs.16,90,103 computed by the AO - Held that:- As decided in Maxopp Investment Ltd. vs. C.I.T.[2011 (11) TMI 267 (HC)] as per-rule 8D period whenever issue of section 14A arises before an AO, he has first of all, to ascertain correctness of claim of assessee in respect of expenditure incurred in relation to income which does not form part of total income under Act and if he is satisfied on an objective analysis and for cogent reason that amount of such expenditure as claimed by assessee is not correct, he required to determine amount of such expenditure on basis of a reasonable and acceptable method of apportionment rule 8D, which is prospective in operation and cannot be regarded as being retrospective - the issue is remitted to the file of the Assessing Officer to consider the issue afresh in light of the decision - partly in favour of revenue.

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• 2012 (7) TMI 181
  Determination of arms length price - assessee contested that TPO rejected certain comparables, economic performance data - Held that:- Set of comparable companies the TPO has relied on this information gathered for non public domain by using powers u/s 133(6) and this information is neither contained in the annual reports nor in the public domain data base and is not not supplied to assessee to enable it to meet the objections - direction to TPO to arrive at the ALP after providing the assessee adequate opportunity of being heard in accordance with law -decided in favour of assessee.

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• 2012 (7) TMI 180
  Disallowance of the claim of "Bad debts" - AO stated to be existence of no valid transactions - Held that:- As assessee had purchased shares on behalf of the sub-broker and in fact paid the amount of Rs. 1,06,10,247/- and as against this amount has received only a sum of Rs.64 lacs. The brokerage which was received in the aforesaid transaction was shown as income by the assessee which was taxed as such as well by the Assessing Authority. Thus only because shares were not delivered for want of full payment it cannot be said that there was no transaction between the parties and the amount which could not recover to the extent of Rs. 41,37,881/- is to be treated as debt. As shares remained in the possession of the assessee he could sell the said shares for whatever consideration it could fetch and it would be adjusted against the balance amount of Rs. 41,37,881/- payable by the debtor, i.e. the sub broker - in favour of assessee for statistical purposes.

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• 2012 (7) TMI 179
  Non-disclosure of assets - Assessing Officer in the order of assessment holds that since as per the depreciation statement of the assessee, the addition of the fixed asset is not reflected, the value of the new car is added to the assessee’s income as undisclosed asset - Depreciation chart does not reflect the gift transaction properly and in the absence of specific mention of the newly purchased car in the addition column of the depreciation chart, the addition is justified – Held that:- No detailed examination by the learned CIT(A) of the claim of the assessee that he has purchased a new car or that his old car is not reflected in his asset statement as it has been gifted to his wife and is reflected in her assessment records which are with the very same A.O. as that of the assessee in the instant case - assessee’s claims are just brushed aside and no cross verification has been carried out - There appears to be no clarity either in the submissions made by the assessee or in the findings of the authorities below and therefore in the interest of justice we remit this issue back to the file of the Assessing Officer Interest u/s.234B of the Act - charging of interest is consequential and mandatory - Assessing Officer is however directed to recompute the interest chargeable - assessee’s appeal is partly allowed for statistical purposes.

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• 2012 (7) TMI 178
  Legal infirmities in reassessment framed u/s 147 - CIT(A)stated that the AO should have reason to believe that income had escaped assessment - Held that:- The AO while issuing intimation u/s 143(1) applied his mind and denied to allow credit for TDS as income against this TDS was not considered by the assessee in the taxable income. Such intimation u/s 143(1) was accepted by the assessee and it has become final. Then the notice u/s 148 has been issued on the basis of same note given by the assessee in the return of income and the TDS certificate which was filed in the original return. As the AO has already considered the same while issuing the notice u/s 143(1) and formed an opinion that credit for TDS is not allowable as the income was not offered. Subsequently, by issuing notice under Section 148, he changed his opinion and came to the conclusion that interest income is taxable in AY 2003-04. It is a clear case of change of opinion - no justification to interfere with the order of CIT(A)- against revenue.

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• 2012 (7) TMI 177
  Penalty u/s 271(1)(c) - assessee contested that since the return was filed in loss and there was no income therefore there is no question of concealment of income, consequently, no penalty can be imposed - Held that:- Finding in the assessment order reveals that it is a case where the sales are made to the parties which were not identifiable, therefore, the claim of the assessee, prima facie appears to be non-genuine. There is no explanation as to how the opening stock of Rs.55,23,532/-, after the sales of Rs.6,37,204/-, reduced to Rs.1,42,600/-. The assessee has also not filed any appeal against the quantum addition of Rs.25 lakhs - The assessee has shown abnormal and excessive loss on the claimed decrease in value and for which also, no satisfactory explanation was adduced - against assessee.

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• 2012 (7) TMI 176
  Deduction u/s. 80-O - principles of consistency - order of the ld. CIT(A) for the assessment year 1997-98, directed that the proportionate amount of Indian salaries from income of the three Chartered Accountants received during the period of absence from India should be treated as direct expenditure against the income from the foreign currency received – assessee contesting contrary decision given in relevant year – Held that:- finding of the ld. CIT(A) for the assessment year 1997-98 has been accepted and the finding therein is a point of fact and a fundamental one at that, such a finding would have to be held to be applicable for the assessment year 1993-94 also - Principles of natural justice demand that a factual finding given by the ld. CIT(A) is liable to be followed for the assessment year 1993-94 also - Following the decision in the case of Radhasoami Satsang (supra) and applying the principles of consistency as explained therein, this issue is restored to the file of the AO with a categorical direction that when computing the deduction under section 80-O, the AO shall follow the same method as prescribed by the ld. CIT(A) for the assessment year 1997-98 in the assessee’s own case referred to supra - order of the ld. CIT(A) stands set aside and the issue is restored to the file of the AO - Ground of the assessee is allowed - Assessee is partly allowed.

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• 2012 (7) TMI 175
  Default u/s 201(1) for not deducting tax at source u/s 194C - supply of plant and machinery of windmill, for civil/electrical works and erection and commission of windmill, is a composite work contract - Held that:- As the assessee has given order for supply of machinery separately and has paid a separate amount for cost of civil work/electrical work and erection of the machines at the place of assessee. Therefore, though it is a single order but it has to be taken separate i.e. on account of supply of machinery and on account of cost of civil work/electrical work and erection work. The supplier has effect a separate sale bill in respect of supply of machines. The assessee has given ‘C’ form to the supplier on account of purchase of machinery and on remaining amount the assessee has deducted TDS i.e. on account of erection work and civil work contract - as the assessee purchased machinery and the supplier was supposed to erect the machinery at the factory premises of the assessee after completing the civil work and erection work and the assessee has already deducted TDS on account of services rendered the provisions of section 194C are not applicable on account of purchase of machinery - in favour of assessee.

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• 2012 (7) TMI 174
  Rejection of renewal of exemption u/s 80G(5) - CIT(A)stated that the provisions contained in section 293C enables him to withdraw approval - Held that:- Considering the amendment brought w.e.f. 1st of October, 2009 to omit the proviso of section 80G(5)(vi) to provide that the approval once granted shall continue to be valid in perpetuity. Further, the Commissioner will also have the power of withdraw the approval if the Commissioner is satisfied that the activities of such institution or fund are not genuine or are not being carried out in accordance with the objects of the institution or fund. Considering the proviso of section 293C it is clear that even if any Income-tax Authority wants to withdraw approval, he shall issue a show-cause notice against the proposed withdrawal to the assessee giving a reasonable opportunity of being heard, whereas in the present case no such show-cause notice has been issued to the assessee. Therefore no merit in this contention of the ld. CIT of invoking the proviso of section 293C - decided in favour of assessee.

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• 2012 (7) TMI 173
  Applicability of provisions of sec. 40A(3) - cash payments exceeding Rs.20,000 - assessee claimed the exceptions provided under Rule 6DD (g) & (k) - Held that:- Applicability of exceptions provided under Rule 6DD of ITR, the assessee has to establish the hardship or inconvenience that is caused to the payees if the payments are made by the account payee cheques - pleas of the assessee that the lands are purchased from the agriculturists who are suspicious of and are usually demanding payment in cash before parting with the possession of their lands is not acceptable as it is observed by the CIT(A) that there is no banking facility in the villages where lands have been purchased. However, we find that the payments are not by cash but are by bearer cheques which had to be encashed in the banks only and, therefore, the argument of the assessee that the payment had to be made in cash to the agriculturists is not acceptable.Thus, the applicability of sec. 40A(3) and its constitutional validity has been upheld irrespective of whether the transaction is genuine or otherwise. The assessee’s reliance on clause (k) of Rule 6DD is also not acceptable for the reason that the payments were directly made to the agriculturists and not to its agents i.e the directors. Even if it is accepted that the payments are made by the assessee to its directors, it is the duty of the assessee to demonstrate that the directors were supposed to make the payment for the goods or services in cash. The onus still lies on the assessee to prove - against assessee. Disallowance u/s 40(a)(ia) - Held that:- As decided in Merilyn Shipping & Transports Versus Assistant Commissioner of Income-tax, Range-1, Visakhapatnam [2012 (4) TMI 290 (Tri)]that disallowance u/s 40a(ia) is to be made only in respect of the amount payable and not on the amount paid, therefore, as submitted that the disallowance made by the AO was with regard to the amount paid by the assessee and not on the amount payable by the assessee, therefore, the disallowance has to be deleted - in favour of assessee.

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• 2012 (7) TMI 172
  Validity of reasons for reopening of assessment - assessee contested that CIT(A) confirmed the order of AO in bringing to tax a sum as long-term capital gains as against Nil declared by assessee ignoring the provisions of S.54 without offering the "reasons recorded" - Held that:- Perusing the alleged 'reasons recorded' by the AO it is clearly written that "hence notice under Section 148 was issued on 10-2-2000 to ascertain details of the aforesaid facts and was served on 14-2-2000", abundantly shows that the date of issuance and service of notice has been mentioned in the 'reasons' itself, which, inter alia, means that "reasons" were not recorded prior to issuance of notice under Section 148 i.e. 10-2-2000. Nothing has been brought on the record to contradict that these are not the "reasons recorded." It was after a gap of almost 11 years that so-called 'reasons' have been provided and that to when the assessee had to approach the ITAT twice to get the direction for providing the "reasons recorded" - ITAT had specifically directed the Assessing Officer to provide "reasons recorded" and decide the issue afresh which was grossly violated - notice had already been issued and served upon the assessee prior to the recording of reasons, the entire proceedings initiated under Section 148 has no legs to stand - decided in favour of assessee.

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• Customs

• 2012 (7) TMI 171
  Non inclusion of cost of bagging charges in the Bills of Entry - the appellant had imported Di-Ammonium Phosphate and carried out the bagging of the same inside the port area - Held that:- Non-inclusion of the bagging charges in the value of Potash imported as the bagging has been done before out of charge in the Customs area - decided in favour of assessee relying on Garden Silk Mills Vs. UoI [1999 (9) TMI 88 (SC)]

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• 2012 (7) TMI 167
  Import of Zircon - Whether Zircon is "Ore" - Zircon Ore and Concentrate - Permission to clear goods in question without payment of CVD till appeal is disposed of by Tribunal –assessee contested that some other persons similarly placed with the petitioner are not required to pay by virtue of the decisions of the authority situated in a different State on interpretation of the selfsame provisions of law- Held that:- Division Bench of this court in the past allowed the petitioner to release the goods on payment of 25% of the duty and on execution of a bond to pay the assessed amount if their appeal before the Commissioner (Appeals) failed with a direction to file such an appeal within a specified time - since a further appeal has been filed before the Tribunal by the petitioners and there is no decision on the above point by any Tribunal of this State the petitioners should be permitted to get the order of release of the similar goods during the pendency of the appeal before the Tribunal on the selfsame conditions imposed earlier by a Division Bench of this court which will abide by the decision of the Tribunal - direction to Tribunal to dispose of the appeal pending within a period of three months from date of Order.

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• Corporate Laws

• 2012 (7) TMI 170
  SLP - Reserve Bank of India shall not grant any permission to the foreign law firms to open liaison offices in India u/s 29 of the Foreign Exchange Regulation Act, 1973. Also, to practice in non-litigious matters in India the foreign law firms, by whatever name called or described, shall be bound to follow the provisions contained in the Advocates Act, 1961.

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• Service Tax

• 2012 (7) TMI 196
  Penalty - Invocability of extended period - Appellant company is engaged in the manufacture and supply of Wind Energy Turbines within and outside India - appellant voluntarily paid the Service Tax and interest thereon on 06.02.2007. Proceedings were initiated by way of issuance of Show Cause Notice on 24.04.2009 – Held that:- Invocability of extended period in cases where the receiver of Service Tax is eligible to avail CENVAT Credit, is no longer res-integra and in such cases, it has been held that no penalty can be imposed - when the situation is revenue neutral and the appellant manufacturer is entitled to CENVAT Credit, it cannot be said that there was an intention to evade duty and extended period can be invoked - penalty imposed on the appellant cannot be sustained – In favor of assessee

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• 2012 (7) TMI 195
  Abatement in respect of amount charged by GTA - Notification No 32/2004 - denial on ground that appellants have filed only revised declaration from the transporter for non-availment of CENVAT Credit of input or capital goods but has not filed such declaration on each and every consignment - Held that:- Issue is no more res-integra. High Court in case of Neral Paper Mills Pvt.Ltd (2010 (9) TMI 297 (HC)) held that exemption is provided by way of notification and the Board can prescribe the procedure for availing the benefit of the said exemption notification. When nothing has been brought on record or alleged that GTA has availed credit on inputs and capital goods, denial of benefit of Notification No. 32/2004 is not correct in law. Following aforesaid decision issue decided in favor of assessee.

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• 2012 (7) TMI 194
  Mandap Keeper services - abatement of the value of the food provided - denial of benefit of Notification No.1/2006 - Held that:- Since the aspect that whether any CENVAT Credit is availed by appellant of any services, input or capital goods, required for rendering the services of Mandap keeper has not been verified. Therefore, matter remanded back to adjudicating authority to reconsider the issue afresh.

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• 2012 (7) TMI 193
  Dismissal of appeal for non-compliance of the pre-deposit ordered - issue involved, whether services rendered as to the measurement of land would fall under the category of Consulting Engineering service - period July 2001 to March 2004 - Held that:- Definition of Consulting Engineers during the relevant period needs to be considered by first appellate authority before coming to any conclusion. Since the issue has not been addressed by the first appellate authority on merit, therefore, in the interest of justice, the matter needs to be reconsidered by first appellate authority. Also, appellant has made out a prima facie case for waiver of pre-deposit of amounts involved - appeal allowed by way of remand to first appellate authority.

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• 2012 (7) TMI 192
  Refund of the service tax, which was used as input services for export of goods under Notification No 41/2007 - Adjudicating authority, after considering all the evidences which were produced before him, allowed the refund claim filed by the assessee - objections to the grant of refund – Held that:- Grant of refund of duty or any other sum due to an assessee should not be denied for mere technical or procedural lapses if it is otherwise due substantively on merits - Matter remanded to the reviewing authority - Appeal is allowed by way of remand.

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• 2012 (7) TMI 191
  Valuation under service tax - inclusion of TDS (withholding tax) where burden born by the recipient (payer) in the gross value - Technical consultancy and project consultancy services - Held that:- As per Section 66A the service covered by that section is treated as if the recipient had himself provided the service in India. Thus by such legal fiction the consideration inclusive of income tax deducted at source shall be assessable value for the purpose of the Act in the hands of the service recipient - No pleading on material facts by the appellant as to how the facts in issue suggest and support defence of appellant that income tax deducted at source shall not form part of the gross amount of taxable service received when Rule 7(1) of Service Tax (Determination of Value) Rules, 2006 provides that actual consideration charged for the service provided or to be provided shall be assessable value in respect of services covered by Section 66A. The agreement with the service providers abroad speaks of the price of contract payable was net of taxes and taxes if any payable in addition to the price of contract was payable by the payer thereon as price of the contract and such factual aspect remaining unrebutted by appellant clearly establishes that tax payable in India was to form part of contract price. Thus consideration charged for the service provided shall include income tax deducted at source as per terms of contract and is in accord with Section 66A read with Rule 7(1) of the Service Tax (Determination of Value) Rules 2006. There shall not be levy of service tax on the engineering consultancy services availed from foreign consultant abroad prior to 18.4.2006, and at the applicable rate for the period 19.4.2006 to 30.9.2007 on the gross amount of consideration inclusive of income tax deducted at source - no levy of penalty u/s 78 considering the difficulty in understanding the law applicable at inception and date of incidence to taxability - partly in favour of assessee.

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• Central Excise

• 2012 (7) TMI 169
  SSI Exemption available under Notification No.8/2002 - ineligibility contended on ground that clearance value of the electricity pole manufactured by all of the units at UPSEB was liable to be clubbed together as per Notification - appellant being a manufacturing unit, owned and controlled by the UPSEB, having other manufacturing units located in the State of U.P. - Held that:- Explanation (E) of said Notification states that where the specified goods are manufactured in a factory belonging to or maintained by the Central Government or by a State Government, or by a State Industries Corporation, or by a State Small Industries Corporation or by the Khadi and Village Industries Commission, then the value of excisable goods cleared from such factory alone shall be taken into account. Since, respondent is a manufacturing unit owned and controlled by the State Government, hence respondent is squarely covered under Explanation (E) to the above referred Notifications - Decided in favor of assessee.

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• 2012 (7) TMI 168
  Power of Commissioner (Appeals) to remand the case back for de novo adjudication in view of amendment in Section 35A of the Central Excise Act, 1944 - Held that:- Wording of the section 35A(3) is exactly similar to the wording of Section 128(2) of the Customs Act, 1962 which deals with the power of the first appellate authority. Supreme Court in case of Union of India vs. Umesh Dhaimode (1997 (2) TMI 140 (SC)) while interpreting Section 128(2) of the Customs Act, held that aforesaid provision vested the appellate authority with power to remand the matter back. In view of the aforesaid position in law expounded by the Supreme Court, no merit exists in appeals.

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