TMI Tax Updates - e-Newsletter
July 19, 2012

Case Laws in this Newsletter:

Income Tax Customs Service Tax Central Excise Wealth tax

Articles

1. Renting of immovable property - Waiver of Penalty

   By: Meenu Garg

2. Learning from reported judgment in case of Super Star Amitabh Bachachan

   By: DEVKUMAR KOTHARI

News

1. Chairman, CBEC Awards AEO Certificates and Launches CBEC’S Interactive Customs Tariff Website.

2. Anand Sharma Condoles Demise of Rajesh Khanna.

3. MCA’s Fresh Mandate on Filing of Balance Sheet and Profit and Loss Account in Extensible Businessreporting Language (XBRL) Mode.

4. Anand Sharma to Discuss Industrial Projects, FDI with Chief Ministers of Punjab and Haryana tomorrow.

Notifications

Customs

1. 36/2012 - dated 16-7-2012 - ADD

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.

2. 60/2012 - dated 17-7-2012 - Cus (NT)

Appoints the Joint Commissioner or Additional Commissioner of Customs (Imports), Jawaharlal Nehru Custom House, Nhava Sheva, Raigad, Maharashtra, to act as a common adjudicating authority to exercise the powers and discharge the duties conferred.

3. 59/2012 - dated 17-7-2012 - Cus (NT)

Appoints the Joint Commissioner or Additional Commissioner of Customs (Port), Custom House, 15/1, Strand Road, Kolkata, to act as a common adjudicating authority.

4. 57/2012 - dated 11-7-2012 - Cus (NT)

Amends in notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 62/1994-Customs (N. T.) dated the 21st November, 1994.

Circulars / Instructions / Orders

VAT - Delhi

1. 10 - dated 13-7-2012

Online submission of information regarding " Central Declaration forms.

2. 09 - dated 12-7-2012

Taxability of Rexine cloth.

FEMA

3. 08 - dated 18-7-2012

Exchange Earner's Foreign Currency (EEFC) Account .

4. 07 - dated 16-7-2012

Scheme for Investment by Qualified Foreign Investors (QFIs) in Indian corporate debt securities.

Highlights / Catch Notes

Income Tax

• Debate on Depreciation Rate: Should Roads Be Classified as Buildings (10%) or Plant and Machinery (25%)?

  Case-Laws - AT : Depreciation on roads - at 10% as building or 25% as plant and machinery - building includes road - AT
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• Surrendered Income Can Be Offset Against Business Losses u/ss 71 and 72 of the Income Tax Act.

  Case-Laws - AT : Addition on account of surrender of income - set off the surrendered income against business losses – allowed as per provisions of section 71 & 72 - AT
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• Exploring Discounts vs. Commissions in Marketing Expenses: TDS Implications u/s 194H of the Income Tax Act.

  Case-Laws - AT : Discount versus commission - ‘Marketing Expenses’ including ‘Incentive and Discount’ - TDS u/s 194H - AT
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• Interest on Tax Refunds: Distinguishing Sections 244 and 244A of the Income Tax Act for Consistent Application.

  Case-Laws - AT : Interest on 'amount of refund' u/s 244 versus Interest on 'any tax' u/s 244A - AT
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• Court Rules 50% of Coconut Sales as Agricultural Income for Small-Time Farmer.

  Case-Laws - AT : Agricultural income - Addition on account of income from sale of coconuts - assessee is a small time farmer. - 50% income from sale of coconut is directed to be considered as Agricultural Income. - AT
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• Taxpayer Wins Exemption for Merging Flats into One Home u/s 54F, Qualifies for Tax Benefits.

  Case-Laws - AT : Exemption u/s 54F - merging of 4 flats originally planed into one unit - exemption allowed - AT
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• Exemption u/s 54 EC Available for Partial Investment in Specified Long-Term Assets Despite Denied Claim.

  Case-Laws - AT : Denial of the benefit claimed u/s 54 EC - exemption under section 54 EC is available even when the part of capital gain is invested in specified long-term asset - AT
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• Sales Tax Subsidy Aims to Boost Regional Industry and Infrastructure, Classified as Capital Receipt, Not Taxable.

  Case-Laws - AT : 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 from Brokerage and Commission in India: Non-Resident External Account with South Indian Bank.

  Case-Laws - AT : 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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• India-Sri Lanka DTAA: Capital Gains from Share Transfers in Sri Lanka Not Taxed in India Under Certain Conditions.

  Case-Laws - AT : 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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• Court Rules Share Transaction Surplus as Long-Term Capital Gains, Not Business Profits, Despite High Volume of Transactions.

  Case-Laws - AT : 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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• Depreciation on Motor Car Allowed: No Disallowance u/s 38(2) of Income Tax Act.

  Case-Laws - AT : 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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• Agricultural Land Denied Exemption Due to Location Within Hyderabad Municipal Corporation u/s 2(14) of the Act.

  Case-Laws - AT : 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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• Debate Over Creditor Balances: Should They Be Income u/s 41 or Unexplained Cash Credits u/s 68?

  Case-Laws - AT : 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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Customs

• Jawaharlal Nehru Custom House appoints Joint Commissioner as common adjudicating authority for customs matters in Maharashtra.

  Notifications : Appoints the Joint Commissioner or Additional Commissioner of Customs (Imports), Jawaharlal Nehru Custom House, Nhava Sheva, Raigad, Maharashtra, to act as a common adjudicating authority to exercise the powers and discharge the duties conferred. - Notification
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• Joint Commissioner of Customs, Kolkata, Appointed as Common Adjudicating Authority for Custom House Matters.

  Notifications : Appoints the Joint Commissioner or Additional Commissioner of Customs (Port), Custom House, 15/1, Strand Road, Kolkata, to act as a common adjudicating authority. - Notification
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• India Amends 1994 Customs Notification to Update Regulations and Procedures.

  Notifications : Amends in notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 62/1994-Customs (N. T.) dated the 21st November, 1994. - Notification
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• Definitive Antidumping Duty Imposed on Grinding Media Balls from Thailand and China to Protect Domestic Industries.

  Notifications : 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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FEMA

• New Guidelines for EEFC Accounts Under FEMA: Manage Foreign Exchange Risks and Compliance.

  Circulars : Exchange Earner's Foreign Currency (EEFC) Account . - Circular
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• QFIs can now invest in Indian corporate debt under FEMA guidelines, boosting foreign capital in the financial market.

  Circulars : Scheme for Investment by Qualified Foreign Investors (QFIs) in Indian corporate debt securities. - Circular
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Service Tax

• Reimbursed Ad Costs for Material Procurement and Logistics Included in Service Tax Value, Affecting Tax Liabilities.

  Case-Laws - AT : Inclusion of reimbursed amounts in the value of services - advertisements for procurement of materials required for executing the project, clearing & forwarding of such material from the port to the project sites - AT
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• Service Tax Rate Based on Date of Service, Not Payment Date, Determines Applicable Rate.

  Case-Laws - AT : 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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Central Excise

• Company Seeks Excise Duty Refund Due to Rate Discrepancy Between Clearance and Sale from Depot.

  Case-Laws - AT : Entitlement to refund claim - difference in rate at which excise duty was paid at the time of clearance and the rate on which the goods were sold from depot - AT
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• Court Rejects Appeal Due to 1035-Day Delay; Claim of Unawareness of Liability Found Invalid.

  Case-Laws - AT : Condonation of delay of 1035 days - the contention is that they were not aware of the liability and it has prevented them in not filing the appeal is not correct - AT
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• Job Work Goods Value Excludes SAIL Invoice Costs; Only Costs Incurred by Appellant Considered in Landed Cost.

  Case-Laws - AT : Calculation of assessable value of the job work goods - invoice of SAIL cannot be included in the landed cost of the inputs/raw materials for the reason that the said cost is not incurred by the appellant herein - AT
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• SSI Benefits Must Be Granted Even When Supplying Under Another's Brand Name, Court Rules.

  Case-Laws - AT : 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
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Case Laws:

• Income Tax

• 2012 (7) TMI 438
  Whether CIT erred on facts and in law in upholding the trading addition and upholding the action of the Assessing Officer in rejecting the books of accounts and holding that the appellant failed to furnish item-wise trading results – Held that:- Assessee is in timber trading activity. The activity involves purchase / import of raw timber, which is thereafter sawed and sold in wholesale / retail basis - assessee’s submission that it is not practically feasible to maintain item-wise stock record of each and every type of timber - there is no allegation by the AO that there has been any pilferage or sale outside the books of account - no case of suppression of sales - assessee’s books of accounts were duly audited, which signifies that books of accounts and method of accountancy are in order - mere fall in G.P. and absence of stock register cannot be a reason to reject the books of accounts - there were no cogent reasons for rejection of the assessee’s books, and estimation of GP rate - details sought by the AO were not practically feasible to be maintained - In favour of the assessee.

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• 2012 (7) TMI 437
  Depreciation on roads - at 10% as building or 25% as plant and machinery - assessee is seeking depreciation as applicable to plants, revenue authorities have allowed depreication as applicable to buiding – Held that:- Roads are to be treated as building and accordingly the depreciation is to be allowed - after the assessment year 1988-89, all the appendices prescribing the table or rates of depreciation had the note that building would include road – In favor of Revenue TDS on Audit fee - amount debited for audit fee on which TDS was not deducted - claim was disallowed u/s. 40(a) – necessary deduction of TDS was made at the time of payment of fee to the auditors only in next F.Y. - Held that:- neither the expenditure pertained to the A.Y. under consideration nor any liability for the same was incurred during the F.Y. relevant to the A.Y. under consideration - disallowance confirmed - appeal filed by the assessee is dismissed.

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• 2012 (7) TMI 436
  Addition u/s. 68 - Issue of share capital - AO has specifically asked the assessee to provide the detailed calculation of the method of valuation of the premium per share in respect of the share premium calculated @ Rs. 400/- per equity share. However, the assessee company has not given any cogent reply in this regard - no cogent explanation on the records, as to why assessee should charge premium of Rs. 400/- on shares of Rs. 100/- per share – Matter remanded to AO Estimation of income – rejection of books of accounts - held that:- all the necessary books of accounts were produced by the assessee and the relevant details of expenditure was also provided. - AO can not reject the books of accounts. Cash payment of repair - held that:- instead of disallowance of Rs. 1,00,000/-, disallowance of Rs. 5,00,000/- to be made.

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• 2012 (7) TMI 435
  Calculation of interest on refund claim - application for rectification disposed off by stating that there is no mistake apparent from record - Held that:- AO has not made any speaking order instead has followed Supreme Court verdict in the case of CIT v. Amalgamation (1997 (7) TMI 15 (SC))which is based upon section 214 and has calculated the interest up to completion of original asset which is not correct as w.e.f. 1.4.1989 the refund has to be paid in accordance with section 244A, thus keeping in view these provisions for assessment years 1993-94 & 1994-95, the assessee was entitled for interest on refund amount due to TDS from 1.4.1993 and 1.4.1994 respectively to date of grant of refund and in the case of tax paid after assessment from the date of payment of such tax to the date of grant of refund - remit the case back to the file of the AO with the direction to re - calculate the interest - in fvavour of assessee as directed.

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• 2012 (7) TMI 434
  Dis allowance of interest as business expenditure - Held that:- CIT(A) had rightly deleted the addition on account of interest paid as interest free loans and advances to sister concern given by the assessee before taking borrowings cannot come in the way of allowing interest paid on borrowings taken by the company as in the present case, there was fresh borrowings of Rs. 6,00,00,000/- whereas loans and advances are continuing from the previous year. Disallowance of administrative & other expenses - assessee is earning income from business, from short term capital gain, long term capital gain and from interest income - Held that:- Long term investments of the assessee constitute a significant portion of total investments, the income from which is exempt either as dividend or long term capital gain. As the portfolio of assessee consists mere of long term, investments than short term investments and therefore 5% disallowance of expenditure upheld by Ld CIT(A) does not seem to be justified - remit the case to the file of the AO to consider to the expenses which could be related to earning of exempt income i.e. long term capital gain and dividend income and recompute the disallowance - partly in favour of revenue.

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• 2012 (7) TMI 433
  Addition on account of surrender of income - set off the surrendered income against business losses – Held that:- Offer of surrender cannot effect the profit or loss declared by the assessee for that year. It will be added if there is profit and it will be reduced if there is a loss - books of accounts were produced before Ld Assessing Officer during the course of assessment proceedings and the Ld Assessing Officer has not pointed out any difference/discrepancy in the audited accounts - Provisions of section 71(1) clearly allows the set off of loss from one head against income from another head - computation of total income of an assessee as per provisions of section 71 & 72 of the Income Tax Act, 1961 and the assessee has computed its total income keeping in view these provisions, therefore, we do not see any reason to interfere in the order of Ld CIT(A) – In favor of assessee

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• 2012 (7) TMI 432
  International transactions with AE - case referred to (TPO) - addition of interest on the advances of the appellant to AE, being wholly-owned subsidiaries of the appellant - Held that:- The authorities below overlooked the fact that these interest free advances were given to its overseas subsidiaries out of commercial expediency from out of surplus funds available with it - TP adjustment is possible only in cases where comparable uncontrolled transactions entered into between two enterprises are established unless such an uncontrolled transaction is identified, no ALP adjustment is possible - in favour of assessee. Disallowance under section 14A r.w.r. 8D - Held that:- As the provisions of rule 8D it would apply with effect from assessment year 2008-09 and prior to when rule 8D was not applicable, AO had to adopt a reasonable basis or method consistent with all the relevant facts and circumstances after furnishing a reasonable opportunity to the assessee to place all germane material on the record - remitted the matter to the file of the AO with a direction to follow the decision. Dis allowance of Set-off of loss of STP undertakings - Held that:- Deduction allowed u/s 10A in respect of undertaking is to be allowed after setting off of brought forward loss of that undertaking - allow set off of loss from 10A units against the other business income of the assessee or income from other sources. Dis allowance of Expenditure on software imports - Held that:- This issue has been held in favour of the that the software purchased by it is in the nature of goods and the provisions of section 40(a)(ia) were not applicable to Allocation of Corporate Expenses - Held that:- No specific finds that exemption/deduction in an artificial way of allocating the expenses and that too on surmises is not justifiable – in favour of assessee. Rates and taxes - Held that:- That assessee himself has agreed to allocation of 20% of such expenditure no further disallowance warranted Software development centers outside India - Held that:- As assessee company in foreign countries also paying foreign taxes but had not recorded a finding that such goods or services have been transferred at the market value. In absence of such a finding case is remitted back to AO. “Other Income” not considered as part income eligible under Section 10A - Held that:- In respect of Scrap sale amount, it is clear that the sale of scrap reduced the quantum of expenditure debited for that purpose cannot be excluded for deduction u/s 10A and exclusion of exchange rate fluctuation foreign exchange gain due to fluctuation in the rate of rupee is to be included in the profit of the undertaking and is to be considered as eligible for deduction u/s 10A. Deemed Exports not eligible for deduction u/s 10A - Held that:- As deemed exports are obviously not on account of export of software and not should be included as part of ‘'export turnover' of the undertakings eligible for deduction under section 10A / 10AA - against assessee. Exclusion of VAT/ GST from export and total turnover - Held that:- Once this sum is not included in 'export turnover', then the same cannot be included in the 'total turnover' - against assessee. Communication link and other reimbursements - Held that:- Issue is remitted back to the file of the AO as excluding an aggregate sum incurred by the appellant towards telecommunication expenses for delivery of computer software outside India - AO committed an error of excluding something which is not originally included. Collections beyond 30th September 2007 - Held that:- AO erred in excluding the aggregate sum from the export turnover of the undertakings eligible for deduction u/s 10A on the premise that the sale proceeds were not remitted into India within 6 months from the end of the previous year as provided in section 10 A(3). The learned AO overlooked the fact that the application for extension of time was filed with the competent authority. Issue of denial of deduction under Section 10A for undertakings at Bangalore - Held that:- Tribunal has decided this issue in favour of the assessee company holding that the assessee is entitled for deduction under section 10A - AO erred in refusing to recognize that each of the new undertakings were different from one another and exist independently and are eligible for deduction under Section10A. That establishing each new undertaking is an expansion of business could not be held against the appellant. Deduction under Section 80IB - Held that:- The assesse himself has allocated the overheads and such allocation has been made on the basis of sales turnover, then it was the duty of AO to point out that why the allocation is not correct - assessing officer was not justified in disturbing the allocation. Trading Activity of monitors & Printers - Held that:- Monitors have been sold as part of the computer without making any value addition by the industrial undertaking, then the profit derived from sale of such monitors cannot be considered as profit derived from the industrial undertaking - not to be included for the purpose of computing deduction u/s 80IB. Other Income’ not considered as income eligible for deduction u/s.10A- Held that:- Unless rental income represents a recovery of the rent paid by the undertaking, it cannot be regarded as profit derived by the industrial undertaking. Since the rental income in the assessee company’s case does not meet this requirement, we confirm the order of the Assessing Officer that rental income should be excluded in computing the deduction u/s. 80 IB Deduction under Section 80IC/80-IAB – Held that:- An identical issue of allocation of corporate over heads to various business units / undertakings for determining the profits for computing the deduction u/s. 80IB/IAB has already been considered by the Tribunal in an earlier year in the assessee’s own case thereof and has deleted the allocation of corporate overheads made by the Assessing Officer - following the same decision deletion of the allocation of corporate overheads is deleted. Credit for Foreign taxes paid – Held that:- Credit for income-tax paid in other country in relation to income u/s 10A will not be available u/s 90(1)(a) - direct AO to examine and verify the TDS claims of the assessee for the applicability of section 90(1)(b), and to go through the DTAA agreements Interest u/s 234B/234D – Held that:- The charging of interest is consequential and mandatory and is to be charged in accordance with the provisions of the Act. AO having no discretion in the matter, his action in charging the same is held to be in order

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• 2012 (7) TMI 431
  Denial of the benefit claimed u/s 54 EC - investment made in REC bonds for a sum of Rs. 50 lakh out of total long-term capital gain of Rs. 3.40 crores - the exemption has been claimed under section 54F - Held that:- It is not a case of availing double exemption on the same amount but the assessee has claimed exemption u/s 54F as well as u/s 54 EC for the respective amount of capital gain invested in purchase of new house and REC bonds. Wherever any such restriction is deemed fit, the legislature has provided in the statute a sufficient check but no such restriction in the statute mentioned - The expression 'the whole or any part of capital gains in the long term specified assets' makes it clear that the exemption under section 54 EC is available even when the part of capital gain is invested in specified long-term asset - in favour of assessee. Once the conditions as prescribed under section 54EC are complied with, than the deduction cannot be denied on the ground that the assessee has also availed the exemption under section 54F against the part of the capital gain. Denial of the benefit claimed u/s 54F - Out of the total capital gain of Rs. 3.40 crores arising from sale of ancestral property, the assessee invested Rs. 2.60-crores for the purchase of 4 flats - AO allowed the exemption only in respect of one flat as cannot be said as adjacent flats - Held that:- The agreement by which the assessee has purchased these flats clearly stipulates that the building in question consisting of duplex houses on top two floors of 9th and 10th floors of the building. The flat number 9A, 9B, 10 A and 10 B are so situated that the flat number 9A and 9B at 9th floor are just below the flat number 10A and 10B at 10th floor. The agreement clearly mentions that one duplex flat was converted from 4 units. Thus, if the requirement of the assessee family is met-out only by enlarging the residential unit by merging of 4 flats originally planed into one unit and that too prior to handing over of the possession of the said residential unit, then the said converted residential unit will be treated as a residential house as stipulated u/s 54F - in favour of assessee.

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• 2012 (7) TMI 430
  Penalty u/s 271B - Failure to get its accounts audited - income as “Business income” instead of “capital gain” claimed by the assessee - exceeding the monetary limit of Rs.40.00 lakh prescribed u/s 44AB - Held that:- The requirement to gets the accounts audited and furnish audit report has arisen because of the change in the head under which income from sale of shares was offered by the assessee. As the assessee declared income from sale of shares under the head 'Capital gains’ and the acceptance by the Revenue of income from sale of shares as capital gain in the immediately preceding year constituted a bona fide ground for the assessee to entertain a belief that such income was liable to be taxed under the head capital gain and not as business income. Once this view is accepted, then failure of the assessee to get its account audited and furnish the audit report, constitutes reasonable cause for default - deletion of penalty - in favour of assessee.

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• 2012 (7) TMI 429
  Eligible for claiming additional depreciation u/s 32(1)(iia) - prior to the installation of the wind mill, assessee was doing only the business of transportation of spirit and molassess - Held that:- As decided in C.I.T v. VTM Ltd. [2009 (9) TMI 35 (HC)]what is required to be satisfied in order to claim the additional depreciation is that the setting up of a new machinery or plant should have been acquired and installed after 31st March, 2002 by an assessee, who was already engaged in the business of manufacture or production of any article or thing - here, the assessee was not into any business of manufacture or production but only transportation of molasses and spirit. Thus, the first condition is not satisfied and thus not eligible for claiming additional depreciation - against assessee.

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• 2012 (7) TMI 428
  Penalty levied u/s 271(1)(c) - Discrepancies were noticed in the accounts and that the assessee has not at all maintained stock register - books of account of the assessee were, therefore, rejected u/s.145 of the Act and made addition on the basis of estimating profit – Held that:- When the matter has been restored back to the A.O. and still pending as claimed by the assessee and one of the addition has been deleted by the co-ordinate Bench - penalty u/s 271(1)(C) is not justifiable and accordingly is deleted - revenue’s appeal is dismissed

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• 2012 (7) TMI 427
  Whether loan to “Sister Concern” even out of borrowed funds is not liable to be disallowed - appellant submitted a copy of ledger account in its books of account during the appellate proceedings to claim the opening balance as well as advance of loan during the year – Held that:- Books of account were seized by the Central Excise and Customs Deptt. Of the appellant and not of its sister concern. It is, therefore, the appellant has no explanation or credible evidence to substantiate its claim of interest - assessee has given interest free loan to sister concern at Rs. 1.20 Crore which is more less matching with interest free fund available with the assessee - There is no direct nexus between interest bearing borrowed fund with interest free advances in the assessment order - assessee’s appeal is allowed

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• 2012 (7) TMI 426
  Penalty in respect of fixed deposit written off - additions made was in respect of claim of bad debt - AO made the addition on the premise that the assessee is not engaged in financing business and the amount written off is a fixed deposit kept in the bank and at the best it represents a capital loss and is not admissible as revenue expenditure – Held that:- Assessee had genuinely suffered loss due to deposit kept in bank during the course of its business - every transaction the issue becomes debatable whether such loss is capital loss or revenue loss - “a mere making of claim which is not sustainable in law, by itself, would not amount to furnishing of inaccurate particulars regarding income of the assessee. Such a claim made in a return not amounting to furnishing of inaccurate particulars” - penalty is not leviable especially when the issue is debatable - assessee has not concealed any particulars of income or furnished any inaccurate particulars - penalty levied by the revenue on the issue of unrealizable fixed deposit kept in bank written off due to cessation of the functioning of the bank deleted

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• 2012 (7) TMI 425
  Power of CIT – Remand - addition on account of disallowance of unpaid service tax, disallowance of service tax, disallowance of rent expenses, disallowance out of consultancy and sales incentive expenditure - AO had specifically stated in the assessment order that in spite of repeated opportunities provided to the assessee, the assessee failed to be present before the revenue in the assessment proceedings - assessment order ex-parte u/s 144 of the Act - CIT(A) had remitted back the matter to the file of the learned AO for verification of all the additions raised – Held that:- Provisions of section 251 of the IT Act wherein the powers of the Commissioner of Income Tax (Appeals) to set aside the order of the learned AO has been omitted by the Finance Act, 2001 with effect from 1st June, 2001 - Order of the learned CIT(A) to be erroneous and hereby, set aside the same and remit back the case to the file of the learned CIT(A) to pass appropriate order as per the provisions of the Act

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• 2012 (7) TMI 424
  Discount versus commission - ‘Marketing Expenses’ including ‘Incentive and Discount’ - discount had been given by the appellant to persons who had booked the flat/building through the appellant and the commission which the assessee received from the builder, is passed on as a part of such commission to the original persons who booked the flat – Held that:- Purchasers received discount in the purchase price. - There is nothing to suggest that the purchasers of flats rendered any service to the assessee rather the assessee rendered services to the intending purchasers - provisions of section 194H are not attracted while making payments to the aforesaid intending purchasers of flats - provisions of sec. 40a(ia) of the Act are not applicable - appeal is dismissed.

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• 2012 (7) TMI 423
  Addition in respect of share application - appellant had furnished details in the form of additional evidence which was referred back to the Assessing Officer for remand report - Assessing Officer neither examined them nor offered his comments on the same – Held that:- share applicants’ existence is recognized as the company is in the records of the IT Department, since the appellant has submitted their PAN and also copies of Income tax records - Assessing Officer had not applied his mind while issuing notice u/s 147/148 of the Act - entire re-assessment is bad in law. Reopening of assessment – Held that:- Assessing Officer had made 2-3 mistakes while framing re-assessment order yet, there was sufficient material before Assessing Officer for initiation of proceedings u/s 147/148 - report of DIT (Inv.) is a primary source of evidence for initiating proceedings u/s 147/148 of the Act and the Assessing Officer had rightly initiated re-assessment proceedings – Against assessee Regarding addition on account of fresh un-secured loans - loans were received by appellant through banking channel from directors, their wives and parents only and that all are income tax payees and has been filing returns since last year – creditworthiness of lender is also proved as they had declared source of income and are filing income tax return - appellant had given interest on the amount of loan and had deducted TDS thereon – Held that:- Assessee has filed necessary documents to prove the genuineness of transactions, identity of investors and creditworthiness of investors - CIT(A) has rightly deleted the addition – In favor of assessee

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• 2012 (7) TMI 422
  Penalty u/s 271(1)( c) on the ground of case selected for security the levy is in mandatory – Held that:- Since the retrospective application of proviso (iv) to section 80HHC is still pending with various Courts, the penalty issue arising out of non implementation of this section cannot be imposed till the final decision of Court relating to applicability of proviso (iv) to section 80HHC. In view of the appeal, the appeal of the assessee is allowed for statistical purposes.

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• 2012 (7) TMI 421
  TDS - disallowance u/s 40a(ia) on account of unverified maintenance expenses – Held that:- Where an amount paid is not chargeable to tax In India at all, there is no requirement of tax deduction - payments were reimbursement of expenses and was in no way income chargeable to tax in India in the hands of the payee and hence did not require any tax deduction at source and therefore addition made u/s 40a(ia) of the Act was not warranted – In favor of assessee

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• 2012 (7) TMI 420
  Interest on 'amount of refund' u/s 244 versus Interest on 'any tax' u/s 244A - Held that:- There is misconception in the interpretation of the AO that interest can be paid only on the tax portion in the refund and not on the entire amount of refund. - Moreover, section 244A doesn’t distinguish that the assessee shall be entitled to receive interest only on tax portion in the refund and not on the entire amount of refund as projected by the Revenue. If the interpretation of the Revenue were to be taken on its face value, we are afraid; it would lead to miscarriage of justice. Assessee was entitled to further interest u/s 244 on interest u/s 214 which had been withheld by the Revenue - When the refund of tax becomes payable as a result of orders passed in appeal or other proceedings under the Income-tax Act, 1961, this refund is to be given along with interest which is to be calculated as per section 244A of the Act – In favor of assessee

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• 2012 (7) TMI 419
  Expenditure in respect of poultry farming - Assessing Officer has added back the cost of purchase of Emu birds as well as expenses incurred towards feeing of the birds – Held that:- Assessing Officer has failed to appreciate the fact that without purchase of Emu birds, sale would not have been possible, so the cost of acquisition of Emu birds and the maintenance/feeding cost which the assessee has alleged not to have claimed during the assessment year 2007-08 deserves to be allowed as business expenditure – In favor of assessee Agricultural income - Addition on account of income from sale of coconuts – Assessing Officer while treating the income from sale of coconut trees as income from other sources has observed that it is not acceptable that Rs. 2,400/- worth of trees would have yielded an amount of Rs. 66,820 – Assessee has about 275 coconut trees out of which he has planted 200 coconut trees in the year 2004-05. The coconut trees start yielding fruit in three years time and it was during the relevant assessment year that for the first time, the trees planted by the assessee gave fruits and the assessee was able to earn Rs. 66,820/- from the sale of coconuts – Held that:- Assessee has not produced any concrete evidence to show that it has earned income from sale of coconuts - assessee is a small time farmer. He may not have maintained record of sale of coconuts - 50% income from sale of coconut is directed to be considered as Agricultural Income. Regarding income from sale of turmeric - contention of the Assessing Officer that there is no correlation between the date of alleged sale of turmeric and the harvesting season of the produce is not tenable - stand of the assessee throughout has been that the assessee use to sell the produce only during the time when he used to get maximum price for the crop – Held that:- Assessing Officer made the addition only on the basis of presumption that since the harvesting season and sale of crop do not coincide, the income cannot be considered as agricultural income - addition made by the Assessing Officer deleted

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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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• Customs

• 2012 (7) TMI 418
  Undervaluation of import - levy of penalty and confiscation of goods - higher value was declared by other importers for similar goods - goods imported by the appellants were similar to the comparable import made by other importers – Held that:- Once the test report establishes that the goods of the appellant match with the compared goods imported earlier and possess same attributes as is found by the same analytical laboratory, there is no necessity to interfere to the first appellate authority s order. Accordingly, appeal is dismissed.

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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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• Service Tax

• 2012 (7) TMI 442
  Difference in gross receipt of commission received shown in periodical ST-3 returns - demand of differential service tax and imposition of penalty - Held that:- As Commissioner (Appeals) rejected the appellant's plea of the differential amount being profit on sale of mobile phones stands rejected by him on the ground of lack of documentary evidence were as as regard the small scale notification benefit stating that it is not established from records that the total value of the services provided by the appellant during the preceding financial year was less than Rs.4 lakhs - instead of assuming the facts should have been got verified by him (Commissioner (Appeals)) from the original field officer - set aside the impugned order and remand the matter to original adjudicating authority for fresh decision, after verifying the facts

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• 2012 (7) TMI 441
  Inclusion of reimbursed amounts in the value of services - advertisements for procurement of materials required for executing the project, clearing & forwarding of such material from the port to the project sites - Held that:- The reimbursed expenses in question could not have formed part of the value of the services rendered - the activities for which such charges are levied are not prima-facie covered in the definition of consulting engineering services - no ground to allege suppression on the part of the appellants as the Revenue had issued a show cause notice in 2001 itself, in respect of similar contracts which notices were dropped - in favour of assessee.

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• 2012 (7) TMI 440
  Travel Agent Services - service tax liability - Held that:- The assessee claim the gross amount received for the services was less than Rs. Four lakhs and they are eligible for the benefit of Small Scale Service providers, as per the Notification No. 6/2005-ST the appellant has not raised this point before/the lower authorities - remand the matter back as the issue needs to be considered by the adjudicating authority in its correct perspective.

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• 2012 (7) TMI 439
  Rejection of appeal by first appellate authority - invoking question of limitation - Held that:- The appellant had a right to file an appeal within three months from the date of receipt of the order with a further period of three months for seeking condonation of delay from the first appellate authority, whereas in this case the appellant had received the order on 28.8.2010 and had filed an appeal before the first appellate authority on 14.6.2011, thus beyond the period of prescribed six months - against assessee.

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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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• Central Excise

• 2012 (7) TMI 417
  Entitlement to refund claim - difference in rate at which excise duty was paid at the time of clearance and the rate on which the goods were sold from depot - Held that:- Considering Rule 7 of the Central Excise (Valuation) Rules where the goods are not sold by the assessee at the factory gate but are transferred to depot from where the excisable goods are to be sold the transaction value of such goods cleared from depot for the purpose of excise duty shall be the rate at which goods are sold from such depot on or about the same time and if such goods are not sold at or about the same time, at the time nearest to the time of removal of goods under assessment. the invoices supplied by the respondent regarding sale at the time nearest to the date and time for removal of the goods from factory to the depot normal transaction value of the goods was much more than the rate at which the excise duty was paid at the time of clearance of goods from the factory and the appellants submitted all the relevant documents including depot invoices which are indicative of the price at depot sale. Duty being advalorem is proportionately reduced with the fall of price at the depot. As a result the appellants have to bear the burden of excess duty paid on the ex-factory value of the goods that is higher than the actual transaction value - though Commissioner (Appeals) has correctly noted the provision of Rule 7 of Valuation Rules, he has not followed the same while deciding the appeal.

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• 2012 (7) TMI 416
  Justification to levy Excise Duty - Held that:- Excise duty is chargeable on any excisable goods if it is established that the assessee has manufactured and cleared the excisable goods, whereas no evidence is find to show that the amount of Rs.27,79,146 which the basis of demand, was received by the respondent against the clearance of the goods manufactured as assessee admittedly explained the receipt of aforesaid amount as advance for development/purchasing tools as per specification of the customer - order in original confirming demand is without any basis is set aside - in favour of assessee.

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• 2012 (7) TMI 415
  Condonation of delay of 1035 days - applicant contended that their factory was closed since 2006 and their Sr. General Manager who was looking after the Central Excise matters left the company and there was no one competent to look after the excise matter - Managerial staff of the company had left the company after the closer of the production – Held that:- There is no denial of the fact that they were received by the applicant - salary was paid by the applicant company and the Central Excise duty were being shown as liability - Therefore the contention is that they were not aware of the liability and it has prevented them in not filing the appeal is not correct - applications is not maintainable and is accordingly dismissed

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• 2012 (7) TMI 414
  Calculation of assessable value of the job work goods - Department stated that assessee has not included the amount of sales tax paid on the raw material i.e. steel - Held that:- It is an undisputed fact that invoice of SAIL clearly indicates the purchasers as M/s. IVCRL Infrastructures & Projects Ltd. and the appellant as a consignee, thus the amount of sales tax indicated in the invoice of SAIL cannot be included in the landed cost of the inputs/raw materials for the reason that the said cost is not incurred by the appellant herein - in favour of assessee.

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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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• Wealth tax

• 2012 (7) TMI 443
  Agricultural land - assessee has claimed the agricultural lands are exempt from Wealth-tax Act – Held that:- Lands in dispute are located within corporation limit not classified as agricultural land by registration authorities, but the assessee is carrying on agricultural activities on these lands - Construction on these lands can be done after obtaining approval of the appropriate authorities. Hence, the properties owned by the assessee attract Wealth-tax provisions, the value of which is fixed by the Government and taxed accordingly - appeals raised by the assessees are dismissed.

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