Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
July 18, 2012
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
Indian Laws
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Treatment of sales tax subsidy - the intention is not to increase the viability of the eligible units but to promote development of further industry and infrastructure in the region - a capital receipt not liable to tax. - AT
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Income received or deemed to be received or accrued or arose or deemed to be accrued or arose in India - Income by way of brokerage and commission - assessee maintains a NRE account with South Indian Bank of Anna Nagar at Chennai - AT
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DTAA between India and Sri Lanka - The capital gains arising on account of transfer of share in Sri Lanka would not exigible to tax in India in the given circumstances - AT
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Surplus of shares transactions - long term capital gains or business profits - mere volume of transactions transacted by the assessee would not alter the nature of transaction - AT
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Disallowance depreciation on car - There could be no disallowance u/s. 38(2) of the Act in respect of the depreciation on motor car, a tangible asset, covered u/s 32(1)(i) of the Act - AT
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Exemption under section 2(14) of the Act - Mere fact that the land in question was agricultural land cannot be a ground to claim for exemption under section 2(14) of the Act as the land is situated within the local limits of Hyderabad Municipal Corporation - AT
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Addition under section 68 of the Act - set off of addition - lower authorities should have considered these balances in creditors accounts as income under section 41 and not as unexplained cash credits under section 68 - AT
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Transfer - development agreement - Starting words of s. 53A of the Transfer of Property Act are "where any person contracts" which means just the existence of a contract. The assessee is the "person" who has entered into a contract with the developer vide agreement dated 31.03.2006 - The term "transfer" is to be read along with the s. 45 and s. 2(47)(v) of IT Act - AT
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Quashing the initiating proceedings u/s. 147 - no basis for the Assessing Officers to form a belief that income has escaped assessment - HC
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TDS - applicability of section 194C or 194-I? - when the contract agreement is read clause-by-clause, it becomes abundantly clear that there is no transfer of the right to use the vehicle involved in the contract agreement and that the contract agreement is merely for carriage of the petroleum and petroleum products and nothing more - AT
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Amendment to section 2(15) is applicable only to the fourth limb of the definition i.e. ‘advancement of any other object of general public utility’ and not to other activities in the field of relief to the poor, education or medical relief - AT
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Disallowance u/s 14A by invoking Rule-8D - disallowance cannot be made in case where the assessee is having sufficient interest free funds - AT
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Donations received as a corpus funds - the gift deed alone is not to be looked into - it was a corpus donation at the end of donor and it is not a taxable income in the hands of the assessee - AT
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Challenge the assessment ex–parte u/s 144 - Valid notice containing the address of the assessee, was issued by speed post to it on 16.8.2008 and the normal presumption is that this notice would have been received by the assessee - AT
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Double taxation Agreement - Agreement between the Government of the Republic of India and the Government of Jersey for the Exchange of Information and Assistance in Collection with Respect to Taxes - Notification
Customs
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Seeks to impose definitive antidumping duty on the imports of ‘Grinding media Balls’ (excluding Forged Grinding Media Balls), originating in, or exported from Thailand and China PR. - Notification
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Corrigendum to Office Order F.No.437/59/2010-Cus.IV dated 23rd November, 2010 - Notification
FEMA
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Scheme for Investment by Qualified Foreign Investors (QFIs) in Indian corporate debt securities. - Circular
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Deferred Payment Protocols dated April 30, 1981 and December 23, 1985 between Government of India and erstwhile USSR - Circular
Service Tax
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Applicable rate of service tax – rate of service tax chargeable is the rate in force on the date of rendering service and not the rate in force on the date receipt of payment - AT
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Refund claim - wrong deposit of service tax - It is well settled law that the authorities working under Central Excise Act are bound by the provisions of the Act and cannot grant relief on the basis of justice, equality and good conscious - AT
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Eligibility of the respondent for availment of cenvat credit of the duty paid on the Air Compressors purchased by them and received in the factory premises on 05.05.2005 - AT
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Refund claim - service tax paid on the input services - Courier Services and Transportation services utilised by the appellant for export of the goods - AT
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Non eligibility for cenvat credit on the input services for the period prior to the registration - AT
Central Excise
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Denial of SSI benefit - cakes and pastries supplied to customers under the brand name assigned by the other brand name owner - SSI benefit cannot be denied - AT
Case Laws:
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Income Tax
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2012 (7) TMI 409
Addition on account of unexplained expenditure - CIT(A) deleted the additions - Held that:- AO has observed that in the absence of books of account and supporting vouchers, the expenses of the assessee remain unverified, therefore, he estimated the income of the assessee out of the expenses incurred through the credit cards as per the information given by the AIR Wing whereas during the appellate proceedings, assessee has produced the details of the expenses incurred through credit cards. The total expenses incurred by the assessee are Rs.36,71,768, out of that Rs.35,96,331 was for purchase of diesel. These payments have been verified by the AO in the remand proceedings with the banks statements and he was satisfied. The difference between these payments and the total expenses has been accepted by the assessee as an addition which pertains to personal expenses - no point of unexplained expenditure - in favour of assessee.
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2012 (7) TMI 408
Commencement of business activity - Denial of assessee’s claim of interest expenses u/s 36(1)(iii) as business of the assessee was yet in the process of being set up - CIT(A)allowed the claim - Held that:- The main activity of the assessee company is to finance the project through special purpose vehicles to other local companies for buying land more than 100 acres or bringing other licenses from the Government Departments and the assessee had entered into a joint construction and development agreement with two more companies which was in the process of acquiring land and government approvals, the sequence of events suggest that assessee has taken active steps in accordance with its Memorandum and Article of Association warranting that the business has been set up - in favour of assessee. Treatment of interest income received from short term fixed deposits - income from other sources or income from business - Held that:- The assessee has not demonstrated as to how it has undertaken the business of lending money in an organized manner which can suggest interest income from a business activity. It has simply surplus funds which were deposited in the fixed deposit during the period when such funds were not required - against assessee.
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2012 (7) TMI 407
Levy of penalty u/s 271(1)(c) - Additions to income on rejecting assessee's claim on amount paid to the ROC on account of fee and stamp duty amounts as revenue expenditure - Held that:- As decided in CIT Versus NALWA SONS INVESTMENTS LTD.[2010 (8) TMI 56 (HC)] that the income of the assessee has ultimately been determined under sec. 115JB and no addition or adjustment has been made by the Assessing Officer in the computation of book profit meant for section 115JB - if ultimate tax is levied on book profit under sec. 115JB then any changes made in the computation of income of an assessee under the regular assessment would be an irrelevant factor for imposing the penalty - in favour of assessee.
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2012 (7) TMI 406
Treatment of sales tax subsidy - CIT(A) directed it to treat the sale tax subsidy as capital receipt - Held that:- Since the incentives were given for bringing about addition to necessary infrastructure in processing/developing the backward area, it would be in the nature of capital receipt not liable to tax - the purpose of granting sales tax incentive is clearly only to provide an incentive for establishment of new industries in the underdeveloped regions or to expand its existing units of the State of Maharashta. That the intention is not to increase the viability of the eligible units but to promote development of further industry and infrastructure in the region. That in the aforesaid circumstances, the exemption availed of by the assessee’s eligible units under the said notification would be a capital receipt not liable to tax. Computation of depreciation allowance - assessee contested against reduction on proportionate basis from the written down value of the respective block of assets the sales tax subsidy received - Held that:- No linking of the subsidy received to the acquisition of asset. The subsidy in this case has been received for encouraging investment in backward area, even if computed with reference to cost of investment in fixed assets, will not be reduced from the cost of assets - the payment of subsidy is not related to the actual acquisition of assets and subsidy is granted on capital investment on land, building and machinery, then it cannot be reduced from the value of asset (WDV) - in favour of assessee. Disallowance of software maintenance / software development expenses - Held that:- The expenditure on computer software was incurred with the view to increasing efficiency of the operations and maintenance of vital data, which was necessary for carrying on the business more efficiently. CIT(A) gave a finding that the amount involved has actually been paid towards monthly license user fee. It is neither a technology up-gradation nor a capital expenses which gives enduring benefit in subsequent years. That as per details and supporting documents provided by assessee, the said expenses are revenue in nature, hence were to be allowed fully - in favour of assessee. Disallowance on account of brokerage and commission - Held that:- No infirmity in the finding given by the Ld. CIT(A) that the documents submitted by the assessee for the payments made to M/s Sidhi Vinayak Enterprises are bonafide and in the course of business and the disallowance made by the AO needs to be deleted - in favour of assessee. Computing book profit u/s 115JB - CIT deleted addition on account of provisions for doubtful debts and advances being provisions for diminution in value of investment and being provisions for Gratuity - Held that:- As per sub clause (x) of clause (II) Schedule 15 of the accounts that provision for gratuity in this case has been made on the basis of actuarial valuation and the liability can be said to be ascertained, accordingly, no disallowance in this regard provision towards gratuity liability is ascertained and could not have been added back under clause (c) of Explanation u/s. 115JB - in favour of assessee. Computing book profit under section 115JB - CIT directed the adjustment of the amount eligible for deduction under section 80HHC to be calculated after reducing unabsorbed depreciation from profits of business and not the amount of deduction calculated on the profit disclosed in the profit and loss account - Held that:- As decided in Ajanta Pharma Ltd.Vs CIT [2010 (9) TMI 8 (SC)]for computing book profit in terms of section 115JB, net profit as shown in the P&L account have to be reduced by the amount of profits eligible for deduction u/s. 80HHC and not by the amount of deduction u/s. 80HHC - in favour of assessee. Charging interest u/s 234B, 234C and 234D - Held that:- The assessee in this case became liable for advance tax due to the retrospective amendment made by the Finance Act, 2008 - It was not possible for the assessee, at that time, to foresee the retrospective amendment, which was yet to be introduced in future, and accordingly adjust his advance tax liability. Therefore, by no stretch of imagination can it be held that, during the relevant previous year, there was any default on the part of the assessee in payment of advance tax - in favour of assessee.
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2012 (7) TMI 405
Additions on account of unexplained advances received - CIT(A)deleted the additions - Held that:- Since the amount was found at the time of search on 18/4/2007 the amount was pertaining to the assessment year 2008-09 and it cannot be added in assessment year 2007-08 - the status and background of the assessee and his family sufficiently proved that assessee’s father in law could have saved Rs. 75,000/- and in the affidavit, he has confirmed that he has handed over the cash to the assessee and was still lying with her unutilized - in favour of assessee. Addition on account of investment in painting - CIT(A)deleted the additions - Held that:- The valuation has done by the AO, who is not an expert in this regard and the contention of the assessee is cogent enough that AO should engage expert in this regard to make the valuation of these paintings - the declaration of gifts were not originally produced before the AO as it was not raised by the AO and the same were produced as additional evidence at the time of appellate proceedings, thus proving the authenticity of the gift declaration and no reason or evidence to disbelief the content thereof - that the paintings were received as gifts during the course of search, no documents have been found to indicate that the painting were received otherwise - no dispute regarding the value of the painting which has already been disclosed by the assessee in her return of income filed in response to notice u/s. 153A - in favour of assessee. Addition on account of commission on sale of painting - CIT(A)deleted the additions - Held that:- As assessee has not denied the fact that the sale of paintings to the tune of Rs. 42,12,595/- was effected through her, hand written page on the letter head of Artist seized at the time of search clearly shows that the assessee was getting commission @ 4% of the value of each art work transacted. Under the circumstances CIT(A) has erred in deleting the addition in this regard merely on the basis of the confirmation from Shakshi Art Gallery, that no commission was paid by them - in favour of Revenue.
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2012 (7) TMI 404
Income received or deemed to be received or accrued or arose or deemed to be accrued or arose in India - Income by way of brokerage and commission - assessee maintains a NRE account with South Indian Bank of Anna Nagar at Chennai - Held that:- The assessee is a permanent resident of Singapore with his salary income taxed as per Singapore's tax laws and also earning income by way of brokerage and commission remitting the proceeds through cheques and demand drafts to assessee's Indian bank account through Telegraphic transfer - It is after having received the brokerage and commission in the accounts of the foreign correspondent banks that those funds are transferred to assessee's Indian bank account in foreign currency. Thus landing of the brokerage and commission transmitted to India through TTs are first landed in the accounts of the foreign correspondent banks outside India, it is to be seen that the assessee received his brokerage and commission outside India. It is only after receiving those brokerage and commission outside India that the corresponding funds were transferred to the assessee's Indian bank account by TTs - as DTAA overrides Indian Income-tax laws therefore, in view of Article 7 the profits of an enterprise of a contracting State shall be taxed only in that State except where the enterprise has a permanent establishment in other contracting States - decided in favour of assessee. Addition being 25% of the jewellery as unexplained in the hands of the assessee - gifts of jewellery made by the assessee to relatives - Held that:- Even if the assessee has spent some funds in gifting gold jewellery to his family members, those funds emanated from non taxable funds available in his bank account. It does not belong to any income liable for taxation in India. Therefore, even if the proposition of the CIT(A) is accepted, there is no justification for making any addition in the hands of the assessee - in favour of assessee.
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2012 (7) TMI 403
Levy of Penalty u/s 271(1)(c) - AO stated that the assessee was not entitled to claim deduction u/s 80HHC - Held that:- Not even a whisper has been made in the penalty order as to which specific particulars were furnished inaccurate or were concealed. The expression 'has concealed the particulars of income' and 'has furnished inaccurate particulars of income' have not been defined either in section 271 or elsewhere in the Act - AO has not been able to establish that the claim of the assessee for deduction u/s 80HHC with respect to export of capital goods which was held to be not derived from business of export was not bona fide or that any specific particulars were concealed or furnished inaccurate. A mere rejection of the claim of the assessee by relying on different interpretations does not amount to concealment of the particulars of income or furnishing inaccurate particulars thereof by the assessee - deletion of penalty levy - in favour of assessee.
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2012 (7) TMI 402
Interest u/s 234B & 234C - failure to pay advance tax - assessee contended liability for advance tax did not exist at time of filing original return and due to retrospective amendment in the section 115JB by inserting (i) of Explanation 1 of subsection (2) of section 115JB w.e.f. 1.4.2001, the company became liable to pay tax under the provisions of section 115JB - Held that:- Assessee became liable to pay the tax as per the provisions of section 115JB only on the retrospective amendment w.e.f. 1.4.2001. Hence in view of decision in case of Emami Limited (2011 (6) TMI 163 (HC)), assessee could not be held as defaulter in payment of advance tax and it would be nevertheless asked to pay interest in terms of Section 234B and Section 234C for default in making payment of tax in advance which was physically impossible - Decided in favor of assessee.
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2012 (7) TMI 401
Disallowance of expenses by applying Rule 8D - assessee contention that no borrowed capital was utilized for making the investment and the dividend income received was directly remitted to the bank account - Held that:- As decided in Godrej and Boyce Mfg. Co. Ltd. v. Dy. CIT (2010 (8) TMI 77 (HC))that Rule 8D applies only prospectively with effect from assessment year 2008-09 and also that though the said rule was not applicable for the earlier years, AO was duty bound to compute the disallowance by applying reasonable method - Since the disallowances were made applying a rule which was not applicable for the impugned assessment years the matter requires a re-visit by the Assessing Officer - in favour of assessee by way of remand. DTAA between India and Sri Lanka - taxing capital gains arising out of sale of certain shares held by the assessee-company in a company incorporated in Sri Lanka - Notification No. 90 of 2008 (supra) relied on by the learned D.R - exclusion method or the Tax Credit Method ?- Held that:- Case of the assessee falls under clause 4 which says that gains from alienation of shares "may be taxed" in the State of issue - when the term "may be taxed" is used in a treaty, there is an automatic exclusion of other State - power cannot be expanded or interpreted in such a way that it would include a power to define terms in a DTAA between countries as well. When a notification is issued exercising the powers conferred under sub-section (3) of Section 90A it can have effect only on those types of agreement mentioned in sub-section (1) thereof. If such a notification goes beyond that mandate, it will have to be ignored to the extent it goes overboard. Even if the term "may be taxed" has been given a meaning by the Government through a Notification No. 90A(3) so as to extend such meaning to terms used in DTAA, it will have to be ignored and the said Section 90A cannot come to the aid of the Revenue in any manner at all - Exclusion Method was the appropriate one and this was rightly used by the CIT(A). The capital gains arising on account of transfer of share in Sri Lanka would not exigible to tax in India in the given circumstances - in favour of assessee.
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2012 (7) TMI 400
Treatment of surplus of shares transactions as long term capital gains as against business profits assessed by the AO - Held that:- Appellant has been maintaining two separate portfolios, one in the name of his proprietorship concern where the shares and securities are held as trading assets and second in his own account where the investments are made on long term basis and the shares and securities are held as long term investment - the assessee has been returning profit and loss in the trading account as business income and the surplus arising on account of purchase and sale of shares in his own account as short term/long term capital gain/loss for a number of years and this practice has been accepted by the AO all along. In respect of the purchase and sale of shares made by the assessee in his personal capacity in the code allotted in his personal name, Security Transactions Tax has been paid by the assessee and income from sale of shares has all along been accepted under the head shortterm/ long-term capital gains and the mere volume of transactions transacted by the assessee would not alter the nature of transaction - thus in order to maintain consistency, it is a judicially accepted principle that same view should be adopted for the subsequent years, unless there is a material change in the facts - against revenue.
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2012 (7) TMI 399
Disallowance of general expenses - expenditure claimed is u/s. 37(1) of the Act – Held that:- Expenses, apart from those that are not allowable have, it would appear, been disallowed on the ground that the same are not properly vouched - Revenue doesn’t doubt the actual incurring of the expenditure; it itself allowing the balance 75%. The expenditure incurred under the said head (tea expenses) for the preceding year/s has not been mentioned - incurring of the expenditure for most part is not doubted, as well as the nature of expenditure. We, therefore, restrict the disallowance to be extent of the sum not eligible for being allowed u/s. 37(1) Disallowance of petrol expenses - on account of the entire claim being not supported by proper bills - CIT(A) has restricted the disallowance to 25%, allowing the assessee's partial relief - assessee has not again explained the reason/s for the same, only stating that no personal element is involved as the assessee is busy doctor, working 12 to 15 hours per day – Held that:- There is no reference to the expenditure claimed in the preceding year/s - disallowance restricted to Rs. 10,000/- as some personal element is inevitable, with nothing on record to show that the expenditure for the same has been separately incurred. Disallowance of expenditure on account of depreciation on car - personal as well as non-business user of the said vehicle/s - assessee, with reference to the relevant provisions of the Act, contends that the provision of section 38(2) does not apply to the depreciation u/s 32(1)(i) of the Act, but only to intangible assets as specified u/s. 32(1)(ii) of the Act – Held that:- There could be no disallowance u/s. 38(2) of the Act in respect of the depreciation on motor car, a tangible asset, covered u/s 32(1)(i) of the Act - disallowance is thus deleted - Needless to add, the written down value of the relevant block of assets would stand to be adjusted downward and restored to its correct value – In favor of assessee Disallowance of expenditure on tour and travel – Held that:- There are no details/particulars of the expenditure incurred. The date/s of travel, of the conferences, of the meetings attended, etc.; the mode of conveyance; the places/doctors (in contradistinction to the stations) visited, etc., nay, there is no evidence of the expenditure having been incurred on travel and the concomitant boarding and lodging - it may not be possible to vouch every expenditure, and that some travel for professional purposes may have been incurred by the assessee, a senior doctor, restrict the disallowance to Rs. 25,000 - assessee gets the partial relief for Rs. 6,215 Claim in respect of water and electricity expenses - assessee is using his premises as his home as well as clinic, for which no separate connection for water and electricity had been taken – Held that:- Assessee’s claim was disallowed at 1/3rd – Against assessee Telephone and mobile expense - representing user for personal/non-business purposes – Held that:- No details of the expenditure claimed were furnished by the assessee, and even as much as the place where the telephone is installed, though called for, not provided - no scope for relief for the same reasons – Against assessee Rent expenditure - rented premises stood used by the assessee during the relevant period for his clinic as well as for residence. The assessee, however, has not at any stage furnished any details/particulars of the space hired and the manner of its utilization, much less substantiate its claim/s in its respect – Held that:- No infirmity in the Revenue restricting the assessee's claim for rent to 50% of the total rent paid
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2012 (7) TMI 398
Addition on account of unexplained cash found at the time of search – Held that:- Trustee, has stated that part of the money was belonging to the assessee trust - cash was from the available balance in the books of the account of the assessee - allegation of the manipulation in the cash book could not be established - Simply stating that there may be possibility of manipulation in the cash books cannot be made sole basis for making the addition – addition deleted – In favor of assessee Deletion made on the basis of Annexure A-47 – alleged that amount appearing in Annexure A-47 are not appearing in the books of account of the assessee – Held that:- Documents seized as Annexure A- 47 is a daybook - daybooks show cash entries of four institutions run by Trust and in fact these are division of assessee’s Trust itself - AR was able to demonstrate and to show us the various entries found in the Annexure A-47 are also reflected in the cash book of various institutions run by the assessee - CIT (A) has rightly deleted the addition – In favor of assessee Addition made on account of corporate donation received - AO disallowed exemption u/s 11(2) of the Act on the ground that registration of the society u/s 12AA of the Act has been cancelled – Held that:- Addition was based on the cancellation of the assessee trust u/s 12AA and denying the exemption u/s 11 of the Act - appeal of the assessee for granting the registration allowed, therefore, addition deleted - assessee is allowed. Cancellation of registration granted to the assessee trust for the purpose of exemption u/s 12AA - alleged that activities of the trust are not genuine and charitable – unaccounted cash found and seized from the residence of trustees of assessee – Held that:- Revenue’s appeal dismissed by confirming the relief granted to assessee - unexplained cash transfer entry has been also decided in favour of the assessee - all the issues on which registration was cancelled did not survive - CIT has found the trust and its activities as genuine and the objectives have been found charitable - assessee has been granted registration again Denial of approval of exemption u/s 80G - on the basis of the cancellation of registration of the assessee trust u/s 12AA – Held that:- Assessee’s appeal against the cancellation of registration allowed, therefore - CIT directed to grant the exemption u/s 80G
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2012 (7) TMI 397
Penalty u/s. 271(1)(c) of the Income Tax Act - deduction claimed from the rental income - standard deduction u/s. 24(a) – Held that:- Non-acceptance of the assessee's claim in quantum proceedings would not make it any less a honest claim - assessee’s claim bears a lower incidence of tax is a matter incidental, and by itself of no consequence - genuine ground, with the material facts having been disclosed - to the extent the claim is for standard deduction against rental income, the same raises no question of substantiation, i.e., is self corroborative - no case for the levy of penalty u/s 271(1)(c) of the Act - appeal by the assessee is allowed
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2012 (7) TMI 396
Addition on account of business expenditure - assessee had not produced any details of the expenditure incurred for the conduct of business such as telephone expenses, traveling expenses etc - appellant had not given details of expenditure or attended the appellate proceedings on the various dates of summons issued by the revenue – Held that:- Assessee did not furnish the details of the expenditure claimed by her. Keeping in view of the general business conditions, the learned CIT(A) had gracefully deleted 50% of the addition made by the learned AO on the premises that in business the appellant would have to incur some expenses Addition u/s 68 read with section 41(1) of the Act - being difference between sundry creditors and sundry debtors – there was excess credit on comparing sundry creditors with sundry debtors, the source of which requires to be proved - onus is on the assessee to establish that the sundry creditors and sundry debtors are genuine – Held that:- Assessee had not furnished any details of the sundry creditors or the sundry debtors - AO was lenient enough to tax only the excess credit over the debtors for want of proof of source – In favor of revenue Addition on account of unexplained investment and loans and advances – Held that:- Assessee has not discharged her onus by producing sufficient information and details to establish her bona fide sources for making such investments and granting such loans and advances - keeping in view of the high value of transactions and the background of the assessee - assessee should be granted with one more opportunity to establish her claim – matter remanded to AO
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2012 (7) TMI 395
Business income versus STCG - assessee claimed that he is an ‘investor’ in the share - assessee is an investor in shares - share are regularly shown under the head “Investment in Shares” and are valued at cost in the books - assessee has earned a substantial dividend income - Funds used for the purpose of investment is owned funds and not borrowed funds – Held that:- There should be consistency in the approach of the Department - assessee’s claim has been consistently accepted in all the preceding years - in this year also ‘on the rule of consistency’ accept the claim of the assessee in respect of short-term capital gain - revenue’s appeal is dismissed.
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2012 (7) TMI 394
Capital gain – Exemption u/s 54F – sale of shares - A.O. after relying on certain newspapers cuttings and the decisions of the Tribunal held that the credit entries of sale of shares shown by the assessee are nothing but a colourable device to introduce unaccounted money in the guise of long term capital gain, he treated the entire amount as “income from other sources” u/s.56 of the Act and also denied the exemption claimed u/s.54F of the Act – assessee submitted Xerox copy of share certificate, Covering letter of Maheshwari Datamatics Pvt. Ltd. dated 19/06/2003 Registered Transfer Agent of the company, through whom shares purchased were duly transferred & send to our above named client, Copies of bills issued by the said broker alongwith various contracts for sale & purchase of shares – Held that:- Share certificates were purchased from the off market and the assessee was not given any opportunity to cross examine the printer - CIT(A) without giving any opportunity to cross examine the printer has relied on the material obtained by the A.O. during the course of assessment proceedings – matter remanded to AO - grounds taken by the assessee are, therefore, partly allowed for statistical purposes
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2012 (7) TMI 393
Exemption under section 2(14) of the Act - agriculture land versus capital asset - transferred by the assessee - which is not notified by the Central Government for the purpose of treating the same as capital asset as required by u/s. 2(14)(iii)(b) of I.T. Act – Held that:- Mere fact that the land in question was agricultural land cannot be a ground to claim for exemption under section 2(14) of the Act as the land is situated within the local limits of Hyderabad Municipal Corporation - mere payment of advance does not entitle the assessee for relief under S. 54B of the Act, if ultimately whole transaction of purchase of land was completed within a period of two years as contemplated under S. 54B of the Act, assessee is entitled for relief under S. 54B of the Act - land transferred by the assessee is a capital asset, liable for capital gain - ground of the Revenue is allowed. Condonation of delay - CO filed by the assessee was delayed by 164 days - assessee explained the reasons in its affidavit. It is submitted that the delay is neither wilful nor intentional – Held that:- Reason advanced by the assessee cannot be considered as good and sufficient reason to condone the delay - delay involved is inordinate and not marginal - delay of 164 cannot be condoned simply because the assessee’s case is hard and calls for sympathy or merely out of benevolence to the party seeking relief - delays are not properly explained by the assessee - no reason for condoning such delay - appeal of the Revenue is allowed
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2012 (7) TMI 392
Addition u/s 41(1) on account of unexplained sundry creditors - CIT(A) after admitting additional evidence found that the assessee was dealing with most of the parties in the subsequent year and liability had been paid up - CIT(A) while deleting the addition – Held that:- unless there is a cessation of liability or there is a remission of liability by the creditor, the liability subsists and the assessee having not unilaterally written back accounts of the aforesaid creditors in its profit and loss account, the provisions of section 41(1) of the Act and explanation 1 thereto, are not attracted - there is nothing to suggest that the assessee obtained any benefit either by way of remission or cessation of any liability while the aforesaid liabilities are continually admitted by the assessee in their balance sheet - AO or the ld. CIT(A) have nowhere doubted the genuineness of purchases - appeal of the Revenue is dismissed Addition on account of unexplained expenses – AO added an amount on account of expenses payable, the assessee having not furnished details of expenses and evidence of payment - assessee contended that the ld. CIT(A) was not justified in upholding the addition out of expenses payable at the end of the year nor any benefit accrued to the assessee – Held that:- No basis to upheld addition while invoking provisions of sec. 41(1) of the Act - CO filed by assessee is allowed
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2012 (7) TMI 391
Unexplained cash credit u/s 68 of the IT Act - unsecured loan - assessee did not furnish any details and confirmation letters in respect of the loan obtained – Held that:- Since, the assessee was not able to furnish any details for the loan received during the year, CIT(A) confirmed the same to be the addition made u/s 68 of the Act - order of the learned CIT(A) confirmed Disallowance of business expenditure - assessee did not furnish any details or explanation for the expenses incurred – Disallowance justified – Against assessee Contravention of Rule 46A of the IT Rules, 1962 - admission of additional evidences - DR submitted that the assessee has not furnished any evidence to justify non-production of details before the learned AO though the same was furnished before CIT(A) – Held that:- On examining the books of accounts the learned CIT(A) excluded the opening balance of loans and brought to tax u/s 68 of the Act for the loan obtained during the year for want of details and confirmation - A.O’s order it does not come out that the assessee had not produced the books of accounts before him - no merit in the arguments of the learned DR on this ground of admitting additional evidences under Rule 46A of the IT Rules, 1962
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2012 (7) TMI 390
Addition under section 68 of the Act - alleged that assessee was not able to produce creditor confirmation - Assessing Officer, in the assessment order allowed set off of this addition against business loss and reduced the business loss – Held that:- Assessing Officer made addition under section 68 as unexplained cash credits though the said credits are only trade credits and that too most of them are opening balances of the previous year - lower authorities should have considered these balances in creditors accounts as income under section 41 and not as unexplained cash credits under section 68 - since the balances in creditors accounts are income falling under section 41(1), the set off of this income against business loss allowed by the Assessing Officer in the assessment order passed under section 143(3) is correct - appeal of the assessee is allowed
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2012 (7) TMI 389
Computation of Capital gain on sale of land - long term capital gain – section 50 of the Act – Held that:- Section 50 does not apply in case of land as no depreciation is allowable on the land when specific consideration for land has been provided in agreement for sale - appellant has not claimed any depreciation on land - revenue’s appeal is dismissed.
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2012 (7) TMI 376
Treating the transaction as liable for capital gain - assessee contested that no 'transfer' within the meaning of section 2(47)(v)has occurred in respect of the Development Agreement executed by the assessee - Held that:- Starting words of s. 53A of the Transfer of Property Act are "where any person contracts" which means just the existence of a contract. The assessee is the "person" who has entered into a contract with the developer vide agreement dated 31.03.2006 - The term "transfer" is to be read along with the s. 45 and s. 2(47)(v) of IT Act If transferee has taken any steps to construct the flats, undisputedly then, under the provision of Income Tax Act a "transfer" has definitely taken place. Terms necessary to constitute the transfer can be ascertained with reasonable certainty - with two certainties one is passing of substantial consideration and second is passing over of possession - In this case the amount of consideration has to be paid to the assessee in the form of cash as well as in kind i.e., the flats to be constructed by the developers to be handed over to the owners - Even if some part of consideration remains to be paid, the transaction shall not affect the liability of capital gains tax so as to postpone the same indefinitely. What is meant in clause (v) is the "transfer" which involves allowing the possession so as to allow developer to undertake development work on the site - since the possession of the property already handed over to the developer and right and interest in the property has been transferred in favour of the developers.Being so the condition laid down in section 2(47)(v) has been complied with and the lower authorities justified in treating the transaction is liable for capital gain - against assessee.
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2012 (7) TMI 375
Disallowance of freight charges on account of TDS not being deducted - invoking Section 40(a) (ia)- Held that:- Assessee had not produced any material to establish the contention of the assessee, but from making a bald assertion. It was also found from the records that the assessee had made the payment subsequently after the due date and wrongly said that the department had entered the finding of liability to freight charges merely on the fact of the subsequent deposit made - against assessee. Addition of liability in hands of assessee - invoking Section 41(1) - Held that:- Assessee had not produced anything to show the subsisting liability towards the alleged creditors and no evidence placed with respect to the payments made and no consequent acknowledgment of such credits were proved by the assessee - against assessee. cash credits added on to the income returned - invoking Section 68 - Held that:- Assesse's contended the cash credits to be advances from customers who had made orders for specified goods but was unable to provided details of the persons who made such advances - said advances were cash infused by the assessee into the business to make up the short fall in cash - no substantial question of law raised in appeal - against assessee.
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2012 (7) TMI 374
Quashing the initiating proceedings u/s. 147 - Revenue appeal - Held that:- The reasons recorded for initiating reassessment proceeding u/s 147 clearly indicates that there was no new material which had come to the notice of the AO so as to lead to a reasonable belief that income assessable to tax has escaped assessment - order passed originally u/s 143(3) was passed after the respondent had made adhoc claim for expenditure at 30% of the professional receipts in the revised return of income which was later withdrawn. In fact the reasons for reopening the assessment for the year 2002-03 itself records that the the claim of 30% adhoc expenses was withdrawn when the respondent assessee was asked to substantiate the claim - no basis for the Assessing Officers to form a belief that income has escaped assessment - against revenue.
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2012 (7) TMI 373
Rejection of the claim for waiver of interest u/s 234A, 234B & 234C - income generated from the deal to an extent of 3/10 was attributed to the petitioner while the remaining 7/10 was fixed against Mr.K.P.Ahamed Kutty - Held that:- The benefit conferred to Mr.K.P.Ahamed Kutty, is on the basis of the earlier Circular, i.e., Circular dated 23.05.1996, which came to be super ceded by the time since no substantial difference is brought to the notice between these two Circulars - the claim for waiver was submitted by the petitioner much before the claim petition preferred by Mr.K.P.Ahamed Kutty, whose case came to be considered first, passing favourable orders, while the case of the petitioner came to be kept in the cold storage for nearly six years - matter is remitted to the second respondent for fresh consideration
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2012 (7) TMI 372
Genuineness of Assessee firm - held to be Association of Persons u/s 2(31)- the revenue generated by the respondent was passed on to the partners such that no profit accrued to the respondents - Held that:- Assessee had not contrived a devise to evade or even avoid tax. The original intention itself was for the consortium members to bid for and perform the contract and to divide the profits arising therefrom among themselves in accordance with the Consortium Agreement. The members of the consortium constituted the firm, not as a devise to evade or even avoid tax, but upon the insistence of the MIDC - the respondent satisfies the requisite tests of a partnership firm constituted in accordance with law - against revenue.
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2012 (7) TMI 371
Unexplained cash credit of 12 persons - CIT(A)deleted the additions - Held that:- The assessee has failed to prove the creditworthiness of all the creditors and no source of their income has been filed. At the best the assessee is able to prove identity of the creditors, but the assessee failed to prove the genuine credit in the matter and they were having sufficient funds or savings in order to give loans to the assessee. On verification of the bank account of the depositors, it was specifically found that there were no sufficient funds available in their bank account and they were having only small bank balance, which was even not sufficient to meet out their household expenses. Therefore, it is unbelievable to accept the contention of the assessee that said persons were having creditworthiness to advance any loan to the assessee - parties have deposited the cash in their bank account before issuing cheques to the assessee, which apparently show that these were accommodation entries, not genuine and all the three creditors were not having creditworthiness CIT(A) has wrongly deleted the addition shifting the burden on the Assessing Officer to establish the creditworthiness of the depositors - only genuineness of few parties have been proved furnishing relevant bank statement of the creditors explaining that the source of loan - partly in favour of assessee.
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2012 (7) TMI 370
Challenge reopening of completed assessment u/s 147 - ad hoc dis allowances of expenses - Held that:- A.O. himself admitted in his order that the details of expenses has been filed but the log book was not filed by the assessee. Therefore, he disallowed 20% of the generator expenses. As the assessee has furnished details of general expense and repair and maintenance no such adhoc disallowance is warranted whereas in respect of generator expenses the assessee has failed to furnish relevant documents, log book and others, therefore, the A.O. has rightly disallowed 20% of the expenses. Addition on account of estimated business income - as per recognized accounting practice on actuaries – 6.5% of deposits mobilized by assessee forfeited - Held that:- Without bringing any material on record or without any discussion in the body of the order the AO has observed that there may be income of Rs.84,00,000/- on account of forfeiture of deposits - there is no question of forfeiture of any deposit and from the material available on record, it is seen that the company is repaying the depositors year after year - The AO has not discussed in his order that in what type of business and how there will be a business yield @ 6.5 times - against revenue. Addition i.e. making imaginary disallowances out of expenses of non existent business - Held that:- whatsoever has been given by the AO while disallowing admissible expenses on adhoc basis. The income has been estimated on imaginary basis which we have already deleted - in favour of assessee. Addition on account of rent received - Held that:- Addition of Rs.1,54,000/- by mentioning Rent as other income is not acceptable as no discussion has been made in the body of the order that how this rent income is other income. In fact, the assessee in its Profit & Loss account of the Hotel business had shown rental income of Rs.1,68,650/- and it seems that AO had treated the rental income of hotel as income from other sources. However, no finding has been given by the AO that how the rental income of hotel can be treated as income from other sources - in favour of assessee.
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2012 (7) TMI 369
Addition made on account of unexplained credit - seized papers belonged to the assessee, therefore, the addition is required to be made in the hands of the assessee - CIT(A) deleted the additions - Held that:- CIT(A) deleted the said addition on the basis ignoring that protective addition in the hands of the assessee on the ground that the case of Shri Hari Shankar Goyal is still pending with the A.O. on the basis of High Court order but the CIT(A) noted that there is no dispute about the disclosure of undisclosed income of Rs.23,71,076/-, which includes Rs.23,50,000/-, before the Settlement Commission in the hands of Late Shri Hari Shankar Goyal, Legal Heir but the fact that what was the final outcome from the case of Shri Hari Shankar Goyal which was pending with the A.O. on the basis of High Court Order - The deletion made by the CIT(A) is little premature as the CIT(A) has deleted the addition without recording the fact of final outcome of assessment in the case of Sahri Hari Shankar Goyal - send back this issue to the file of CIT(A) - in favour of revenue.
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2012 (7) TMI 368
Challenging the re-opening of the closed assessment u/s 147 - disallowing of the assessee’s claim of exemption u/s 54F - Held that:- Originally the A.O. had opted proceeding u/s 154 and when that proceeding became final, he has taken proceeding under section 147 - The assessment must be one single assessment and not piecemeal assessment. If the I.T.O. has assessed only the part of the income of sale income making the assessment and deferred the other part of income for consideration at later stage under section 147 could not be invoked for the purpose of completing the deferred assessment. Claim of exemption u/s 54F- Held that:- Reinvestment of sale consideration for availing benefit u/s 54F should be in the name of the assessee is a debatable issue as there are decisions available on the both the sides, on applying rule as laid down in the case of Mysore Minerals Limited vs. CIT, [1999 (9) TMI 1 (SC)] that in case there are two possible views, a view favorable to the assessee should be adopted - decided in favour of assessee.
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2012 (7) TMI 367
Deduction of tax at source on hiring of buses - applicability of section 194C or 194-I? - Held that:- Considering the Bulk Petroleum Products Road Transport agreement the arrangement for transportation of petroleum products was essentially a contract for transportation of goods and not an arrangement of hiring of vehicles. Thus tax is required to be deducted at source from the payments to the carrier in terms of provisions of sec. 194C and not u/s 194-I - there is nothing to indicate that the assessee has taken trailers/cranes on rent so as to attract the provisions of section 194-I and assessee had given sub-contracts for transportation of goods, thus the said transactions would fall within the purview of section 194C as the assessee was responsible for paying the amount in question for carrying out work in pursuance of contracts between the assessee and the transporters and as such was required to deduct tax at source at the rate prescribed @ 2% - when the contract agreement is read clause-by-clause, it becomes abundantly clear that there is no transfer of the right to use the vehicle involved in the contract agreement and that the contract agreement is merely for carriage of the petroleum and petroleum products and nothing more - in favour of assessee.
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2012 (7) TMI 366
Refusal to grant exemption u/s 80G(5) - withdrawal of the registration granted to the assessee society under section 12AA - Held that:- Assessee Samiti is carrying on the activities in respect of medical relief whose object is ‘education’ or ‘medical relief’ would continue to be eligible for exemption as charitable institutions even if they incidentally carry on a commercial activity - the newly inserted proviso to section 2(15) will apply only to entities whose purpose is ‘advancement of any other object of general public utility’ i.e. the fourth limb of the definition of ‘charitable purpose’ contained in section 2(15). Thus, there is no basis for satisfying the CIT that the activities of the trust are not genuine and they are not being carried out in accordance with the object of the trust/society - C.B.D.T. Circular No.11/2008 dated 19.12.2008 clearly pointed out that the amendment to section 2(15) is applicable only to the fourth limb of the definition i.e. ‘advancement of any other object of general public utility’ and not to other activities in the field of relief to the poor, education or medical relief - cancellation of registration under section 12AA (3) and refusal to renew exemption u/s 80G is not warranted - in favour of assessee.
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2012 (7) TMI 365
Disallowance u/s 14A by invoking Rule-8D - steep increase in the expenses claimed under the head bank interest as compared from previous year concludes that the borrowing of funds has been resorted to by the assessee mainly for purchase of shares - Held that:- As decided in M/s Lala Ram Finance & Investment Versus DCIT [2012 (7) TMI 127 (Tri)]disallowance cannot be made in case where the assessee is having sufficient interest free funds - as the assessee was having sufficient interest free funds to cover the investment made in shares of which income is exempt under section 10 disallowance cannot be warranted. Disallowance of power and fuel, manufacturing and out of selling expenses after comparing the expenses with earlier years - Held that:- Neither AO nor CIT(A) found that the expenditure incurred and claimed by the assessee was not for the purpose of business. The adhoc disallowance was made merely on the basis that some of the vouchers were self-made as merely that the assessee has accounted for the expenditure by self-made vouchers automatically does not prove that the expenditure incurred was for other than business purposes - decided in favour of assessee.
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2012 (7) TMI 364
Addition of the entire credits in bank account in the income as unexplained deposits - assessee contested that only the peak credit in the bank account could have been added in the income of unexplained deposit - Held that:- Principle of peak credit is not applicable in the cases where the deposits remained unexplained u/s. 68 and would not apply in the case of different depositors where there has been no transaction of deposits and its repayment between the particular depositor and the assessee - as different drafts were deposited in the bank account of the assessee in the name of different persons, therefore, peak theory cannot be applied in the case of assessee. Further, from the bank statement, it is clear that after deposit of bank drafts in the account in the name of different persons, cash was withdrawn in each and every case, but no evidence was furnished whether the amounts were paid to the same depositors of the drafts or to some other parties - in favour of revenue. Levy of penalty u/s. 271(1)(c) - rejection of appeal as to be time barred - Held that:- It is well settled law that penalty cannot be levied on the amounts /additions, which have already been deleted on quantum appeals. No basis would be left for levy of penalty if addition on which penalty was levied has already been deleted by the appellate authorities - Since the order of the Tribunal was delivered after the levy of penalty, therefore, such circumstances and peculiar facts should have been considered by the ld. CIT(A) in the penalty appeal instead of dismissing the appeal of the assessee holding it to be time barred - the assessee was prevented by sufficient cause from not filing the appeal before the CIT(A) within the period of limitation, thus in such circumstances, the delay should have been condoned - the appeal of the assessee is restored to the file of CIT(A) with the direction to redecide the appeal on merits - in favour of assessee by way of remand.
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2012 (7) TMI 363
Computation of Income - CIT(A) restricted the income of assessee to Rs.3 Lakh as against AO's declaration of at Rs.10,51,812/- treating it to be excessive and on higher side - assessee contested that AO erred in clubbing the purchases of both the entities in the hands of the appellant estimating the sales of both the entities in the hands of the appellant - Held that:- The assessee claimed in the profit and loss account, payment of license fees of Rs.6,00,000/- which was paid for both the concerns and report of the Excise Inspector also confirmed it and the assessee also claimed deduction of total license fees of both the concerns in the profit and loss account. Therefore, from the conduct of the assessee, it was clear that the assessee has shown ownership on both the shops in question and when the assessee was confronted of the fact and was called upon to file rejoinder to the remand report, the assessee did not say anything and stated that it is a matter of record of the AO. Assessee's claim that both the entities of AOP is to be assessed separately is found to be afterthought because no return of income for the assessment year under appeal was filed for AOP. The return of AOP was filed for the first time for subsequent assessment year 2005-06 after completion of assessment of assessee. Thus, no reliance can be placed in the assessment year under appeal that any valid AOP exists as claimed by the assessee - as the assessee did not file the allotment letter of D.M. in respect of shop and no documentary evidence has been filed in support of any of the contentions. The CIT(A) was justified in upholding that both the shops were operated and owned by the assessee and estimate of profit of both the concerns in the hands of the assessee was justified - estimation of the figure of net profit at Rs.3,00,000/- which was in proportion to the income declared by the assessee in the return of income on the basis of declared purchases was correct - against assessee.
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2012 (7) TMI 362
Disallowance of deduction u/s 80-IC - an interest income earned by the assessee - deletion of administrative expenses paid for earning gross interest income as net interest income has to be disallowed from the eligible profit - Held that:- Since the assessee has not advanced any arguments with regard to the proposition that on interest income deduction u/s 80-IC no idea to examine the provisions of sec. 80-IC and in what condition the computation for such deduction has to be made - interest income on fixed deposit for the purpose of availing of credit facility from the bank does not have an immediate nexus with the business and, therefore, it has to necessarily be treated as income from other sources and not business income - as the net interest income which has to be excluded from the eligible profit for grant of deduction under sec. 80-IC and Learned first appellate authority on an ad hoc basis allocated 50,000 rupees towards administrative expenses for earning interest income, remit the issue to the file of the Assessing Officer for allocation purposes.
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2012 (7) TMI 361
Donations received as a corpus funds - DR stated that without any specific directions by the donors it is an income of the assessee - Held that:- As Registration granted u/s 12AA is concerned it is an order passed by competent authority and if any irregularity crept in the order, the same can be rectified by the competent authority itself, DR cannot raise any objection qua the irregularity, if any, crept in the order of the Learned CIT while granting registration. If discussion between the donor and the donee in the shape of correspondence etc. is seen then it would reveal that donation was made by the donor in order to establish an engineering and a management college in the name of his grand-father. The donor has specifically mentioned in this connection. As the trust had put a proposal to the donor for establishing a college in the name of his grand-father which the donor accepted and accordingly gift deed was made. Thus, the gift deed alone is not to be looked into - it was a corpus donation at the end of donor and it is not a taxable income in the hands of the assessee - with regard to the other donations all the donors have filed their affidavit indicating the fact that they have donated the funds towards corpus - decided in favour of assessee.
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2012 (7) TMI 360
Challenge the assessment ex – parte u/s 144 - the notice was served after the due date - Held that:- Valid notice containing the address of the assessee, was issued by speed post to it on 16.8.2008 and the normal presumption is that this notice would have been received by the assessee - company within a period of one or two days. The notice has not been received back. Therefore, it is held that in absence of any valid rebuttal of service, the same deemed to have been made on the assessee - against assessee. Deletion of addition made by the AO u/s 40(a)(ia)for non-deduction of tax at source - Held that:- Only one notice has been issued in this case for making the assessment u/s 144 adequate opportunity of being heard was not granted to the assessee. Therefore, it is justified in admitting additional evidence under Rule 46(A)(3). The evidence showed that tax has been deducted and paid to the Central Government. Consequently there is no reason to disallow the expenditure Disallowance from laundry expenses, house keeping and service expenses have been deleted by mentioning that the AO has not brought any evidence on record that the expenses were not incurred in the course of business - in favour of assessee
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2012 (7) TMI 359
Levy of penalty u/s 271(1)(c) - penalty levied on account of reduction in the claim made by the assessee u/s 80IB - Held that:- Penalty merely because the claim in the revised return has been reduced is not warranted as Section 271(c) contemplates levy of penalty if assessee conceals the particulars of total income as is referred in S. 2 (45) or furnishes inaccurate particulars of such total income - there is no finding that any details supplied by the assessee in its return were found to be incorrect or erroneous or false - A mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars - decided in favour of assessee.
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2012 (7) TMI 358
Addition in account of undisclosed income - AO included the income of assessee's wife and in his undisclosed income - Held that:- As the assessee is held to be the owner of M/s Transworld International upto assessment year 1996-97 and his to be owner of this proprietary concern from assessment year 1997-98 the income from this concern for assessment year 1997-98 cannot included in the hands of the assessee - that the addition has been deleted in wife's case also on the ground that the transactions of proprietary concern had been taken into account and profit from this concern was declared by her at Rs. 1,04,996/- and this finding has not been challenged by the revenue - following the rule of consistency CIT(A) was right in deleting the addition. House hold expenses cannot be estimated while making assessment of undisclosed income under chapter XIVB. Thus CIT(DR) has not been able to show that any material was found in search in respect of this issue. Therefore, this ground cannot be taken up for computing undisclosed income - in favour of assessee.
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2012 (7) TMI 357
Disallowance of expenses - Held that:- Assessee failed to submit evidence in support of its claim as no material was brought on the record indicating that he has carried out business activities. In this year, it has only shown rental income and against such income, the expenses enumerated in section 24b can be allowed and the expenses like Loan processing fee, Sales-tax, Insurance Expenses and Bank charges as claimed by assessee cannot be allowed - decided against assessee. Disallowance of interest expenses - the borrowed capital was not used for business purposes - Held that:- If an assessee has borrowed funds, purchased a property/land, raised construction it or renovated it and then earned income, then expenses in the shape of interest etc. would be allowed as a deduction out of the rental income - assessee has filed a bank certificate to provide the transaction details and the accounts of the assessee for earlier years i.e. balance sheet, ledger account etc has alleged that it has raised unsecured loan from individual for construction, these loans were repaid by taking a term loan from the bank - remit the case back for verification and re adjudicate - in favour of assessee for statistical purposes.
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Customs
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2012 (7) TMI 388
Whether the imports made by the respondents, by declaring the same as gold mountings and findings, bangles, necklaces, earrings etc. are entitled to the benefit of Notification No. 62/04 Cus or same have to be considered as gold jewellery liable to customs duty – Held that:- Gold mountings and findings being items as jewellery are outside the purview of the Notification No. 62/2004 and the Board s circular No. 40/2004-Cus dated 4.6.2004 and 13/06-Cus dated 29.3.06 clarifying that gold and silver mountings and finding are covered by Notification No. 62/2004-Cus are contrary to the provisions of law and hence have no validity – In favor of assessee
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2012 (7) TMI 356
Valuation - Quantity to be considered for the valuation of imported MS/HSD and whether CVD is liable to be paid on such value or not - the assessee contested that the quantity which has been unloaded into the shore tank is only the quantity on which duty liability needs to be discharged and not the bill of lading - Held that:- As the appellant is paying the price indicated in the invoice even if appellant would have received lesser quantity of the goods in the shore tanks, the invoice value charged and paid by the appellant would be the correct value unless there is a clear evidence that they have paid less amount or they have paid the value/price for the quantity received in shore tanks - in against the assessee.
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Service Tax
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2012 (7) TMI 413
Whether the appellants are eligible to take credit of service tax paid on various services for the purpose of paying duty in respect of various goods manufactured by them - Held that:- Order of the Bombay High Court in case of CCE Vs. Ultratech Cement Ltd (2010 -TMI - 78203 - BOMBAY HIGH COURT) extending credit of tax paid on all services used in relation to the business of manufacturing the final product, was not before the authorities below when they decided the present cases - Appeals are allowed by way of remand.
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2012 (7) TMI 412
Whether the respondents are entitled to avail the benefit of credit of Service Tax paid on outward GTA services availed by the respondents up to the place of removal i.e. the port area – Held that:- Sale or purchase of goods in case of goods cleared for export is effected by the transfer of documents of title to the goods after the goods have crossed the customs frontiers i.e. when the documents have been handed over of the Customs in the port areas. Thus, the place of removal in case of goods cleared for export is the port area – Cenvat credit allowed – In favor of assessee
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2012 (7) TMI 411
Penalty u/s 76 - assessee submitted that major amount of tax was paid when he came to know that its liability arose - Held that:- The case is remanded back to bring to record about the date on which liability arose, date of return ought to have been filed, date on which admitted tax liability should have been discharged and the date of discharge of duty liability.
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2012 (7) TMI 410
Applicable rate of service tax – year of bill or receipt – the services rendered prior to 14/5/03 the payment for which was received on or after 14/5/06 - Held that:- As decided in Reliance Industries Ltd. vs. CCE, Rajkot [2008 (1) TMI 86 (Tri)] that the rate of service tax chargeable is the rate in force on the date of rendering service and not the rate in force on the date receipt of payment - against revenue Waiver of the penalty under Section 76 and 77 - short paid amount had been paid only after the issue of show cause notice – Held that:- It is not a case of non-levy or short-levy of service tax on account of any fraud, willful mis-statement or suppression of fact by the respondent as the assessee have been filing ST-3 returns correctly indicating the quantum of service tax required to be paid by them - appellant has discharged service tax liability along with interest - delay in filing in the absence of malafide intention on the part of the assessee, imposition of penalty may not be warranted - against revenue
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2012 (7) TMI 382
Refund - appellant paid and deposited Service Tax in respect of commission agent services provided from outside India - Service Tax was not required to be paid by the appellant - no protest was lodged at the time of deposit of said Service Tax – Held that:- In terms of provisions of section 11B, the refund claim are required to be filed within a period of one years from the relevant date. The relevant date stand defined as date of payment of Service Tax. The refund application filed on 9.12.09 is beyond the period of one year from the date of payment of Service Tax on 17.2.07. It is well settled law that the authorities working under Central Excise Act are bound by the provisions of the Act and cannot grant relief on the basis of justice, equality and good conscious – Appeal rejected
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2012 (7) TMI 381
Eligibility of the respondent for availment of cenvat credit of the duty paid on the Air Compressors purchased by them and received in the factory premises on 05.05.2005 - Air Compressors which are purchased and received by the appellant was for providing out put service Commercial and Industrial Construction Services (Pipeline Services) and the said services were brought into the tax net from 16.6.2005 – Held that:- Cenvat credit could not be availed on duty paid on such Air Compressors though it is capital good as the said capital goods were received in the premises of the service provider i.e. respondent before the services were taxable under the Finance Act, 1994.
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2012 (7) TMI 380
Refund claim - service tax paid on the input services - Courier Services and Transportation services utilised by the appellant for export of the goods – claim denied on the ground that appellant has not provided the original or self attested copies of shipping bills, courier bills, bills of lading, MRs of invoices indicating actual export of the goods – Held that:- Appellant is also directed to show the linkage of the goods which are being exported by them with documents - order is set-aside and matter is remitted back to the adjudicating authority
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2012 (7) TMI 379
Non eligibility for cenvat credit on the input services for the period prior to the registration - Held that:- As decided in J.R. Herbal Care India Limited v. CCE, Noida [2010 (3) TMI 391 (Tri)]no provision in the rules that credit was not available to unregistered manufacturers. Manufacturers exempted from the registration do not cease to be a manufacturer of excisable goods. Therefore, in respect of the goods manufactured during the period when the appellant was not registered, credit can be taken subsequently also - in the case of clandestine removals, even if the duty is paid subsequently, cenvat credit on inputs used will be available to the assessee/manufacturer subject to the conditions that proper documents showing the payment of duty are available. If the appellant is eligible for cenvat credit, post registration, this availment or showing the account being credited by the service tax paid on input services, but not availing the same for the purpose of discharge of duty, would be more or less the same or an identical situation to indicate that as STP appellant is eligible for refund of underutilized credit - decided in favour of assessee.
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Central Excise
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2012 (7) TMI 387
Transaction value versus MRP bases valuation - Assessment u/s 4 or u/s 4A - appellant s packages containing 34 retail pouches of net quantity below 10 mg. each is a wholesale package and merit assessment under Section 4 of the Central Excise Act - no demand has been raised by the Department nor the respondent has sought to file any refund claim within limitation – Held that:- Department continues to assess the excise duty under Section 4A and the assessee has no intention to apply for refund for the past period. Thus, it is contended that it has become infractuous after coming into operation Chewing Tobacco & Unmanufactured Tobacco Packing Machines ( Capacity Determination and Collection of Duties) Rules, 2010 framed under Section 3A of the Central Excise Act, 1944 - since the respondent has given an undertaking that he will not file any refund claim in respect of the past period, the appeal has become infractuous - appeal is dismissed as infractuous
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2012 (7) TMI 386
Waiver of pre-deposit – Exemption notification – applicant were under the bona fide belief that they are entitled for benefit of Notification No.6/2002 as amended and accordingly they were availing the benefit of the Notification and their clearances were never more than S.S.I. exemption limit even after including the clearances made to M/s.Lagan Jute Manufacturing Company, who in-turn was using the said goods in the manufacture of machines which were required for jute manufacturing - intended use was only for manufacturing in jute mills – Held that:- Commissioner(Appeals) has not decided the issue on merits and decided the appeal only on non-compliance with the provisions of section 35F - Commissioner(Appeals) is directed to decide the case on merits without insisting for any further pre-deposit from the applicants/appellants
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2012 (7) TMI 385
Non-inclusion of the amount received for Digital and Pulsation Study conducted - Held that:- It is on record that the appellant is not conducting this study and charging separately for all gas compressors, number of machines manufactured and sold by him during the relevant period and subsequently also - any study or additional tests conducted by the manufacturer at the option of the assessee, value/cost thereof need not form a part of the assessable value, as the same being optional - assessee has made out a case in his favour on the point of limitation as non-declaration of collection of charges of DPS in RT 12 should not be held against them, as they could entertained a bonafide belief, as it is done only in respect of few customers.
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2012 (7) TMI 384
Denial of SSI benefit - cakes and pastries supplied to customers under the brand name assigned by the other brand name owner - Held that:- SSI benefit cannot be denied to the appellant in respect of the subject goods on the ground that these goods were supplied to customers under a brand name belonging to another person as that the appellant thereby acquired exclusive right to use it on cakes and pastries within the territorial limits set out in the deed of assignment. It is not in dispute that, within such territory, nobody else, nor even the brand name owner, had the right to use the brand name on identical or similar goods - in favour of assessee.
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2012 (7) TMI 355
Denial of CENVAT credit on lead acid battery and UPS System used in their office and the Cenvat Credit on S. Tax was not available prior to 10/9/2004 - appellant reversed the credit alongwith interest on being pointed out - Held that:- As duty amount is paid before issuance of SCN and the appellant have not been given any option in terms of Section 11AC under 1st proviso for payment of 25% of penalty as decided in the case of Commr. of C. Ex. & Customs, Surat-I Vs. Harish Silk Mills [2010 (2) TMI 494 (HC)] that if the duty amount with interest is not paid in time and even reduced penalty of 25% of the duty amount is not paid in time and option is not given to the respondent assessee, we have taken the view that such option should be given to the assessee and period of 30 days would commence from the date of giving such option - partly in favour of assessee.
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2012 (7) TMI 354
Eligiblity of cenvat credit of service tax paid on outward transportation of the goods from the factory to the customer s premises - sales are on FOR destination basis - denial of credit - department who pleaded that the impugned order has been passed based on the judgement of the Tribunal in the case of ABB Ltd. (2009 (5) TMI 48 (Tri) ) without any reference to the facts of the case - It is pleaded that even if the customer s premises is treated as the place of removal, there is no finding by CCE(Appeals) that the sales were on FOR destination basis – Held that:- Neither the Commissioner (Appeals) nor the adjudicating Joint Commissioner have looked into this aspect of the case by referring to the facts - Matter remanded to the adjudicating authority for denovo adjudication
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2012 (7) TMI 353
Applications for waiver of pre-deposit along with Education Cess and equal amount of penalty - the contention of the applicant that their appeals were dismissed by ld.Commissioner(Appeals) for non-compliance with the provisions of section 35F of Central Excise Act and cases were not decided on merit - Held that:- Undisputedly the ld.Commissioner has not decided the issue on its merits as on similar facts and circumstances the demands for subsequent period have been set aside by ld.Commissioner(Appeals) vide his order - thus after waiving the requirement of pre-deposit the matter is to be remanded back to ld.Commissioner(Appeals) to decide the issue on its merits without insisting for pre-deposit - Appeal allowed by way of remand - in favour of assessee.
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2012 (7) TMI 352
Wrong availment of Cenvat credit - stay application for granting waiver of penalty - Held that:- Since the appellant took wrong Cenvat credit which was reversed on 17.11.2007 it is necessary to ascertain is whether such credit was utilized by the appellant without having any other credit over and above such amount - if credit was utilized without sufficiency thereof on record penalty should be imposed if there was no utilization it is left for the adjudicating authority to re-adjudicate the matter of imposition of penalty since there is already reversal of Cenvat credit not disputed by the assessee - need to be decided afresh.
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Indian Laws
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2012 (7) TMI 383
Petition seeking reference of the disputes to an independent and impartial sole Arbitrator - provisions of arbitration contained in Clause 10 of the general conditions that once the parties have agreed upon a named arbitrator, the parties cannot resile therefrom - the Chairman-cum-Managing Director had duly acted and exercised his powers and had appointed General Manager (Kot) as the arbitrator - Held that:- It would appear that even though the order may have been made on 19th July, 2011, it was served for the first time on the counsel of the petitioner by e-mail on 26th July, 2011. Therefore, prima facie, it would not be possible to accept the submission of respondent that the petition would not be maintainable on the ground that the arbitrator had already been appointed at the time when the present petition was filed. The issue needs to be decided on the basis of the evidence produced by the parties, at the appropriate time. It would not be possible to reject the petition merely on the ground that this Court would have no power to make an appointment of an arbitrator other than the Chairman-cum-Managing Director or his designate. This Court would have the power to appoint a person other than the named arbitrator, upon examination of the relevant facts, which would tend to indicate that the named arbitrator is not likely to be impartial - the petitioner had clearly pleaded that the named arbitrator is a direct subordinate of the CMD and employee of the respondent. CMD is the controlling authority of all the employees, who have been dealing with the subject matter in the present dispute and also controlling authority of the named arbitrator. Apprehending that the CMD, who had been dealing with the entire contract would not act impartially as an arbitrator - the petitioner thus made it explained that it may not get any justice in the hands of the Managing Director, since he cannot go against the directions issued by the Ministry of Defence, Government of India and, therefore, it would be appropriate to appoint independent sole arbitrator - in favour of petitioner
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2012 (7) TMI 377
Challenge of detention order at the pre-execution stage - Held that:- While the detention orders could be challenged at the pre-execution stage, that such challenge could be made only after being prima facie satisfied that the five exceptions i.e. (i) that the impugned order is not passed under the Act under which it is purported to have been passed, (ii) that it is sought to be executed against a wrong person, (iii) that it is passed for a wrong purpose, (iv) that it is passed on vague, extraneous and irrelevant grounds or (v) that the authority which passed it had no authority to do so had been fulfilled - this case did not fall under any of the five exceptions to enable the Court to interfere and rejected the contention that the exceptions were not exhaustive and that it is only in the five types of instances that the Courts may exercise its discretionary jurisdiction under Articles 226 and 32 of the Constitution at the pre-execution stage. Rejecting Mr. Rohatgi's contention regarding the right of a detenu to be provided with the grounds of detention prior to his arrest - Held that:- That the right of a detenu to challenge his detention at the pre-execution stage on grounds other than those five exceptions mentioned therein, requires further examination - various Special Leave Petitions and the Writ Petitions be listed for final hearing.
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