Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
July 13, 2012
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Capital gains tax - sale of shares before listing - sale through public offer - the transaction would not be eligible for payment of capital gain tax at the lower rate of 10%. - HC
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The trust is not an “association of persons”, the provisions of Section 40A(2) are not attracted to the transaction between the trust and the assessee company. - HC
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Dis allowance of lease rental paid to the Trust - Enhancement of lease rent allowed as revenue expenditure - - HC
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Deleting penalty u/s 13 of Interest Tax Act. 1974 - ‘bill discounting charges’ have to be computed and included in interest - Penalty levied - This is not the case of a bonafide, honest or even plausible different interpretation. - penalty confirmed - HC
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Difference in the investment as shown by the assessee and as ascertained by DVO - addition u/s 69 or 69B - the condition precedent for making a reference to the DVO is not satisfied in the instant case - AT
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Apportionment of income - An estimate of 15% ratio fixed 10 years back cannot be applied now in the name of consistency especially keeping in view the increase in globalization increase in Indian passengers originating from India and the facts that assessee is not in losses - AT
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Revenue expenditure versus capital expenditure - expenditure incurred on ERP Software – allowed as revenue expenditure - AT
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Disallowance of conveyance expenses, staff welfare expenses, sundry expenses and traveling expenses - certain expenses were not supported by third party vouchers, disallowance is warranted - AT
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Accrual of income - Taxability of advance license benefit receivable - assessee could not contend while filing the return of income that such income should not be treated as having accrued in the year under consideration, as duty-free raw material had not actually been imported till the end of the relevant year but it should be treated as income accrued in the year, when raw material had actually been imported - AT
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Though there was no manufacturing and sales activity, but there certainly was some “business activity” - the revenue authorities were incorrect in disallowing the claim of expenses and depreciation - AT
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Disallowance u/s 40A(3) - cash payment of legal tender fees to the ‘South Western Railway’ which is a part of the Government was covered in the exceptions provided in clause (b) of Rule 6DD and the provisions of sec. 40A(3) as wrongly invoked - AT
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Charitable Trust - if commercial principles are applied then adjustment of expenses incurred by the trust for charitable religious purpose in the earlier years against the income earned by the trust in the subsequent year will have to be regarded as application of the income of the trust for charitable and religious purpose. - AT
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Addition on account of unvouched expenses - Salary expenses - The addition of finally made by CIT(A) comes to less than 10% of expenses claimed, accordingly, the addition on account of unvouched expenses deserves to be sustained. - AT
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Trading Liability - job work payable of earlier year brought forward - addition made u/s 41 - There is no cessation of liability merely because the assessee has not paid the amount till the completion of assessment. - AT
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Asset management company - making any addition on account of load is not justified - AT
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Taxability of income from transfer of development rights - postponement of payment does not stop accrual of income - AT
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Disallowance of Society Charges paid in respect of property given on leave and license - deduction to be allowed subject to section 24 - no other deduction is allowed - AT
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Estimation of expenditure incurred in earning the exempt income -as the assesee’s explanation is not satisfactory, therefore, provisions contained in 14A are applicable r.w.r.8D - AT
Customs
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Challenge import of toxic wastes from industrialized countries to India - Central Government is directed to issue a notification to ban the import of such identified hazardous substances - SC
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Decisions in respect of classification/valuation of hardware and software of computers cannot be mechanically applied to hardware and software relating to telecom equipments. - AT
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Classification of Mouse Pads – regarding. - Circular
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Amends Notification Nos. 92/2009-Cus dated 11.09.2009, 93/2009-Cus dated 11.09.2009, 94/2009-Cus dated 11.09.2009, 95/2009-Cus dated 11.09.2009 and 104/2009-Cus dated 14.09.2009. - Notification
DGFT
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Deferment in the date of effect for implementation of bar-coding on Primary and Secondary level packaging on export consignment of pharmaceuticals and drugs for tracing and tracking purpose. - Public Notice
FEMA
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Non Resident Deposits- Comprehensive Single Return. - Circular
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Foreign Exchange Management Act, 1999 – Submission of Revised A-2 Form. - Circular
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Risk Management and Inter Bank Dealings. - Circular
Corporate Law
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Notifying certain sections of Companies (Second Amendment) Act, 2012. - Notification
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Sections 51, 63-65 of LLP Act,2008 notiifed. - Notification
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Delegation of powers of Central Government to Regisrar of Companies. - Notification
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Delegation of Powers of Central Government to Regional Director. - Notification
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Company Law Board (Fees on Application and Petitions) (Amendment) Rules, 2012. - Notification
Service Tax
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Storage or warehouse keeper – recipient of service from foreign party i.e. PROSAFE – Being an agent of the process of production, it was not a storage or warehouse keeper. - AT
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Reclassification of service - consulting engineer services versus maintenance and repair service – Any change in classification can only be prospective and the issue has to be raised before the appropriate authority for consideration and decision. - AT
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Valuation - transportation of passengers for International journey by air - passenger service fees (PSF) collected on behalf of the International Airport Authority of India (IAAI) not to be included - AT
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Service tax on waterfront royalty and way leave facility compensation - invocation of extended period is not based on a strong ground and the appellant has been able to make out a prima facie case as far as extended period is concerned - AT
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Invocation of section 80 - non-payment of service tax under the bonafide belief that Service Tax is not applicable to them as they were providing services of rent-a-cab operator to another rent-a-cab operator and not to clients directly - no penalty - AT
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Advertising Agency Service - Dealers/agents are promoting the business of the applicant and they are not the advertising agency - not taxable - AT
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Business Auxiliary Service - procuring blank cards, loading operating system on these cards, obtaining photo/thumb impression and other information, storing and printing the said information in the card, and ultimately dispatch the loaded cards to the customers on behalf of the transportation authority on B.O.T. basis. - Not taxable as BAS - AT
Central Excise
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Dispute regarding classification of pin mailer - printed continuous computer stationery - assessee contending the same to fall under Chapter 49 of the tariff whereas Revenue contended it to be under chapter 48 - AT
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Classification of motherboard and add on card - parts and accessories of the data processing machine falling under Heading 84.71, therefore classifiable under Heading 8473 of the Tariff. - AT
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Regarding Exemption Focus Product Scheme Duty Credit Scrip - Notification
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Regarding exemption under Status Holder Incentive Scrip (SHIS) scheme. - Notification
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Regarding Exemption under Vishesh Krishi and Gram Udyog Yojana (VKGUY). - Notification
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Regarding Exemption under Agri. Infrastructure Incentive Scrip. - Notification
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Regarding Exemption under Focus Market Scheme (FMS). - Notification
VAT
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CHARGING OF INTEREST UNDER THE DVAT ICST ACTS. - Circular
Case Laws:
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Income Tax
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2012 (7) TMI 289
Deleting the penalty u/s. 271(1)(c) - Held that:- As the assessee had purchased new plant and machinery on which it claimed additional depreciation. This fact is not controverted by Revenue nor has it brought on record any material to prove that assessee had not purchased machinery. The assessee’s claim of additional depreciation was based on the certificate of the Auditor wherein it was certified that the installed capacity has increased by more than 10% - the addition has been confirmed by ITAT on the basis of director’s report. in these circumstances, it cannot be said that the assessee has furnished inaccurate particulars of income - no penalty cannot be levied - in favour of assessee.
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2012 (7) TMI 283
Liability to pay capital gains tax on the income earned from sale of SEBI shares sold through the public offer - whether at lower rate of 10% or at the normal rate of 20% - Held that:- Shares in question having already been transferred from the demat account of the appellant to the demat account of the Registrar to the issue and then to the demat against of the applicants, by 05.01.2006, it is difficult to dispute that at the time of commencement of trading on 6.1.2006, the ownership in the shares vested in the applicants/allottees, and not in the appellant - Once the listing as well as trading approvals had been received from BSE and NSE and the shares were transferred to the demat account of the applicants on 05.01.2006, the applicants in the public issue had no right or lien over the money which they had paid for acquiring these shares - the transfer for the purpose of Income-tax Act being complete prior to 6.1.2006 and the trading in stock exchange having commenced only on 6.1.2006, it cannot be said that the transaction involved in this case had taken place in the stock exchange. capital gain tax at the rate of 10% was payable only in case of 'listed securities'. Since, these shares had been transferred to the applicants in the public offer, by 5.1.2006 before they were actually listed on the stock exchanges on 6.1.2006, they were not 'listed securities' at the time of sale by the appellant and consequently, the transaction would not be eligible for payment of capital gain tax at the lower rate of 10%.
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2012 (7) TMI 282
Dis allowance of lease rental paid to the Trust - enhanced lease rent for the period from January to March, 1992 was a capital expenditure and therefore not allowable as a deductible expenditure - AO invoked the provisions of Section 40A(2) - Held that:- The limited right which the assessee acquired under the lease was the right to purchase khair wood trees from the Government in the State of Himachal Pradesh. Assessee company would have got a right only to purchase the raw material and not the source of raw material. Therefore, that part of the lease rent, which is attributable to the right to purchase Khair wood would be a revenue expenditure and not a capital expenditure - the normal lease rental in this case would be a revenue expenditure and not a capital expenditure, as the ownership of the property as well as the plant and machinery continued to vest in the trust and in any case the lease granted to the assessee company was neither a perpetual lease nor a lease for such a long term as would bring it at par with a perpetual lease. Enhancement of lease rent attributable to improvement and modernization of plant and machinery carried out by the Trust - enhancement of lease rental from Rs.1 lac p.m. to Rs.6,70,000/- p.m., to the extent it is attributable to the expenditure incurred by the trust in the year 1989-90 on modernization and improvement of the plant and machinery which the lessee had taken on lease, would be a revenue expenditure, since it would have the effect of enhancing the lease rent of the plant and machinery in the open market Enhancement in lease rent attributable to normal appreciation in line with the lease rentals prevailing in the market - if there was any appreciation in the market in the lease rentals of such properties, the enhancement in the lease rent of the property to the extent it is attributable to such normal appreciation in the lease rentals prevailing in the market, would be a revenue expenditure. Thus it would be for the AO to determine whether there was any such appreciation in lease rentals, and if so, to what extent. Payment of non-compete fees - Increase in lease rent relatable to elimination of competition from the Trust constitutes capital expenditure as the Trust had leased whole of its production unit which was a profit generating unit to the assessee and not only the building, but the plant and machinery was also leased to the assessee along with all benefits, etc - The Trust had also relinquished its rights to purchase khairwood from the Government in favour of the assessee. Therefore, the business being carried by Trust was practically taken over by the assessee-company for an indefinite period . Therefore, this was a case of takeover of the business, coupled with elimination of competition from the rival - constitutes capital expenditure,applicability of Section 40A(2). the trust is not an “association of persons”, the provisions of Section 40A(2) are not attracted to the transaction between the trust and the assessee company.
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2012 (7) TMI 281
Deleting penalty u/s 13 of Interest Tax Act. 1974 - there could be honest or bona fide difference of opinion on whether discounting charges were in the nature of interest income for computation of the tax under the Act - assessee in the return had shown amount under the head “Interest others” and "bills discounting charges" but had not included in the said amount on which tax was payable - Held that:- Declaration or statement in the return that the said amounts were not included for the purpose of tax may show/establish absence of mens rea but in the present case this by itself does not justify cancellation or quashing of penalty as the ingredients of the provisions of Section 13 are satisfied - for the purpose of the Act, bill discounting charges have to be treated and regarded as ‘interest’.The term ‘interest’ as per the definition clause i.e. Section 2(7) amended w.e.f. 1st October, 1991 is absolutely clear and unambiguous and cannot be any doubt or ambiguity that ‘bill discounting charges’ have to be computed and included in interest for the purpose of tax payable under the Act. This is not the case of a bonafide, honest or even plausible different interpretation. Two divergent views on interpretation of Section 2(7) of the Act are not possible. Discount on promissory note and bills of exchange drawn or made in India by express stipulation have been included in the word ‘interest’. What is excluded is ‘discount on treasury bills’. There is no ambiguity or doubt in the said words. The single sentence observations of the CIT(A) and the tribunal to the contrary are unsustainable - in favour of the appellant Revenue
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2012 (7) TMI 280
Difference in the investment as shown by the assessee and as ascertained by DVO - CIT(A)deleted the addition considering disregard of legal provision of section 142A - Held that:- Provisions of section 142A can be invoked only where the assessee is first found to have made investment outside the books of accounts or where any such investment made by him is not fully disclosed in the books of accounts. It is only once this condition is satisfied, then the AO is entitled to make a reference u/s 142A to ascertain the quantum of such investment for making the addition u/s 69 or 69B. In the instant case however, there is nothing to suggest that any incriminating document was found and seized during the course of search or survey in the premises of the aforesaid groups and no reference whatsoever has been made by the AO to any material/evidence/information on the basis of which he could have found that the consideration shown by the assessee was less than the amount actually paid by him. Thus the condition precedent for making a reference to the DVO is not satisfied in the instant case - the primary burden of proof to prove the understatement or concealment of income is on the revenue and it is only when such burden is discharged that it would be permissible to rely upon the valuation given by the DVO - in favour of assessee.
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2012 (7) TMI 279
Unexplained credits under the provisions of section 68 - addition made u/s 68 during reopening of assessment u/s 147/148 - Held that:- First sentence of the socalled reasons recorded by the AO is mere information received from the Deputy Director of Income Tax (Investigation). The second sentence is a direction given by the very same Deputy Director of Income Tax (Investigation) to issue a notice u/s 148 and the third sentence again comprises of a direction to initiate proceedings u/s 148 in respect of cases pertaining to the relevant ward, it is clear that the AO referred to the information and the two directions as “reasons on the basis of which he was proceeding to issue notice under Section 148" - From the so-called reasons, it is not at all discernible as to whether the AO had applied his mind to the information and independently arrived at a belief that, on the basis of the material which he had before him, income had escaped assessment - there is no reference to any document or statement, except Annexure, which has been quoted as Annexure cannot be regarded as a material or evidence that prima facie shows or establishes nexus or link which discloses escapement of income. Annexure is not a pointer and does not indicate escapement of income - need not go into the merits of the addition made by the AO as the CIT (A) had deleted the addition on merits and the Tribunal has simply remitted the case back to the AO - in favour of assessee.
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2012 (7) TMI 278
Addition in respect of unapproved Sundry Creditors - liabilities accrued by way of royalty - CIT(A)deleted the additions - Held that:- Considering the records and balance sheets of all the creditors except one all the additions are liable to be deleted as no addition is there to the liability in this year under considerations and it cannot be said that the liability has ceased to exist as the amount has not been credited to profit and loss account. Therefore, it is held that addition in respect of this account was not justified - Looking to the fact that this is also a running account addition of closing balance was not maintainable - partly in favour of assessee. Disallowance on account of unvouched expenses - Held that:- adhoc disallowance was made on the ground that expenses are not fully vouched whereas not even a single instance of unvouched expense has not been mentioned in the assessment order - considering that the expenses are fully vouched as the AO has not mentioned even a single missing voucher no addiotns is warranted - in favour of assessee.
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2012 (7) TMI 277
Apportionment of income - CIT(A) held that the computers of the travel agents in India constitute a fixed place of business under Article 5(1) of the DTAA - CIT(A) restricted the attribution of the revenue attributable to the PE in India to 15% - Held that:- An estimate of 15% ratio fixed 10 years back cannot be applied now in the name of consistency especially keeping in view the increase in globalization increase in Indian passengers originating from India and the facts that assessee is not in losses - the Income tax proceedings are applicable from year to year depending upon facts of each year and principle of res judicata do not ordinarily apply to income tax proceedings - Estimate of 10 back years cannot said to be applicable for years to come without considering the change in facts and circumstances. The estimation of profits attributable to Indian operations should ideally be based upon number of bookings originating from India viz-a-viz total bookings in a particular year and consideration of global accounts - remit the matter back to the file of the AO for fresh consideration by adopting a reasonable and commercial test for estimation of business attributable to India and net taxable income which could have been said to have accrued to appellant due to bookings from India - in favour of revenue.
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2012 (7) TMI 276
Justification on restricting the addition u/s 14A - AO applied Rule 8D in order to disallow interest expenditure relatable to the investments - Held that:- For AY 2007-08 which is under consideration provisions of Rule 8D are not applicable and held that prior to Rule 8D the AO was bound to examine the application of sec. 14A(2)as decided in GODREJ AND BOYCE MFG. CO. LTD. Versus DCIT AND ANOTHER [2010 (8) TMI 77 (HC)] - CIT(A) has agreed with the contention of the assessee without examining the case whether out of Rs.31.5 crores only expenditure of Rs.2 crore was out of borrowed funds. Since the CIT(A) has not examined the issue and has accepted the contention of the assessee without verification it is proper to set aside the issue to the file of the AO with the directions to examine the issue afresh - in favour of revenue.
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2012 (7) TMI 275
Penalty u/s 271(1)(c)- reduction in loss on account of additions/ disallowances - Held that:- Issue of claim of depreciation, penalty imposed under similar facts has been deleted by the ITAT in preceding year considering the claim of depreciation being a debatable issue, penalty cannot be imposed - in regard to LTCG on sale of investments and sale of vehicles all the relevant details were filed by the assessee along with the return of income and a change in claim of head of income cannot be considered as concealment or furnishing inaccurate particulars of income - in respect of PF and ESI only mistake committed by the assessee is in not giving proper effect to P&L A/c can be held to be of technical or venial in nature and not to concealing particulars of income or inaccurate particulars - for 43B disallowance assessee has given satisfactory explanation that revised return was prepared which was not filed by the Chartered Accountant due to dispute on payment of professional fees - no point of concealment or inarticulateness proved - in favour of assessee.
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2012 (7) TMI 274
Penalty levied u/s 272A(2)k) - late filing of the returns - CIT(A) deleted the levy - Held that:- The reasons put forth by the assessee i.e. incapacity and absence of the accountant and the director being not aware of the intricacies penalty levied are liable to be deleted. Penalty levied u/s 271C - non-deduction/ short deduction of TDS - CIT(A)deleted the levy - Held that:- The late filing of e-return assumes a character of technical default and delay in filing such return without any loss of revenue cannot be a held a deliberate default looking at the facts and circumstances and pleas raised by the assessee CIT(A) has rightly considered it to be a reasonable cause - in favour of assessee.
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2012 (7) TMI 273
Revenue expenditure versus capital expenditure - expenditure incurred on ERP – Held that:- In case the software becomes obsolete with technological innovation and advancement within a short span of time, it can be said that where the life of the computer software is shorter or say less than 2 years, it may be treated as revenue expenditure - software programme without which the computer cannot work and with the advancement of technology, the programme changes during short period and this change is requirement of the business of the assessee i.e. share - assessee's appeal is allowed Deduction being 150% weighted deduction u/s. 35(2AB) of the Act in respect of capital expenditure on motor cars and interest – Held that:- Capital expenditure incurred by the assessee on purchase of motor cars cannot be considered as expenditure incurred by the assessee on in-house research & development and therefore, the same is not eligible for weighted deduction u/s. 35(2AB) of the Act - capitalized interest on purchase of car is also not eligible for this benefit for same reasons because it is equal or similar to cost of car – Against assessee Disallowance made u/s 14A of the Act - disallowance made merely on the basis of estimation of administrative expenses earned to tax free income - contention of the appellant that earning of dividend income does not require any specific/special administrative efforts, as even where company presumes to have not invested in single penny of money in shares /scripts, company would have to pay salary to its employees – Held that:- Proportionate disallowance u/s. 14A should be limited to only interest liability and not overhead or administrative expenditure, which should be considered for disallowance under Rule 8D of the I.T. Rule, 1962 from 2007-08 - addition made on account of administrative expenses deleted - assessee's appeal is partly allowed.
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2012 (7) TMI 272
Income from undisclosed sources - the assessee had deposited in cash in his savings account - AO denial that the cash deposited and withdrawn in question was the same - Held that:- Viewing the affidavit in question dated 16.4.2012 clearly proves that the cheques in question had been encashed by the assessee himself, thus to that extent CIT(A)'s finding that the cheques are issued to their party is not correct - there is also no evidence against the assessee that the money deposited in bank account was not drawn earlier - There is evidence on record that assessee owned property which had 33 tenants with the negotiations going on to vacate the property, but the sudden death of Counsel who was acting in this behalf, assessee had no option than to stop the negotiations and redeposit the cash. The cash withdrawal by company at the same time was also accepted, source of cash withdrawal cannot be doubted - accept the assessee’s plea that he had withdrawn the amount earlier also which was redeposited later on - in favour of assessee.
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2012 (7) TMI 271
Disallowance of conveyance expenses, staff welfare expenses, sundry expenses and traveling expenses - Held that:- As immediately preceding assessment year 2004-2005 AO disallowed 10% of above mentioned expenses and that too for a year prior to that i.e. assessment year 2003-2004, and the assessee admitted that he did not file any appeal against the disallowance made by the A.O. in the immediately preceding year - thus, considering the facts that the assessee itself admitted, that certain expenses were not supported by third party vouchers, disallowance is warranted - decided against assessee. Disallowance being 20% out of cash expenses incurred on behalf of customers - Held that:- As assessee had issued Debit notes to its principal companies for Rs.5.36 crore towards service charges and commission income to the tune of Rs.3.07 crore and reimbursement of expenses worth Rs.2.29 crore. The Assessing Officer deduced the figure of Rs.5.36 crore from the accounts of the principals appearing in the ledger account of the assessee, this amply proves that the amounts were promptly displayed in the books of account - bedrock for making any addition u/s 69C is that there must have been some expenditure incurred by the assessee, the source of which is not disclosed is not proved here - incurring of such expenses by the assessee in cash etc. calling for disallowance cannot be warranted - When the principal companies have reimbursed the expenditure to the tune of `2.29 crore there cannot be any presumption that the assessee must have saved some money out of the same - decided against revenue.
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2012 (7) TMI 270
Justification of re-assessment proceedings initiated u/s 147 - non payment of TDS - Held that:- As decided in ACIT Vs. Rajesh Jhaveri Stock Brokers (P) Ltd.[2007 (5) TMI 197 (SC)]the intimation u/s. 143(1)(a) is not an order of assessment and therefore the question of change of opinion does not arise - the assessment in this case was made u/s.143(1)(a) and not u/s.143(3)with the re-assessment notice issued by the AO within four years from the end of the relevant assessment year - thus re - assessment proceedings are warranted - against assessee. Disallowance made u/s. 40(a)(ia)- Held that:- As provisions of section 40(a)(ia)are applicable only to amounts of expenditure which are payable as on 31st March of every year restore the issue to the file of the AO with a direction to verify the accounts and disallow the amount which is payable as on 31st March of the impugned assessment year - in favour of assessee by way of remand.
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2012 (7) TMI 269
Taxability of advance license benefit receivable - whether the value of such ALBR by the assessee could be treated as income accrued to them in the year when the exports were actually made or such income would accrue only in the year when the duty-free raw material was actually imported pursuant to such import licenses - Held that:- ALBR benefit is contingent and it materializes only when the relevant imports are made and not earlier and therefore the same cannot be said to accrue prior to the import of raw material - The assessee had maintained their accounts on accrual basis, accounted for the value of such benefit only in the year in which the corresponding export obligation had duly been dis-charged - the income represented by the value of ALBR by the assessee had been accounted for in the books of account in the year when the exports had actually been made, which was in conformity with one of the alternative recognized methods of accounting. The choice of choosing one of the recognized alternative methods of accounting rested with the assessee,the assessee could not thereafter contend while filing the return of income that such income should not be treated as having accrued in the year under consideration, as duty-free raw material had not actually been imported till the end of the relevant year but it should be treated as income accrued in the year, when raw material had actually been imported - CIT(A) had rightly held that the income by way of ALBR duly accounted for as income in the books of account maintained by the assessee in the year under consideration on accrual basis could not be excluded from the taxable income of the year under consideration. Dis allowance of claim in respect of deduction paid to GIDC as premium on leasehold land - Held that:- As Coordinate Bench decision in assessee’s own case is against them, thus following the same ground raised by assessee is dismissed - against assessee. Dis allowance of miscellaneous expenses in respect of leasehold land - Held that:- Considering the nature of the expenditure incurred on the land being utilized in the business the amount is allowable as revenue expenditure - in favour of assessee. Disallowance on account of depreciation - Held that:- Considering the assessee's submission that he has furnished revised statement of depreciation after excluding depreciation on interest capitalized in earlier year and in the A/Y 1992-93 the interest capitalized but claimed as revenue was not allowed and accordingly the depreciation had to be increased on a higher written down value - AO is directed to examine whether the interest capitalized in the books was allowed as revenue expenditure in that year. If it is allowed as revenue expenditure, the ground will become infructuous, else AO is directed to allow depreciation on the capitalized interest portion - in favour of assessee for statistical purposes. Allowing deductions u/s 80I and 80IA after deducting depreciation eligible u/s 32 - decided against assessee. Interest u/s 244A - Held that:- Held that:- As interest under section 244A was granted for the period upto 31/3/1994 although refund order was issued on 25.4.1994,claim is in favour of assessee for granting of one month interest. Computing the deduction u/s 80HHC - Held that:- Even under section 80HHC(3)(c)(i) the profit is to be the adjusted profit of business. The adjusted profit of the business means a profit as reduced by the profit derived from business of exports out of India of trading goods. Thus, in calculating the profits under sub-section (3)(c)(i) one necessarily has to reduce the profits under subsection (3)(c)(ii)- AO is directed to work out the deduction accordingly as the loss derived from export of traded goods should be added back to the profits of the business while computing the adjusted profits of the business as required by clause (b) of the Explanation below section 80HHC(3) for arriving at the amount of deduction eligible under sub-section 3(c)(i)- in favour of assessee.
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2012 (7) TMI 268
Disallowance of expenditure there was no business activity - Held that:- As both the revenue authorities had restricted their thought process in the “manufacturing activity and sales” whereas from the details in Statement of Facts supplied by assessee and schedules as appended along with the Balance Sheet, it is found that not only the assessee had received advances from its customers, but had also paid advances to its sub contractors, which goes to prove that there was some movement in business, if not full business activity - though there was no manufacturing and sales activity, but there certainly was some “business activity” - the revenue authorities were incorrect in disallowing the claim of expenses and depreciation - decided in favour of assessee.
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2012 (7) TMI 267
Additions on account of Gift - Held that:- Considering affidavits filed by the donors, the assessee has discharged the onus cast on him., but the revenue has failed to bring relevant material on record to dislodge the deposition made in the affidavits - decided in favour of assessee. Addition on account of cash deposits made with bank - Held that:- The assessee has withdrawn money from bank account, where his business receipts were credited and deposited in another bank account. There is small gap of time in the withdrawal and deposits of such amounts, thus,containing withdrawal and deposits of amounts from the relevant bank accounts, it is evident that no findings can be sustained on the ground of gap of one month, between withdrawal and deposit in such transactions - decided in favour of assessee.
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2012 (7) TMI 266
Cancellation of registration u/s 12AA(3)- the assessee has been carrying on activities in the nature of trade, commerce, business etc. and is hit by the proviso to section 2(15), applicable from assessment year 2009-10 - Held that:- Considering the Order cancelling registration it is noted that DIT(E) has nowhere recorded any satisfaction that the activities of the assessee trust are not genuine or are not being carried out in accordance with the objects on which it was granted registration u/s 12AA. In absence of such satisfaction, registration u/s 12AA cannot be cancelled. Cancellation in view of the amended provisions of section 2(15) read with proviso with effect from 01-04-2009 the assessee cannot be held to be carrying out activities of charitable purposes. The insertion of proviso would not have any bearing on section 12AA (3) since it does not extend to the objects of the trust or institution but only to its activities as stated therein. Registration granted u/s. 12AA(1) cannot be subjected to cancellation u/s. 12AA(3) to re-examine or review the objects - that the activities of the assessee are not governed by “principles of mutuality” or it has been dealing with non members, thus, from this aspect also new proviso does not apply to the case of the assessee - decided in favour of assessee.
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2012 (7) TMI 265
Best judgement assessment passed u/s 144 - sale of property - proceedings initiated u/s 147 against assessee on ground of information obtained from assessment of assessee's brother that assessee is co-owner of property and capital gains accrued to it - non-filing of return by assessee and no response to notice issued u/s 142 - consequent denial of exemption u/s 54F - Held that:- It is found that assessee, a lady, who was not previously assessed to tax clearly establishes that her failure to suitably respond to notices issued by the AO was due to her ignorance of the provisions of the Act. Also, assessee’s claim for deduction u/s 54F was also denied by the AO, by holding that the assessee had violated the conditions mentioned in the proviso to section 54F(1). However, whether or not the proviso to section 54F(1) was applicable in her case has not been examined. In these circumstances, in the interest of justice, Assessing Officer is directed to consider the entire matter de novo - Decided in favor of assessee for statistical purposes.
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2012 (7) TMI 264
Disallowance u/s 40A(3) - assessee contested that he is fully covered by the exceptions provided in rule 6DD of the I.T. Rules - assessee had purchased railway scrap material from South Western Railways - Held that:- Considering the exceptions are laid down in Rule 6DD(b)that payments exceeding twenty thousand rupees to be made to Government and, under the rules framed by it, such payment is required to be made in legal tender - As the meaning of legal tender has not been defined in the Income-tax Act, however, the dictionary meaning of ‘legal tender’ is “the coinage of a county in which the debts may be paid and which the creditor is bound to accept”. As the assessee made the payment in cash i.e in Indian currency because it is not the case of the department that the payment was made in foreign currency to the ‘South Western Railway’ towards purchase of scrap by the assessee, giving a confirmed view to the fact that the payment made in cash by the assessee was actually made in legal tender to the ‘South Western Railway’ which is a part of the Government was covered in the exceptions provided in clause (b) of Rule 6DD and the provisions of sec. 40A(3) as wrongly invoked - decided in favour of assessee.
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2012 (7) TMI 253
Appeal against denial to admit additional evidence on ground of delay even though ground was pure legal - assessee also contending assessment to be illegal and void ab initio on ground that assessment has been made in the individual name of the appellant even though the panchnama and search warrant was in the joint names - Held that:- Fact that the panchanama has been drawn up in joint names, leads to a probable inference that the warrant in question was issued in joint names. This fact has to be verified. First Appellate authority should have admitted this additional ground, which goes into the root of the matter and adjudicated the same. It cannot be rejected on the ground of delay, as it was taken before disposal of the appeal by the CIT(A) and when it is a purely legal ground and facts are on record. CIT(A) directed to admit additional ground and adjudicate the same on merits
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2012 (7) TMI 252
Charitable Trust - carry forward and set off of losses - denial on ground that there was no provision for carry forward of the excess of expenditure of earlier years - income of the charitable trust was not assessable under the head ‘profit and gains of business’ u/s 28 in which the provision for carry forward of losses was relevant - Held that:- Income derived from the trust property has also got to be computed on commercial principles and if commercial principles are applied then adjustment of expenses incurred by the trust for charitable religious purpose in the earlier years against the income earned by the trust in the subsequent year will have to be regarded as application of the income of the trust for charitable and religious purpose. Also, assessee has been permitted to carry forward the losses and also to claim set off such losses against the income in earlier AYs, which has been accepted by Revenue. Carry forward and set off allowed. See DIT vs. Vishwa jagrithi Mission (2012 (4) TMI 289 (HC)) - Decided against Revenue
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2012 (7) TMI 251
Rejection of books of account on account of non-production of relevant registers, bills and vouchers or inventories before CIT(A) - estimation of net profits - assessee filed an affidavit that all the books of account as prescribed in Rule 6F were produced before the CIT(A) and denied the aforesaid observations of CIT(A) - Held that:- Since Revenue did not place any material controverting the averments in these affidavits and merely supported the findings of the CIT(A), hence it is find appropriate to restore these issues to file of CIT(A) for deciding the matter afresh, after verifying the genuineness of averments made in the aforesaid two affidavits - Appeal of assessee allowed for statistical purposes.
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2012 (7) TMI 250
Determination of Presumptive profit u/s 44BB - addition of reimbursement of fuel recharge received to gross receipts - assessee(foreign company) having PE in India reflected income u/s 44BB in terms of contracts with ONGC - Held that:- It has been held in case of Halliburton Offshore Services Inc ( 2007 (9) TMI 230 (HC)) that it is clear from perusal of Section 44BB that all the amounts either paid or payable (whether in India or outside India) or received or deemed to be received (whether in India or outside India) are mutually inclusive. This amount is the basis of determination of deemed profits and gains of the assessee @ 10 %. S44BB is a complete code in itself. Following aforesaid decision, action of addition of reimbursement of fuel recharge to gross receipts is upheld - Decided in favor of Revenue. Addition of reimbursement of Service tax - Held that:- Service tax which is a statutory liability, would not involve any element of profits and a service provider is collecting the same from its customers on behalf of the Government and, accordingly, same cannot be included in the total receipts for determining the presumptive income. See Islamic Republic of Iran Shipping Lines(2011 (4) TMI 637 (Tri)) - Decided against Revenue
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2012 (7) TMI 249
Addition on account of unvouched expenses - Salary expenses - partial relief in dis-allowance granted by CIT(A) on ground that assessee's books of accounts were subject to tax audit and AO has failed to record specific defects and particular vouchers in his assessment order - Held that:- Assessee, neither before CIT(A) nor before us, submitted any explanation regarding above infirmity, as noted by authorities below, despite an opportunity to submit the same. The addition of Rs.35,000 finally made by CIT(A) comes to less than 10% of expenses claimed i.e. amounting to Rs.3,90,105 and, accordingly, the addition on account of unvouched expenses deserves to be sustained. Appeal dismissed.
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2012 (7) TMI 248
Trading Liability - job work payable of earlier year brought forward - addition made u/s 41 on presumption that assessee will not pay these amount in future also - Held that:- Since expenditure does not pertain to this year, it cannot be disallowed. Further, the amount has not been written back to the P/L A/c. There is no cessation of liability merely because the assessee has not paid the amount till the completion of assessment. Only option before the AO is to consider the assessment of the years in which the amounts were debited to P/L A/c. No addition can be made in this year - Decided against Revenue Alleged bogus payments - CIT(A) deleted the addition on ground that payments have been subjected to TDS - Held that:- No evidence exist on the record of the AO to show that tax has been deducted from payments made. Relied has been given by CIT(A) without obtaining any confirmed account from this party. The assessee has also alleged that Shri A has fled away with some third party cheques lying in his office. Therefore, there is something doubtful about the transactions with Shri A. Matter restored to the file of the AO to be examined fresh.
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2012 (7) TMI 247
Addition u/s 68 - gift received from NRI friend - revenue contending assessee has not proved any evidence regarding creditworthiness and no occasion has also been mentioned for making gift - Held that:- It is clear that the identity of the donor has been proved by filing identification card from Florida authorities and the notarised declaration. The donor has mentioned that he is engaged in service. The amount of US$ 3600 is not such a big amount that a serving person in USA cannot give it as a gift. Therefore, the creditworthiness of the donor has been proved. Since donor and donee have close relationship and, thus, it cannot be said that it is a gift to a total stranger so that it defies human probabilities of conduct. The gift has been made through banking channel, thus, its genuineness has also been proved. Hence, all the three ingredients of section 68/69 have been proved on a prima facie basis. Consequently it is held that the gift is genuine - Decided in favor of assessee.
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2012 (7) TMI 246
Unexplained cash credit u/s 68 - CIT(A) deleted the additions - Held that:- The assessee has furnished the copy of confirmation, copy of income tax return and bank statement of individual to whom loan was given there cannot be any doubt about his identity or creditworthiness - letter in response to summons issued by AO clearly stated the evidence of the cheque number or the bank balance of 2004-05 adjudicating the repayment of loan received during the year under consideration, thus proving the identity and creditworthiness of party as well as genuineness of transaction - in favour of assessee.
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2012 (7) TMI 245
Deduction u/s 10A - assessee contending communication expenses and insurance expenses attributable to the delivery of software, which is reduced from export turnover in the numerator then the same is to be excluded from the total turnover in the denominator - Held that:- Amount attributable to export which is to be reduced from export turnover, should also be reduced from total turnover while working out the deduction u/s 10A of the Act. Assessing Officer is directed to recompute deduction u/s 10A. See ITO vs Sak Soft lTd (2009 (3) TMI 243 (Tri)) - Decided in favor of assessee.
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2012 (7) TMI 244
Dis-allowance u/s 14A of expenditure incurred in earning dividend income - application of Rule 8D - AY 07-08 - Revenue contesting restriction of dis-allowance by CIT(A) - Held that:- It has been held in case of Godrej & Boyce Manufacturing Co. Ltd. vs. DCIT (2010 (8) TMI 15 (HC)) that provisions of Rule 8D would apply with effect from AY 2008-09. In the case before us the AY involved is AY 2007-08. Therefore, Rule 8D will not be applicable in the case of the assessee. However, disallowance can be made in relation to exempt income on reasonable basis. The assessee had himself disallowed Rs.1,73,98,255/- in the proportion of exempt and taxable income earned by way of dividend and interest income, which is reasonable. Since Rule 8D is not applicable for AY under consideration, the disallowance made by the assessee on proportionate basis of exempt income and taxable income in our considered opinion is justified - Decided against Revenue.
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2012 (7) TMI 243
Asset management company - addition made on account of Load charges received in respect of management of different schemes of Mutual Fund - assessee contended that load had been collected on behalf of the mutual fund and does not belong to the assessee - Held that:- Assessee had only received load which had been accounted separately and adjusted for various expenses of the scheme to which it was entitled. Balance amount had been transferred to the Mutual fund, from time to time. As per regulation 52(2) of SEBI Regulations and agreement between the asset management company and mutual fund, the assessee as an asset management company is entitled to advisory fees at a specific rate and reimbursement of certain expenses as specified in regulation 52(4). The assessee is not entitled to any other benefit. Under these circumstances, making any addition on account of load is not justified - Decided in favor of assessee.
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2012 (7) TMI 242
Jurisdiction of Assessing Officer to revisit issue while giving effect to direction of High Court, when the same was not a subject matter before the High Court - assessee contending adoption of sale consideration actually received as against amount receivable under the agreement that was later cancelled and adopted by AO - Held that:- Matter of actual sale consideration received was not a subject matter neither before the Tribunal nor before the High Court, therefore, it cannot be said that the AO ought to have considered the same in the assessment completed pursuant to the High Court’s judgement dated 13/12/2007. Therefore, as rightly pointed out in the CIT(A)’s order in the set aside assessment proceedings, the Assessing Officer did not have the jurisdiction to revisit this issue. Appeal of assessee dismissed.
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2012 (7) TMI 241
Levy of penalty u/s 158 BFA(2)- addition made by AO to the undisclosed income as substantial gold/diamond jewellery had been found at the time of search - Held that:- Considering the statement of the father at the time of search that the shortage found represented gifts given to various family members is no acceptable as it was not supported by any gift tax paid nor full details/particulars of items gifted - assessee submission that 140 gms jewellery had been declared in VDIS but no VDIS certificate had been produced and even if VDIS declaration was made, the jewellery declared therein had merged with the jewellery declared in the returns for assessment year 1992-93 - explanation of the assessee cannot be considered as bonafide as diamond/ gold jewellery are precious items which are carefully kept by any person and it cannot be accepted that a person will not keep accounts of the same - mere confirmation even if given is not enough as there is no supporting evidence in the form of gift tax return nor there are details of purchase of items gifted or the source thereof - as in case of silver items the amount being small (Rs.4258/-) it will not be appropriate to levy penalty in respect of such addition - penalty confirmed on gold/diamond jewellery - partly allowed in favour of assessee.
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2012 (7) TMI 240
Levy of penalty u/s 271(1)(c) - AO disallowed the loss as claimed by assessee on redeeming the units on 26- 03-2004, purchased back on 26-12-2003 - invoking provisions of section 94(7)- Held that:- As the basis of dispute is whether the transactions dated 26-12-2004 and 26-03-2005 fall within the period of three months or not, because the Act, under section 94(7)(b)(i) uses the words “after such Date”, and the revenue authorities have used this expression against the assessee, which even the assessee has not denied, but the revenue authorities could not point which could lead to omission, concealment or inaccurate and certainly nothing has been found to be “false” - mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee - decided in favour of assessee.
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2012 (7) TMI 239
Additions on account of undisclosed income - Held that:- Since income of assessee was below taxable limit, therefore, no return was filed, thus in view of the decision of in the case of SURENDRA KUMAR LAHOTI Versus ACIT [2006 (4) TMI 68 (HC)] the income below taxable limit may not be treated as undisclosed income On account of difference in value of car and undisclosed interest the assessee could not explain the source of deposit, thus the addition made by AO is confirmed for the assessment year 1988-89, whereas in view of the income assessed in assessment year 1988-89 till 1993-94, the assessee was having sufficient cash for deposit in the Bank account. Accordingly, the addition made by the Assessing Officer is not sustainable. As for unexplained investment in gold ornaments and unaccounted rental income the assessee could not explain the source of acquisition of gold ornaments, the AO has correctly made addition. Addition in respect of purchase of tanker - Held that:- As the AO has not properly evaluated the documents filed to explain the source of investment in tanker, restore this ground back to the file of the Assessing Officer for deciding afresh
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2012 (7) TMI 238
Taxability of income from transfer of development rights - assessee jointly with the trust granted development rights to party in respect of part of the land for a consideration in which the share of the assessee was @ 32% receiving a sum of Rs.92.00 lacs during the assessment year and balance in instalments in subsequent years - assessee offering income from transfer of development rights @ 25% of the receipt taking the transfer as integral part of the development project - Held that:- The assessee had development rights in respect of certain piece of land, but instead of developing the land he transferred the development rights in respect of part of the land to a separate construction company and as per the agreement, the assessee jointly with the trust was required to convey the land to the proposed buyers and possession of the land had also been given during the year along with development rights. Thus parting away with the development rights in respect of part of the land forever, conclusion is derived that this was an independent activity having no connection with the development of the remaining part of the land. As the assessee was following mercantile system of accounting as per which income accrues when it becomes due for payment, thus the entire amount became due to the assessee in the relevant year on signing of development agreement and on handing over of the possession of the land - postponement of payment does not stop accrual of income - alternate claim of the assessee that in case the entire income was assessed, the cost of acquisition of development right has to be allowed as deduction is acceptable - partly in favour of assessee.
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2012 (7) TMI 237
Disallowance of Society Charges paid in respect of property given on leave and license - amount is being claimed as deduction from profit of his business by assessee - Held that:- As per the provisions of section 23 the Annual Letting Value of the property is determined, and as per the fiction created in section 23(1)(a) the fair market value also can be treated as the annual letting value if the same is more than actual rent received or receivable. Section 24 provides the rights of the assessee to claim the deduction on some equal to 30% of the annual value and Interest on the borrowed capital if the same is used for acquiring, constructing or renovating the property and other than this, no other deduction is allowed - rightly denial of deduction claim of assessee - against assessee. Disallowance of Generator Running Expenses - no evidence was produced by the appellant for expenses having incurred genuinely for the diesel expenditure - Held that:- Considering submissions made by assessee that Diesel Generator was for the warehouse of appellant, that all bills were produced before the AO and (DR) relied upon the orders of the lower authorities - from the details filed by the assessee and admitted that payments were made in violation of Sec. 40A(3) for purchasing diesel disallowance is restricted to Rs. 1,51,315/- out of the disallowance upheld by the CIT - partly in favour of assessee.
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2012 (7) TMI 236
Allowance of claim of deduction under section 80IB (10) - assessee are engaged in the business of builders and developers - Held that:- In terms of provisions of clause (d) of section 80IB(10) inserted in the Finance Act 2004, and effective from 1.4.2005, deduction under section 80IB(10) cannot be allowed in case built-up area includes commercial area exceeding 5% of the aggregate built-up area or 2000 sq.ft. whichever is lower - that the amended provisions will not apply to the project approved prior to 1.4.2005 and would apply prospectively - as the project under question had been approved long before the cut-off date of 1.4.2005, and therefore, respectfully following the above rulings no infirmity in the order of CIT(A)- in favour of assessee.
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2012 (7) TMI 235
Estimation of expenditure incurred in earning the exempt income - applicability of Rule 8D by AO disallowing 10% of the income - assessee submitted that no expenditure can be identified which has been incurred for earning the dividend from units - Held that:- The total of the investments when compared at the beginning of the year with the end of the year clearly shows that substantial activity has taken place in purchase / subscription, and sale / redemption of the units. Therefore, it will be naďve to accept that such activities have been undertaken merely at the advice of the bank and without any substantial participation of the managerial personnel in this behalf - Such investments require constant monitoring and undoubtedly expenditure has been incurred for earning income by way of management, establishment and office expenses. As the investments at the beginning of the year stood at about Rs. 14.65 crores, which were reduced to about Rs. 13.01 crores at the end of the year. The assessee has earned dividend income and capital gain, which are tax-free incomes as mentioned earlier. Therefore, these incomes have not been included in the total income - as the assesee’s explanation is not satisfactory, therefore, provisions contained in 14A are applicable r.w.r.8D - CIT(A) erred in estimating the expenditure by ignoring the mandatory provision contained in Rule 8D - against assessee.
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2012 (7) TMI 234
Levy of penalty u/s 271(1)(c) - assessee had not complied with the provisions of section 50C as per which the capital gain was required to be computed on the basis of stamp duty valuation - Held that:- As the assessee was required to compute capital gain under the clear provisions of section 50C, assessee however declared much lower capital gain on the basis of consideration received which was against the clear provisions of law - explanation of the assessee that lower declaration was by mistake cannot be considered as bonafide because the assessee did not file revised computation even during assessment proceedings when the issue was being examined and assessee filed revised computation only after the addition was made in the assessment order - explanation cannot be considered as bonafide nor the issue is debatable as the assessee did not dispute the valuation report thus Penalty has being rightly levied - decided against assessee.
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Customs
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2012 (7) TMI 263
Challenge import of toxic wastes from industrialized countries to India - Writ Petition - Ministry of Environment and Forests permitting import of toxic wastes under the cover of recycling - Held that:- Interim directions given with regard to the handling of hazardous wastes and ship breaking in the various orders passed in the writ petition from time to time and, in particular, the orders dated 13th October, 1997 and 14th October, 2003 to issue a notification to ban the import of such identified hazardous substances - The Central Government is also directed to ban import of all hazardous/toxic wastes which had been identified and declared to be so under the BASEL Convention, aimed and protecting marine biology and countries having coast-lines alongside seas and oceans and its different protocols - The Central Government is also directed to bring the Hazardous Wastes (Management & Handling) Rules, 1989, in line with the BASEL Convention and Articles 21, 47 and 48A of the Constitution - that without adequate protection to the workers and public the aforesaid Rules are violative of the Fundamental Rights of the citizens and are therefore unconstitutional is however rejected in view of what has been discussed.
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2012 (7) TMI 233
Whether ADG DRI was competent to issue the impugned show-cause notices - there is both appointment as Collector/Commissioner and special authorization by the Board to issue show-cause notices in respect of cases investigated by DRI – Held that:- All persons appointed as officers of Customs under sub-section (1) of Section 4 before the 6th day of July, 2011 shall be deemed to have and always had the power of assessment under section 17 and shall be deemed to have been and always had been the proper officers for the purposes of this section. Whether there is violation of principles of natural justice in not allowing the cross-examination of the group of scientists involved in preparing the CAIR report - There is no absolute right for cross examination of any witness in the adjudication proceedings – Held that:- When cross examination was sought for, apparently, not all the members of the Team were available with CAIR. Therefore, the cross examination of the Team from CAIR was not given. Instead, BAL was requested to give a questionnaire, which was answered by the Team-Head, which is part of the adjudication proceedings. Further, the Commissioner has permitted expert opinions of two experts to be were produced by the appellants, and considered the same as well – there is no violation of principles of natural justice in this regard. What are the nature/characteristics of goods imported by the assessee/appellants as hardware and software separately - What is the true nature of transactions involved in such imports - import is of telecom equipment system - They did not disclose preloading of software in the factory in Sweden - comprising both hardware and software units – Held that:- Not only the software has been preloaded in flash memory or hard disc but a backup of the same was taken and stored in the hardware imported - What was imported as software separately was lying in original packing condition, without being opened and therefore, without being used for a few years. That does not mean that the hardware was not put into use. Hardware was installed and tested by the officials of EIL and the system was put into operation. They did not find any need for use of the software imported separately - it is not proper to consider the telecom equipments as a specialized computer as claimed by the appellants - decisions in respect of classification/valuation of hardware and software of computers cannot be mechanically applied to hardware and software relating to telecom equipments. Whether the value of software preloaded at factory in Sweden before shipment took place requires to be excluded from the value of hardware as claimed by the assessees or to be included as held by the department – Held that:- Without the preloaded software, the imported equipments cannot get the identity as telecom equipments and cannot serve the purpose - software preloaded in the equipments imported and which is undisputedly essential not only for its functioning but for giving identity to the equipments cannot be treated as presented with the equipments - no justification to pull out or disintegrate the preloaded software from the imported equipment and grant it separate status and to classify it under Chapter sub-heading 85.24 and to exclude its value (which was artificially split from the composite value of the equipment) to arrive at the value of the equipment - it is a case of importing equipments which contained essential software/intrinsic software giving the functional identities to the imported equipments Whether the decision of the Tribunal in the case of Vodafone is applicable to the facts of the present case or not – Held that:- In the case of Vodafone came to the conclusion that the software was contained only in Winchester hard disc and therefore, could not be considered as embedded or etched software - In the present case, software meant for BTS is contained in the flash memory which is a form of EEPROM - facts of the present cases are different from the facts of Vodafone case - software in the form of tapes/CDs having come separately in CDs and Tapes was not embedded or etched - there is fraud in preparation of ODs and CDs and sending them to Sweden and re-importing the same to be dumped as e-waste - It is settled law that fraud nullifies everything - This crucial fact also distinguishes the present case from Vodafone case. Whether all the imported goods are liable to confiscation or only goods which were seized by the department are liable to confiscation – Held that:- Goods are offending in nature and they are liable to confiscation - confiscation under Section 111 applies to any goods in respect of which offences have been established and not necessarily to all goods which have been seized - there is no restriction under Section 124 to issue show-cause notice proposing confiscation of only the seized goods - provisions of Sections 110 and 124 are independent, distinct and exclusive of each other - imported goods are offending in nature due to deliberate misdeclaration of value of the goods, they are liable to confiscation - goods were imported over a long period August 2001 to April 2006 and that the order of confiscation was made in April 2008, and that the goods were meant for the importers own use for rendering services and not for sale, we are of the view that there is some scope for reducing the quanta of redemption fines imposed by the Commissioner Whether the quantum of duty has been correctly worked out - assessee submitted that the department, instead of valuing the software on the basis of payments made to the supplier, computed the value on a completely notional basis and the same was against the provisions of the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 – Held that:- Adoption of software value for the full capacity of the imported hardware based on the appellants own documents cannot be held to be erroneous. The appellants claim to rely on value mentioned in corresponding software orders is not acceptable - appellants have deliberately split the value of equipments between hardware and software without any basis. Whether extended time limit is applicable and whether penalties are liable to be imposed - There is clear evidence of deliberate underdeclaration of value of the imported equipments by the assessee-appellants through a grossly deceptive method with intention to evade payment of duty - invocation of extended period for demand of duty, confiscation of the imported goods, and imposition of penalties on the assessees are justified
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Service Tax
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2012 (7) TMI 288
Taxability - Overseas commission agent services received – period prior to 18.04.2006 - Held that:- Liability under Finance Act 1994 for availing service of foreign agents arise after 18.04.2006 following Apex Court decision in case of Indian National Shipowners Association v. Union of India (2010 - TMI - 78723 - Supreme Court of India) - Decided in favor of assessee.
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2012 (7) TMI 287
Storage or warehouse keeper – recipient of service from foreign party i.e. PROSAFE – Held that:- In terms of the agreement, PROSAFE was responsible for maintaining floating storage and offloading unit system and was to operate the system efficiently to receive storage and deliver correctly in accordance with the specification and operating requirements. That does not bring the activity of PROSAFE squarely within the fold of Section 65 (105) (zza) as a storage or a warehouse keeper - Being an agent of the process of production, it was not a storage or warehouse keeper. Therefore, service was not provided by the foreign agency as storage or warehouse keeper - appellant shall not be liable to pay service tax as the recipient of service of the nature not falling within the purview of Section 65 (105) (zza) of Finance Act 1994 read with Section 65 (102) - appeal is allowed
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2012 (7) TMI 286
Penalty under Section 76 and 78 - non-payment of service tax – due to financial hardship – after being pointed out, discharged their service tax liability along with interest – Held that:- case is covered by the provisions of Section 73(3) of the Finance Act and, hence, penalty under Section 76 and 78 is not called for.
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2012 (7) TMI 285
Reclassification of service - maintenance and repair service – Held that:- appellant has never disputed the classification of service and they have been discharging the service tax liability under the category of “Consulting Engineers” right from the beginning. Issue of classification of service was never a point for decision before the adjudicating authority and the only point for decision was the valuation of the services rendered. Any change in classification can only be prospective and the issue has to be raised before the appropriate authority for consideration and decision. Miscellaneous application is non-maintainable. Value of such taxable service - electricity is supplied free of cost by the service receiver – Held that:- electricity is required for rendering the service of operation and maintenance of the plant, then the cost of supply of electricity is a consideration for the service rendered and such cost will have to be included in the value of the taxable services rendered. Appellant directed to make a pre-deposit of Rs.1.00 Crores.
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2012 (7) TMI 284
Valuation - transportation of passengers for International journey by air along with other services to its clients - While issuing tickets to the passengers, they were collecting passenger service fees (PSF) on behalf of the International Airport Authority of India (IAAI) and remitting it to IAAI - They had not included these amounts collected from the passengers, in the value of their services – Held that:- As per Section 67 of the Finance Act, 1994, the value of any taxable service shall be the gross amount charged by the service provider for such service provided or to be provided. The amount in question is not paid for the services provided by the appellants. Wavier of pre-deposit granted.
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2012 (7) TMI 258
Service tax on waterfront royalty and way leave facility compensation - extended period of five years has been wrongly invoked - Held that:- Commissioner has come to the conclusion that there was suppression of facts only on the ground that the agreement was drafted in a complicated manner with intention to evade payment of duty. For this, there is no evidence forthcoming and it was submitted that agreement was entered into before the liability of Service Tax arose. This submission would show that invocation of extended period is not based on a strong ground and the appellant has been able to make out a prima facie case as far as extended period is concerned - as extended period should not have been invoked and stay was granted directing the appellant to deposit an amount of Rs.25 lakhs, as condition of hearing of their appeal - in favour of assessee
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2012 (7) TMI 257
Invocation of section 80 - Service of Rent-A-Cab scheme to another operator of rent-a-cab – non-payment of service tax under the bonafide belief that Service Tax is not applicable to them as they were providing services of rent-a-cab operator to another rent-a-cab operator and not to clients directly as per circular of CBEC bearing F. No. B 43/7/97-TRU dated 11.07.97 - Additional Commissioner's denial of benefit on the ground of non-segregation of amount fortifies the reason of their bonaflde belief that their service was not taxable - Additional Commissioner did not show any reason why the appellant's appeal and grounds for invocation of section 80'could not be given any cognizance to – Held that:- They paid the tax and interest when non-applicability of the said notification was pointed out to them without going into any dispute. This bona fide conduct as also argument of the appellant showing sufficient and reasonable cause for the failure certainly call for invocation of I section 80 of the Act – Commr. (Appeals) has rightly invoked Section 80 of the Finance Act.
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2012 (7) TMI 256
Waiver of pre-deposit - Demand of service tax - Advertising Agency Service - For the selling activity in Ukraine, the applicants have appointed dealers/agents for promoting the sale of the applicant's products – Held that:- Dealers/agents are promoting the business of the applicant and they are not the advertising agency, therefore, the demands in the category of advertising agency is not sustainable. In favor of appellant.
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2012 (7) TMI 255
Business Auxiliary Service - procuring blank cards, loading operating system on these cards, obtaining photo/thumb impression and other information, storing and printing the said information in the card, and ultimately dispatch the loaded cards to the customers on behalf of the transportation authority on B.O.T. basis.- assessee contested that it operated under a contract to build a system for benefiting the Regional Transport Authority and District Transport Authority as well as the consumers - Held that:- Looking into the functional specifications and reading all these clauses states that the appellant carried out specific independent activities with different kinds of remuneration, package for such works. There was also no split of the contract made to examine different aspects to ascertain taxability - when there is no effort made to judge the activity carried out by the appellant in accordance with the letters of law, adjudication fails to sustain. Revenue also fails to get helping piecemeal reading of the law without proving that the services provided by the appellant was auxiliary in nature to serve the purpose of business of client - in favour of assessee.
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2012 (7) TMI 254
Demand of service tax - 'consulting engineers service' - payments made to the foreign consultant - services having been provided before 18.04.06 – Held that:- no clear findings given by adjudicating authority in spite of all relevant documents presented before him. Law has undergone evolution. Authority should be very specific to bring out what was the activity carried out, nature of same. Matter remanded.
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Central Excise
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2012 (7) TMI 262
Denial of credit of CVD paid in respect of 4 Bills of Entry - Held that:- The appellants produced evidence by way of certificate from the Range Supdt. that credit had not availed by the importing unit and also produced chartered accountant's certificate that the draw back of CVD has not been claimed by the importing unit. This evidence was not before the Commissioner(Appeals), thus the impugned order denying the credit is set aside and the matter is remanded back to decide afresh - in favour of assessee by way of remand.
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2012 (7) TMI 261
No Cenvat credit can be taken if a manufacturer claims depreciation under the Income Tax Act - Held that:- The assessee submission that he had filed a revised Income Tax Return and in that he had not claimed the depreciation - Since it is not clear from this record whether the revised return is accepted by the Income Tax authority the matter is remanded back to the adjudicating authority to decide the issue afresh after taking into consideration the assessment order passed on the revised Income Tax Return - in favour of assessee by way of remand.
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2012 (7) TMI 260
Whether Cenvat credit availed on input for generation of power bartered to Haryana State Electricity Board shall dis-entitle the appellant to such credit - Held that:- As no cogent reason brought out by Revenue against motive of battering the power, appeals of Revenue is misconceived - against revenue.
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2012 (7) TMI 259
Plea for waiver of pre-deposit of duty of 99 lacs and penalty - dispute regarding classification of pin mailer - assessee contending the same to fall under Chapter 49 of the tariff whereas Revenue contended it to be under chapter 48 - assessee engaged in the manufacture of PIN mailer, stationery and other stationery items - Held that:- As explained, Pin mailer is printed continuous computer stationery which is further used by the Bank in the dot-matrix printer to print the PIN number of their customers. In these circumstances, prima facie we find that it is not a fit case for total waiver of duty. However, keeping in view the financial hardship as pleaded, the applicants are directed to deposit an amount of ₹ 15 lacs within a period of eight weeks. On deposit of aforesaid amount, recovery of remaining amount of duty, interest and penalty is stayed during the pendency of the appeals.
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2012 (7) TMI 232
Classification of motherboard and add on card - Held that:- Add-on card and motherboard cannot be considered as automatic data processing machines. Same are parts and accessories suitable for use with the machine falling under Heading 84.72. As the goods in question are parts and accessories of the data processing machine falling under Heading 84.71, therefore being parts and accessories are classifiable under Heading 8473 of the Tariff. Appeal of Revenue allowed.
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2012 (7) TMI 231
Whether refund claim is liable to be rejected on ground of unjust enrichment u/s 11B - Held that:- As the respondent has not disputed the computation of assessable value of cigarettes after the decision of the Delhi High Court that duty at only concessional rate was deductible from the cum-duty price for determination of assessable value as the respondent has not challenged deduction of amount of Rs. 20,33,381.53 from the total refund of Rs.35,57,094.53. Therefore, the decisions relied upon by the respondents do not support their claim which is rejected on the ground of unjust enrichment. The invoice price charged to the buyers from 30.11.82 to 07.12.82 includes the duty amount calculated at the rate of 440% Adv. plus Rs. 32/- specific amount of duty paid and the duty paid in the ARI is calculated and paid under Notification No. 30/79 dated 01.03.79 plus 50% of the disputed amount shown in ARI and less than the duty amount charged in the invoices, thus it is clear that although duty has been charged at tariff rate from the buyers in the invoice, the total amount of duty paid to the Central Excise department as is evident from the ARI assessment is less than the amount recovered as duty from the buyers, the respondent has not been able to prove that the amount sought to be refunded by the assessee was not recovered from buyers - against assessee.
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2012 (7) TMI 230
Legality of reduction of penalty leviable u/s 11AC even on proven and admitted shortage of stock - Appellate authority made contradictory approach by admitting shortage on one side and negating clandestine removal on other side - Held that:- It is clear that assessee failed to adduce evidence before the appellate authority to defend the adjudication. There was no controversy of the fact found by investigation when physical verification resulted in discrepancy in stock and more particularly, shortage of raw material. Possible inference that may arise is either the raw materials were removed as such or those must have been instrumented to make finished goods for clandestine removal. It would be proper, if the first appellate authority thoroughly re-examines the facts and evidence and come to a rationale conclusion about the veracity of the SCN - matter remanded back.
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2012 (7) TMI 229
Non-inclusion of the loading and forwarding charges in the assessable value - demand and equal amount of penalty – Held that:- The issue relates to the period from March, 01 to Nov. 02, whereas the show cause notice has been issued on 21.12.04, i.e. beyond the time limit prescribed under Section 11A - extended period of limitation cannot be invoked by reasons of willful mis-declaration of assessable value as it is clear that all the relevant information was available with the department appellant was filing monthly statutory returns like RT-12/ER-1 indicating that no duty has been paid by the appellant on the loading and forwarding charges while clearing the goods from the factory and therefore, the allegation of suppression of relevant facts is totally without any basis – in favour of assessee.
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