TMI Tax Updates - e-Newsletter
July 2, 2012

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws FEMA Service Tax Central Excise

Articles

1. Rightly availed but wrongly utilized?

   By: Shilpa G.

2. EXEMPTIONS UNDER SERVICE TAX

   By: Dr. Sanjiv Agarwal

3. WRITTEN CONTRACT IS NOT A PRECEDENT FOR DEDUCTION OF TAX AT SOURCE.

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Release of Core Sector Index for May 2012 – Issue regarding revised press note.

2. Rates of Income Tax, TDS, TCS, and Depreciation etc. as amended.

3. Calendar for Auction of Government of India Treasury Bills for the Quarter Ending September 2012.

4. Change in Tariff Value of Brass Scrap (All Grades), Gold and Silver Notified.

5. Ministry of Finance Issues Instructions to CERSAI Extending the Registration of Subsisting Transactions Prior to 1st April, 2012 free of Any Fee or Cost for a Further Period of Three Months.

6. CBDT Invites Comments/Suggestions on Draft GAAR Guidelines.

7. Index of Eight Core Industries (Base: 2004-05=100), May 2012.

8. Draft guidelines regarding implementation of General Anti Avoidance Rules (GAAR) in terms of section 101 of the Income Tax Act, 1961.

Notifications

Customs

1. 55/2012 - dated 29-6-2012 - Cus (NT)

Amends Notification No. 36/2001-Customs(N.T) - Palm oil, Palmolein, Soyabean Oil (Crude) and Brass Scrap (all grades) - Traiff Values.

2. 54/2012 - dated 29-6-2012 - Cus (NT)

Amends Notification No. 14/2012 – Customs (N.T.). - in the Table, against serial number 34, in column (2), for the words and brackets “Chief Commissioner of Customs (Preventive), Chennai”, the words and brackets “Chief Commissioner of Customs (Preventive), Tiruchirapalli” shall be substituted.

3. F.No. 437/15/2012-Cus. IV - dated 28-6-2012 - Cus (NT)

Appointment of Common Adjudicating Authority in respect of M/s Sun Tan Trading Co. Ltd., Mumbai and others.

Service Tax

4. 42/2012 - dated 29-6-2012 - ST

Exemption in respect of services used in relation to export of goods

5. 41/2012 - dated 29-6-2012 - ST

Rebate of service tax paid (hereinafter referred to as rebate) on the taxable services which are received by an exporter of goods (hereinafter referred to as the exporter) and used for export of goods

6. 02 - dated 29-6-2012 - ST

Service Tax (Removal of Difficulties) Second Order, 2012.

Circulars / Instructions / Orders

Service Tax

1. 160/11/2012 - dated 29-6-2012

Applicability of provisions of the Finance Act, 2004 relating to education cess and the Finance Act, 2007 relating to secondary and higher education cess– regarding.

2. D.O.F.No.334/1/2012-TRU - dated 29-6-2012

D.O. letter dated 29-06-2012 by Joint Secretary (TRU-II).

FEMA

3. 137 - dated 28-6-2012

Foreign Investment in India - Sector Specific conditions.

4. 138 - dated 28-6-2012

Exim Bank's Line of Credit of USD 50 million to the Government of the Republic of Zambia.

Companies Law

5. 08/2012 - dated 29-6-2012

Filing of Cost Audit Report (Form I) and Compliance Report (Form A) in the eXtensible Business Reporting Language (XBRL) mode.

Highlights / Catch Notes

Income Tax

• Penalty Not Justified u/s 271(1)(c) for Land Sale: Agreement on Additions Doesn't Mean Inaccurate Filing.

  Case-Laws - AT : Penalty u/s 271(1)(c) - sale of land - Only because the assessee agreed to the additions because of the deeming provisions it cannot be construed to be filing of inaccurate particulars on the part of the assessee. - AT
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• Partner Share on Dissolution Not Taxed as Transfer, Aligns with Case Law Principles on Asset Distribution.

  Case-Laws - HC : Dissolution of partnership - taxability of sum received by a partner - Any amount paid to a partner as his share on dissolution of the partnership firm cannot be regarded as transfer - HC
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• High Court Rules Share Loss as Ordinary Business Loss, Not Speculation, Under Exception in Section 73 Explanation.

  Case-Laws - HC : Set off of loss incurred on purchase and sale of shares as Ordinary Business Loss or Speculation Loss - assessee fell within the purview of the exception carved out in the explanation to Section 73 - HC
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• Section 545EC Exemption Denied for REC Bonds Investment Made 8.5 Months Before Property Transfer Date.

  Case-Laws - AT : Exemption claimed u/s 545EC on investment made in REC Bonds - investment was made 8.5 months prior to date of transfer of the property - benefit denied - AT
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• Advance for Product Development Classified as Business Loss, Deductible as Revenue Expenditure for Tax Purposes.

  Case-Laws - AT : Non-recovery of the advance made for the development of the product - bad debts or capital loss - amount advanced, which was subsequently not recovered is a business loss and thus allowable as revenue expenditure - AT
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• Tribunal Affirms: Commissioner Must Not Act as Assessing Authority in Section 12AA Applications; Appeal Rightly Allowed.

  Case-Laws - HC : The Commissioner while processing the application under Section 12AA of the Act was not to act as an Assessing Authority and thus, the Tribunal has rightly allowed the appeal filed by the society. - HC
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• Income from other sources offset against unabsorbed depreciation despite business closure; no prejudice to Revenue found.

  Case-Laws - AT : Income from other sources set off against unabsorbed depreciation – business ceased to exist - no prejudice was caused to the Revenue not an erroneous order. - AT
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• Director's Remuneration Not Disallowed u/s 40A(2)(a) Due to Lack of Evidence of Excessiveness or Unreasonableness.

  Case-Laws - AT : Dis-allowance u/s 40A(2)(a) - remuneration paid to Directors - in absence of material on record to hold that payment of remuneration @ Rs. 3 lacs pm to the director was excessive or unreasonable, no dis-allowance - AT
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• Principal Payments on Financial Lease Classified as Capital Expenditure, Not Deductible for Assessees Under Finance Arrangement.

  Case-Laws - AT : Financial lease - principal payments made towards financial lease - revenue or capital expenditure - assessee is not entitled to deduction of payment of principal amount under the aforesaid financing arrangement - AT
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• Education Cess Not Applicable on Tax Liability Under India-Singapore DTAA, Rules Court.

  Case-Laws - AT : Levy of ‘education cess’ and ‘higher education cess’ - DTAA between India and Singapore - education cess cannot indeed be levied in respect of tax liability of the appellant company - AT
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• High Court Rules Consultant Fees for Cement Project are Capital Expenditure.

  Case-Laws - HC : Professional fees paid to the consultants in relation to cement project - capital expenditure or revenue expenditure? - Held as capital expenditure - HC
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• Site Restoration Fund is an Ascertained Liability, Not Contingent, under MAT Framework per ICAI Guidelines.

  Case-Laws - AT : MAT - Treatment of provision of site restoration fund made in accordance with the guidelines issued by the ICAI, then it cannot be said as contingent liability - held as an ascertained liability - AT
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Customs

• Customs Notification Update: Chennai Chief Commissioner of Customs Designation Changed to Tiruchirapalli in Notification No. 14/2012.

  Notifications : Amends Notification No. 14/2012 – Customs (N.T.). - in the Table, against serial number 34, in column (2), for the words and brackets “Chief Commissioner of Customs (Preventive), Chennai”, the words and brackets “Chief Commissioner of Customs (Preventive), Tiruchirapalli” shall be substituted. - Notification
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FEMA

• FEMA Updates: Key Sector-Specific Conditions for Foreign Investment in India and Compliance Guidelines for Investors.

  Circulars : Foreign Investment in India - Sector Specific conditions. - Circular
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• Exim Bank Grants $50M Credit Line to Zambia for Economic Development Under FEMA Regulations.

  Circulars : Exim Bank's Line of Credit of USD 50 million to the Government of the Republic of Zambia. - Circular
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Corporate Law

• Companies Must File Cost Audit Report & Compliance Report via XBRL for Better Oversight & Transparency.

  Circulars : Filing of Cost Audit Report (Form I) and Compliance Report (Form A) in the eXtensible Business Reporting Language (XBRL) mode. - Circular
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• High Court to Decide on Company Name Dispute Involving "M/s International Trade and Exhibitions India Pvt Ltd" Under Companies Law.

  Case-Laws - HC : Dispute about the name of the company - petition against the order directing the petitioner, registered as a company in the name of "M/s International Trade and Exhibitions India Private Limited" to change its name - HC
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Indian Laws

• Indian Tax Law Amendments: Changes to Income Tax, TDS, TCS Rates, and Depreciation Impact Compliance and Financial Planning.

  News : Rates of Income Tax, TDS, TCS, and Depreciation etc. as amended.
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• Draft Guidelines for General Anti Avoidance Rules u/s 101 of Income Tax Act Released to Combat Tax Avoidance.

  News : Draft guidelines regarding implementation of General Anti Avoidance Rules (GAAR) in terms of section 101 of the Income Tax Act, 1961.
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Service Tax

• Exemption from Service Tax for Export-Related Services Aims to Reduce Costs and Promote Export Activities.

  Notifications : Exemption in respect of services used in relation to export of goods - Notification
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• Exporters Can Claim Service Tax Rebate for Export-Related Services to Boost Competitiveness and Reduce Costs.

  Notifications : Rebate of service tax paid (hereinafter referred to as rebate) on the taxable services which are received by an exporter of goods (hereinafter referred to as the exporter) and used for export of goods - Notification
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• Legal Interpretation of Borrowed Funds Services Under Articles 246 & 253, ADB & IFC Acts, and Finance Act.

  Case-Laws - AT : Services in relation to borrowed funds - Banking and Financial Services - Since issue involves interpretation of various provisions of law such as Article 246, 253 of the Constitution of India, the various provisions of ADB and IFC Act and the provisions of United Nations (Privileges and Immunities) Act, 1947 and Finance Act, 1994. - pre deposit waived - AT
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• Passenger Service Fees Now Classified Under Business Support Services for Duty Collection.

  Case-Laws - AT : Business Auxiliary Service - Duty demand on collecting Passenger Service Fees (PSF) from the passengers who embark on a flight of the airlines - covered under BSS and not under BAS - AT
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• Study Materials Excluded from Taxable Value in Coaching Services Under Notification No.12/2003-ST.

  Case-Laws - AT : Denial of benefit of Notification No.12/2003-ST dated 20.6.2003 - commercial training and coaching - - value of study material supplied to students excluded - AT
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• Court Finds Lack of Justification in Classifying Appellant's Services; Grants Waiver for Pre-Deposit Requirement.

  Case-Laws - AT : Having given no reason in order in original, for classifying the services rendered by the appellant under the category of "Commercial Construction and Industrial Services", just simply denying the claim of the assessee, that services are not Works Contract services. Appellant has made out a prima facie case for waiver of pre-deposit - AT
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• Service providers retreading tires cannot deduct raw material costs from service tax valuation.

  Case-Laws - AT : Valuation (Service Tax) - Goods and materials sold by service provider to recipient of service - Retreading of tyres on job work basis - not entitled to the benefit of deduction of cost of raw materials consumed - AT
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• Service Tax Order 2012 Simplifies Compliance, Resolves Ambiguities, and Streamlines Administration for Better Tax Law Application.

  Notifications : Service Tax (Removal of Difficulties) Second Order, 2012. - Notification
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• June 2012 Circular Details Updates and Clarifications on Service Tax Regulations for Stakeholder Compliance.

  Circulars : D.O. letter dated 29-06-2012 by Joint Secretary (TRU-II). - Circular
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• Clarification on Implementation of Education Cess Under Finance Act, 2004 and 2007 for Service Tax Compliance.

  Circulars : Applicability of provisions of the Finance Act, 2004 relating to education cess and the Finance Act, 2007 relating to secondary and higher education cess– regarding. - Circular
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• Commission-Based Applicant Classified Under "Manpower Recruitment and Supply Agency Services" for Service Tax Purposes.

  Case-Laws - AT : Manpower Recruitment and Supply Agency Services - gross salary - Since applicant is receiving commission on monthly salary, the applicants are covered under ‘Manpower Recruitment and Supply Agency Services'. - AT
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• Extended Limitation Period Inapplicable: Genuine Belief Exempts Civil and Electrical Works Contract from Service Tax.

  Case-Laws - AT : ST on Civil Work such as, foundation, control room, etc., and electrical work such as, earthing station, transformer etc. - They were under a bona fide belief that Works Contract was not liable to tax. - Extended period of limitation not applicable - AT
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Central Excise

• Pay Duty and 25% Penalty Within Set Timeframe for Reduced Penalty; No Extensions Allowed u/s 11AC.

  Case-Laws - HC : Benefit of reduced penalty - When the legislature specifically fixes the time limit within which the duty with interest and penalty at 25% is to be paid for availing the incentive, it would neither be open to the appellate authority nor any other authority to permit the assessee to pay 25% penalty at any time other than the time prescribed under Section 11AC. - HC
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• CENVAT Credit Allowed Despite Bill of Entry Issued to Different Unit of Appellant.

  Case-Laws - AT : Availment of cenvat credit on the basis of bill of entry, which is in the name of another unit of the appellant – credit allowed - AT
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• Cenvat Credit Goods Can Be Exported Duty-Free Under Bond, Says Central Excise Case Law.

  Case-Laws - AT : Cenvat Credit - inputs and capital goods on which credit has been availed can be cleared without payment of duty under bond for export purposes - AT
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• Central Railway's Printed Goods Face Scrutiny Over Marketability and Classification Under Central Excise Laws.

  Case-Laws - AT : Marketability - excisable goods - goods in question are printed for the use of Central Railway only - No evidence to show that the goods in question are capable on being bought and sold in the market - AT
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Case Laws:

• Income Tax

• 2012 (6) TMI 718
  Penalty u/s 271(1)(c) - sale of land - addition made in the revisionary proceedings on the basis of deeming provisions of section 50C - Held that:- In present case, AO has not disputed the consideration received by the assessee. The addition has been made on the basis of deeming provisions of section 50C. The assessee has furnished all the facts of sale, documents/ material before the AO, genuineness of which has not been doubted by AO. Only because the assessee agreed to the additions because of the deeming provisions it cannot be construed to be filing of inaccurate particulars on the part of the assessee. Hence, penalty cannot be levied on the basis of deeming provision - Decided in favor of assessee.

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• 2012 (6) TMI 717
  DTAA between India and Singapore - taxability - consultancy charges @ 1% of the total transacted volume of forex derivatives, futures and options paid to Singapore Company - dis-allowance u/s 40(a)(i) on ground of non deduction of tax at source u/s 195 - Held that:- There is no dispute with the factual position that the GMPL did not have any permanent establishment in India, and with the legal principle laid down in the applicable tax treaty that, in the absence of the PE of GMPL, its business profits could not be taxed in India. The taxability under the source state under Article 7 of the applicable tax treaty, therefore, clearly fails. Further, services were simply consultancy services which did not involve any transfer of technology. Unless there is a transfer of technology involved in technical services extended by Singapore company, the ‘make available’ clause is not satisfied and, accordingly, the consideration for such services cannot be taxed as FTS under Article 12(4) of India Singapore tax treaty. Therefore, the income from consultancy services, which cannot be taxed under article 7, 12 or 14 because conditions laid down therein are not satisfied, cannot be taxed under article 23 either. It is also only elementary that when recipient of an income does not have the primary tax liability in respect of an income, the payer cannot have vicarious tax withholding liability either. Hence, CIT(A) was justified in holding non-taxability of such fees in India and non-existence of assessee's tax withholding obligation - Decided against Revenue.

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• 2012 (6) TMI 716
  Distribution of assets on dissolution of partnership - taxability of sum received by a partner - Revenue contending accrual of capital gains - AY 78-79 - Held that:- Any amount paid to a partner as his share on dissolution of the partnership firm cannot be regarded as transfer not only in view of the clear mandate of Section 47(ii) but also because such receipt of amounts and/or property does not involve an element of transfer within the meaning of the definition of the word transfer in Section 2(47). See Prashant Joshi Vs. Income Tax Officer and anr (2010 (2) TMI 271 (HC)) - Decided in favor of assessee.

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• 2012 (6) TMI 715
  Set off of loss incurred on purchase and sale of shares as Ordinary Business Loss or Speculation Loss - assessee contended non-application of Explanation to Section 73 on ground that only income which is included in gross total income is dividend income, i.e. "Income from other sources" - Held that:- Section 73 would not apply in view of the fact that the explanation thereto, does not operate in respect of a company whose gross total income consists mainly of income which is chargeable under the heads of "interest on securities", "income from housing property", "capital gains" and "income from other sources". In present case, in the relevant year, the income from other sources was the only chargeable income, as the respondent had suffered a business loss otherwise, hence, assessee fell within the purview of the exception carved out in the explanation to Section 73 and that consequently the assessee would not be deemed to be carrying on a speculation business for the purpose of Sec. 73(1) - Decided in favor of assessee.

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• 2012 (6) TMI 714
  Registered Trust u/s 12AA - exemption u/s 11 & 12 - denial by invoking provisions of Section 13 - assessee-society was running educational institutions on the land in the ownership of wife of Secretary of the Society, given on lease to the assessee society in accordance with a renewable lease deed for a period of 30 years - AO under assumption that as per lease deed, it is seen that after 30 years, if lease is not extended then whatever investment is made in the construction of building on leased land will become the property of the lessor, thereon passing benefit to relative of trustee, which is in violation of Section 13 - Held that:- Assumption of AO that benefit has been conferred upon the relative of the Secretary of the Society in terms of section 13(3) is wholly unwarranted under the law and hypothetical. Said Clause is not, in absolute terms, to put the assessee to disadvantageous situation. Further, no event has happened in the AY under appeal. Whether in such event, the order of the AO would stand as on today because the option can be exercised in the year 2034, which nobody knows as to what would happen in future. Moreover, aassessee was in an advantageous position to get a land at such a lower rate of Rs. 150/- per month and was authorized to carry out the construction on the leased land at its own cost. In addition, the need for the examination of the signatures of witnesses was denied in the absence of any dispute and the fact of passing contradictory order by the AO, by allowing depreciation to the assessee @ 10% i.e. admitting the ownership of the building with the assessee was acknowledged. Order of the CIT (A) was upheld in deleting the addition - Decided in favor of assessee.

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• 2012 (6) TMI 713
  Validity of revisionary order passed u/s 263 - alleged erroneous deduction u/s 37 given in respect of premium to LIC for the policy under Group Leave Encashment Scheme - Revenue contended that leave encashment is an allowable deduction u/s 43B(f) only and the same can be availed of only with respect to payments made on that account in the previous year - Held that:- In the instant case it was not a provision for future liability which was claimed as a deduction. The assessee, a Government Company had insured itself against the liabilities that may arise on account of the claims made by the employees towards leave encashment. The assessee being covered by a valid insurance policy and premium being regularly paid, incurs no liability towards leave encashment. The liability; being covered by a valid insurance policy, is solely that of the insurer. Even if Section 43 B(f) stands, in the case of the assessee, where the liability is borne by the insurer, there can be no situation wherein assessee could make a valid claim for deduction u/s 43B(f) since the actual liability is not incurred in any of the years. However, premium paid towards the renewal and continued validity of the insurance policy necessarily becomes business expenditure wholly and exclusively incurred for the business purpose and allowable as a deduction u/s 37. Therefore, order passed u/s 263 is not valid. Also, Revenue having accepted the decision of the High Court in case of Exide Industries Ltd. And another v. Union of India (2007 (6) TMI 175 (HC)) holding Section 43B(f) to be unconstitutional cannot press into service Section 43B(f) - Decided in favor of assessee.

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• 2012 (6) TMI 712
  Dis-allowance of Sundry Creditors - addition made u/s 68 on surmise of it being bogus - Held that:- Tribunal after examining the mode and manner of payment, TDS certificates, vouchers produced etc., had reached the finding that assessee had discharged the burden upon them and the addition under Section 68 was not justified. No infirmity found in the order. Prior period expenses - dis-allowance on ground that though expenses are recorded in relevant year - AY 03-04, however vouchers are dated 31.03.02 - Held that:- Since liability has crystallized in relevant year and cannot be called as relating to earlier year hence the same is an allowable expenditure. Depreciation to be provided at 60% and not 15% on computer peripherals. Depreciation on emergency spare parts - dis allowance on ground that emergency spares had not been used - Held that:- Emergency spares are entitled to depreciation in terms of the decision in Capital Bus Services (P) Ltd. v. CIT (1980 (2) TMI 69 (HC)). Tribunal rightly held that depreciation was allowable to the assessee on the principle of passive user - Decided in favor of assessee.

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• 2012 (6) TMI 711
  Disallowance of exemption claimed u/s 545EC on investment made in REC Bonds - investment was made 8.5 months prior to date of transfer of the property subjected to capital gains - Held that:- Section 54EC clearly states that the investment in specified bonds is to be made "within a period 6 months after the date of such transfer". Had the legislature wanted to give liberty to the assessee to invest before or after the date of transfer, they would have explicitly said so, as has been provided in section 54 & 54F. Section 54EC clearly states that the investment in specified bond is to be made "within a period of six months after the date of such transfer …….." whereas in Section 54 and 54F which are adjacent to the Section 54EC, no such provision has been made - Since such specific words are not used in section 54EC, the intention of the legislature is clear and cannot be substituted with our own , the deduction u/s. 54EC for Rs. 50,000/- denied by the AO is correct and is upheld - against assessee.

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• 2012 (6) TMI 710
  Non-recovery of the advance made for the development of the product - bad debts or capital loss - assessee engaged in the business of software verification, validation and testing for various software developers - Held that:- CIT(A) has taken into consideration the terms and conditions of the agreement to ascertain the nature of amount forwarded by the assessee to M/s.SATPL and has rightly held that amount was paid by the assessee for furthering its business interest and not for the purpose of investment. Therefore, amount advanced, which was subsequently not recovered is a business loss and thus allowable as revenue expenditure - Decided in favor of assessee.

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• 2012 (6) TMI 709
  Acceptance of additional evidence by CIT(A) when sufficient opportunities were afforded to the assessee during the assessment proceedings - Held that:- As the assessee for the first time before the CIT(A) has stated that she had entered into agreement for purchase of land the same was sent to the AO for his remand report - As per the AO the copy of agreement of sale, cancellation of sale agreement and subsequent cash transaction of Rs. 14 lacs was not reliable and it was only a cooked up story to establish the genuineness of source of cash deposit of Rs. 14 lacs in the bank account. However, the ld. CIT(A) has deleted the addition without controverting these observations of the AO in the remand report nor given any finding with regard to availability of cash of Rs. 14 lacs with the assessee, which was alleged to be given as advances for purchases of land - Merely by pointing out fault in AO’s action and without controverting the findings of Assessing Officer and without giving any positive finding, CIT(A) has deleted the addition, which is not justified - set aside this ground also to the file of AO for deciding afresh - in favour of revenue. Addition in respect of unexplained cash credit - Held that:- As regard cheque received against cash credit, cheque was issued out of Bank account of HUF and assessee has also furnished PAN numbers and also confirmation of the loan creditor to prove not only identity but the genuineness of transaction as well as creditworthiness of the loan creditor. As the assessee has discharged his primary onus, the Assessing Officer was not justified in making addition - in favour of assessee. Addition being unexplained investment in the purchase of the property - Held that:- As the extent of Bank finance to purchase the property has already being accepted by AO and nothing was asked from him in the remand proceedings nor he has given any of the remarks in the remand report. While deleting the addition, CIT(A) has not given any positive finding as to the source of income as added by the AO. The CIT(A) has simply stated regarding amount invested in the property and the loan taken from the Bank, which was already accepted by the AO - set aside this ground also to the file of AO for deciding afresh.

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• 2012 (6) TMI 708
  Substantial question of law - Setting aside of 'best judgement assessment' by CIT(A) holding that assessment order passed cannot be categorized as a "best judgment assessment" as it not only suffer with technical and procedural irregularities but also the same was passed in an arbitrary and capricious manner in violation of the principles of natural justice - Revenue contesting the same - Held that:- It has not been demonstrated that finding of CIT(A) was based on no evidence or it has not been properly appreciated and as such, there was any perversity. The substantial question of law arises for consideration only if there is perversity in the finding of fact. Since instant appeal involves only on the question of facts, and no question of law, much less substantial question of law, arises. Appeal being bereft of merit, is dismissed.

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• 2012 (6) TMI 707
  Whether ITAT was right in law in granting registration to the assessee Trust when no work of relief to the poor in the field of education was done as per definition of "Charitable Purposes" provided u/s 2(15) of the Act. – Respondent-society which was admittedly running a Polytechnic College and the activities were interwoven for furthering the projects and activities pertaining to education – Held that:- Tribunal rightly directed that registration should be granted to the respondent-society with the rider that the same could always be cancelled if it came to the notice of the CIT that the society was not carrying on the activities as per its objects. The Commissioner while processing the application under Section 12AA of the Act was not to act as an Assessing Authority and thus, the Tribunal has rightly allowed the appeal filed by the society. Appeal is dismissed.

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• 2012 (6) TMI 706
  Capital or revenue expenditure - network development expenses - new line of business but the expenses were incurred to extend the business by opening new branches – Held that:- assessee has already set up its business in the preceding assessment year. Therefore, the expenditure incurred by the assessee for its various branches which are revenue in nature has to be allowed as deduction during the year. Disallowance of conveyance charges, telephone expenses, miscellaneous expenses, printing & stationery, repairs & maintenance and depreciation of vehicles – Held that:- AO has not confronted the assessee about the discrepancies, if any. He merely disallowed various expenses on adhoc basis on the ground that personal element in those expenses cannot be ruled out - there cannot be an element of personal use in a corporate entity and no disallowance has been made in the scrutiny assessment - Since the A.O. has not brought on record specific evidence of any expenditure which is personal in nature or which is not for the purpose of business - no adhoc disallowance can be made under the facts and circumstances of the case - ground raised by the Revenue is dismissed Addition made by the Assessing Officer on account of courier charges - no response by the party to the notice issued by the Assessing Officer u/s.133(6) and summons issued u/s.131 of the I.T. Act - assessee neither produced the said person nor made any efforts to substantiate its claim – Held that:- Payments have been made by A/c payee cheques and all the details were furnished before the A.O - assessee has discharged the onus cast upon it. Merely because the other party did not attend the office of the A.O. in response to the summon u/s 131, the assessee, in our opinion, cannot be blamed for it. The party has also not denied the transactions. The A.O. has enough power to enforce the attendance of the other party which he failed to do in the instant case - no addition was called for by the A.O. and the order of the ld. CIT(A) deleting the addition is justified - appeal filed by the Revenue is dismissed.

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• 2012 (6) TMI 705
  Transfer of development rights - capital gains - held that:- The right under the development agreement, therefore, is merely a contingent right, depending on the grant of licence or approval, as provided for in art. I of the agreement. It is only from the date of grant of licence from the DTCP, the developer would actually be vested with the licence to develop the property. Prior to such development, all approvals as enumerated in art. I of the agreement are to be obtained from DTCP and it is the responsibility of the developer to do so. It is only when the sanctioned plan and the approvals are obtained, that the developer can commence the development on the scheduled property. - Decided in favor of assessee. Disallowance under section 40(a)(ia) - Assessee having appointed a consolidator to acquire land who, as per the terms of MOU, agreed to assign its right to purchase the land in favour of the assessee – Held that:- Vikram Electric Equipment (P) Ltd. was transacting on a principal to principal basis. Provisions of s. 194H of the Act are, therefore, not at all applicable - In favor of assessee. The provisions of s. 40(a)(ia) of the Act in any case do not apply, the assessee having not claimed any deduction for any expenses on account of payment to Vikram Electric Equipment (P) Ltd., either in its P and L a/c or in the computation of taxable income filed.

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• 2012 (6) TMI 704
  TDS - reimbursement of actual freight charges paid to the airlines - disallowance made u/s. 40(a)(ia) in respect of freight on export outward on which no tax was deducted at source – Held that:- provision of section 40(a)(ia) does not apply to such payments made towards reimbursement of actual freight charges paid to the airlines. CBDT Circular No. 715 dated 08.8.1995 provide that the TDS is required to be made, only in cases where the bills are raised for gross amount inclusive of professional fees as well as reimbursement of actual expenses and accordingly no TDS is required to be made when bills are raised separately by agents for reimbursement of actual expenses incurred by them. Decided in favor of assessee.

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• 2012 (6) TMI 703
  Transfer pricing - Computation of arm's length price - related party transactions – Assessing Officer made reference to TPO to ascertain arm's length price - TPO selected four comparables and since arithmetic mean of operating profit margins of said comparables was higher than margin of assessee, he proposed an adjustment of Rs. 8.56 crores – Held that:- On instant appeal, it was seen that assessee was entitled to benefit of standard deduction of 5 per cent in matter of making transfer pricing adjustment - Further, proposition put forth by assessee that adjustment for ALP was to be made only in respect of transactions with associated enterprises instead of its entire turnover of trading segment was also found acceptable - on facts, impugned order passed under section 143(3), read with section 144C(13), was to be set aside and, matter was to be restored to file of Assessing Officer for disposal afresh – Matter remanded.

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• 2012 (6) TMI 702
  Income from other sources set off against unabsorbed depreciation – Held that:- In the case of Deepak Textile Industries Ltd. (1987 (8) TMI 81 (HC)) it was held that unabsorbed depreciation is to be allowed to be carried forward and set off against assessable income of a subsequent year notwithstanding the fact that the business in respect of which it arose ceased to exist in the year of such set off - once the AO had made requisite enquiry and on investigation he was of the view that the set off of depreciation against the interest income was legally sustainable - no prejudice was caused to the Revenue and upto that extent the order of the AO cannot be termed as an erroneous order. MAT - surplus on transfer of assets to NDDB and the taxability of book profit u/s.115JB of the Act. - held that:- an assessment was completed without ascertaining certain legal as well as factual aspect, then such an order of the AO was termed as an erroneous order. Reasons assigned for holding so were that the relevant material facts were not before the AO hence neither there was an enquiry nor there was application of mind and due to this reason there was no question of difference of opinion. - Revision order u/s 263 upheld - decided against assessee.

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• 2012 (6) TMI 701
  Search - Block assessment - Undisclosed income of any other person - warrant was in the name of Shri. C.P. David and the warrant was to search the premises of Kothamangalam Aggregates Nelkrishi – The Revenue maintains that search on Shri C.P. David was only in his capacity as a partner of the assessee-firm-being its principal partner. - Held that:- warrant was issued in the case of Shri. C.P. David and it does not mention therein that the same was issued on his name in his capacity as partner of Kothamangalam Aggregates Nelkrishi - In the case of "other person", the assessment has to be made u/s. 158BD and not u/s. 158BC - assessment in the case of a person other than the one subject to search can only be u/s.158BD and not u/s. 158BC alone as in the instant case – Decided in favor of assessee.

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• 2012 (6) TMI 700
  Dividend - assessee claimed the entire dividend income as exempt - CIT exercised the powers of revision of the assessment order u/s 263 - CIT directed the AO to invoke the provisions of Section 14A of the Income-tax Act, 1961 – Held that:- As per the provisions of section 14A read with Rule 8D. Assessing Officer shall determine the amount of expenditure incurred in relation to such exempt income in accordance with the provisions of Section 14A read with Rule 8D. AO had not discussed about the expenditure relating to dividend income earned by the assessee. Therefore, the ld. CIT was justified in remanding the matter to the AO by invoking the provisions of section 263 of the I.T. Act However, the ld. CIT has directed the AO to apply the provisions contained in Rule 8D which are applicable from A.Y. 2008-09 - order of CIT modified to this extent - Assessing Officer should decide the issue in accordance with the guidelines laid down in the case of Godrej & Boyce Mfg. Co. Ltd. (2010 (8) TMI 77 (HC)) and compute the disallowance. - Appeal filed by the assessee is allowed for statistical purposes.

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• 2012 (6) TMI 689
  Dis-allowance u/s 40A(2)(a) - remuneration paid to Directors - dis-allowance of an amount of 30 lacs out of total salary of 36 lacs - Held that:- It is well settled that the provisions of section. 40A(2)(a) cannot have any application unless it is first concluded that the expenditure was excessive or unreasonable. In the instant case, there is nothing to suggest that the AO found the payment of remuneration to director excessive having regard to either (a) fair market value of the services or facilities; or (b) the legitimate needs of the business of the assessee; or (c) the benefits derived by or accruing to the assessee on receipt of such services or facilities. Hence, in absence of material on record to hold that payment of remuneration @ 3 lacs pm to the director was excessive or unreasonable, CIT(A) was justified in deleting the addition - Decided against the Revenue.

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• 2012 (6) TMI 688
  Financial lease - principal payments made towards financial lease - revenue or capital expenditure - Held that:- A finance lease is one where the lessee uses the asset for substantially the whole of its useful life and the lease payments are calculated to cover the full cost together with interest charges. It is thus a disguised way of purchasing the asset with the help of a loan. In view of decision in case of CIT vs. The Instalment Supply Ltd(2012 (5) TMI 59 (HC)) and on analyzing various terms and conditions of the agreement with lessor, it is held that assessee is not entitled to deduction of payment of principal amount under the aforesaid financing arrangement - Decided against the assessee. On alternative contention of claim of depreciation it is held that in terms of clause 10.5 of the agreement, the assessee agreed that the assessee shall not claim any relief by way of any deduction, allowance or grant available to LPIN as the owner of the vehicle under the Income-tax Act, 1961 or under any other statute, hence in view of aforesaid, claim of depreciation is not available to assessee. Preliminary expenses - dis-allowance - Held that:- Indisputably, the assessee failed to submit necessary information in support of the claim of expenses written off. Hence dis-allowance upheld. Contribution towards Federation of Indian Mining Industries Building Fund - revenue or capital expenditure - assessee being one of the members of the said Federation - Held that:- Expenditure incurred by way of contribution towards building fund of the said federation, is for commercial consideration and it is not incurred for the purpose of securing any capital assets. Therefore, the same is allowable as revenue expenditure - Decided in favor of assessee.

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• 2012 (6) TMI 687
  Turnkey contracts for offshore & onshore supply - assessee (China Company), filed its return of loss in respect of contracts entered for setting up of turnkey thermal power projects - Revenue contended that contracts for erection of power plants were inseparable, which were manipulated and divided into separate parts solely to suit the assessee’s purpose to understate onshore supply profits and correspondingly inflating the value of offshore supplies contract, so as to avoid tax liability in India - Held that:- Transactions are to be essentially looked at as a whole, and not on standalone basis, when the overall transaction is split in an unfair and unreasonable manner with a view to evade taxes. In order that such a situation can arise, it is sine qua non that while the assessee submits the bids for different segments (e.g. offshore and onshore in the present case) separately, these bids are considered together, as a single cohesive unit, by the other party, and this fact must be apparent from material on record. Core dispute before us is not of the ALP adjustment but of an adjustment to the value assigned to the contract for ‘onshore supplies and services’, which is alleged to have been kept for a lower amount with a view to avoid taxes in the India. Real issue is as to at what value the revenues for onshore supplies and services should be adopted so as to bring out the correct onshore profits. This in turn, proceeds on the assumption that there were profits on offshore supplies which have been outside the ambit of taxation in India. However, in view of the assessee’s claim that there are losses on overall project and that there cannot thus be any advantage by assigning lower value to onshore activities, what really needs to be examined in the first place is the working of overall losses given by the assessee. In case the Assessing Officer has no issues with this computation of overall losses, the very foundation of his action ceases to hold good in law. Hence, the matter is being remitted back to the file of the Assessing Officer for fresh adjudication.

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• 2012 (6) TMI 686
  DTAA between India and Singapore - whether ‘education cess’ and ‘higher education cess’ can be levied in addition to the tax rates prescribed in DTAA - assessee(Singapore company), offered interest and royalty income to tax at the rate of 15% & 10% as specified in Articles 11 & 12 of the India-Singapore DTAA respectively - Held that:- Under Articles 11 & 12 of the said DTAA, tax charged on interest and royalties cannot exceed 15% and 10% respectively. The expression ‘tax’ is defined in Article 2(1) to include ‘income tax’ and is stated to include ‘surcharge’ thereon, so far as India is concerned. Article 2(2) further extends the scope of the ‘tax’ by laying down that it shall also cover “any identical or substantially similar taxes which are imposed by either Contracting State after the date of signature of the present Agreement in addition to, or in place of, the taxes referred to in paragraph 1”. "Education cess, introduced by the Finance Act, 2004, described in Section 2(11) of the Finance Act 2004, is nothing but in the nature of an additional surcharge. Accordingly, the “education cess” being in the nature of an “additional surcharge” is covered by Article 2. Accordingly, education cess cannot indeed be levied in respect of tax liability of the appellant company - Decided in favor of appellant.

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• 2012 (6) TMI 685
  Professional fees paid to the consultants in relation to cement project - capital expenditure or revenue expenditure? - Held that:- As decided in CIT Versus J. K. Chemicals Limited [1992 (10) TMI 18 (HC)]where the expenditure is incurred for the project /feasibility report in connection with exploring the feasibility of a new business venture different from the existing line of business then such expenditure is capital expenditure and not revenue expenditure - decided in favour of the Revenue

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• 2012 (6) TMI 684
  Whether appeal of Revenue should be admitted and await the outcome of the decision of the Supreme Court in respect of similar question, when the question has been decided against Revenue by High Court - question regarding deduction u/s 10A without setting off the carried forward business loss and depreciation - Held that:- Supreme Court has not laid down or settled the law in this regard. Though some times this Court may await the decision of the Supreme in a pending appeal before it, if the same question is involved in matter pending before the High Court, in the instant case we do not see any justification or reason to await the decision of the Supreme Court, as in the special leave petition only notice is ordered and the appeal is yet to be admitted. Impugned question decided against Revenue. Appeal dismissed.

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• 2012 (6) TMI 683
  Disallowance of claim of deduction u/s 80IB - Both the units of assessee were integrated as one unit - the assessee claimed deduction in respect of pellet feed division, for which separate computation of income was filed submitting that conversion of mash feed into pellet feed amounts to manufacturing and not processing and both are commercially two distinct products having their own peculiar features and advantages and disadvantages - Held that:- Examining the stages through which the mash feed is converted into pellet feed there has been only processing' while the production of pellet feed is done by following various stages, namely, i) batch weighing, ii) grinding, iii) mixing, iv) conditioning with steam, v) pelleting, vi) cooling, vii) crumbling and, finally, viii) packing - doing something to the goods to change or alter their form can be termed as processing and does not amount to manufacture -CIT v. Casino (P.) Ltd.[1972 (10) TMI 17 (HC)]- doing something to substance to change or alter their form can be termed as processing and does not amount to manufacture as a production of a new substance does not mean merely to produce some change in the substance -decided against assessee. Disallowance of foreign travel expense - Held that:- As the assessee failed to prove that the expenditure incurred towards foreign travelling expenses of two persons is wholly and exclusively for the purpose of its business by way of documentary evidence, dis allowance is warranted - against assessee. Levy of interest u/s 234D - Held that:- As the provisions of section 234D having been inserted with effect from 1st June 2003, applicable only from the assessment year 2004-05. Since the assessment year under consideration is 2003-04 interest charged u/s 234D need to be deleted - in favour of assessee. Validity of the reopening of the assessment u/s 147 - Held that:- As the assessee has to initially file a return and after that the assessee can ask reasons for issuing the notices for re-assessment, but in the present case, the assessee has not at all filed the return of income in the first place to seek for reasons recorded and hence the reopening u/s 148 is valid - against assessee.

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• 2012 (6) TMI 682
  Addition in Gross Profit - invoking the provisions of section 145(3) - assessee has declared GP ratio @ 12.67% as compared to gross profit rate ratio at 15.07% - Held that:- As the assessee did not maintain stock register of raw material, work in progress, consumable and finished products the necessary verification of the trading results cannot be made - the AO has correctly applied the provisions of section 145(3)as the GP ratio declared by the assessee for the year under consideration was on lower side as compared to GP rate of immediate preceding year failing to give any plausible explanation regarding the fall in GP ratio at 2.40% particularly when the turn over has remained almost consistent as per past year - as the GP rate at 14% estimated by the AO and confirmed by the CIT(A) is on higher side therefore, in the interest of justice same is to be reduced to 13% - partly in favour of assessee. Addition under the head Disallowance u/s 40A(2)(b) - AO noted that the assessee has paid excess salary to his son as compared to other employees - Held that:- The disallowance u/s 40A(2)(b) can be made only to the extent the payment for the services is excessive or unreasonable vis-a-vis the market price of such services but what is essentially required is that the market price of these services is established and then amount paid in excess of such market price is to be disallowed - estimate of salary made by AO @ Rs. 5,000/- per month is without any basis and against the express provisions of Section 40A(2)(b) - disallowance of Rs. 60,000/- in this case will meet the ends of justice and thus, the assessee gets a relief of Rs. 1,25,000/- on this count - partly in favour of assessee. Addition under the head Disallowance u/s 43B - payment of bonus and leave with wages after filing of return - Held that:- Payment of liability covered u/s 43B are liable to be paid before the due date of filing of the return as prescribed u/s 139(1) and there is no relevance with regard to the date of filing of the income tax return - as the assessee paid the amount in question on 8.11.2007 i.e. before the due date of filing of return i.e. 15.11.2007, which was extended time for filing the return u/s 139(1) the addition are to be deleted - in favour of assessee. Addition under the head Provision for Foreign exchange - Held that:- As a detailed reply dated 30.11.2009 was filed before the AO in support of the contention claiming the provision for foreign exchange as Revenue expenditure in the profit and loss account for the year under consideration which the authorities have ignored while deciding the issue in hand - remand this issue back to the file of the AO to consider it afresh. Addition under the head Disallowance of Telephone expenses - AO disallowed 1/5th of the expenses which comes to Rs. 31,799/- observing that the element of personal use of telephone - Held that:- Considering the assessee submission that in the computation of income, the assessee himself has disallowed 1/10th out of telephone expenses which comes to Rs. 15,900 the addition of Rs. (31,799/- minus (-) Rs. 15,900/-) = Rs. 15,899/- may of sustained - partly in favour of assessee. Addition under the head Disallowance of Vehicle Expenses - Held that:- Considering the Copies of acknowledgment of return and computation of income assessee has already added back Rs. 32,775/- being 1/5th out of car expenses of Rs. 1,63,873/- plus Rs. 68,911/- being 1/5th out of car depreciation of Rs. 3,44,553/- aggregating to Rs. 1,01,686/- in the computation of income chart under the head "Car expenses" and "Car depreciation - in favour of assessee.

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• 2012 (6) TMI 681
  Addition on account of bogus claim of expenditure and unexplained expenditure u/s 69C - Held that:- As the assessee gave explanation reconciling the difference in the accounts pointed out by the AO along with the copies of account in the assessee’s books of account, the AO without pointing out any defect in the maintenance of books of account or in the entries recorded therein and without rejecting the assessee’s explanation reconciling the differences, which cannot be accepted - since the assessee has discharged his burden which was not controverted by the Revenue and in the absence of any material to show that the reconciliation/ explanation submitted by the assessee was not filed before the AO the additions made by the AO are need to be deleted - against revenue. Disallowance of sub-contractor expenses/purchases - Held that:- As the assessee was able to produce confirmation from one sub contractor only along with TDS certificate, with no contrary material placed on record by the Revenue against the said confirmation and keeping in view that the said material was available before the AO even during the remand proceedings the assessee has fully discharged his burden to the extent of one sub-contractor - partly in favour of assessee. Disallowance being employer’s contribution to provident fund - Held that:- As decided in CIT Versus AIMIL Limited and others [2009 (12) TMI 38 (HC)]that if the employee’s share of contribution is paid before the due date of filing of the return u/s 139(1), then no disallowance can be made - as the assessee has deposited the amount of PF before the end of the financial year 2002-03 i.e. much before the due date of filing of the return - in favour of assessee. Charging interest u/s 234B and 234D - Held that:- As the issue was not objected by the Ld. DR. AO is directed to allow consequential relief in respect of levy of interest - in favour of assessee.

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• 2012 (6) TMI 680
  Depreciation on loss due to fluctuation of foreign exchange and capitalization u/s 43A - CIT denied the capitalization as the asset did not exist in the Block of Assets - Held that:- Considering the provisions of section 43A that if there is a change in the rate of foreign exchange after the acquisition of assets, as a result of which there is an increase or reduction in the liability of the assessee as expressed in the Indian currency, then such increase or reduction shall be added to or deducted from the actual cost of the asset and after giving effect to this adjustment the actual cost of the assets shall stand substituted with the new figure. Depreciation - Definitions contained in section 32 r.w.s.43(1) & (6) describes the depreciation is to be allowed on the actual cost of the asset less all depreciation actually allowed in respect thereof in earlier years. Thus, where the cost of the asset subsequently goes up because of devaluation, whatever might have been the position in the earlier year, it is always open to the assessee to insist, and for the Income-tax Officer to agree, that the written down value in the year in which the increased liability has arisen should be taken on the basis of the increased cost minus depreciation earlier allowed on the basis of the old cost - in favour of assessee. Loss on fluctuation of foreign currency in respect of development cost u/s 42 - AO has considered the claim of the assessee u/s 42(1)(a) whereas the claim falls under section 42(1)(b)by assessee - Held that:- Section 42(1)(b) entitles the assessee to deduction after the beginning of the commercial production and the case of the assessee is that it was working in consortium, however necessary details could not be placed to show that the assessee had commenced production - set aside this issue to the record of the CIT(A) for deciding the issue afresh in terms of the directions of the Tribunal in the earlier year - in favour of assessee by way of remand. Treatment of interest income as income from other sources claimed by the assessee for the purpose of deduction u/s 80IB(9)- department treated it as business income - Held that:- As the deduction u/s 80IB(9) is not available to the interest received from bank deposits as the receipt of interest does not comes within first decree source as derived from the undertaking, accordingly, the issue is decided against the assessee. Setting off of brought forward losses and unabsorbed deprecation against business profit a determined by AO - Held that:- As this issue is subjected to the outcome of the issue involved for the AY 2001-02 the same may be remanded back to the record of the AO to decide the issue as per the outcome of the appeal for the AY 2001-02 pending before the Tribunal. Eligibility of deduction/s 80IB on extraction of oil from oil field - Held that:- As in the case of CIT vs Sesa Goa Ltd [2004 (11) TMI 14 (SC)] the assessee in the extracting process of iron ore, the High Court came to the conclusion that extraction of iron ore and the various process would involve ‘production’ within the meaning of sec 32A(2)((b)(iii) and consequently, the assessee was entitled to the benefit of investment allowance under sec. 32A. The view expressed by the High Court that the activity of extraction and processing of iron ore constitute production has been affirmed by the Supreme Court -every manufacturer can be characterised as production, every production need not amount to manufacture - in favour of assessee. Treatment of provision of site restoration expenses - computation of the book profit u/s 115JB - Held that:- As the Site Restoration expenses are scientifically estimated by an independent agency for determining the abandonment costs of contracted area in accordance with the guidelines issued by the ICAI, then it cannot be said as contingent liability - the provision has been made as per the requirement under the Production Sharing Contract and the appellant is liable to contribute this amount to site restoration fund in each year. In view of these facts, the provision is made for an ascertained liability - in favour of assessee.

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• 2012 (6) TMI 679
  Writ petition - exemption from the applicability of the Act under Section 10(23C)(iiiab) of the Act – Held that:- order dated 26.07.2011 is only an interim order. - Ordinarily, interim order cannot be allowed to be challenged at every stage, like present one. - The petitioner will have a right to challenge the impugned order in regular appeal against final order, in case, necessity so arises. Submission of learned counsel for the petitioner is that impugned order is final and the same cannot be challenged in any other proceedings, except by way of this writ petition is not correct and tenable.

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• 2012 (6) TMI 678
  Deduction under section 80P(2)(e) of the Act - godown on rent - let out to the FCI or any other agency for the purposes of storage - co-operative society – Held that:- assessee was purchasing the goods and then selling the goods to the FCI and in such a situation, storing was part of business of the assessee and did not amount to letting out of storage capacity as till the goods were sold to the FCI, goods belonged to the assessee itself, and not to the FCI – income not entitled to special deduction Deduction under section 80G - income of the assessee is partly exempt and partly liable to tax – Held that:- Tribunal in the assessee’s own case (supra) direct the Assessing Officer to allow deduction under section 80G out of the taxable income of the assessee - It is not clear in the order of the Tribunal that the assessee had produced any proof – matter remanded to Tribunal for want of proof. Expenditure for construction of Sahakarita Bhawan and amount paid to Co-operative Development Federation for modernizing the printing press - construction was done on the direction of the State Government – Held that:- claim of the assessee was not controverted by the revenue - expenditure was revenue in nature was clearly distinguishable as therein tenements constructed for welfare of employees did not vest in the asses- see and the assessee did not get any benefit of enduring nature - matter remanded to the Tribunal

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• 2012 (6) TMI 677
  Penalty under section 271(1)(c) of the Income-tax Act, 1961 – concealment - assessee understated the cost of construction - total cost of construction was Rs.12,50,000, when he filed the returns – Held that:- Assessee admits the total cost of construction as being Rs.32,05,000 as determined by the appellate authority on the original side, the difference in the amount constitutes concealed income and the main provisions as contained in section 69B of the Act is attracted. In spite of the opportunities given to the assessee, when he did not avail of the opportunity and neither offered any explanation, the finding arrived at by the authorities imposing penalty cannot be found fault. In favour of the Revenue

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• 2012 (6) TMI 676
  Reopening of assessment under section 147 - based on the valuation report - cost of construction – Held that:- section 142A of the Act is not attracted to the facts of the present case - Initiation of reassessment proceedings on the basis of report of the DVO cannot legally be sustained - against the Revenue

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• Customs

• 2012 (6) TMI 699
  Writ petitions - Duty Drawback – imported goods re-exported because goods were found to be defective in nature – claim rejected on the ground that petitioner had not submitted the required documents as per the Deficiency Memo - petitioner had furnished the Non-availment of Central Value Added Taxes Certificate to the respondent - Held that:- Petitioner ought to have submitted the required documents as per the Deficiency Memo dated 23.10.2009 within 30 days of its receipt by the petitioner - said memo is said to have been issued by the respondent on 23.10.2009 nothing has been shown on behalf of the respondent as to when it had been received by the petitioner - petitioner had stated that the Central Value Added Taxes Certificate had been submitted by the petitioner to the respondent –Petitioner is entitled for the grant of duty draw back under Section 74 of the Customs Act, 1962. Accordingly, the respondent is directed to grant duty draw back - writ petition stands allowed

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• 2012 (6) TMI 674
  Application for early hearing of the appeal - Held that:- As appeal has been disposed by this Tribunal by way of remand in the year 2004 which shows that the departmental officers are not doing their duty properly before filing this type of application - application is dismissed as infructuous.

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• Corporate Laws

• 2012 (6) TMI 698
  Winding up – misfeasance by Directors of the company in liquidation – allegation was based on declaration made in statement of affairs which was on basis of realizable value – Held that:- valuation got done by this Court prior to the sale of the fixed assets has been realised and the value is more than the book value which has been indicated in the balance sheet as on the date of winding up. Apart from the same, there is no other pleading or evidence with regard to the misfeasance having been indulged by the erstwhile Directors - proceedings under Section 543 cannot be initiated merely based on the realisable value of the assets indicated - application is dismissed

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• 2012 (6) TMI 673
  Winding up petition - Failure to make repayment of the loan - the petitioner bank had granted loan to the respondent to meet with the need of working capital against collateral security by way of postdated cheque issued as well as personal guarantee of the Directors – dishonor of cheque when placed for clearance – respondent raised dispute in in response to the petitioner's statutory notice demanding the repayment - Held that:- Having availed the loan facility and after having agreed to repay the loan amount and then after having asked for extension of time to repay the loan amount and then having again asked for further extension, the respondent company not only failed to keep its promise and fulfill its assurance and the respondent company not only went back on its written assurance in the loan agreement as well as the said two communication dated 18.5.2011 and 17.6.2011 - the dispute or defence of the respondent company is spurious, speculative, illusionary and an afterthought raised only with a view to resisting the petition and delaying the liability to make the payment of due and payable amount - respondents contention that the petitioner bank has not claimed definite and exact sum/amount which relevant to take into account the details mentioned in the statutory notice as para 1 of the statutory notice clearly mentions the amount - as the respondent's contention that the petition is filed without authority and the resolution is not acceptable as the Act, Rules or forms do not require any resolution to be passed for the purpose of initiating winding up proceedings, even where the petitioning-creditor is a Company with a Board of Directors - the legal consequence of a petition not being properly signed by the petitioner is a mere irregularity which can be cured at any time - accept and admit this petition - The petitioner is allowed time to place on record resolution of the petitioner bank to file the petition and authorizing Chief Manager to file the petition.

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• 2012 (6) TMI 672
  Dispute about the name of the company - petition against the order directing the petitioner, registered as a company in the name of "M/s International Trade and Exhibitions India Private Limited" to change its name - name which is identical with or too nearly resembles - Powers under Section 22 of the Companies Act - Rectification of Name of company - full form of the abbreviation "ITE" in the name of the respondent no. 2 was also "International Trade and Exhibitions" and further since both respondent no. 2 and the petitioner were in the same business of Events – Held that:- the test provided in the guidelines under Section 20 could not have been applied to a rectification proceedings under Section 22 when the Legislature has not deemed it appropriate to provide for rectification of undesirable names other than those covered by Section 20(2). The remedy against undesirable names falling in any category other than Section 20(2) is not under Section 22 but would be before the Civil Court Legislature in its wisdom has confined power of Central Government to registered names and marks only and did not extend inquiry into identical with and resemblance with unregistered names and marks – Respondent no. 2 is unregistered company - power of rectification in section 22 is limited to form an opinion as to identical with and resemblance with registered names and marks only - It thus cannot be said that any case for exercising of powers for rectification under Section 22 was made out. I am unable to find any identity or resemblance between "ITE" or "ITE India" and "International Trade and Exhibitions". The alphabets "IT" and "ITE" are today identified more as "Information Technology" and "Information Technology Enabled" than with "International Trade and Exhibitions". It thus cannot be said that any case for exercising of powers for rectification under Section 22 was made out. Petition succeeds and is allowed

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• FEMA

• 2012 (6) TMI 675
  Penalty for contravention of Section 9(1) (d) read with Section 68 of Foreign Exchange Regulation Act, 1973 - Condonation of 507 days delay in filing the appeal - appellants contended that delay in filing the original appeal and in re-filing has taken place on account of the delay in normal decision making process which is bound to entail certain time at different levels and since the case of the appellants – Held that:- applications have been drafted in a most casual manner and absolutely no details have been given for the reasons as to why a delay of 507 days had occurred - appeals are bereft of any material which will persuade the Court to condone the delay either originally or in re-filing – Application for COD dismissed

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• Service Tax

• 2012 (6) TMI 723
  Plea for waiver of pre-deposit - Banking and Financial Services - assessee alleged of not discharging tax liability on import of service on the basis of transactions entered into with ADB and IFC - payments made towards commitment charges, up-front fee, arrangement fee, agency fee and out of pocket expenses paid to ADB and IFC in respect of funds borrowed from aforesaid institutions - Held that:- Since issue involves interpretation of various provisions of law such as Article 246, 253 of the Constitution of India, the various provisions of ADB and IFC Act and the provisions of United Nations (Privileges and Immunities) Act, 1947 and Finance Act, 1994. Therefore, appellant has made out a case for 100% waiver of pre-deposit, accordingly, we waive the requirement of pre-deposit of entire amount of service tax, interest and various penalty and recovery thereof stayed during the pendency of the appeal.

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• 2012 (6) TMI 722
  Business Auxiliary Service - Duty demand on collecting Passenger Service Fees (PSF) from the passengers who embark on a flight of the airlines - Held that:- As the applicants have no choice but to collect this PSF on behalf of AAI as per the reference to Ministry of Civil Aviation and they are bound to do collection of PSF for AAI, the activity undertaken by the applicant covers under ‘Business Support Service' and are not liable to pay service tax under ‘Business Auxiliary Service'- complete waiver of pre-deposit of the demands

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• 2012 (6) TMI 721
  Denial of benefit of Notification No.12/2003-ST dated 20.6.2003 - appellant is engaged in providing the service of commercial training and coaching - AO denied granting benefit of Notification as the appellant is providing study material to students and the value of the said material has not been included in the assessable value - Held that:- A s decided in PINNACLE Versus COMMISSIONER OF C. EX., CHANDIGARH [2011 (8) TMI 570 (Tri)]it is not in dispute that the activity of the company is to provide coaching and the Revenue has not disputed the fact that the study materials were purchased by the appellants, therefore there is nothing in the Notification No.12/2003-ST which would help Revenue in their arguments. The Circular of CBEC No.59/8/2003-ST dated 20.6.2003 states that such exemption will be applicable only if material sold is ‘standard textbooks'. The question as to what is a ‘standard textbook' can lead to disputes, since the expression is not used in the notification and the fact that the books sold are of another entity, we do not find any reason to deny the benefits of the Notification No.12/2003-ST - in favour of assessee.

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• 2012 (6) TMI 720
  Waiver of pre-deposit – Commercial Construction and Industrial Services or works contract - appellant was providing "Commercial Construction and Industrial Services" right from the beginning and after the introduction of services "Works Contract" with effect from 01.6.2007, they opted to pay service tax on the services provided by them under the category of Works Contract – Held that:- Board Circular dated 24.08.2010 has clarified that the services could be considered as works Contract services. Having given no reason in order in original, for classifying the services rendered by the appellant under the category of "Commercial Construction and Industrial Services", just simply denying the claim of the assessee , that services are not Works Contract services. Appellant has made out a prima facie case for waiver of pre-deposit

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• 2012 (6) TMI 719
  Valuation (Service Tax) - Goods and materials sold by service provider to recipient of service - Retreading of tyres on job work basis - Maintenance and Repair service - tax paid on labour charges shown in the invoices and did not include cost of tread material procured - Notification No.12/03-ST – Held that:- Service provider is required to produce documentary proof specifically indicating the value of the said goods and materials so sold by them - invoices unilaterally raised by the appellants indicating the break-up without substantiating the amount attributable to the value of the goods supplied cannot be considered as documentary proof for the purposes of the said notification - assessee has not proved that the conditions under Notification 12/03 ST dated 20.06.2003 have been satisfied and, therefore, they are not entitled to the benefit of deduction of cost of raw materials consumed in providing the impugned service.

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• 2012 (6) TMI 693
  Manpower Recruitment and Supply Agency Services - Plea for waiver of pre-deposit - Revenue contended that gross salary paid to the employees has to be taken into account for paying the service tax whereas applicant contended that persons, supplied by the applicant are the employees of the M/s P and the applicants are not liable to pay service tax on same, however tax on commission received is paid - Held that:- Since applicant is receiving commission on monthly salary, the applicants are covered under ‘Manpower Recruitment and Supply Agency Services'. Therefore, applicant has failed to make out a case for 100% waiver of pre-deposit of the demand. Accordingly, applicant is directed to make a pre-deposit of 50% of the service tax within stipulated time.

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• 2012 (6) TMI 692
  ‘Cable Operators Service' - re-transmission of TV signals to various cable subscribers - SCN issued for recovery of service tax and and also for commission received from their signal supplier under the category of ‘Business Auxiliary Service' - assessee contended that if the services of signal received by them is considered as ‘input service', their tax liability will be nil - Held that:- If the appellants had paid the service tax for obtaining signal from their service provider they are entitled for ‘input service' credit. If the service tax has been paid by the appellants on input service is equal to the service tax liability, the same has to be verified from the records of the appellants. In view of aforesaid, matter is remitted back to the adjudicating authority for fresh adjudication. Further, appellant is directed to pay interest on admitted under the category of ‘Business Auxiliary Service' and ‘Renting of Immovable Property Services'.

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• 2012 (6) TMI 691
  Waiver of pre-deposit of service tax – relevant date - refund alleged to be erroneously refunded to the assessees – Held that:- date when payment for services exported was received was the relevant date. assessees have made out a case for unconditional waiver and accordingly dispense with pre-deposit of tax and interest.-

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• 2012 (6) TMI 690
  Civil Work such as, foundation, control room, etc., and electrical work such as, earthing station, transformer etc., including material supplies - Held that:- service tax could not be demanded on Works Contract which at that time was held to be not vivisectable. They were under a bona fide belief that Works Contract was not liable to tax. Demand is time-bared and, therefore, not sustainable. Regarding Erection Charges - service tax of 3.25 crores (approx.) has already been paid out of 3.64 crores confirmed [the Commissioner has examined the claim of abatement and rejected it on the ground of certain discrepancy]. However, taking into account those discrepancies only an amount of 4 lakhs can be said not to have been paid by the assessees. Pre-deposit waiveed Regarding TNEB Infrastructure Charges - Held that:- As per the Electricity Act, 2002, it is the responsibility of the generating company to establish transmission lines, sub-station etc., and the wind mill operator is required to pay Infrastructure Development charges to the Electricity Board towards strengthening the power evacuation capability and connectivity to the power handling system of Electricity Board. These charges are paid on behalf of their clients by the assessees to the Tamil Nadu Electricity Board and, therefore, the assessee have made out a prima facie for waiver. Regarding Land Development Charges - demand was raised for tax under a particular category, while the impugned order demands tax in another category, which was not the case made out in the show-cause notice. Pre-deposit waived.

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• Central Excise

• 2012 (6) TMI 697
  Whether Tribunal was justified in directing the assessee to pay 25% of the penalty levied u/s 11AC within 30 days from the date of communication of the order passed by the Tribunal - non-payment of penalty at 25% of the duty determined u/s 11A(2) within 30 days from the date of communication of the order of the Central Excise Officer determining duty payable u/s 11A(2) - Held that:- Instead of paying 25% of the penalty within the stipulated time, the assessee has chosen to file an appeal against imposition of penalty u/s 11AC and the Tribunal has permitted the assessee to pay 25% penalty beyond the time prescribed under the proviso to Section 11AC which is not permissible in law. When the legislature specifically fixes the time limit within which the duty with interest and penalty at 25% is to be paid for availing the incentive, it would neither be open to the appellate authority nor any other authority to permit the assessee to pay 25% penalty at any time other than the time prescribed under Section 11AC. The incentive in Section 11AC is intended to encourage payment of tax due to the revenue at the earliest without resorting to unwarranted litigation and it is not an incentive for violating the provisions of law. Therefore, benefit of paying lesser penalty cannot be extended to the assessee - Decided in favor of Revenue.

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• 2012 (6) TMI 696
  Denial of CENVAT credit - steel items used in the manufacture of immovable property - application for waiver of pre-deposit - Held that:- As per Rule 2(k) of the CENVAT Credit Rules, 2004, to qualify for capital goods the item have to be goods first. “Goods” by definition are items which can come to the market for being bought and sold and they have to be movable in nature. Chimneys of power plants and storage silos are immovable properties and are not goods. Therefore, though storage tanks have been specified under capital goods, only such storage tanks which are ‘goods' can fall within the definition of capital goods. If the storage tanks are immovable property, they cannot come under the definition of capital goods - ‘capital assets' and ‘capital goods' cannot be held to be synonymous, thus, foundations and supporting structures imbedded to earth may be categorized as capital assets but would not qualify to be capital goods in terms of the definition contained in the Cenvat Credit Rules - the appellant has not made out any prima facie case for complete waiver of pre-deposit.

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• 2012 (6) TMI 695
  Differential duty demand – assessee contested the denial clause in the impugned Notification No.11/96 under the deemed credit scheme has no applicability and the imposition of penalty under Rule 57I is not appropriate – Held that:- Since the appellants are willing to accept the differential value and make duty payment accordingly in such a case, it would be unfair to deny the deemed credit totally, applying the denial clause in the impugned notification which is meant for cases where a case of fraud, collusion etc. is established - No willful misstatement or suppression found the impugned order-in-appeal is modified to allow the deemed credit and set aside the penalty of Rs.5000/- imposed – in favour of assessee.

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• 2012 (6) TMI 694
  Applicability of Rule 57C(1)(ii) – Assessee used naphtha for manufacture of steam, which in turn was used for generation of electricity and the electricity was supplied to 100% export oriented unit – Held that:- The order passed by the CESTAT is liable to be set aside as in case electricity was not used wholly in the factory of production, the question of availing modvat credit does not arise and it can be availed only proportionately - applicability of Rule 57C (1) (ii) has to be decided by the CESTAT on merits - Rule 57C(1) states that no credit of duty shall be allowed on such quantity of inputs which is used in the manufacture of final products which are exempt from duty or are chargeable to nil duty. However, one of the exceptions provided to Rule 57C (1) relates to cases where the final products are cleared to a 100% EOU - the matter is remanded to the original authority who shall cause the necessary verification and decide the matter afresh keeping in view the provisions of Rule 57C(1)(ii).

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• 2012 (6) TMI 671
  Availment of cenvat credit on the basis of bill of entry, which is in the name of another unit of the appellant – applicability of provisions of Rule 9 (2) – Held that:- In the case of BHEL vs. CCE, Bhopal[2011 (7) TMI 974 (Tri)] it has been decided that just because the bill of entry is in the name of another unit of the same Company and the other unit did not endorse in the bill of entry, credit cannot be denied - as regards applicability of Rule 9 (2) of Cenvat Credit Rules, 2002 except for importer’s name, address and registration number which are required to be mentioned in the bill of entry when the goods are diverted, rest of the particulars were available. Difference in description and quantity between bill of entry and Lorry Receipt(LR) – Held that:- Assessee’s explanation is acceptable that Phenol’s weight has increased due to addition of water since it cannot be transported as such – as there is no indication that investigation or verification was made to see whether the goods received by the appellant was not Phenol at all – against revenue.

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• 2012 (6) TMI 670
  Denial of credit on the duty paid on capital goods put to use in the factory of production and thereafter the capital goods were exported under bond - Held that:- As capital goods are exported under bond and the Board vide Circular No. 345/2/2000-TRU dt. 28.9.2000 clarified that inputs and capital goods on which credit has been availed can be cleared without payment of duty under bond for export purposes - decided in favour of assessee.

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• 2012 (6) TMI 669
  Waiver of pre-deposit - Marketability - Printing of registers, accounts books, various forms, order books, receipt books and similar articles - goods in question are printed for the use of Central Railway only – Held that:- Goods are not ordinarily capable of bought and sold in the market as these are basically made to run the Railways administration and to maintain the internal records of the Railway. Therefore, the demand is not sustainable - No evidence on record to show that the goods in question which are printed by the Central Railway Printing Press are capable on being bought and sold in the market - Pre-deposit of duty, interest and penalty is waived - Petition is allowed

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