Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
July 21, 2012
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
Indian Laws
Articles
News
Notifications
Highlights / Catch Notes
Income Tax
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Valuation - consideration of self supervision factor which lead to less value - Addition made on account of unexplained investment in cost of construction of building u/s.69B - AT
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Exemption of HRA u/s 10(13A) - reimbursement is considered against the free housing accommodation provided by the employer company to the employee assessee, then this reimbursement of house rent to employer is no more available to be considered for exemption u/s 10(13A).
- AT
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Revenue versus Capital expenditure - The expenditure incurred on Printer, Scanner and Web Camare cannot be said to be replacement of the spares /defective parts of the computer- AT
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Determination of the cost of acquisition - computation of the period for which the asset is held by the assessee - property transferred to the assessee under a will or by inheritance - HC
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Payment for know-how - deductible under Section 37 as a Revenue expenditure OR Section 35AB? - said expenditure qualifies for deduction u/s 37 - HC
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Penalty u/s 271D - reasonable cause - contravention of sec. 269SS - cash was taken by discounting cheques to meet the urgent business needs of the assessee - deletion of penalty is warranted - AT
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Challenging the order passing ex parte - considering the lethargic and irresponsible attitude of the assessee we hereby reject the adjournment letter filed by the assessee - AT
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Appeal before ITAT - authorization - The grounds which are not arising out of the order of the CIT(A) are not maintainable - AT
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Demand of interest u/s. 201(1A) of the IT Act - late deposit of TDS - The time taken for clearing of cheques and government holidays and reasonable cause etc. are not the reasons, which could be considered while levying the interest against the assessee - AT
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Rent receivable - Accrual of rental income - Addition of Income based on TDS certificate whereas deductor admitted the mistake is not correct. - AT
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Addition on account of unexplained purchases u/s 69C of the Income Tax Act – section 69C refers to the ‘source of the expenditure’ and not to the expenditure itself. - AT
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Long term capital gain - exemption / deduction u/s 54 - Alternate claim out of two investment in residential properties - AT
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Commission versus Rent - Whether TDS was required to be deducted in terms of provisions of sec. 194H or 194 I of the Act - AT
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Adjustment of cash seized during the search - AO to re-compute the tax liability - after adjusting the seized cash from the date of request made by the assessee - AT
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Addition is made on the ground that there is under-recovery of sale proceeds on an inference that there is a sale – . There is no loss to the Revenue as one of the sister concerns has offered the income in question to tax - AT
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Rejection of books of accounts u/s 145(3) of the I T Act - Applicability of AS-1 / AS-7 (revised) - authorities below are not justified in estimating the profits on percentage basis as per the work in progress shown by the assessee - AT
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Trading liability or capital liability - income u/s 2(24) read with section 41(1) - The write back under reference a receipt of capital nature. - however the cost of the relevant assets would be required to be recomputed - AT
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Addition on account of sundry creditors - deemed income u/s 41(1) - no change in the outstanding balance in AY 2007-08 and 2008-09 - letters issued u/s 133(6) were returned undelivered - Addition confirmed - AT
Customs
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Amendment Notification No. 33/2008-Customs - Anti dumping duty on Acetone imported from Chinese Taipei or Singapore or South Africa or USA or European Union from specified producers / exporters. - Notification
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Rate of exchange of conversion of each of the foreign currency with effect from 20th July, 2012. - Notification
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Demurrage charges and other incidental charges for goods detained in the customs area are required to be paid by the exporter consignor even if such goods were illegally detained - AT
Service Tax
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Cenvat credit – amount paid by the appellant has to be treated as paid under protest - original adjudicating authority's decision to allow the refund by way of credit in the cenvat account is correct - AT
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Demand of service tax - they are liable to pay the Service Tax on the amount collected by them as an advance prior to introduction of Service Tax liability on said services - AT
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Sale of space or BAS - the service cannot be classified under business auxiliary service as the service is more specifically covered under the heading sale of space as the activity undertaken is only sale of space in monthly news - AT
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Manpower Recruitment and Supply Agency Service - the claim of the applicants that they were under bonafide belief is not sustainable - AT
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Penalty under section 77(c) on Director - delay in payment of service tax - No provision for imposing personal penalty on the Director - AT
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Refund claim – amendment in the scope of existing services - works of drawings and blue print and interior decorator services - assessee claimed wrong deposit under construction services - AT
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Whether service tax paid on CHA services in respect of export of goods can be allowed as credit or not – credit is admissible - AT
Central Excise
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Condonation of delay – there was an affidavit filed by a person who received the order in original and had stated that after receiving the order in original he placed it in the cupboard and forgot to handover the same to the management. - delay condoned - AT
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Cenvat credit – Rule 6 - Maintenance of separate accounts - manufacturers of sugar and molasses - SCN issued in these cases are defective inasmuch as neither of the SCN indicates as to which are the input and input services used which have resulted in the generation of press-mud which was converted into bio-compost - AT
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CE - Reduction of the cost freight and insurance charges incurred for carrying the goods from the depot to the customer’s end would make the wholesale price available ? - HC
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Cenvat credit – suo motu credit on the amount paid by assessee erroneously earlier – suo motu credit availed by the appellant is inadmissible to them - AT
Case Laws:
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Income Tax
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2012 (7) TMI 497
India-Mauritius Double Taxation Avoidance Convention - capital gain on sale of shares - Held that:- The applicant has a Tax Residency Certificate from Mauritius is registered as a Foreign Venture Capital Investor considering Article 13 of the DTAC would govern such a transaction and under paragraph 4 of that Article, the capital gain that may arise would be taxable only in Mauritius and not in India - the buyer of the shares has no obligation to withhold taxes under section 195 of the Income-tax Act.
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2012 (7) TMI 496
Determination of the cost of acquisition - computation of the period for which the asset is held by the assessee - property transferred to the assessee under a will or by inheritance - Held that:- 50% portion of the property acquired by the respondent from his father, the cost of acquisition must be determined to be the cost at which the respondent's grandfather or in any event the respondent's father acquired the property and not the date on which the respondent acquired it. Computation of the period for which the respondent held that 50% portion of the property he acquires from his mother - Held that:- The respondent's mother also acquired the property under her husband's will. She therefore, acquired the property by a mode of acquisition referred to in section 49(1)(ii). Thus the date of the acquisition of her share in the property is not relevant. The last previous owner of her share was therefore her husband's father and at the highest her husband - If therefore a capital asset becomes the property of the assessee in the circumstances mentioned in section 49(1) and the period for which it is held as determined by section 49(1) r.w.s. 2(42A) is more than the period stipulated in section 2(42A), the case would not fall within the ambit of a short term capital asset - the respondent must be deemed to have held this 50% share in the property also from 1.4.1981 - in favour of respondent.
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2012 (7) TMI 495
Challenging taxation of undisclosed income under the provisions of Section 143(3)/153A - Held that:- As the books of account have been maintained and duly certified having been verified by the auditors who have been authorized by the provisions u/s 44AB to submit a report certifying that the books of account were verified which books resulted in computing the returned income by the assessee as per the balance sheet and P & L account annexed with the report the CIT(A) upholding the contention of the AO on having invoked the provisions of Section 145 actually had no basis - AO has accepted the Net Profit as returned by the assessee but at a higher rate which rates has no basis for enhancement insofar as the gross margin on a turnover is directly related to the sales and the expenditures claimed leading to holding of stock which valuation has not been disputed by the AO. This indicates that all the facts remaining the same, the AO has not estimated the enhanced NP on sound footings - Disallowance of expenditures claimed u/ss.30 to 37 therefore leave no meaning to consider the NP insofar as the AO has not resorted to tinker with the gross profit rate - to proceed simultaneously u/s.143(3)/153A is defective to the extent that the AO cannot roll back from the very facts for computation of income of the assessee for the purpose of his enhancing the income - in favour of assessee.
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2012 (7) TMI 494
Dis allow the claim of exemption of HRA u/s 10(13A) - the assessee has not paid the rent directly to the landlord - CIT(A)allowed the claim - Held that:- Assessee is getting twin benefit from the employer, first is of rent free accommodation provided by the employer to the assessee employee for which the employer is incurring rental expenditure of Rs. 1.70 lacs per month in addition to providing interest free deposit of Rs. 40 lacs with the land lord and 2nd being received by the assessee is this that he is getting HRA of Rs.3 lacs approximately per month including special HRA of Rs.1.70 lacs per month and out of these two benefits the assessee is making one payment i.e. reimbursement of rentals to the employer company @ Rs.1.70 lacs per month, thus this reimbursement is considered against the free housing accommodation provided by the employer company to the employee assessee, then this reimbursement of house rent to employer is no more available to be considered for exemption u/s 10(13A). Once, the housing perquisite value is worked out as 'nil' after considering this rental payment of Rs.1.70 lacs per month to the employer company, there is no rental payment made by the assessee employee for the purpose of working out exemption of HRA u/s 10(13A)and, therefore, the disallowance made by the A.O. regarding the claim of the assessee for exemption u/s 10(13A) is in order - against assessee.
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2012 (7) TMI 493
Challenging Tribunal's Order in confirming the addition of cash credits u/s 68 - assessee contested that such deposits could have been proceeded against as unexplained investments in terms of section 69 - Held that:- Even in the bank deposits on the security of which amount had been borrowed and the assessee had shown as a credit taken from several persons was a deposit jointly held by the assessee and the persons who were shown as creditors were close relatives such as kith and kin of the assessee. The circumstances weighed with the assessing authority to infer that the explanation is not satisfactory that they were not genuine cash credits, but so indicated in the books of accounts of the assessee - as three authorities below have found that the explanation offered by the assessee to claim that the amount was genuine cash credit was not acceptable find scope for reversing this finding in an appeal under section 260-A - The possibility that the amount would also attract the provisions of section 69 of the Act is not a ground for excluding the applicability of section 68 - against assessee.
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2012 (7) TMI 492
Revenue versus Capital expenditure - AO made out in the assessment order that out of the total expenditure of Rs. 32,80,058, Rs. 1,18,225 was incurred by the assessee for new hardware of the computer to be in the nature of capital - Held that:- Apart from the expenditure of Rs. 32,80,058/- the assessee has also purchased some computer, which were included in the fixed assets as clear from the Schedule C showing the fixed assets at the written down value. The parts like CD ROM Drive, Hard Disk Drive and RAM are only spares of the Central Processing Unit (CPU) of the computer and they cannot be considered as separate and independent machinery. Accordingly, replacement of the parts of the machinery is allowable expenditure. The expenditure incurred on Printer, Scanner and Web Camare cannot be said to be replacement of the spares /defective parts of the computer therefore, the expenditure of Rs. 31,250/- incurred on printer, scanner and Web Camera is capital in nature and accordingly, the addition to the extent of Rs. 31,250/- is confirmed - partly allowed in favour of assessee to the extent of the expenditure of Rs. 86,975/- as revenue expenditure u/s 37. Disallowing of repairs and maintenance expenses as “capital” in nature - out of the total expenditure of Rs. 50,35,444/- AO disallowed Rs. 1,66,423/- being capital in nature - Held that:- As regards the expenditure of Rs. 1,35,613/-, pertains to office renovation charges, the same has been incurred by the assessee to make the office premises as fit for business use of the assessee and without bringing any new capital asset into existence; therefore, the same is allowable as revenue expenditure - As regards the expenditure on split AC of Rs. 30,850/-, it is apparent that the assessee has brought into existence a new asset therefore, the same is capital in nature and only depreciation is allowable. Accordingly, we confirm the disallowance to the extent of Rs. 30,850/ towards spilt air-conditioning expenditure - partly in fvaour of assessee. Disallowance of trading loss - DR has submitted that the assessee has not even claimed trading loss in the return of income but has made a claim only during the appellate proceedings by way of a note - assessee has claimed bad debts/trading loss being non recoverable deposit given to the subsidiary company - Held that:- 0bjection raised by the ld DR that without filing the revised return the Assessing Officer has no jurisdiction to entertain a fresh claim it is to be noted that the jurisdiction of the appellate authorities is not barred as observed in the case of Goetze (India) Ltd [2006 (3) TMI 75 - SUPREME COURT] - When the assessee is holding company and both the companies are controlled by the same management then there was no such need for any deposit. Therefore, the element of commercial expediency does not exist in the case in hand - it was not a case of insolvency of the subsidiary company; but the assessee voluntarily waive off the claim; therefore, when the advance was not given either in the ordinary course of business or in connection with the business, then the loss of the same is loss of capital and is not allowable - against assessee. Since interest u/s 220(2) is consequential in nature; therefore, no specific finding is required.
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2012 (7) TMI 491
Payment for know-how - deductible under Section 37 as a Revenue expenditure OR Section 35AB ? - Held that:- As decided in CIT Versus Kirloskar Tractors Ltd. [1998 (2) TMI 117 (HC) ] wherein the assessee having entered into an agreement for execution of the turn-key project and at the request of the said client acquired technical know-how to be used in its engineering, activity the confidentiality that has to be maintained on the technical know-how obtained, it is clear that the entire expenditure incurred by the assessee was towards its profit making process qualifying for deduction as revenue expenditure. That being so, going by the provisions under Section 37 the said expenditure qualifies for deduction u/s 37 and hence Section 35AB has no application to the facts of the case - in favour of assessee.
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2012 (7) TMI 490
Deleting the addition made on account of deferment of Sales-tax by CIT - Held that:- Joint Director, District Industries Centre, Belgium, Karnataka had issued a certificate stating that the unit is eligible to avail sales tax deferment both “KST and CST” for a period of eight years with effect from 14-12-2001. This shows that this unit of the assessee is eligible for the benefit of deferment of sales tax for the sales made up to 13-12-2009 and as the relevant case falls for the previous year 2006-07 and the assessment year 2007-08 which is well within the period of sanction granted by the appropriate Authorities in the State of Karnataka. Hence, the assessee is entitled to claim the benefit of deferment of sales tax for the relevant assessment year - Further no materials are produced by the Revenue to suggest that the certificate granted by the Joint Director is withdrawn or cancelled - in favour of the assessee.
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2012 (7) TMI 489
Deletion of the penalty levied u/s. 271(1)(c)- disallowance u/s 40(a) (ia) , 40A (2) (b) & unexplained expenditure u/s 69C - Held that:- Since the various disallowance made are a debatable issue there is nothing on record to suggest that the assessee had concealed any particulars of his income or furnished inaccurate particulars of such income - merely making a wrong claim does not call for levy of penalty - in favour of assessee.
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2012 (7) TMI 488
Penalty u/s 271D - reasonable cause for contravention of the provision of Section 269SS - CIT(A) deleted the penalty - Held that:- The identity of the person, genuineness of the transaction and capacity of the person with whom the cheques were discounted is proved beyond doubt and also accepted that the party was discounting cheques of the assessee - the documents filed by the assessee that the amount of cash received through cheque discounting were either fully spent on the same day or within 2-3 days, therefore, the cash was taken by discounting cheques to meet the urgent business needs of the assessee - deletion of penalty is warranted - in favour of assessee.
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2012 (7) TMI 487
Challenging the order passing ex parte - conforming additions and dis allowances by CIT(A) - Held that:- All the notices were sent by registered post and receipts have been duly acknowledged. Despite this there was no compliance to the notices. Under the circumstances CIT constrained to decide the appeal on the basis of material available on record ex parte - considering the lethargic and irresponsible attitude of the assessee we hereby reject the adjournment letter filed by the assessee - assessee present at the time of hearing assured the Bench that the relevant necessary records shall be filed within a day and also assured the Bench to cooperate with the proceedings for speedy disposal of the case but until this date no record as suggested by the assessee was furnished - instance of the assessee for default and for not taking necessary steps showing no interest in prosecuting the appeal - against assessee.
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2012 (7) TMI 486
Valuation - consideration of self supervision factor which lead to less value - Addition made on account of unexplained investment in cost of construction of building u/s.69B - CIT(A) deleted the addition and allowed a deduction of 10% for construction under owner’s own supervision - Held that:- The assessee has shown cost of construction in balance sheet at Rs. 97,76,773/- whereas cost estimated by the valuer at Rs. 1,15,55,424/-. The difference is remained Rs. 17,76,412/-. There is own supervision in construction of bungalow which reduces the cost of construction. This benefit was allowed by the various ITATs near about 10% of the estimated cost of construction. The appellant also made expenditure after 31.03.2007. The A.O. has not brought on record any incriminating evidence found during the course of search and seizure operation for construction of bungalow. Thus considered view that the valuation made by the D.V.O. is an estimate and has variation in cost estimation. The appellant has explained the difference before the CIT(A), therefore, no reason to interfere in the order of CIT(A)as DVO has not considered self supervision factor - in favour of assessee. Rejecting the application for rectification u/s 154 and charging interest u/s 234B and 234C - Held that:- The interest u/s.234B and 234C was charged originally in the assessment order passed u/s 143(3) and in the order giving effect to the order of the CIT(A), the interest was reduced accordingly thus it is therefore, clear that there was no mistake apparent from the record in the order giving effect to the order of the CIT(A) and the AO has rightly rejected the rectification application u/s.154 against which the appeal under consideration is filed. - As the assessee has not raised any ground of appeal against charging of interest u/s. 2234B & 234C in the order passed u/s.143(3), thus through the rectification application, the appellant wants to raise the ground against the charging of interest by quoting wrong facts in the rectification application which cannot be accepted As no fault of the assessee in adjusting the cash against the advance tax even after written request had been made by the assessee, direction to the A.O. to give the credit of Rs. 23 lac as advance tax and charge interest after assuming advance tax paid Rs. 23 lac u/s 234B and 234C as per law
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2012 (7) TMI 485
Revised return – order of the CIT (A) treating the revised return filed u/s 139(5) as that of sec. 139(4), rejecting the claim on the ground, as no such claim was made u/s 139(1) - reason behind disallowance of claim made by the assessee since the assessee has not claimed deduction u/s 10A in the return filed u/s 139(1), the proviso to section 10A debars him from making any such claim in revised return – Held that:- assessee has fulfilled all the requirements of provisions of section 10A. However, this claim of the assessee not examined by the lower authorities - keeping in view the orders of the ITAT for the earlier assessment years 2006-07 and 2007-08, directing the AO to consider assessee’s claim for deduction u/s 10A - matter remanded back to the file of the AO directing him to consider assessee’s claim of deduction u/s 10A - appeal filed by the assessee is treated as allowed for statistical purpose.
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2012 (7) TMI 484
Unaccounted contract receipts - CIT(A)deleted additions made by AO - CIT(A) held that the additions made by AO are covered in the surrender of Rs.5 lacs made by the assessee during the course of assessment proceedings - Held that:- If this amount has been received in subsequent year and has been offered for tax this submission can be explained very well by furnishing the relevant abstract of books of accounts of contract receipts in the year under consideration and for the subsequent year. The assessee instead of furnishing such reasonable documents, tried to further explain which is just contrary to the earlier explanation that the amount was payable on account of E.D. royalty and others etc and also not supported by the relevant abstract of books of account which is very well in the possession of the assessee and the burden is on the assessee to furnish such information and details of documents to ascertain the correct fact - the CIT(A) has wrongly deleted the addition simply relying on assessee’s submissions without verifying the relevant facts - The set off allowed by the CIT(A) against surrender of Rs.5,00,000/- is not correct it was for deficiencies in vouchers etc - in favour of Revenue. Suppression of closing stock as it is shown in the balance sheet and not shown in the trading account - CIT(A)deleted additions made by AO - Held that:- Considering the assessee's submission that he has followed a system of accounting in respect of purchases to take net amount of repair & maintenance, part tyre tube, bitumen, diesel and material expenses verifiable from the copies of the ledger account of financial statement. Thus when purchases expenses have been debited to P/L account by net amount, naturally the stock in hand in this account remains in the respective individual account which can be said to be individual trading account. The corresponding effect of the accounting entries are shown by the assessee in the Balance Sheet - Additions made by AO deleted on above ground and not CIT's stand to set off from surrender amount - Against Revenue. Non incurring of any expense regarding the provision for legal and consultancy charges - CIT(A)deleted additions made by AO - Held that:- No infirmity in the order of CIT(A) as the assessee has surrendered Rs.5,00,000/- on account of non-producing the relevant bills and vouchers. Therefore, the separate addition is not warranted - in favour of assessee. Additions made on account of bogus liabilities - CIT(A)deleted additions made by AO - Held that:- Assessee filed a comparative chart of the result of computation of position of labour and material expenses but that does not help as the case of the A.O. was that these were outstanding liabilities for which the assessee has failed to prove that these liabilities were in fact outstanding. Further, the assessee failed to prove genuineness of these liabilities. - CIT(A) deleted the said addition without verifications - in favour of Revenue. Non Inclusion of contract receipt in work in progress - CIT(A)deleted additions made by AO - Held that:- The assessee has failed to furnish the details of closing stock as called for in the proforma the contention of the assessee that contract receipt for Rs.7,08,444/- is included in the WIP amounting to Rs.2638639/- is not acceptable because the assessee has failed to explain as how this amount is included in WIP - if this amount was included by the assessee in closing stock this amount should be appearing in the debit side of Balance-sheet but there is no entry appearing in the debit side of Balance-sheet - CIT(A)deleted the additions without finding the genuineness - in favour of revenue.
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2012 (7) TMI 483
Appeal before ITAT - authorization - The grounds which are not arising out of the order of the CIT(A) are not maintainable - According to section 253(2) of the IT Act, the Commissioner may, if objects to any order passed by Commissioner (appeals), direct the Assessing Officer to file appeal before the Appellate Tribunal against such order. Therefore, before filing of the appeal by the Assessing Officer, the directions/authorization of the Commissioner is required. The authorization of the Commissioner is available on record dated 05.09.2011 in which ground No. 1 to 5 have not been authorized by the ld. Commissioner for filing the appeal before the Tribunal. Therefore, these grounds have not been authorized by the ld. Commissioner for the purpose of filing the appeals before the Tribunal and further these are not arising out of the impugned order of ld. CIT(A).
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2012 (7) TMI 482
Demand of interest u/s. 201(1A) of the IT Act - late deposit of TDS - assessee has submitted explanation for late deposit of TDS on account of time involved in bank clearing, government holidays etc. – Held that:- Since the assessee has not deposited the amount of tax within the prescribed time, therefore, the assessee was liable for interest as per the above provisions. The time taken for clearing of cheques and government holidays and reasonable cause etc. are not the reasons, which could be considered while levying the interest against the assessee Excessive interest – Held that:- There may be some mistake in calculating the excessive interest as is demonstrated by the ld. counsel for the assessee on examining the payment of tax for the month of May, 2007 because the delay is apparently of 11 days but the AO treated the default for 60 days - to that extent, the matter remanded to CIT(A)
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2012 (7) TMI 481
Addition on account of share application money u/s 68 - CIT(A)deleted the additions made by AO - Held that:- The assessee is a Private Limited Company, accordingly all the relevant provisions of Companies Act are applicable in respect of receiving share application money and issue of shares, whereas assessee did not file relevant resolution passed by the Board of Directors or otherwise related to share application money as required under the Companies Act and CIT(A), without appreciating the facts that the assessee has failed to prove the genuineness of the transaction, deleted the addition - against assessee Rent receivable - Accrual of rental income - AO stated that assessee has shown rent for two months whereas he ought to have shown rent for ten months as the assessee followed Mercantile System of accounting - CIT(A)deleted the additions made by AO - Held that:- AO has calculated ten months rent merely on the ground that information under section 133(6) was not furnished by tenant and notices were retuned back and alleged that the assessee has failed to furnish correct address of tenant but ignored to note that the respective tenant is a Private Limited Company and the information regarding registered office would have been gathered from Registrar of Companies, if the AO was having doubt about the correct address, but no such exercise has been done by the AO - letter from Tenant confirmed the fact that the deposit of the property was given in the month of February, 2008, where he has admitted the mistake in TDS certificate and confirmed they have paid rent only for February & March, 2008 also confirmed the balance in their books of account which tallied with the books of account of the assessee - in favour of assessee.
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2012 (7) TMI 480
Disallowance out of Car and Telephone Expenses at 1/6th of the total expenditure - assessee is running the business with the help of its employees and the town of Pilkhuwa which is having narrow lanes, the places are reachable in a very short time due to less distance – Held that:- Personal use of the car and telephone could not be ruled out - disallowance out of car expenses and telephone expenses is restricted to 1/10th of these expenses on account of personal use Addition on account of gift received by assessee - income u/s 68 - gift was received through cheque and the assessee has filed copy of the gift deed in evidence of the gift having been received by the assessee - copy of the donor’s bank account on which the cheque for the amount of gift was issued was also furnished to the Assessing Officer - gift deed was executed between the donor and donee and copy of gift deed was filed during the course of assessment proceedings - donor has explained further regarding the source of the cash deposits made by her in her savings bank account and has stated that these were out of the interest income received by her from time to time which was kept at home and the interest income was declared in her returns of income – Held that:- Assessee has discharged its onus of proving the identity and creditworthiness of the donor and the genuineness of the transaction of gift. The Revenue could not bring any material on record to doubt any part of the statement on oath of the donor recorded by the Assessing Officer wherein she has explained source of the gift amount made by her - addition is accordingly deleted – In favor of assessee
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2012 (7) TMI 479
Disallowance of 50% of packing charges and labour charges - CIT(A) deleted the additions - Held that:- The assessee’s claim is cogent one that persons engaged in the packing are not skilled labourers and are paid cash as they are not having any bank account. Thus, there is no necessity to maintain detailed records of temporary workers who finished the work assigned to them in a short span of time and that as assessee has paid piece rate charges in these circumstances, the quantum of expenditure can be compared to production done by the labour - This shows that the percentage of labour charges and packing charges to the turnover compares favorably with the percentages of expenses claimed in the earlier and subsequent years. AO has made adhoc disallowance of 50% of packing charges and labour charges without pointing out the specific expenditure under those heads - in favour of assessee. Deletion of addition made on account of shortage in production by CIT(A) - Held that:- CIT(A) has given a finding that assessee is maintaining the complete details / particulars of opening stock, purchases, consumption, production and sales which were verified by the AO and accepted without pointing out any deficiency or defect in them. Thus in these circumstances provision of section 145(3) have been incorrectly resorted to by the AO. Furthermore, AO has partly rejected the books of account, which is not tenable - in favour of assessee. Addition on account of disallowance u/s 40(a)(ia) - Held that:- The assessee has made payments to the three transporters mentioned in the assessment order for each order of transport executed by them. As the assessee has no contract for transport with any transporter, thus each GR Note becomes a separate contract and since the value of such contract does not exceed Rs. 20,000/- the assessee was not required to deduct tax at source from the said payments - the Board Circular No. 715 dated 8.8.1995 comes to the rescue of the assessee - the AO has not brought on record any document to show that the assessee had contract with any transporter and thus just because the payments exceeded Rs. 50,000/- there was no implicit reason to hold that the payments were made in pursuance to a contract - in favour of assessee. Disallowance of commission paid to foreign agents - Held that:- As assessee has made the payment of commission to non-resident agents for business procured abroad. Thus, the nonresident agents operated outside the country, no part of their income arises in India. Further, since the payment was remitted directly abroad it cannot be held to have been received by or on behalf of the agent in India - Board Circular No. 786 dated 7.2.2000 & CBDT Circular No. 23 dated 23rd July, 1969 is relevant for this case - CIT(A) has given a finding that in earlier years such expenditure have been allowed in the scrutiny assessment u/s. 143(3) - in favour of assessee. Disallowance of vehicle expenses and telephone expenses - CIT restricted the diss allowance to to 1/ 10th instead of 1/5th & 1/3rd respectively by AO - Held that:- 1/10th disallowance against the impugned expenses is reasonable and has been also so held by the tribunal in assessee’s own case in earlier year assessment year 2001-02 no point of rejecting the order of the Ld. CIT(A) - in favour of assessee. Deletion of addition on account of household expenses by CIT(A) - Held that:- Addition in this case has been made by the AO, in a purely arbitrary manner and without any basis and documentary evidence, thus deletion is warranted - in favour of assessee.
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2012 (7) TMI 478
Addition on account of expenses incurred by the appellant on its foreign visit on business visa to Melbourne - Business trip to expand present business offsore at Melbourne – Held that:- where the existing business is to expand or set up a new unit in the same fold, the expenditure incurred in setting up such a unit of existing business is admissible business expenditure - management of its aforesaid overseas unit at Melbourne and its old proprietary business Jeevan Enterprises here in India is the same – In favor of assessee
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2012 (7) TMI 468
Powers of CIT(A) under sec. 263 - revision - denial of an opportunity of hearing to the assessee - Held that:- Section 263 contemplates that the Ld. Commissioner may call for and examine the record of any proceedings if he considers that any order passed therein by the AO is erroneous in so far as it is prejudicial to the interest of the revenue after giving the assessee an opportunity of being heard and after making necessary inquiries as he deems fit pass such orders thereon as the circumstances of the case justify - to hold dwell charge at the end of Ld. Commissioner and the paucity of time at a particular station cannot be valid reason for denying an opportunity of hearing to the assessee - because the act provides an opportunity of hearing before taking any action u/s 263 and such opportunities cannot be substituted in a subsequent proceedings his order deserves to be set aside - in favour of assessee.
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2012 (7) TMI 467
Addition on account of unexplained purchases u/s 69C of the Income Tax Act – section 69C would apply only when there is some expenditure for which the assessee is not in a position to explain the source of the same – Held that:- section 69C refers to the ‘source of the expenditure’ and not to the expenditure itself. In the instant case before us, indisputably, the purchases and sales are accounted for in the books of accounts. Thus, source of the expenditure incurred in purchases is obviously explained. - Decided in favor of assessee.
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2012 (7) TMI 466
Disallowance under Rule 8D - business of activities of sales purchase in shares and securities - assessee also earned dividend from these shares and securities – Held that:- Disallowance u/s 14A can only be invoked where Assessing Officer is not satisfied with the correctness with the claim of expenditure made by the assessee or no expenditure has been incurred - application of Rule 8D of the Rules is not automatic. When the assessee makes the claim regarding the quantum of expenses to be disallowed in terms of section 14A of the Act, it was incumbent on the part of the Assessing Officer to consider the claim of the assessee - Assessing Officer has proceeded to apply Rule 8D without giving any finding with regard to the correctness of the claim made by the assessee regarding the disallowance to be made u/s 14A of the Act. The CIT(A) has also proceeded on the same basis - matter is remitted to the file of the Assessing Officer - appeal filed by the department allowed for statistical purposes.
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2012 (7) TMI 465
Justification on levy of interest u/s 234B - CIT(A) deleted levy of interest - assessee's return declaring book profits in terms of provisions of section 115JB - Held that:- The CIT(A) without analyzing the facts of the case deleted levy of interest merely on the submissions of the assessee and did not analyse the facts of the case in the light of decision of the Hon’ble Supreme Court in the case of JCIT Vs. Rolta India Ltd.[2011 (1) TMI 5 (SC)] holding that section 115JA/115JB is a self contained code and all the companies were liable for payment of advance tax u/s 115JB and consequently, the provisions of section 234B and 234C were applicable in the event of default in the payment of advance tax. Section 250(6) mandates that the order of the CIT(A) while disposing of the appeal shall be in writing and shall state the points for determination, the decision thereon and the reasons for the decision whereas a mere glance at the impugned order reveals that the order passed by the ld. CIT(A) is cryptic and grossly violative of one of the facets of the rules of natural justice that every judicial /quasi -judicial body/authority must pass a reasoned order, which should reflect application of mind by the concerned authority to the issues/points raised before it which was missing in the order - as the impugned order suffers from lack of reasoning and is not a speaking order the case is restored back to file of CIT(A) with the directions to readjudicate the issue - decided against assessee.
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2012 (7) TMI 464
Denial of exemption claim u/s 80-IAB - the assessee has not completed that minimum built up area by the end of the previous year relevant to the assessment year under question - the developed portion of the SEZ cannot be given on lease before completing the development of entire approved land - Held that:- This presumption is against the law stated in the SEZ Act as Rule 6(2) of the SEZ Rules, 2006 provides that the letter of approval of a Developer granted shall be valid for a period of three years within which time at lease one unit has commenced production and the SEZ become operational from the date of commencement of such production. It is clear from the above Rule that the SEZ Act does not contemplate that a Developer can assign the land to the entrepreneurs only after completing the development of the entire approved land. The condition specified in the Rule to sustain the validity of the approval is that at least one unit should commence production and to that extent, the SEZ should become operational - The objection of not having developed land of one lakh sq. mtrs. thus fails. Income declared by the assessee company has not been derived from the business of developing SEZ - Held that:- The assessee is a company engaged in the business of developing sector specific SEZ for IT and IT Enabled Services been granted approval by Government of India. By virtue of overriding effect of the SEZ Act, 2005, it is an established fact that the company is a Developer who is engaged in the business of developing SEZ - assessee is the developer and it need not do any other business to claim the benefit of deduction under sec.80-IAB - Assessee's SEZ is sector specific and is not required to run operating units - the only income derived in the hands of the assessee developer will be the lease rent and other service charges if any - the profits and gains of business of a developer contemplated in sec.80-IAB for the purpose of deduction thereunder, is nothing but lease/rental income. Therefore, it made it clear that the lease rental income generated in the hands of a Developer engaged in setting up of the SEZ, is the profits and gains derived from the business of developing a SEZ. Land given on a perennial lease of 99 years with further scope of renewal which in effect is nothing but a sale - Held that:- SEZ Act, 2005 overrides the provisions of the Income-tax Act, 1961 for deciding the basic character of transactions entered into by the Developer and the approved entrepreneurs it is clear that the assessee-Developer has proceeded with the allotment of developed area on lease hold basis to the approved entrepreneurs, the period of lease is 99 years which is permissible under the SEZ Act, 2005 and where there is no right of sale, the possible way is only lease. It may be a perennial lease but that does not change the character of the lease - when the SEZ Act, 2005 provides that it is not permissible for a Developer to sell the land in a SEZ, it is not conceivable in law that the assessee can transfer the ownership of the property to the approved entrepreneurs through any other means. Therefore, there cannot be a case of capital gains arising in the hands of the assessee - decided in favour of assessee.
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2012 (7) TMI 463
Computation of capital gains - self generated assets like trade mark or brand name - Held that:- Where the cost of acquisition of the capital asset is nil then the computation provision fails and the transfer of goodwill not give rise to capital gains tax. Prior to the amendment made to Section 55(2) by the Finance Act, 2001 effective from 1/4/2002 by adding the words “trade mark or brand name associated with the business” self generated assets such as trademark did not have any cost of acquisition - as amendment bringing self generated intangible assets such as trademark to capital gains tax only with effect from AY 2002-03 onwards in this case AY is 1999-2000 and therefore, the amendment would not have any effect - in favour of assessee.
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2012 (7) TMI 462
Dis allowance of Business Promotion expenses - being of non-business views - Held that:- The invoice submitted by assessee reveals the purpose that the business promotion expenses were incurred as commissioning advance for value assessment of commercial plot in Noida and AO disallowed business promotion expenses only on cryptic reason stating that no details and purpose was given or offered by the assessee - the purpose of above payment as business promotion expenses was properly explained by the assessee as the fresh evidence submitted by the assessee and admitted after due procedure as provided in Rule 46A of the ITR - decided against revenue. Addition on account of deemed dividend u/s 2(22)(e) - the assessee company has taken loan from A.P. Projects Ltd. - Held that:- Shri Pankaj Bajaj was director of the assessee company and he was also a director in the lender AP Projects Private Limited during the year under consideration. In view of the exception as per sub-clause (ii) of Section 2(22)(e, the provisions of deemed dividend are not applicable as the appellant assessee company was not a shareholder in lender A.P. Projects Private Limited and Section 2(22)(e) of the Act is not applicable to a non shareholder - against revenue.
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2012 (7) TMI 461
Refusal of registration u/s 12AA and 80-G of the Income-tax Act - Assessee submitted the required documents, audited accounts along with copies - specific non compliance is not mentioned - CIT, for want of information, rejected the applications of the applicant for registration u/s 12AA as well as u/s 80G of the I.T. Act – Held that:- CIT has not indicated the nature of information not furnished and without considering the documents filed by the applicant along with applications for registration u/s 12AA/80G has rejected assessee’s claim solely on the ground that applicant could not file most of the informations call for . We find force in the argument of ld. counsel that CIT failed to consider the claim of the applicant on merit, without considering the record and affording opportunity of being heard to the applicant on alleged non compliance – matter ramanded to CIT - appeal allowed for statistical purposes only
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2012 (7) TMI 460
Long term capital gain - exemption / deduction u/s 54 - Alternate claim out of two investment in residential properties - for construction of a residential property and for an apartment - due to reasons beyond the control of the builder, the construction would not be completed before the time limit to construct a residential house - assessee had taken the possession of the immovabale property at Park View Apartments within three years from the date of sale of the residential property - in the case of ACIT vs. Smt. Sapna Dimri, the exemption u/s 54 of the Act has been allowed under almost similar circumstances in favour of the assessee while following various precedent - decided in favor of assessee.
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2012 (7) TMI 459
Dis allowance of Deduction u/s 80HHC - assessee contested for not allowing appropriate amount of deduction by holding that the entire amount received on the sale of DEPB represents profits chargeable to tax under section 28 (iiid)- Held that:- DEPB is a kind of assistance given by the Government of India to an exporter to pay customs duty on its imports and it is receivable once exports are made and an application is made by the exporter for DEPB, therefore, no doubt that DEPB is “cash assistance” receivable by a person against exports under the scheme of the GOI and falls under clause (iiib) of Section 28 and is chargeable to income tax under the head “Profits and Gains of Business or Profession” even before it is transferred by the assessee - while the face value of the DEPB will fall under clause (iiib) of Section 28 the difference between the sale value and the face value of the DEPB will fall under clause (iiid) of Section 28 and it was not right in taking the view that the entire sale proceeds of the DEPB realized on transfer of the DEPB and not just the difference between the sale value and the face value of the DEPB represent profit on transfer of the DEPB - in favour of assessee.
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2012 (7) TMI 458
Commission versus Rent - Whether TDS was required to be deducted in terms of provisions of sec. 194H or 194 I of the Act - AO invoked provisions of sec. 194I of the Act on the ground that agreements were for rent payments and not commission – Held that:- Specific clause in agreements that the exclusive possession will be with the franchisee and not the assessee - when the assessee is not only not in physical possession and there being no fixed rent payable while the francisee have to receive commission on the basis of turnover or on mutually agreed terms, it is evident that the aforesaid two agreements are truly of franchise and can, by no stretch of imagination, be treated as a tenancy in favour of the assessee - assessee rightly deducted TDS in terms of provisions of sec. 194H of the Act in respect of payments. Provisions of sec. 40(a)(ia) of the Act – Held that:- Assessee deducted and paid tax in accordance with the provisions of sec. 194H of the Act in relation to payments - there is no violation of provisions of sec. 40a(ia) of the Act - even in the event of any shortfall in deduction of tax at source, provisions of sec. 40a(ia) are not attracted
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2012 (7) TMI 457
Adjustment of cash seized during the search - while filing return in compliance to the notice issued u/s 153A, the assessee has computed his income tax liability by taking credit of the cash seized in course of search and seizure operation - AO has accepted the income declared in return filed u/s 153A of the Act, but has not adjusted the cash seized towards the tax liability - nothing on record to show that there is any other existing liability excepting the income tax liability - Held that:- Assessee is entitled to adjustment of seized cash against his income-tax liability - AO to re-compute the tax liability - after adjusting the seized cash from the date of request made by the assessee and thereafter consider charging interest u/ss 234A, 234B and 234C in case there is still any default in discharging the tax liability – In favor of assessee
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2012 (7) TMI 456
Addition is made on the ground that there is under-recovery of sale proceeds on an inference that there is a sale – Held that:- Once the agreement is not doubted and the income has been disclosed in the hands of one of the co–developers, it would be not correct for the Revenue to step in and decide what should be the share of each party - When the income on this area has been offered to tax by the sister concern - it is not proper for the Assessing Officer to sit in the judgment as to which firm is entitled to the revenue on this area of 1628.21 sq.ft. There is no loss to the Revenue as one of the sister concerns has offered the income in question to tax - addition would amount to taxing the same amount in the hands of two assessees which would be bad–in–law.
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2012 (7) TMI 455
Whether CIT erred while passing the order under section 263 of the Income Tax Act, 1961 wherein the order under section 263 has been passed based on the change of opinion – Held that:- On change of opinion, the CIT cannot assume his jurisdiction under section 263 of the Act - Assessing Officer erred in calculating the exemption u/s. 10A of the I.T. Act after deducting the telephone charges from the export turnover - Once an appeal is taken and is decided the original order merges in the appellate order and thereafter it is the appellate order which is operative and enforceable - order of the CIT passed under section 263 of the Act cannot be survived - appeal of the assessee is allowed.
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2012 (7) TMI 454
Recalling of order - Rectification of mistake – Held that:- Tribunal's power under section 254(2) is not to review its earlier order but only to amend it with a view to rectifying any error apparent from the record. The power of rectification under section 254(2) of the Income-tax Act can be exercised only when the mistake which is sought to be rectified is an obvious and patent mistake which is apparent from the record, and not a mistake which requires to be established by arguments and a long drawn process of reasoning on points on which there may conceivably be two opinion - recalling of the orders of the Tribunal for the AYs 1999-00 to 2007-08 for re-adjudicating the issue in question afresh, as prayed in the Misc. applications would tantamount to review/revision of the order of the Tribunal, which is not permissible in law - no any merit in the present Misc. applications and as such, the Misc. applications filed by the assessee are dismissed
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2012 (7) TMI 453
Rejection of books of accounts u/s 145(3) of the I T Act - Applicability of AS-1 / AS-7 (revised) - addition by way of net profit @ 8% on cost incurred on closing balance of WIP - assessee is following this uniform method of accounting since beginning and the revenue has accepted the same for the AY 2004-05 while passing the assessment u/s 143(3) – Held that:- Contract of installation of elevators/lifts, assesseee’s responsibility and liabilities extent even after the execution work is completed - project cannot be treated as completed until and unless the execution of installation work is completed by the assessee - receipts of advance or part payments of the contract amount itself would not necessary means that the project is completed even to the extent of percentage of receipt of the amount - authorities below are not justified in estimating the profits on percentage basis as per the work in progress shown by the assessee - in favour of the assessee
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2012 (7) TMI 452
Trading liability or capital liability - income u/s 2(24) read with section 41(1) - the credit balance/s, written back in terms of the rehabilitation scheme approved by the Board for Industrial and Financial Reconstruction (BIFR) included not only those on account of trading operations, but also on account of import of plant and machinery. - held that:- The write back under reference a receipt of capital nature. - however the credit written back being admittedly on account of import of plant & machinery, the cost of the relevant assets would be required to be recomputed, being not incurred to that extent (s. 43(1)). Trading liability or capital liability - income u/s 2(24) – Held that:- Without doubt, the nature of the liability stands to be determined independently, and the fact of the sum being credited to the running account of the said party, though relevant, cannot be considered to be conclusive or determinative of the matter, as assumed by the Revenue. - In any case, if it, as contended, represents a loan liability, i.e., on capital account, its write back would without doubt be only a capital receipt in the hands of the assesseecompany. - matter restored to the file of AO. Disallowance u/s. 36(1)(va) r/w s. 2(24)(x) of the Act - payment of the employee’s contribution to the Provident Fund being made by the assessee belatedly – Held that:- Payment in respect of the employee’s contribution to the welfare funds, as the EPF and ESI, by the assessee-employer would stand to be allowed as deduction where the contribution was made by the due date of filing the return of income under the Act – Against revenue Addition in respect of legal and professional charges paid/payable - by invoking the provision of section 40A(2)(a) of the Act - AO made a generalized statement to the effect that the consideration for such services, i.e., Rs. 104.66 lacs, exceeds the legitimate needs of the assessee-company for its business, treating the same to be unreasonable and excessive – Held that:- Onus u/s 40(A)(2) being directly on the Revenue - same has not been discharged by it in any manner - details of the charges raised qua various services performed or charged for is available, that would yield the basis for a decision with regard to the reasonability thereof, including with reference to the legitimate needs of the assessee’s business, could if at all be taken; in the clear absence of which, the Revenue’s case is no more than an allegation or a surmise - appeal by the Revenue is dismissed
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2012 (7) TMI 451
Addition on account of sundry creditors - deemed income u/s 41(1) - AO observed that in 21 cases there was no change in the outstanding balance in AY 2007-08 and 2008-09 - Assessee did not furnish the details called for but submitted copies of purchase bills in the case of 9 parties - In case of 3 parties the letters issued u/s 133(6) were returned undelivered by the postal authorities with the remarks “not known”. The remaining 5 parties stated that as per their books of accounts, they had no transactions with the Assessee for Financial years 2005-06 to 2007-08 and as such no amount is due to them from the Assessee - Held that:- Appellant was not able to explain how the appellant could ever repay these parties because he neither knew their correct addresses or any details of the agents through whom the purchases were made from these parties - Liability has ceased to exist and accordingly taxed it u/s 41(1) of the Income Tax Act - With respect to the action of CIT (A) in deleting the addition with respect to 5 parties CIT(A) has given a categorical finding that the enquiry made by the AO was not proper as the bills issued by the parties related to period prior to 31.3.2001 whereas the AO had asked those parties about the transactions carried out in FY 2005-06 to FY 2007-08. The existence of these 5 parties was therefore not in doubt - CIT (A) deleted the addition - no infirmity in the order of CIT(A) and therefore no interference is called for in his order
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2012 (7) TMI 450
Disallowance of expenses under Section.14A - alleged to be relatable to earning the dividend income, by applying Rule 8D – alleged that assessee's income included exempted income and the assessee has not segregated and excluded any expenditure pertaining to the exempted income, invoked the provisions of sec.l4A of the Act - Assessing Officer, before invoking the provisions of Rule 8D r.w.s.14A of the Act, has not given the reasons as to why he was invoking the provisions of Rule 8D r.w.s.14A of the IT Act – Held that:- Provisions of Rule-8D can be invoked only if the Assessing Officer is not satisfied with the claim of the assessee - Assessing Officer is satisfied that there was an element of expenses involved in earning the exempt income and the assessee has not shown the same - matter remanded back to the file of the Assessing Officer for adjudicating the same afresh - appeal of the Assessee is allowed for statistical purposes
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2012 (7) TMI 449
Penalty under section 271(1)(c) of the Income-tax Act - in the course of the search and seizure action, assessee admitted certain additional income in the course of statement recorded under section 132(4) of the Act - appellant has stated that since he has made the declaration u/s 132(4), and paid taxes on it, he is entitled to benefit of immunity under clause (2) of Explanation 5 to sec. 271(1)(c) – Held that:- Income which has not been disclosed so far in his return of income to be furnished before the expiry of time specified in s. 139(1) in clause 2 of explanation are intended to cover only such situations where the time-limit specified in s. 139(1) did not expire as on the date of the search - declaration of income was made for the earlier years for which due date for filing the return of income has already expired prior to the date of search - appellant is not entitled to benefit of immunity prided under clause 2 of Explanation 5 for the declaration made for the year under appeal - appeals are dismissed
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Customs
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2012 (7) TMI 477
Confiscation of the goods on the charges of mis-declaration and for imposition of penalty – Held that:- Declaration was in accordance with the papers issued by the foreign supplier, the appellant himself came forward indicating presence of rerollable scrap and the appellant's request for mutilation of the same - no justifiable reasons for confiscation of the imported consignment or for imposition of penalty upon the appellant - same is accordingly set aside and appeal is allowed
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2012 (7) TMI 448
Waiver of the demurrage and detention charges - confiscated the goods for the contraventions of misbranding and adulteration under the Prevention of Food Adulteration Act, 1954 - goods are prohibited for importation into India - consignments to be re-exported on payment of redemption fine and penalty – Held that:- Demurrage charges and other incidental charges for goods detained in the customs area are required to be paid by the exporter consignor even if such goods were illegally detained - delay in redemption and re-export till date has been entirely caused on account of the appellants filing appeals first before the lower appellate authority and then before the Tribunal – against assessee
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Service Tax
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2012 (7) TMI 503
Cenvat credit – refund – duty paid under protest - department took objection for the debiting of interest amount in the cenvat account - refund claim for the excess amount paid – Held that:- Original debit in the cenvat account was under protest and the second payment was made since, the department objected to debiting of interest in the cenvat account - Second payment has to be taken as part of the payment made originally and it cannot be said that there was no protest as regards the second payment when it was rectification of an error committed in debiting the interest amount in the cenvat account - amount paid by the appellant has to be treated as paid under protest - original adjudicating authority's decision to allow the refund by way of credit in the cenvat account is correct – pre-deposit waived
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2012 (7) TMI 502
Demand of service tax, interest and penalty - Collection of advance fee from students - services were brought into the Service Tax net w.e.f . 01.07.2003 - appellant has been collecting the advance fees from the students during the period from April 2003 to June 2003 – Held that:- they are liable to pay Service Tax on the amount collected as advance fees by them from their students prior to the said services came into the Service Tax net. appellant is liable to discharge the Service Tax liability and interest thereof on the amount collected by them and considering the said amount as cum tax value. Regarding penalties under Section 76 & 78 – Held that:- in the mind of the assessee during the relevant period as to the taxability of the amounts which were collected in advance. Appellant has made out a case for invokation of Section 80 of Finance Act, 1994 and by invoking the provisions of Section 80 of Finance Act, 1994, penalties imposed under Sections 76 & 78 of Finance Act, set aside. lower authorities will calculate the Service Tax amount, interest thereof payable by the appellant, considering the amount collected by the appellant as cum tax amount.
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2012 (7) TMI 501
Club or association services – demand of service tax – Held that: - Rejection of the appellant’s appeal for a refund claim as per section 96J on the ground that the matter is pending before the Tribunal. It was submitted that the appeal filed by them against the rejection is pending with Commissioner (Appeals). Therefore no concern with service tax liability on subscription collected by the appellant from their members under club or association service. Business auxiliary service - collecting advertisement charges from manufacturers of medicines for publishing the details of the medicines manufactured in the "Chemist News" in monthly publication of the appellant – Held that:- The activity undertaken by the appellant cannot be considered as promotion or marketing or sale of goods produced AS details such as name of the company, name of the product, packing details, category, VAT payable, stocks price, retailer price, MRP and whether the price includes local tax or not are of use only to the chemists and druggists - the purpose is to help the members of the association to know the margins and also to ensure that by at correct price and get the proper margins in their business - mere publication of name of the company and the details explained above cannot amount to sale or promotion. Sale of space - it is quite clear that the activity undertaken by the appellant is nothing but sale of space - details of "Chemist News" submitted by them for the purpose of registration to support this submission that the monthly news is nothing but a newspaper - the service cannot be classified under business auxiliary service as the service is more specifically covered under the heading sale of space as the activity undertaken is only sale of space in monthly news - in favour of assessee.
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2012 (7) TMI 500
Goods Transport Service – no service tax paid – Held that:- When the transporter is same and recipient is respondent and there is no contradiction that tax was collected from the transporter, double taxation on the same transaction is inconceivable under the present provisions of Finance Act, 1994 - no loss of Revenue - Revenue appeal dismissed.
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2012 (7) TMI 499
Manpower Recruitment and Supply Agency Service - stay application for demand of service tax along with interest and various penalties - Held that:- As prima facie the activity undertaken by the applicant is covered under Manpower Supply Services and the applicants are under bonafide belief that their demand for the extended period is not sustainable, therefore, the applicant has failed to make out a case for 100% waiver of pre-deposit for the normal period - against assessee.
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2012 (7) TMI 472
Default in payment of Service Tax - Courier Service - M/s. Professional Courier Services made a claim that they were only providing co-loader service and the appellant was the one who had provided courier service to the service receivers - Held that:- CA of the appellants submitted a certificate issued by Regional Manager of M/s. Professional Couriers certifying that appellant was working as employees in its branch and income of period 1999-2000 and 2000-2001 was of M/s. Professional Couriers - the appellant became a franchisee w.e.f. March 2001 only and prior to that period they were only employees and the liability had to be discharged by the M/s. Professional Courier Services - as the matter is required to be reconsidered the impugned order is set aside and the matter is remanded to the original adjudicating authority.
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2012 (7) TMI 471
Reduction of penalty by Comm(Appeals)- penalties imposed u/s 75A,76,77,78 by original adjudicating authority - Held that:- Since penalty under Section 78 has been imposed, penalty under Section 76 need not be imposed - a small scale unit need not have to be inflicted with penalties under all these sections - as the appellant is a small scale person and in view of the fact that for a period of four years the total demand for service tax comes to Rs.27,568/- it can be said that provisions of Section 80 can be applied in this case for full waiver of penalty - against revenue.
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2012 (7) TMI 470
Penalty under section 77(c) on Director - delay in payment of service tax - Held that:- No provision for imposing personal penalty on the Director therefore, the impugned order is not sustainable - against revenue..
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2012 (7) TMI 469
Refund claim – amendment in the scope of existing services - works of drawings and blue print and interior decorator services - assessee claimed wrong deposit under construction services – Revenue claim that the services undertaken correctly fall under the category of construction services as per Section 65 (30a) for the period in question – Held that:- The definition of construction services was amended along with the new heading clause 'c' of Section 65 (25b) with effect from 16.6.2005 relate to the completion and finishing services - if the Revenue's stand that such services were covered by the earlier definition is accepted, the newly introduced clause 'c' would become redundant as there is no need to introduce the said clause - the activities undertaken by the respondents were the services contained in the definition under newly introduced clause 'c' of Section 65 (25b) of the Act with effect from 16.6.2005 and not clause 'b' of Section 65 (30a) as it existed prior to 16.6.2005 – against revenue.
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2012 (7) TMI 447
Whether service tax paid on CHA services in respect of export of goods can be allowed as credit or not – Held that:- Government under Notification No. 17/2009-ST dated 7.7.2009 has since granted exemption to various taxable services provided to an exporter. CHA services are also exempted under Sl. No. 11 to the Table annexed to the said Notification. The present cases have arisen apparently in the absence of exemption notification for the previous period. The only way freeing export goods from domestic taxes can be ensured for the period relevant to these appeals is to allow credit of the service tax paid on the CHA and other services in respect of the export consignments so that the exporter would be compensated either by utilization of such credit for payment of other taxes or by taking refund when such utilization is not possible - appeal is allowed holding that the credit is admissible
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Central Excise
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2012 (7) TMI 476
Waiver of pre-deposit - Appellant is required to pay 8% or 10% of the amount of exempted products cleared by them from their factory premises, as per the provisions of Rule 6 of Cenvat Credit Rules, 2002/2004 – Held that:- Appellant cleared exempted product falling under Chapter 31 of Central Excise Tariff Act, 1985, at the nil rate of duty - appellant has taken cenvat credit on the inputs and used them for manufacturing bulk drugs and this product Penmycellium Meal has arisen as a waste during the process of manufacturing – Decision in the case of Rallis India Limited (2008 (12) TMI 46 - BOMBAY HIGH COURT) followed. – Appeal is allowed
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2012 (7) TMI 475
Stay - condonation of delay – Held that:- There was an affidavit filed by a person who received the order in original and had stated that after receiving the order in original he placed it in the cupboard and forgot to handover the same to the management. Any statement on oath, whether it is of a Clerk or a Managing Director, needs to be considered in a proper perspective. In our view, in application for condonation of delay such affidavit should have been considered in an objective manner and not in narrow - justifications given by the appellant before the first appellate authority for delay in filing appeal are to be accepted – delay condoned - Stay petition allowed and appeal is allowed by way of remand.
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2012 (7) TMI 474
Cenvat credit – Rule 6 - Maintenance of separate accounts - manufacturers of sugar and molasses - two waste products are generated pressmud and waste water which for complying with the environmental regulations, are mixed together and converted into bio-compost which is sold by them – alleged that since bio-compost is an excisable product under Chapter 31 of the Central Excise Tariff with nil rate of duty, same would be an exempted goods as defined in Cenvat Credit Rules, 2004 - no separate account and inventory have been maintained - appellant required to pay an amount equal to 5% of the sale value of bio-compost – Held that:- Show cause notices issued in these cases are defective inasmuch as neither of the show cause notices indicates as to which are the input and input services used which have resulted in the generation of press-mud which was converted into bio-compost - orders are set aside and the appeals are allowed
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2012 (7) TMI 473
Reduction of the cost freight and insurance charges incurred for carrying the goods from the depot to the customer’s end would make the wholesale price available ? - Held that:- The assessee become liable to pay excise duty at the time of removal of the manufactured goods from its factory, but such duty is leviable on the wholesale price of the manufactured goods. The assessee does not have any wholesale market either outside its factory gate or at anywhere else, the Law authorizes reduction from the retail price, such amount, as is necessary and reasonable to arrive at wholesale price - while there is no direction that the freight and insurance charges for carrying the goods from the factory to the depot is to be reduced from the retail price, there is no bar in reducing the same and, while doing so, as provided in the proviso, the proper officer is required to take note of the nature of the excisable goods, the trade practice in that commodity and other relevant factors. The instant matter stood closed as far back as in 2003 decided in favour of the assessee, it would not be appropriate to interfere with the judgment of the Tribunal - but in future it will be permissible for the revenue to go into the question whether the entire freight and insurance, as paid by the assessee, for carrying the goods from its factory to different depots would stand the test of necessity and reasonableness having regard to the nature of the goods dealt with, the trade practice in the commodity and other relevant factors.
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2012 (7) TMI 446
Applicability of compounded levy scheme - determination of annual production capacity - Commissioner has fixed the annual capacity of production of the appellant under the Hot Re-Rolling Steel Mills Annual Capacity Determination Rules, 1997 on the basis of the report dated 25.09.1997 of the Superintendent of central excise - Superintendent has accepted all other parameters except the d -factor which according to him was 170 MT and not 155 MT – Held that:- Superintendent while discharging his statutory function under the provisions of law ought to have been meticulous and careful as the verification done by him would be crucial for determination of the annual capacity of production, the basis for payment of duty by the appellant/assessee - there cannot be any assumptions and presumptions in justifying an improper verification report by the said Superintendent which got regularized by him consequent to the failure on the part of the senior officers to get the joint verification completed on 17.10.1997 - order set aside and appeal filed by the appellant allowed
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2012 (7) TMI 445
Demand invoking extended period of limitation u/s 11A - wrong claim of Exemption Notification No.7/94-CE - Held that:- The appellants have been procuring the sulphuric acid for the manufacture of magnesium sulphate under Chapter X obtaining a CT2 certificate from the jurisdictional officer having control over their factory and who was well aware of what was being manufactured by the appellants. This position was also borne out from the earlier Board s circular of 1994 and that there was a change in the situation with the issue of the circular in 1998 was obviously not known to both sides - it would not be proper to uphold the demand for the extended period of limitation under Section 11A - the appellants are liable to pay the demanded duty only for the normal period of one year counting the same backwards from the date of issue of SCNs along with interest thereof - partly in favour of assessee.
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2012 (7) TMI 444
Cenvat credit – suo motu credit on the amount paid by assessee erroneously earlier – Held that:- Any excess payment made to the Department ought to be claimed by filing a refund claim as prescribed under Section 11B of the Central Excise Act - suo motu credit of the amount erroneously paid is not authorized under the Central Excise Act and Rules made thereunder - suo motu credit availed by the appellant is inadmissible to them Penalty – Held that:- Commr. has erred in imposing penalty without issuing them any notice as required under Section 35A (3) of the Central Excise Act and also erred in not mentioning the specific provision under which penalty of Rs.10,000/- imposed - penalty imposed on the appellant by the Ld.Commr. (Appeal) is set aside - Appeal partly allowed.
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Indian Laws
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2012 (7) TMI 498
Prohibition of horse-racing on unlicensed race- courses - Validity of the demand notice was questioned by the appellant as delegation of powers u/s 11 to the Lt. Governor to fix the licence fee without any guidelines is excessive delegation of legislative power and is therefore ultra vires and in the absence of an element of quid pro quo, the licence fee charged was not in the nature of a fee but a tax and the ten fold increase in licence fee was highly excessive - Held that:- In the instant case, it is plain from the scheme of the Act that its sole aim is regulation, control and management of horse-racing. Such a regulation is necessary in public interest to control the act of betting and wagering as well as to promote the sport in the Indian context. To achieve this purpose, licences are issued subject to compliance with the conditions laid down therein and violation of the conditions is penalised under the Act besides a provision for cognizance by a court not inferior to a Metropolitan Magistrate. To ensure compliance with these conditions, the 1985 Rules empower the District Officer or an Entertainment Tax Officer to conduct inspection of the race club at reasonable times. For the purpose of enforcement, wide powers are conferred on various authorities to enable them to supervise, regulate and monitor the activities relating to the race course with a view to secure proper enforcement of the provisions. Therefore, by applying the principles, it is clear that the said levy is a 'fee’ and not 'tax’. A licence fee imposed for regulatory purposes is not conditioned by the fact that there must be a quid pro quo for the services rendered, but that, such licence fee must be reasonable and not excessive. It would again not be possible to work out with arithmetical equivalence the amount of fee which could be said to be reasonable or otherwise. If there is a broad correlation between the expenditure which the State incurs and the fees charged, the fees could be sustained as reasonable. The object of the Act, as synthesized from its provisions, is to regulate, monitor, control and encourage the sport of horse-racing. For this purpose, licences are issued subject to certain conditions. The compliance with the licence conditions is inevitable for renewal of the licences as well as significant to avoid any penalty under the Act. To ensure such compliance, as aforesaid, district officers/ entertainment tax officers are entrusted with the duty of inspection it is not of a general nature but requires expertise and training and also constant vigil on the activities of the race course. The expenses incurred in carrying out such regular inspections have to be considerable. Hence, in our opinion, the licence fee imposed in the present case is a regulatory fee and need not necessarily entail rendition of specific services in return but at the same time should not be excessive Quantum of the licence fee was increased by the Government on account of non revision of the same since the commencement of the Act. Evidently, the inflation during this period was taken as the criterion for increasing the quantum of the fee. It is a reasonable increase keeping in view the fact that the expenditure incurred by the Government in carrying out the regulatory activities for attaining the object of the Act would have proportionately increased
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