TMI Tax Updates - e-Newsletter
July 16, 2012

Case Laws in this Newsletter:

Income Tax Customs Service Tax Central Excise

Articles

1. SEIZURE OF GOODS – SOME ISSUES.

   By: DR.MARIAPPAN GOVINDARAJAN

2. Service Tax on service portion in execution of works Contract:- An Analysis

   By: ROHAN THAKKAR

News

1. Suggestions on proposed amendments in the CESTAT Forms-reg.

2. Export Stood at US $ 25.07 Billion in June 2012 Trade Deficit Contracts in June.

3. Jyotiraditya Scindia Holds Bilateral Meetings in CUBA Requests Early Renewal of OVL Contract and Proposes Equity for an Oil Refinery India Willing to Supply Buses for Cuban Transport System.

Notifications

Companies Law

1. F No. 1/1/2003-CL.V - dated 10-7-2012 - Co. Law

Companies (Central Government's) General Rules and Forms), 2012 - New Form 24AAA.

Customs

2. F.No. 437/01/2012-Cus. IV - dated 13-7-2012 - Cus (NT)

Appointment of Common Adjudicating Authority in respect of Revenue Intelligence, Kolkata Zonal Unit, Kolkata.

3. F.No. 437/25/2012-Cus. IV - dated 11-7-2012 - Cus (NT)

Appointment of Common Adjudicating Authority in respect of M/s Dow Chemical International P. Ltd., Mumbai.

Service Tax

4. CORRIGENDUM - dated 11-7-2012 - ST

Corrigendum of Notification No. 42/2012-Service Tax.

VAT - Delhi

5. F.7(450)/Policy/VAT/2012/336-347 - dated 12-7-2012 - DVAT

Furnishing of details of sales/transfer against Central Declaration Form for the year 2011-12 and onwards.

Circulars / Instructions / Orders

VAT - Delhi

1. 08 - dated 11-7-2012

Extention of date of filing of return for the tax period ended 30.06.2012 by quarterly dealers.

2. 07 - dated 10-7-2012

Filling and filing of information in Annexure 2A and 2B.

Highlights / Catch Notes

Income Tax

• Court Rules No Direct Link Between Alleged Bogus Purchases and Sales; Decision Favors Assessee's Taxable Income Assessment.

  Case-Laws - AT : Addition made on account of bogus purchases - there cannot be a direct nexus between purchases and sales - in favour of assessee. - AT
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• Surcharge Provision Deemed Non-Taxable: Considered Hypothetical, Not Actual Income of Assessee.

  Case-Laws - AT : Addition made on account of non realization of ‘Provision for surcharge’- such amount of surcharge cannot be held to be taxable as it is not the real income of the assessee and is hypothetical by nature - AT
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• Capital gains from flat sales depend on the actual holding period of the flats, not just acquisition rights.

  Case-Laws - AT : Capital gain from sale of flats - short term or long term - computation of period of holding - The assessee had sold the flats and not its rights to acquire the flat and, therefore, the capital gain in the present case has to be computed in respect of assets being flats. - AT
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• Deduction Claim u/s 36(1)(viia) Denied; Recompute Using 1991 Census for Rural Branch Advances.

  Case-Laws - AT : Decline of claim of deduction u/s 36(1)(viia) of the Act with reference to the advance made by rural branches - Assessing Officer to recompute the amount of deduction eligible u/s 36(1)(viia) of the Act as per Census of 1991 rather than as per Census of 2001 - AT
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• Cooperative Society's Tax Exemption Denied for Failing Mutuality Principle in Flat Construction: Contributors Must Benefit Equally.

  Case-Laws - AT : Principle of mutuality - assessee is a cooperative society engaged in the construction of flats - assessee has failed to satisfy the basis of mutuality on various grounds - AT
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• Appeal Allowed Before CIT(A) Against Order Made Under CIT's Directions in Revisionary Proceedings per Section 263.

  Case-Laws - AT : Maintainability of appeal - revisionary proceedings under Section 263 - It was only an order passed in compliance of the directions of CIT - against such an order, appeal was maintainable before CIT(Appeals) - AT
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• Disputed Property Valuation? Assessing Officer Must Refer to Valuation Officer u/s 50C(2)(a) for Fair Assessment.

  Case-Laws - AT : Mandatory reference to Valuation Officer when assessee objects to valuation adopted by Assessing officer on invocation of Section 50C - in accordance with the provisions of section 50C(2)(a), he should have made a reference to the Valuation Officer - AT
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• Car Purchase Costs Excluded from In-House R&D Expenditures for Tax Purposes Based on Case Law.

  Case-Laws - AT : Expenditure on Scientific Research - Expenditure on purchase of car cannot be accepted as expenditure whether capital or revenue incurred on in-house research & development. - AT
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• Section 40(a)(ia) of Income Tax Act: Disallowance Applies Only to Year-End Payables, Not Paid Expenses Without TDS Deduction.

  Case-Laws - AT : Provisions of section 40(a)(ia) of the Act 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 - AT
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• Deduction for Prior Period Expenditure Allowed in Assessment Year 2006-07, Not in 2007-08.

  Case-Laws - AT : Prior period expenditure - recognition on the basis of finalization of negotiations - deduction is not permissible in assessment year 2007-08, but, it is permissible in assessment year 2006-07 - AT
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Customs

• Burden of Proof on Claimant in Illegal Importation Cases u/s 11: Prove Goods Are Not Smuggled.

  Case-Laws - AT : Illegal import into India in violating the provisions of Section 11 - the burden of proof is either on the claimant or on the person from whose possession the goods were seized, to show that the goods were not smuggled - AT
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Corporate Law

• New Form 24AAA Introduced in Companies Law to Enhance Compliance and Streamline Corporate Governance Processes.

  Notifications : Companies (Central Government's) General Rules and Forms), 2012 - New Form 24AAA. - Notification
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Indian Laws

• Navigating Goods Seizure in India: Legal Framework, Procedural Challenges, and Compliance for Businesses Under Indian Law

  Articles : SEIZURE OF GOODS – SOME ISSUES. - Article
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• CESTAT Form Amendments Proposed to Streamline Tax Case Procedures and Improve Efficiency; Stakeholder Feedback Invited.

  News : Suggestions on proposed amendments in the CESTAT Forms-reg.
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Service Tax

• Court Rules Free Electricity Isn't Additional Consideration for Taxable Services in Equipment Maintenance.

  Case-Laws - HC : Valuation of taxable service - services relating to maintaining and operating the equipments - the electricity supplied free of cost by the customers to the assessee does not in any way amount to additional consideration received by the assessee in kind - HC
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• No Taxable Services Without Established Relationship in Construction Cases: Key Principle for Service Tax Obligations.

  Case-Laws - AT : Construction services - in the absence of relationship of service provider and service recipient , the question of providing taxable service to any person by any other person does not arise at all - AT
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• CENVAT Credit Allowed for Mall Construction: Tours, Travel, and Security Services Deemed Essential for Renting Property.

  Case-Laws - AT : Denial of CENVAT Credit - renting of immovable property - without utilizing the service like tours and travel agent services, security service, air ticket booking services,etc. mall could, not have been constructed and therefore the renting of immovable property would not have been possible - credit allowed - AT
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• Corrigendum Issued for Notification No. 42/2012 on Service Tax, Ensuring Clarity and Accuracy in Provisions.

  Notifications : Corrigendum of Notification No. 42/2012-Service Tax. - Notification
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Central Excise

• Respondents failed to provide re-warehousing certificates for goods removed under CT-3; cannot extend beyond SCN allegations.

  Case-Laws - AT : Re-warehousing - respondents removed the goods against CT-3 under ARE3s, however they failed to produce the re-warehousing certificates in respect of such goods - The law does not permit to go beyond the allegations made in the SCN - AT
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• Cenvat Credit Cannot Be Denied If Excise Duty on Final Product Is Accepted; Technical Objections Insufficient Grounds.

  Case-Laws - AT : Disallowance of cenvat credit - The department having accepted the excise duty on the final product cannot be permitted to deny cenvat credit on the inputs used for the manufacture of the final product on a technical plea of department - AT
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Case Laws:

• Income Tax

• 2012 (7) TMI 345
  Addition to the income made on account of unexplained loans and interest thereon - Tribunal confirmed CIT(A) order for deletion - Held that:- Tribunal being the appellate authority vis-à-vis CIT (Appeals) was under the duty to satisfy itself that the reasoning adopted by the CIT (Appeals) in a case where the appeal was allowed and the reasoning of the Assessing Officer displaced was bound to ensure that there were adequate and sound reasons for doing so. Unfortunately, the Tribunal did not display the diligence that was called for and record its satisfaction that the CIT (Appeals)’ reasoning overturning the Assessing Officer’s findings were sound and justified - As loans received are utilized only for partners personal requirement & non-business use and whereas creditors did not respond to the summons issued by the Assessing Officer during the course of the assessment proceedings disallowance in regard to unexplained cash credit is warranted - remit the matter for reconsideration on the question of adding back of the cash loans and interest thereon for the concerned assessment years - against assessee.

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• 2012 (7) TMI 344
  Dis allowance of claim of exemption u/s.80-IB(10)- invoking provisions of Sec 263 by DIT - Held that:- Assessee's claim for deduction u/s.80-IB(10) for AY 2009-10 relates to the profit derived from developing housing project, cannot be regarded as income of a charitable trust or institution within the meaning of Sec.11(1)(a) because carrying on of the housing project was not a charitable purpose even in AY 2009-10 in view of the first proviso to Section 2(15) of the Act - the activity of construction of building and sale was in the nature of trade, business, commerce for consideration and therefore the income from the said activity will stand excluded from the provisions of Sec.11 & if Sec.11 is excluded, then the income of the Assessee has to be computed in accordance with the provisions of the Act and therefore the claim of the Assessee for deduction u/s.80-IB(10)has to be allowed - exercise of jurisdiction u/s. 263 by DIT on the ground of lack of inquiry regarding eligibility of the Assessee for deduction u/s.80-IB(10)cannot therefore be upheld - in favour of assessee.

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• 2012 (7) TMI 343
  Addition to the income of assessee u/s 68 - Held that:- As there was sufficient cash withdrawal from the bank account of M/s. Ocean Trading Company during the relevant period and Assessee’s wife was partner of M/s. Ocean Trading Company - Ledger account of capital account of wife of assessee from the books of firm also reflects the withdrawals made by her. Thus, the facts regarding the withdrawal of cash from the capital account of her are not in dispute and facts regarding the purpose for which the withdrawal was made were also well established - The person with whom the deal of purchase of property was made has also confirmed the fact regarding the transaction entered into for purchase of the property. Therefore, there is no doubt that cash balance was available with the wife of the assessee - as the amount was given by her to her husband which in turn has deposited in his bank account, not stating specifically regarding the character of transaction between husband and wife whether it was loan or gift, shall not be sufficient to treat the source of the amount deposited in the bank account of the assessee as unexplained - in favour of assessee.

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• 2012 (7) TMI 342
  Addition made on account of dividend income - claimed as exempt in terms of sec. 10(34) - CIT(A) deleted the addition - Held that:- As the assessee has invested in mutual funds during the previous year under consideration and the Revenue could not produce any evidence contrary to the findings recorded by the CIT(A) no infirmity is found in the order passed by the CIT(A) deleting the addition - in favour of assessee. Restricting the disallowance u/s 14A by CIT(A) - Held that:- The assessee had paid interest of Rs.17,16,952/- out of which the AO had disallowed Rs.16,92,466/-. Therefore, u/s 14A disallowance of balance interest of Rs.24,486/- (Rs.17,16,952 – 16,92,466) can be allowed. The AO has made separate disallowance of Rs.16,92,466/- on account of interest free advances given to the sister concerns. Therefore, for the purpose of sec. 14A interest of Rs.16,92,466/- would not be considered and only remaining expense of Rs.24,486/- would be liable to be considered under sec. 14A,thus CIT(A) was justified in restricting the disallowance u/s 14A to the extent of Rs.24,486/- decided in favour of assessee.

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• 2012 (7) TMI 341
  Challenging the re opening of assessment u/s 147 - Held that:- The AO received information from investigation wing that assessment is a beneficiary of the bogus accommodation purchase bills and on this information, AO applied his mind and formed a belief that income has escaped assessment - it was neither a change of opinion nor it conveyed a particular interpretation of a specific provision which was done in a particular manner in the original assessment, the reason to believe has been appropriately understood by the Assessing Officer - was sufficient material on the basis of which notice was issued - against assessee. Against the deletion of addition made on account of bogus purchases by CIT(A) - Held that:- Not getting the accounts audited as per the provisions of section 44AB even when the turnover exceeds the limit also solidify the belief that transactions were not genuine - CIT (A) observation that no sales can be executed without making corresponding purchases is perverse as during financial year 1999-00 and 2000-01, the installed capacity for Atta shown in accounts is 60,000 MTs while production was 73,149 MTs and 84,316 MTs respectively. Assessee was also getting grinding done on lease contract also. All these facts show that there cannot be a direct nexus between purchases and sales - in favour of assessee. Against the deletion of addition made on account of employees provided fund and ESIC by CIT(A)- Held that:- The deduction of payment of employees’ contribution towards provident fund and ESI cannot be disallowed under section 43B, if paid before the due date of filing the return - in favour of assessee. Against the deletion of addition of interest free loan given to sister concern of assessee by CIT(A) - assessee also gave interest-free loans and advances to its sister-concerns - Held that:- Revenue was not able to establish any nexus between the amount borrowed by the assessee company on interest and the amounts advanced by the assessee to its sister-concerns. In fact major parties from whom interest was not charged were the same as in assessment year 1977-78 for which the Tribunal held that there was no warrant for adding any notional or deemed interest - to decide whether interest on funds borrowed by the assessee to give an interest free loan to a sister concern should be allowed as a deduction under section 36(1) (iii), one has to enquire whether the loan was given by the assessee as a measure of commercial expediency - in favour of assessee.

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• 2012 (7) TMI 340
  Addition made on account of non realization of ‘Provision for surcharge’- CIT(A) deleted the addition - Held that:- assessee changed its method of accounting after seeking necessary approval of CAG, shows that as far as the assessee is concerned, the collection of surcharge was contingent and did not accrue due to assessee. The liability will accrue on the basis of crystallization i.e. the payment of the surcharge or passing of a suitable order by the appropriate authority on the dispute raised by the customer - assessee being a state PSU the surcharge on delayed payment being disputable item was not mandatorily payable at the time of payment of electricity consumption bill was not an accrued receipt in view of the accounting policy accepted by the revenue - such amount of surcharge cannot be held to be taxable as it is not the real income of the assessee and is hypothetical by nature in given facts and circumstances, and does not amount to accrued of receipt taxable as income - in favour of assessee. Addition u/s 40(a)(ia) on account of non deduction of tax on the payment of wheeling / transmission charge - CIT(A) deleted the addition - Held that:- Considering the clauses of transmission service agreement it is clear that all the parties involved with generation, transmission and distribution of electricity are to comply with the direction of State Load Dispatch Center and the Regulatory Commission for achieving the economy and efficiency in the operation of power system and therefore question of any person rendering service to another does not arise. The operation and maintenance of transmission lines by RVPNL and the use of these lines by assessee for transmitting energy does not result into any technical service being rendered to the assessee - the services rendered qua interconnection/port access do not involve any human interface and, therefore, the same cannot be regarded as 'technical services' as contemplated under section 194J - there is no liability to deduct tax at source on payment of transmission/wheeling/SLDC charges under section 194J or for that matter under section 194C - transmission/wheeling/SLDC charges is reimbursement of the cost, therefore the provisions of Chapter XVII-B are not applicable since there is no payment of income/revenue by the assessee - in favour of assessee.

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• 2012 (7) TMI 339
  Disposing of the appeal ex-parte by CIT(A) - Held that:- As none of the notice dated notice dated 20th October, 2011, 27th January, 2012 and 14th February, 2012 issued by the CIT(A) appear to have been served upon the assessee nor the DR placed any material regarding service of any of these notices. In these circumstances, the CIT(A) dismissed the appeal without even analyzing the issues or recording his specific findings on the said issues raised in the grounds of appeal before him - that the order passed by the CIT(A) is cryptic and grossly violative of facets of the rules of natural justice which should reflect application of mind by the concerned authority to the issues/points raised before it - Section 250(6) of the Act mandates that the order of the CIT(A) while disposing of the appeal shall be in writing and shall state the points for determination, the decision thereon and the reasons for the decision - it fair and appropriate to set aside the order of the CIT(A) and restore the matter to his file for deciding it afresh.

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• 2012 (7) TMI 338
  Penalty u/s. 271(1)(c) - CIT(A) deleted levy - ITAT reversed the order of CIT(A) and upheld the AO’s view that interest earned from fixed deposits is liable to be assessed as income from other sources and not "Business Income" - Held that:- The issue resulting in the determination of higher income u/s 143(3) was clearly debatable, penalty is not imposable on debatable issues or claims/deductions disallowed on account of varying legal interpretations it is held that penalty u/s 271(1)(c) is not imposable in the present case - penalty u/s 271(1)(c) will not lie merely if an incorrect or inadmissible claim has been made in the return and when all material facts having been disclosed in the return of income - in favour of assessee.

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• 2012 (7) TMI 337
  Challenging the initiation of proceeding u/s 147/148 - Held that:- The reasons for reopening the assessment communicated do not indicate the satisfaction of the first proviso to Section 147 namely failure on the part of the petitioner to fully and truly disclose all material facts necessary for the assessment which took place on 18th December,2006 in respect of the Assessment Year 2004-05. Therefore, the notice was completely without jurisdiction- the ground for reopening of the assessment is only that earlier assessment allowing depreciation on goodwill and set off of unabsorbed depreciation was erroneous, this would amount to a mere change of opinion and would not give jurisdiction to reopen the concluded assessment - Hence the jurisdictional requirement to reopen the assessment after more than four years from the end of the relevant assessment 2004-05 is not satisfied - in favour of assessee.

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• 2012 (7) TMI 336
  DTAA between India and Germany - assessee contending that it is having a PE and its profit attributable to the PE is assessable as a business income as per Article 5 read with Article 7 whereas Revenue taxed gross total receipt as FTS, taxable @ 10% - assessee further contended that DRP has not considered objections of the assessee and passed a non-speaking order - Held that:- It is observed that in subsequent AY, the AO himself accepted the case of the assessee that it is having a PE and its profit attributable to the PE is assessable as a business income as per Article 5 read with Article 7. Since, DRP did not take cognizance of any of the objections raised by the assessee and passes a non-speaking order, hence it deserves to be se aside. Accordingly, we restore all these issues to the file of the DRP for re-adjudication.

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• 2012 (7) TMI 335
  Addition of Gross Profit - notional tax effect - AO has not established any case of bogus claim or double deduction of expenses by the appellant Rectification under Section 254(2) of IT Act – Held that:- At the time when the impugned appeal of the Revenue was dismissed by the Tribunal vide order dated 14-05-2010, reliance was placed on certain decisions and the CBDT Circular available at that time – adjudication was proper after due consideration of the facts as also the law applicable at that point of time - All the latest development thereafter thus raised a controversy and being controversial in nature therefore cannot be made the basis for rectification of the order as prescribed under Section 254(2) of IT Act - petition of the Revenue dismissed

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• 2012 (7) TMI 334
  Capital gain from sale of flats - short term or long term - computation of period of holding - The right to acquire the flats and ownership of the flats - held that:- The assessee had earlier right to acquire flats which no longer subsisted after flats were acquired by the assessee. The assessee had sold the flats and not its rights to acquire the flat and, therefore, the capital gain in the present case has to be computed in respect of assets being flats. The assessee along with flats had also sold right of the assessee in the land which was an independent asset and which was being held by the assessee since 1962 as an owner. Therefore, following the judgment of Hon'ble High Court of Bombay (2010 (10) TMI 16 (HC)), the capital gain in respect of transfer of right of assessee in the land has to be computed separately as long term capital gains and gain in respect of sale of super structure has to be treated as short term capital gain. - Decided partly in favor of revenue.

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• 2012 (7) TMI 333
  Adhoc disallowances under the head ‘wages’ - assessee claimed that the difference was due to a computer error and passed a single entry of Rs.1,88,919, the amount of the discrepancy detected, with the narration ‘cash payment to labourers’ as on 31.3.2005. - assessee failed to explain a factual discrepancy of Rs.1,88,919 that has been detected in its books of account - Decided against the assessee. Disallowance u/s.40A(3) read with 6DD - lorry freight charges - being 20% of the payments made in cash exceeding Rs.20,000 each u/s.40A(3) of the Act - held that:- assessee was placed in exceptional circumstances to make cash payments to the extent of Rs.2,95,096 and the authorities below were not justified to invoke the provisions of section 40A(3) of the Act - Decided in favor of assessee. Addition towards not accounting contract receipts - Assessing Officer found that bills in respect of 6 parties were not accounted for in the books of accounts of the assessee – Held that:- Assessee has not been able to establish with any documentary proof that these contract receipts amounting to Rs. 5,29,919 as per bills unearthed and impounded in the course of survey were nothing but estimates as contended or to disprove Revenue’s finding that they were contract receipts not accounted for - assessee’s ground is dismissed. Addition on account of excess of assets over liabilities - Assessing Officer had examined the account extracts of the assessee in the books of ISKON Temple and clearly established that the assessee’s claim that an amount of Rs. 29,326 was due by it to ISKON was not backed by any material evidence or documentary proof – Held that:- Assessee has not brought on record any documentary evidence to contradict Revenue’s finding on this issue – Against assessee Addition as unexplained cash credit under section 68 of the Act - credits in the capital account of partners of the assessee firm - Held that:- While the identity of the creditors, i.e. the partners, is proved, the transactions remain unexplained in the hands of the firm and he was of the view that the credit worthiness and genuineness of the transaction was not proved in the absence of any plausible explanation - assessee has failed to discharge its burden to prove and establish with documentary evidence, the capacity of the partners to actually make such credits in their capital account and the genuineness of the credits therein, thereby justifying the findings of the authorities below to bring to tax under section 68 – Against assessee

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• 2012 (7) TMI 332
  Disallowance u/s 36(1)(iii) based on the provisions of Sec. 40A(2)(a) of the Act - Interest on loans - held that:- The addition was made by the ld. Assessing Officer merely on the premises that lower rate of interest was charged by the assessee from its two relatives and jumped to the conclusion that the assessee made excessive payment. The CBDT in circular no. 6P dated 6.7.1968, while examining the reasonableness of expenditure, has clarified that the Assessing Officer is expected to exercise its judgment in a reasonable and fair manner and should not apply the reasonableness which cause hardship in bona fide cases. - So far as establishing business exigencies are concerned, it has to be judged by the businessman and not by the Revenue unless and until some adverse material is brought on record - Decided in favor of assessee. Long term capital gain on the sale of the house – sale deed for a consideration of Rs.30 lakhs - stamp valuation authority determined the value at Rs.35,71,000/- for the purposes of stamp duty levy - fair market value of the house was determined at Rs.36,52,000 - assessee has challenged the valuation – Held that:- Valuation adopted, approved by the DVO is based upon detailed working and the value of the house as on 1.4.1981 including the cost of the land/cost of the construction. There are very minor variations in the approach of the authorities - no infirmity in the direction of the learned Commissioner of Income Tax (Appeals) to recalculate the long term capital gain by taking the sale consideration at Rs.35.71 lakhs by adopting the cost of the house as on 1.4.1981 at Rs.5.11 lakhs as determined by the DVO Disallowance on account of bad debts - disallowed on the plea that identically in earlier assessment year also, the bad debt was disallowed – Held that:- Relief was given to the assessee and for the remaining amount of Rs.9,52,500/- in respect of fixed deposits and recurring deposits with Gujarat Mercantile Bank are concerned, these can be considered as capital loss, therefore, the Assessing Officer is directed to examine the claim of the assessee, consequently, the amount to the extent of Rs.9,52,500/- is remanded back for consideration of the ld. Assessing Officer for which due opportunity of being heard be provided to the assessee - appeals filed by the revenue are dismissed

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• 2012 (7) TMI 331
  Composite work contract - deduction of tax at source u/s 194C - 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. The assessee has already deducted TDS on account of services rendered for civil work/electrical work and erection of the machinery - provisions of section 194C are not applicable on account of purchase of machinery - supplier of the machinery is a separate component and on account of services rendered for commissioning machinery after civil work and electrical work is separate on which TDS has already been declared - assessee has not committed any default in view of provisions of section 201(1) - In favour of the assessee Interest under section 201(1A) for non-deduction of tax on salary payment to Director of the assessee company – Held that:- Total salary paid to director was Rs. 1,43,539/- and after deduction under section 80C and 80D the net taxable salary comes to Rs. 91,660/-. Since the salary was below Rs. 1,00,000/-, therefore, there was no liability to deduct tax on the amount of salary. The Assessing Officer has computed the total income which is other income i.e. interest etc. from bank. The company is liable to deduct tax on the amount of salary only which is less than Rs. 1,00,000/- and, therefore, there was no liability for deduction of tax - appeals of the assessee are allowed.

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• 2012 (7) TMI 330
  Decline of claim of deduction u/s 36(1)(viia) of the Act with reference to the advance made by rural branches - assessee has classified rural branches on the basis of 1991 census whereas as per the Assessing Officer, census of 2001 was published in public domain on 26.3.2001 as mentioned in Census of 2001 Series 1 issued by Registrar General and Census Commissioner, India, at Part-V page XII of the said report – Held that:- Assessing Officer to recompute the amount of deduction eligible u/s 36(1)(viia) of the Act as per Census of 1991 rather than as per Census of 2001 which was not available in the public domain as on the first day of the relevant assessment years under consideration - appeals of the assessee are partly allowed for statistical purposes

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• 2012 (7) TMI 329
  Disallowance of lease charges - sale and lease back transaction - assessee is claiming an expenditure towards quarterly rent and lease management fee – Held that:- If the assessee used the safety locker for part of the Assessment Year and the other part falls in the next Assessment Year, the lease charges paid by the assessee has to be necessarily allowed in the next Assessment Year. Claim of fall of market value of Government securities - claim on account of depreciation in market value of Government securities and claim for loss in sale of Government securities – Held that:- Once it is accepted that Government securities were to be treated as stock-in-trade, the loss in such Government securities are to be allowed - claim for depreciation in market value of Government securities stands resolved in favour of the assessee

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• 2012 (7) TMI 328
  Addition on account of unexplained income - deal between the assessee and Mr. Anton B. Rodrigues could not be finalised due to dispute in the title of the property and the same was cancelled vide cancellation Deed dated 10-11-2006. Mr. Anton B. Rodrigues returned the amount of Rs. 15 lacs to the assessee in three installments of Rs. 5 lacs each – Held that:- Action of the adding back Rs. 15 lacs to the income of the assessee as unexplained cash deposit in the bank account is not in order as all the necessary documents proving the cash deposit in the bank account is out of the explained sources – addition deleted

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• 2012 (7) TMI 327
  Disallowance u/s 40(b) - Remuneration to be paid to the partners – Held that:- Refusal to allow remuneration to the partners would result in holding the firm as un-registered firm which was not the case of the Assessing Officer. Having set a limit on firms income, the salary or remuneration to the partners can be varied by passing necessary resolution and would have to be inscribed in the books of account as such - Assessing Officer directed to allow the claim of remuneration paid to the partners. Claim of expenditure under head Drivers’ Commission - TDS u/s 194H - assessee was asked by the contractee to include the amounts paid to the drivers by them so that the payments under the transport charges – Held that:- Transportation charges receipts included payment to the drivers for the safe delivery of goods of the contractee was as per the terms of the contract therefore could neither be held disallowable in isolation in the hands of the assessee for the simple reason that the amount was separately shown claimed in the P & L account but was actually forming part of the bills raised by the contractee who deducted tax at source on payment to the assessee in accordance with the provisions of the I.T.Act – disallowance deleted

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• 2012 (7) TMI 326
  Addition - expenditure incurred on interest paid to specified persons – alleged that assessee has diverted interest bearing loans in interest free advances/loans – Held that:- Where the assessee possessed sufficient interest free funds of its own then a presumption stands that the investment in sister concern were made by the assessee out of interest free funds and therefore no part of interest on borrowing can be disallowed on the ground that investments were made out of interest bearing funds - appeal filed by the revenue is dismissed

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• 2012 (7) TMI 315
  Disallowance of purchases - goods were available in the bonded warehouse - Held that:- The AO's objection that assessee has not taken physical delivery of Insulated Kraft Paper is imaginary as the goods were in bonded warehouse which technically is in the custody of the assessee. Therefore, this objection of the Assessing Officer is not correct. No mention of insulating paper in the closing stock was also not correct as the raw materials were shown at the value of Rs. 88,37,636/- whereas work-in-progress was Rs. 69,13,407/- and the total stock under head 'inventory' was shown at Rs. 1,59,22,271/-. The details of raw material show that an amount of Rs. 84,15,144/- pertains to insulating paper, which included the imported stock (72,056 KGs valued Rs. 81,79,352), thus no basis on which AO came to the conclusion that the stock was not shown in closing stock - in favour of assessee.

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• 2012 (7) TMI 314
  Rejection of cross-objections being time barred - cross-objection that ITAT had not issued notice and that the appellant became aware of the pendency of the remitted appeals only upon noticing them in the cause list - Held that:- Tribunal could not have rejected the cross-objections without entering into the factual matrix and being satisfied itself that the appellant had not in fact filed cross-objections at the time when it could have originally when the appeals had been filed before the ITAT - the impugned order itself appears to have proceeded on the assumption that the assessee did not choose to file cross-objections despite service of notice whereas the assessee’s argument is that notice in fact was not served even after remand from this Court and that the cross-objection was filed since the pendency of appeals was noticed. Thus, the Tribunal could have examined whether the cross objections could be entertained in the facts and circumstances of the case having regard to the independent power to entertain them contained u/s 253 (5) - direction to consider cross-objections after giving due notice to the parties - in favour of assessee.

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• 2012 (7) TMI 313
  Deletion of the disallowance by CIT(A) - repair and maintenance expenses held to be capital in nature by AO - Held that:- The expenditure was in the nature of repairs incurred in order to preserve and maintain the existing asset namely, the factory building and therefore was allowable as revenue expenditure as no new asset or enduring advantage was obtained by the assessee by incurring the expenditure. No extra capacity or space was created in the factory by repairing the roof and the floor - findings of fact recorded on the basis of the material on record and those findings have not been challenged or shown to be perverse or based on no material - no substantial question of law - in favour of assessee.

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• 2012 (7) TMI 312
  Re-computation of the disallowance u/s 14A - Held that:- Since substantial amount of the total expense incurred by the assessee, for earning both taxable and non-taxable income, has been offered for disallowance by the assessee itself. Neither the CIT(Appeals) nor the Departmental representative who appeared before the Tribunal could point out any error or serious discrepancy in the basis adopted by the assessee for making the disallowance - Tribunal was not in error in not remitting the matter to the Assessing Officer for fresh consideration - in favour of assessee.

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• 2012 (7) TMI 311
  Disallowance u/s 14A - expenditure incurred to earn exempt dividend income by applying the provision of Rule 8D - Held that:- Assessee submitted before the AO that all the investments made by it were through internal funds and it did not incur any expenditure having direct or indirect nexus with dividend income. Apparently, the assessee did not furnish any such details of incurring expenditure while making huge investments - for the pre-Rule 8D period, whenever the issue of section 14A arises AO has, first of all, to ascertain the correctness of the claim of the assessee in respect of the expenditure incurred in relation to income which does not form part of the total income - it is nothing in the assessment order or impugned order as to whether the assessee expressed his willingness to furnish the details desired by the AO nor the AO or the CIT(A) seems to have undertook any exercise to ascertain the details of expenditure objectively in managing and supervising the aforesaid huge investments in shares and securities - set aside the order of the CIT(A) and restore the matter to his file for deciding the issue afresh. Disallowance of donation - Held that:- Though the assessee claimed that donation was deductible u/s 37(1), but not an evidence was placed before the lower authorities as how the expenditure is related to the business of the assessee nor the activities of the SREI Foundation were narrated. Since the assessee failed to establish the nexus of the aforesaid amount with the business of the assessee, apparently the claim is not admissible Denial of the claim of allowability of leave encashment - Held that:- Disallowance of an amount n terms of directions dated 8th May, 2009 of the Supreme Court in the case of Exide Industries Ltd. [2007 (6) TMI 175 (HC)]with a rider that the assessee is free to move a rectification petition on the final out come in the case of Exide Industries Ltd., we do not find any infirmity in the approach of the ld. CIT(A) Dis allowing TDS credit - Held that:- there is no recourse available to the deductee to get credit regarding TDS for any mismatch in the departmental computer system. As per section 199(2) of the I.T. Act credit for tax deducted is automatic and there is no provision in the Income Tax Act for appeal before the CIT (A) against the non-granting of TDS credit u/s 199(2). The appellate authorities are not provided with any access to the departmental computer system to verify any of the details regarding TDS credit. Therefore, the recourse available to the appellant is to approach the concerned administrative authorities with grievance petition - against assessee.

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• 2012 (7) TMI 310
  Disallowance u/s 40(a)(i) - reimbursement of the expense made to various overseas companies - Held that:- Since the expenditure to foreign companies was reimbursed to overseas companies for the expenses incurred on behalf of the assessee company and their margin for the services rendered outside India, therefore, such payment does not falls under the purview of “sum chargeable under the provisions of the Act”. Hence, these payments are not liable to TDS u/s. 195 and consequently the expenditure alongwith the margin reimbursed to the overseas companies for service rendered outside India becomes allowable expenditure and the same is outside the rigors of section 40(a)(i). Since the assessee has a book loss and was not subject to tax u/s. 115JB. Hence, disallowance of interest paid on TDS and service tax are of no relevance with regard to the tax calculated - in favour of assessee.

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• 2012 (7) TMI 309
  Principle of mutuality - assessee is a cooperative society engaged in the construction of flats - Held that:- The assessee has failed to satisfy the basis of mutuality on various grounds which inter-alia included that proper bye laws were not furnished to demonstrate the existence of complete identity between the cooperative society and the members. The affairs of the society were not carried out in the manner as prescribed under the Act. In the absence thereof, it cannot be ascertained as to whether there is complete identity between the members and the assessee. Besides, the provisions about distribution of surplus in the event of dissolution of cooperative society cannot be examined or verified For quantum addition CIT(A) held that AO has erred in adding both credits and debits in the profit & loss account as income of the assessee alongwith the surplus income Officer had not brought anything so as to treat the expenditure as bogus or out of the undisclosed sources, the double additions were deleted. Interest income has been earned by the assessee by deposit of the surplus funds and there is no doubt that the interest income is to be treated as “income from other sources”. No borrowed funds have been used for earning this interest in various years. Dis allowance of expenditure - Held that:- It will be a distorted view to disallow all the expenditure only because the record is seized. Since a fair and reasonable estimate of income has to be made, the reasonable expenditure is to be allowed to the assessee in all these years Claim of exemption u/s 54F - LTCG received by the assessee on acquisition of land from GDA - Held that:- As assessee’s claim of exemption u/s 54 is devoid of merits as the concept of mutuality has not been extended to the assessee besides the constructed houses or the properties of the respective members cannot be deemed to be purchased or construction of the houses belonging to the society - set aside the issue back to the file of the AO to allow the assessee benefit of long term capital gains by indexation of cost as per law

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• 2012 (7) TMI 308
  Admission of additional evidence by CIT(A) - Revenue contention that additional evidence on a finding about lack of sufficient opportunity, which is not borne out from the record - Held that:- Admission of additional evidence has to be in terms of Hon’ble Delhi High Court judgment in the case of Manish Build Well Pvt. Ltd. (2011 (11) TMI 35 (HC)), which mandates that when the Assessing Officer has objected to the admission of additional evidence, then the issue should be decided first and thereafter the Assessing Officer may be asked to furnish the remand report - assessee should have filed an application for admission of additional ground in this behalf and mere narration of facts in statement of facts will not suffice inasmuch as the law provides that the CIT(A) shall decide the appeal on the grounds raised by the assessee. Advances received from ATS held to be business transaction- CIT(A) has not recorded any specific finding about the aspect of MOU being genuine or otherwise. In the absence of a clear finding about the genuineness of the MOU, reference to business customs and usages are not decisive. Unexplained gifts - Ignoring the importance of relationship, occasion of gift and human probabilities in case of gift from unrelated persons, the issue is decided solely on the basis of confirmations and gift deeds - set aside the appeals back to the file of CIT(A).

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• 2012 (7) TMI 307
  Addition on account of unexplained cash credits u/s 68 - CIT(A)deleted the additions - Held that:- After examining the relevant details and documents including bank statements of the assessee and share applicants it is to be concluded that in view of the evidences on record, the mismatch as observed by the AO is duly explained by the entries in the bank statement of the assessee as well as the share applicant and the assessee discharged its onus by establishing the identity of the share applicants, the genuineness of the transaction as well as the credit worthiness of the investors - Also DR did not place before us any material, controverting the aforesaid findings of facts recorded by the CIT(A) so as to enable to take a different view in the matter - decided in favour of assessee.

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• 2012 (7) TMI 306
  Entitlement to deduction u/s 80IB(10) on the amount disallowed u/s 40a(ia) - Held that:- The expenditure of eligible unit stands disallowed consequently the same results in increase of the profit of the eligible unit. The deduction under section 80IB is allowable in respect of profits and gains derived from the industrial undertaking, thus any disallowance of business expenditure of the eligible unit will logically result in enhancement of deduction allowable under section 80IB - During the year as the expenditure of the eligible business is disallowed the assessee's business income derived from the eligible business of the industrial undertaking stands at increased figure and therefore, the assessee will be eligible for deduction of enhanced amount under section 801B - there cannot be a double deduction to the assessee. Since the assessee is deriving its income only from the eligible business of construction of flats in respect of which the assessee is entitled to deduction u/s 80 IB(10) there is nothing to suggest that the amount disallowed u/s 40a(ia) is not related to the business of the industrial undertaking - upholding the findings of the CIT(A) that the assessee is entitled to deduct ion u/s 80IB(10) on the amount disallowed u/s 40a(ia) - in favour of assessee.

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• 2012 (7) TMI 305
  Addition u/s 68 - unexplained share application/capital - Assessing Officer received information from the Investigation Wing, Delhi stating that the assessee had taken accommodation entries by obtaining/arranging bogus documents etc. and thereby introduced its own unaccounted money in its account - Assessing Officer reopened the case under section 147 of the Income Tax Act – Held that:- Assessee has produced the names, address, PAN account details and affidavit, resolution of the Board of Directors and also the necessary documents failed before the Registrar of companies for the purpose of making investment in the share of the assessee company by the applicant companies –CIT(A) deleted the addition – In favor of assessee

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• 2012 (7) TMI 304
  Disallowing u/s 40(a)(ii) of the Income Tax Act - whether amount of advance made to the contractor for acquisition of its capital asset more so when the same has been adjusted within 3 months and tax has been deducted and deposited before the filing of the return is bad in law – Held that:- Assessee had deducted tax at source out of payments made to contractor which was deposited before 8.7.2008 - due date for filing return of income of the assessee was 30.09.2008 - once the tax has been deducted and deposited by the assessee before the due date of filing return of income, there is no merit in disallowing the expenditure relatable to such tax deducted at source - appeal filed by the assessee is allowed.

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• 2012 (7) TMI 303
  Revisionary proceedings under Section 263 – search – unaccounted money – assessee’s wife admitted that unaccounted money belongs to her - assessment stood set aside by CIT in a revisionary proceedings under Section 263 - But, revisionary proceeding under Section 263 of the Act stood quashed by this Tribunal – Held that:- Order was already available with CIT(Appeals) when he was considering appeal of the assessee. The order of CIT(Appeals) was passed on 13.3.2009 and therefore, the argument of the assessee that the order of this Tribunal quashing the order under Section 263 of the Act was already available on record - CIT(Appeals) fell in gross error in not considering the order of this Tribunal quashing the proceedings under Section 263 of the Act - revisionary order having been quashed, CIT(Appeals) was duty bound to dispose of the assessee’s appeal on merits - order of CIT(Appeals) set aside and matter remanded back to him for consideration afresh. Revisionary proceedings - deletion of addition - plea of the assessee that the money recovered from his house, purchase of real estate, recovery of gold biscuits and fixed deposits were all belonging to his wife – Held that:- Entire money had been treated by Revenue as a part of income of the wife of the assessee in her assessment - CIT(Appeals) was justified in placing reliance on the order of Hon’ble Apex Court and in deleting the addition made in the hands of the assessee – In favor of assessee Addition on account of investment made in the name of associated persons - assets belonged to his wife and not to him. However, the A.O. was of the opinion that the fixed deposits in the Punjab National Bank, though claimed as owned by assessee’s wife, was not corroborated and therefore, had to be considered in assessee’s hand – Held that:- In assessee's own case it was held that fixed deposits had to be explained only by the assessee’s wife and not by the assessee. CIT(Appeals) also noted that such additions were made substantially in the hands of the assessee’s wife also - IT(Appeals) was justified in deleting the addition for the impugned assessment year also – In favor of assessee Maintainability of appeal - revisionary proceedings under Section 263 - CIT(Appeals) held the assessment to be not appealable since such assessment was done in pursuance of the direction of CIT under Section 263 of the Act –Held that:- CIT has requested the A.O. to make a fresh assessment in accordance with law - it cannot be said that any finality has been reached by virtue of the order of the CIT with regard to the items mentioned by him in the said order - it cannot be said that fresh order passed by the assessing authority pursuant to revisionary proceedings, was an order passed for giving effect to the directions of the revisioning authority per se. It was only an order passed in compliance of the directions of CIT - against such an order, appeal was maintainable before CIT(Appeals) - Appeal of the assessee for assessment year 1995-96 is allowed for statistical purposes.

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• 2012 (7) TMI 302
  Mandatory reference to Valuation Officer when assessee objects to valuation adopted by Assessing officer on invocation of Section 50C - Sale of property - addition on account of LTCG - assessee contended that AO should have issued notice and given an opportunity to the assessee before invoking the provisions of section 50C - Held that:- In the instant case, it is seen that the assessee’s objection, to the AO’s adoption of the guideline value of Rs. 26.40 lacs in place of the stated consideration of Rs 8 lakhs in the sale deed, were rejected by the AO and therefore we are of the view that in accordance with the provisions of section 50C(2)(a), he should have made a reference to the Valuation Officer of the Income Tax Department for valuation of the said property. Such an action of AO is in violation of the provisions of section 50C(2). In the interest of justice, matter remitted to file of AO for de novo consideration by making a reference to the Valuation Officer. Unexplained cash deposits in bank - assessee submitted that these cash deposits are savings out of money given to the assessee for expenses by her husband who is assessed to tax - Held that:- It strange that said submission of assessee is brushed aside without calling for any report in the matter from the Assessing Officer regarding the genuineness of the assessee’s claim as to the source of these cash deposits. Matter remitted to file of AO - Decided in favor of assessee for statistical purposes. Unexplained cash deposits -

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• 2012 (7) TMI 300
  Disallowance under section 40(a)(ia) of the Income Tax Act - on the ground that the payments made by the assessee to Indian agents of foreign airlines, were not deducted to deduction of tax at source under section 194 C of the Act – Held that:- Assessee did not have any obligations to deduct tax at source - whether under section 194 C or under section 195 - from payments made to the foreign airlines for airfreight. In this view of the matter, the impugned disallowances under section 40(a)(ia) are devoid of any merits, nor can these disallowances be made under section 40(a)(i) either - appeals are allowed

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• 2012 (7) TMI 299
  Prior period expenditure – payment/ deposit under the Over Your Telephone (OYT) scheme for securing a telephonic connection - assessee did not claim the OYT deposit as an expenditure in the year of payment and had treated it as a deferred revenue expenditure which was debited in the profit and loss account in the next three years – Held that:- Quantum of expenditure, rent payable etc. the assessee had followed the accounting practice - revenue had accepted the said proportionate set off/ expenditure in the earlier and the subsequent years - Making or adopting a change in one year will lead to anomalies and incongruities – In favor of assessee

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• 2012 (7) TMI 298
  Sale of shares – capital gain or Business transaction – Held that:- Assessee had an intention to maximize his return on the money sought to be invested and certainly it cannot be said to be a case of undertaking any trading per se - some of the other transactions in Tech Mahindra shares have been classified by the assessee himself as business transactions primarily on account of it being carried out in smaller lots and involving very small period of holding or being squared up on the same day, would not imply that the purchase of 5000 Tech Mahindra shares cannot be claimed by the assessee as investment in nature - transactions of 5000 Tech Mahindra shares stood on a different footing and complexion than the other transactions in the same scrip carried out during the year - Assessing Officer directed to treat the transaction of 5000 Tech Mahindra shares in the nature of investment and assess the same as short term capital gain and not business income - appeal of the assessee is allowed.

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• 2012 (7) TMI 297
  Addition on account of disallowance of interest paid for non-business purposes - similar issue was allowed in earlier year and no appeal was filed by the revenue – Held that:- An adventure in the nature of trade and therefore, the interest claimed was allowed - disallowance of interest claimed by the AO is deleted and this ground of appeal is allowed Addition on account of disallowance of rent as per provisions of sect ion 40(a) ( ia) of the Act – Held that:- Provisions of section 40(a)(ia) of the Act 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 - AO, should verify the actual amount of rent paid by the assessee during the relevant financial year from the relevant records and adjudicate the issue afresh – matter remanded to AO - appeal of the revenue is partly allowed.

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• 2012 (7) TMI 296
  Prior period expenditure - during the accounting year relevant to Assessment Year 2007-08 when the negotiations were finalized with the vendors it was found that the provision made for increase in the price of material during the accounting year relevant to assessment year 2006-07 fell short by Rs. 498.09 lacs. The same was claimed as deduction in assessment year 2007-08 – Held that:- deduction is not permissible in assessment year 2007-08, but, it is permissible in assessment year 2006-07 i.e., the year in which material was actually received from the vendors, then, the deduction can be claimed and allowed in assessment year 2006-07. Admission of additional grounds - Deduction on account of short provision for the discount to be given to dealers under sales promotion schemes - disallowed as prior period expenditure – Held that:- the additional ground is taken as an abundant precaution so as to take care of a situation that if while deciding the appeal for assessment year 2007-08 the ITAT takes the view that the deduction is not permissible in the year 2007-08, but, permissible in the year in which material was supplied or the vehicles were sold, then, the assessee should be entitled to make the claim in the relevant period i.e., assessment year 2006-07 - additional grounds admitted.

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• Customs

• 2012 (7) TMI 325
  Non compliance of the order of pre deposit - Held that:- The first appellate authority has dismissed the appeal only on the ground of non compliance of the order of pre-deposit whereas on a specific query the SDR confirmed that the appellant has deposited the said amount on 03.06.2011 - set-aside the impugned order and remand the matter back to the first appellate authority dispose the same on merits.

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• 2012 (7) TMI 295
  Illegal import into India in violating the provisions of Section 11 - lower authority on the basis of bills of entry dropped the proceedings for reason that the goods which were seized are those very which had been imported under the bills of entry - Held that:- The seized goods were synthetic fabric, made wholly or mainly of synthetic yarn, there are goods which are covered by section 123 , the burden of proof is either on the claimant or on the person from whose possession the goods were seized, to show that the goods were not smuggled and that except for forwarding the bills of entry which are for import of viscose knitted fabrics no other evidence has been produced to rebut the presumption under section 123.

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• Service Tax

• 2012 (7) TMI 350
  Waiver of pre-deposit - Demand the differential amount of service tax from the appellant on the ground that the appellant has not included the value of the gross amount received by him and as declared in the service tax returns - claim of the assessee that the amount attributable to the sale of food and beverages if entirely taken out from the total consideration received, then he is not liable to pay any amount as he has already discharged the entire service tax liability – Held that:- matter remanded back to the adjudicating authority for reconsideration of the issue

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• 2012 (7) TMI 349
  Stay petition - Waiver of pre-deposit - Service tax liability - Technical Inspection and Certification Service provided - Appellant was informed on 01.08.2006 by the office of the Commissioner of Service Tax that their activities would not fall under the category of services rendered and they would not be covered under the Service Tax - Show cause notice was issued to the appellant on 13.04.2010 for the period October 2004 to March 2006 – Held that:- Department itself has taken a stand that the appellant s services would not fall under the category of services of Technical Inspection and Certification Services, invocation of larger period by the authorities seems to be not in consonance with the law - show cause notice is blatantly time-barred and on this ground itself – order set aside and appeal allowed in favor of assessee

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• 2012 (7) TMI 348
  Cenvat credit of service tax paid on various services has been denied on the ground that the invoices did not contain service tax registration number of the service provider and in some other cases, the name and address of the recipient was not mentioned correctly – Held that:- appellants have also undertaken to get certificates from the service providers and stated that input service for inputs have been received and utilised. Two invoices which would be produced are required to be verified and the provision of Rule 9 have to be applied to see whether omission are condonable. requirement of pre-deposit of balance amounts is waived. Matter is remanded to original adjudicating authority

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• 2012 (7) TMI 347
  Waiver of amount of Service Tax, interest and penalty – denial of credit of Service Tax paid on outward transportation of the goods - applicant relied upon the Board Circular dated 23/08/2007 whereby it has been clarified that in case the outward freight is part of price, the credit of service tax paid in this regard is admissible – Held that:- credit in respect of Service Tax on outward transportation is admissible if the freight is part of price. In absence of any evidence to show that the freight is part of the price, applicant had not made out a case for total waiver of the demand. Demand of the service tax – BAS - appellant claimed the benefit of Notification No.21/05-ST dated 7/6/05 – Held that:- applicants are also undertaking the activity in respect of other goods also such as petrdidish, dental powder, medical equipments, semi-conductors, irradiation of O ring, LDPE Gaskets etc and these items are not covered under the Notification No.21/05-ST. Applicant has not made out a total waiver of demand Regarding laying of cables – Held that:- contracts are for laying the cables and the Board vide Circular dated 24/5/10 clarified that laying of cables are not liable to service tax. In favor of assessee

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• 2012 (7) TMI 346
  Waiver of pre-deposit – cenvat credit - suppression of facts or mis-declaration – as soon as the appellant was informed that they are liable to Service Tax, they promptly paid the Service Tax with interest - Held that:- if the appellant was to pay Service Tax on the services received by them, the entire amount was available as CENVAT Credit and could have been utilized for payment of Excise duty on the manufactured goods. By not paying the Service Tax, the appellant have, in fact, lost the benefit of immediate credit and interest element and no benefit could have been derived by avoiding Service Tax in this case. There is no suppression of facts or mis-declaration. Requirement of pre-deposit of penalty is waived. Stay granted.

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• 2012 (7) TMI 324
  Valuation - activities relating to maintaining and operating the equipments - service tax liability on enhanced value including cost of electricity supplied free of cost by the customers in the value of taxable service - Held that:- Argument of the Revenue is not acceptable that the electricity supplied free of cost is a consideration in kind received by the assessee from its customers. Admittedly, the electricity supplied free of cost is meant to be consumed in the manufacture of oxygen and admittedly the oxygen so manufactured is used by the customers in the manufacture of their final product. It is the customers of the assessee who clear the final product on payment of duty and no benefit accrues to the assessee on such clearances. Thus, the electricity supplied free of cost by the customers to the assessee does not in any way amount to additional consideration received by the assessee in kind - sustainability of the demand raised against the assessee being in doubt, it is a fit case for entertaining the appeal without any predeposit - in favour of assessee.

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• 2012 (7) TMI 320
  Waiver of pre-deposit - recalling of final order - COD application - appellants have raised a point of limitation in their memo of appeal which does not stands considered while rejecting the appeal - appellant s contention is that the period involved if 01.04.2000 to 31.03.2007 and the show cause notice stands issued on 27.10.07. During the relevant period, there was conflicting orders of the Tribunal on the said issue and there was utter confusion. As such invocation of longer period was not justified - appellants to deposit an amount of Rs.1.50 lakhs balance amount of duty and entire amount of penalty shall stands waived.

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• 2012 (7) TMI 319
  Construction services - taxability - Construction activities undertaken on own land for residential complexes, which are further sold to the prospective buyers - Held that:- In view of decision in case of Magus Construction P.Ltd (2008 (5) TMI 18 (HC)), wherein it has been held that when a builder, promoter or developer undertakes construction activity for its own self, then in such cases, in the absence of relationship of service provider and service recipient , the question of providing taxable service to any person by any other person does not arise at all - Decided in favor of assessee.

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• 2012 (7) TMI 318
  Waiver of predeposit of service tax - appellant had filed the appeal after more than three years – Held that:- Appeal is filed before the ld. Commissioner (Appeals) after condonable period of three months, the ld. Commissioner (Appeals) has rightly dismissed the appeal on the ground of limitation.

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• 2012 (7) TMI 317
  Application for waiver of penalty - entire amount of Service Tax along with interest paid by assessee before issuance of Show Cause Notice – Held that:- It is a fit case for invoking section 80 of Finance Act, 1994. Accordingly the appeal is allowed

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• 2012 (7) TMI 316
  Denial of CENVAT Credit - demand of service tax under the category of renting of immovable property after the mall was opened was discharged by utilizing the CENVAT credit in respect of tours and travel agent services, security service, air ticket booking services, etc - Held that:- Credit of duty paid on inputs is available when the inputs are used for providing an 'output service'. In the case of 'input service', the definition includes input services used by a provider of taxable service for providing an output service. Therefore the definition of input and input service are pari materia as far as the service providers are concerned. As decided in CCE, VISAKHAPATNAM-II Versus SAI SAHMITA STORAGES (P) LTD.[2011 (2) TMI 400 HC)] that that without use of cement and TMT bars for construction of warehouse assessee could not have provided 'storage and warehousing service'. In the present case also, without utilizing the service like tours and travel agent services, security service, air ticket booking services,etc. mall could, not have been constructed and therefore the renting of immovable property would not have been possible - in favour of assessee.

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• Central Excise

• 2012 (7) TMI 351
  Assessable value – cost of mould - appellants are manufacturing goods for M/s PDAP and the plastic mould and components procured from M/s PPMF. M/s PPMF is paying duty after taking into consideration of the mould amortization cost – Held that:- Mould amortization cost is not paid by the appellant and the mould amortization cost is directly paid by M/s PDAP and the appellants were clearing the goods to M/s PDAP on payment of duty. While arriving at the assessable value of the goods cleared to M/s DPAP the mould amortization cost is not taken into consideration by appellant - no infirmity in the impugned order - the same is additional consideration flowing to the appellants. - Decided against the assessee.

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• 2012 (7) TMI 323
  Valuation - Demand of differential duty – alleged that appellant has not included the conversion charges, charged by them for the manufacture of finished goods in the factory premises - appellant has discharged the duty liability on final products based upon the price declared by the principal manufacturer to them – Held that:- If the appellant in this case has discharged the duty liability, based upon the value of the product given to him by the principal manufacturer, there cannot be any further addition to the assessable value of the product, manufactured and cleared by the appellant from his factory premises – In favor of assessee

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• 2012 (7) TMI 322
  Claim for remission of duty on ground of molasses stored in kutcha pit being deteriorated and ultimately getting destructed - assessee contended that from perusal of the second proviso of erstwhile Rule 49 (l) of CER. 1944, there is no ambiguity that duty is not demandable on any goods which become unfit for consumption due to natural causes - Held that:- Commissioner disallowed the remission for duty only for the periods 1982-83 and 1983-84 on ground that assessee were responsible for any deterioration and they are required to pay duty leviable thereupon whereas Commissioner allowed the remission for the period, 1991-92 on ground that goods were deteriorated and become unmarketable due to reasons beyond the control of the assessee. In view of contradictory orders of Commissioner, dis-allowance of remission for the years, 1982-83 and 1983-84, is not sustainable - order is set aside.

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• 2012 (7) TMI 321
  Valuation - determination of value of goods cleared for captive consumption to a related unit, when similar goods are also sold to independent buyers - assessee submits that price at which the goods were cleared to related units at the relevant time, were also sold to independent buyers - Held that:- Assessable value of the goods cleared to related unit ought to have been determined on the basis of sales to independent customers as per Rule 4 of the Valuation Rules, 2000 and not under the provisions of Rule 9 read with Rule 8 of the Valuation Rules. Impugned Order set aside and the case is remanded to the Adjudicating Authority for the limited purpose of verification of price adopted.

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• 2012 (7) TMI 294
  Re-warehousing - respondents removed the goods against CT-3 under ARE3s, however they failed to produce the re-warehousing certificates in respect of such goods – duty demanded along with interest and penalty - respondent before the lower authorities had produced the evidence of re-warehousing these goods which were cleared against ARE-3s - Revenue contended that since there was only paper transaction and no physical movements of the goods had taken place in the instant case, the re-warehousing certificates furnished by the respondents were found to be bogus/ fake – Held that:- There are no such allegations in the SCN that there was only paper transaction and no physical movements of the goods taken place In the instant case and the re-warehousing certificates furnished by the respondents were bogus/ fake. The law does not permit to go beyond the allegations made in the SCN - In favor of assessee

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• 2012 (7) TMI 293
  Cenvat credit - Reversal of 10% value of the exempted goods cleared by the appellants, manufactured by using common inputs - Adjudication authority has held that reversal of cenvat credit on the inputs itself is enough and sufficient for compliance of the provisions of Rule 6 of Cenvat Credit Rules, 2004 and - proceedings initiated by show cause notice for recovery of 10% of the value of the exempted goods cleared from the factory premises dropped - order is correct and legal and does not suffer from any infirmity - Appeal filed by the Revenue is rejected

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• 2012 (7) TMI 292
  Stay petition - denial of cenvat credit on the ground that photocopy of the bill of entry which was produced by the appellant before the first appellate authority - appellant should have produced reconstructed bill of entry in order to be eligible for availing the cenvat credit – Held that:- Since this evidence was not produced before the first appellate authority - remand the matter back to the first appellate authority to reconsider this evidence and pass an order on merits. Appeal is allowed by way of remand

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• 2012 (7) TMI 291
  CENVAT credit on furnace oil used for generation of power and transmitted to other company - Held that:- Appellant fairly agreed that first appellate authority was justified to direct the appellant to reverse the CENVAT Credit availed on the furnace oil utilised for purpose otherwise than in manufacture and transmission of such power to other units - the matter may go back to learned adjudicating authority to compute the quantum to be reversed.

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• 2012 (7) TMI 290
  Disallowance of cenvat credit - process of printing and laminating the bare polyester / metalised film - whether amount to manufacture - appellants were using duty paid polyester film and metalized film as input for their final product - Held that:- If the department wanted to contend that the assessee has undertaken manufacture, the department was required to prove it by a cogent evidence and that the Tribunal was clearly in error in seeking to cast the burden on the assessee to show that there was no process of manufacture - the Commissioner (Appeals) has not cared to look into the process through which the finished goods were cleared by the manufacturing assessee's emerge out of the process of manufacture. It is clear that the appellant after purchasing the bare polyester/ metalised film on payment of duty, first subject those film to printing as per the requirement of the customer and thereafter those films are laminated either in two layers or three layers, thus the aforesaid process changes the character of the bare polyester film (inputs) in terms of its user as also the thickness and lamination falling within the definition of manufacture as defined under Section 2(f)- The department having accepted the excise duty on the final product cannot be permitted to deny cenvat credit on the inputs used for the manufacture of the final product on a technical plea of department - decided in favour of assessee.

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