TMI Tax Updates - e-Newsletter
July 27, 2013

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws Service Tax Central Excise CST, VAT & Sales Tax Indian Laws

Articles

1. Section 2(24) (x) deeming contributions of employees as income appears to be ultravirse the Constitution of India (COI) and purposes of the Income-Tax Act (ITA).

   By: DEVKUMAR KOTHARI

2. AUDIT UNDER SERVICE TAX

   By: Dr. Sanjiv Agarwal

News

1. PM’s remarks at the foundation-stone laying function for the new NCAER Centre

Highlights / Catch Notes

Income Tax

• High Court Dismisses Writ Petition Challenging Section 153C Notice; Emphasizes Exhausting Alternate Remedies First.

  Case-Laws - SC : Validity of notice u/s 153C - Reply to notice not filed, instead writ challenging notice filed - High Court dismissed notice - It is settled law that when an alternate remedy is available to the aggrieved party, it must exhaust the same before approaching the Writ Court - SC
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• Subsidiary's obligation failure doesn't make a transaction illegal; expenses still considered for business purposes.

  Case-Laws - HC : Merely because, a subsidiary company did not fulfil its obligations, that will not render the transaction illegal and consequently, it cannot be held that the expenditure laid out or incurred is not wholly for the business - HC
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• High Court Rules: Firm's Emergency Expense Deductions Not Allowed for Individual Partners; Must Be Firm-Assessed.

  Case-Laws - HC : Deduction in the hands of firm or partner - in an emergency for the purpose of protecting the firm from loss, as would be done by a person of ordinary prudence, in his own case, under similar circumstances - deduction can not be allowed in individual capacity - HC
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• Court Rules No Interest u/s 234B When Tax Fully Deducted at Source; Section 201 Covers Non-Deduction Consequences.

  Case-Laws - HC : Interest u/s 234B - Order u/s 154 - when the entire tax is deducted at source and the consequence of non-deduction is given under section 201, the question of levy of interest under section 234B on the assessee did not arise - HC
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• UK Advance Corporation Tax Credit on Dividends Under DTAA Article 11 Sent Back for Further Review.

  Case-Laws - AT : Credit of Advance Corporation Tax, paid in United Kingdom on dividend paid to the assessee by UK companies - Article 11 of the DTAA. - matter remanded back - AT
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• Section 153A Assessment Valid Without New Search Material; Supports Six-Year Independent Completion of Assessments.

  Case-Laws - AT : The assessment completed cannot be held as bad in law on the issue that there was no material found during the course of search as the assessment has been completed u/s 153A, which is a new provision in the law by which it has been provided that the assessment for six years has to be completed independently - AT
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• Charitable Trust Donations: Contradictory Findings on Income Status u/s 11(1)(d) of the Income Tax Act.

  Case-Laws - AT : Charitable Trust - The findings are mutually contradictory ie. on the one hand the corpus donations have been taken as income; on the other, they have been held not to be treated as part of assessee's income by quoting relevant provision {sec.11(1)(d) of the Act} - AT
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• AHL's 1.5% contribution for marketing, Rs. 38.59 lacs, not classified as 'royalties' under DTAA Article 12.

  Case-Laws - AT : When admittedly contribution at the rate of 1.5% by AHL to the assessee, amounting to Rs. 38.59 lacs, is towards marketing activities, it can not be characterized as 'royalties' falling within the ambit of Article 12 of the DTAA - AT
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• Understanding Deductions for House Property Income: Key Points from Sections 23 and 24 of the Income Tax Act.

  Case-Laws - AT : Income from house property shall be computed after making the deductions of municipal taxes paid, a sum equal to 30% of annual value and the amount of interest payable on borrowed capital - Other expenses not deductible - sections 23 & 24 - AT
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Customs

• Section 27-A: Refund Claims for Duty or Interest Exclude Interest on Penalty Refunds or Pre-Deposits Before Appeals.

  Case-Laws - HC : Interest on pre- deposit - Section 27-A applies to a claim of refund of duty or interest and does not specifically refer to the payment of interest on a refund of penalty or on pre-deposit effected before the Appellate Tribunal or before the appellate authority - HC
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• Court Rules Premature Bank Guarantee Encashment Invalid Before Appeal Period Ends and 2013 Circular Conditions Met.

  Case-Laws - HC : Validity of notice - recovery - circular dated 1.1.2013 - It was not proper on the part of the respondents to encash the Bank Guarantees even before the period of appeal was over or the conditions stipulated in circular was not attracted - HC
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• Amendment Request Denied: Fraudulent Intent Detected in Import General Manifest Case.

  Case-Laws - CGOVT : Amendment in name in Import General Manifest (IGM) - evidence available as on records proved that the applicant did not make a genuine request for amendment in IGM as they had fraudulent intention on their part to claim the goods - CGOVT
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Corporate Law

• Supreme Court: Non-drawer cannot be prosecuted u/s 138; liability extension requires Section 141 conditions met.

  Case-Laws - SC : Scope of section 141 of NI Act – U/S 138 only the drawer of the cheque can be prosecuted - the appellant was not a drawer of the cheque and had not signed the same - Sec. 141 contains conditions which have to be satisfied before the liability can be extended - SC
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Service Tax

• Tribunal Denies Extension for Late Filing, Citing Ignorance of Law Isn't an Excuse for Delay.

  Case-Laws - AT : Condonation of delay – Ignorance of law is not an excuse - delay not condoned - AT
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Central Excise

• Appeal for Rs. 95,009 to be dismissed in limine per Board's circular dated August 17, 2011.

  Case-Laws - AT : Amount involved in the appeal is Rs.95,009/- - Appeal needs to be dismissed in limine as per the Board s circular dated 17.08.11 - AT
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• Entity Entitled to Duty Refund Due to Delay in Assistant Commissioner's Permission for Duty-Free Clearance.

  Case-Laws - AT : Refund - Only the permission from the Asst. Commissioner was received late. Since the permission was not received in time they cleared the goods on payment of duty. Had the permission been obtained in time, they would have cleared the goods without payment of duty. Since the goods are otherwise entitled for clearance without payment of duty, they are entitled for the refund - AT
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Case Laws:

• Income Tax

• 2013 (7) TMI 740
  Validity of notice u/s 153C - Reply to notice not filed, instead writ challenging notice filed - High Court dismissed notice - Held that:- at the said stage of issuance of the notices under Section 153C, the assessee could have addressed his grievances and explained his stand to the Assessing Authority by filing an appropriate reply to the said notices instead of filing the Writ Petition impugning the said notices. It is settled law that when an alternate remedy is available to the aggrieved party, it must exhaust the same before approaching the Writ Court - High Court ought not have entertained the Writ Petition and instead should have directed the assessee to file reply to the said notices and upon receipt of a decision from the Assessing Authority, if for any reason it is aggrieved by the said decision, to question the same before the forum provided under the Act - Matter remitted back for filing of replies and procedure thereof - Following decision of Bellary Steels Alloys Ltd. v. CCT [2009 (8) TMI 688 - SUPREME COURT OF INDIA] and Indo Asahi Glass Co. Ltd. v. ITO [2001 (9) TMI 5 - SUPREME Court] - Decided in favour of Revenue.

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• 2013 (7) TMI 739
  Disallowance u/s 40A(2) - Addition made on 50% amount - Tribunal deleted addition - Held that:- any expenditure laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head 'Profits and gains of business or profession' - agreement between the assessee and the subsidiary company is not in dispute - subsidiary company was not able to comply with or perform its part of the contract. Merely because, a subsidiary company did not fulfil its obligations, that will not render the transaction illegal and consequently, it cannot be held that the expenditure laid out or incurred is not wholly for the business of the assessee-company - Following decision of Commissioner of Income-tax Versus V. S. Dempo and Co. P. Ltd. [2010 (10) TMI 711 - Bombay High Court] - Decided against Revenue.

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• 2013 (7) TMI 738
  Capital expenditure or Revenue expenditure - Expenditure of software support and maintenance - Tribunal held expenditure as Revenue expenditure - Held that:- These services, thus essentially were in the nature of maintenance and support services providing essentially backup to the assessee, who had procured software for its purpose. These services, thus essentially did not give any fresh or new benefit in the nature of a software to be used by the assessee in the course of the business but were more in the nature of technical support and maintenance of the existing software and hardware - following decision of COMMISSIONER OF INCOME TAX Versus M/S ASAHI INDIA SAFETY GLASS LTD. [2011 (11) TMI 2 - DELHI HIGH COURT] - Decided against Revenue.

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• 2013 (7) TMI 737
  Deduction u/s 80IB - Work contract - Tribunal granted deduction - Held that:- assessee took the full risk of executing the housing project and thereby making profit or loss as the case may be. The assessee invested its own funds in the cost of construction and engagement of several agencies. Land owner would receive a fix predetermined amount towards the price of land and was thus insulated against any risk - Therefore, it cannot be said that the assessee acted only as a works contractor - Following decision of CIT v. Radhe Developers [2011 (12) TMI 248 - GUJARAT HIGH COURT] - Decided against Revenue.

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• 2013 (7) TMI 736
  Disallowance on account of of Forex Trading Loss - Tribunal confirmed disallowance - Held that:- investment was made in the name of the firm. The amount invested was also from the account of the firm. The partner, therefore, cannot individually claim any deduction of such loan in the individual capacity - subject to the contract between the partners, partnership firm shall indemnify the partner in respect of the payments made and liabilities incurred by him in the ordinary and proper conduct of the business and in doing such act, in an emergency for the purpose of protecting the firm from loss, as would be done by a person of ordinary prudence, in his own case, under similar circumstances - Decided against assessee.

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• 2013 (7) TMI 735
  Disallowance u/s 35D - Public issue expenses - Tribunal set aside disallowance - Held that:- When Tribunal has merely remanded the issue for further consideration of the Assessing Officer with reference to the material on record - No question of law arises - Decided against Revenue. Deletion on account of bogus purchase - CIT sustained addition - Tribunal deleted addition on account of bogus purchase - Held that:- The authorities below merely on going through the findings in earlier year followed the order for holding bogus purchases made by the assessee. The assessee explained before the learned CIT(A) that no sufficient opportunity was given to produce the documents on this issue, therefore, additional documents were filed at the appellate stage on which remand report from the AO was called for, but the AO has not given any finding against the assessee based on the additional evidences - Nothing is brought on record if any adverse findings were given by central excise authorities against the assessee for assessment year under appeal - in absence of any material against the assessee, such addition could not have been made - Decided against Revenue.

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• 2013 (7) TMI 734
  Credit under Amnesty Scheme - CIT rejected to grant credit - Held that:- . It was not disputed that in the proceedings relating to assessment year 1982-83 wherein the assessee had claimed Amnesty scheme relating to assessment years 1976-77 and 1977-78 was available in its books of account. The said amount was also held to be available with the petitioner relating to the assessment year 1984-85 - Following decision of The Commissioner of Income Tax, Patiala Vs. M/s Ghunna Ram & Sons [2010 (11) TMI 854 - PUNJAB & HARYANA HIGH COURT] - Decided in favour of Revenue.

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• 2013 (7) TMI 733
  Interest u/s 234B - Order u/s 154 - Interest on non resident - Tribunal held that interest u/s 234B cannot be invoked by order u/s 154 - Held that:- proceedings were taken under section 154 of the Income-tax Act on the ground that since the advance tax paid was less than 90 per cent., interest under section 234B of the Income-tax Act was leviable on the assessee - when there was 100 per cent. deduction of tax at source and there being no liability to pay any advance tax, interest under section 234B could not be charged on the assessee - when the entire tax is deducted at source and the consequence of non-deduction is given under section 201, the question of levy of interest under section 234B on the assessee did not arise - Following decision of Director of Income-tax v. Jacabs Civil Incorporated [2010 (8) TMI 37 - DELHI HIGH COURT] and CIT v. Madras Fertilizers Ltd. [1983 (9) TMI 74 - MADRAS High Court] - Decided against the Revenue.

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• 2013 (7) TMI 732
  Existence of business activity - Whether assessee is having business activity or not pending cancellation of the license due to the orders of the suspension granted by SEBI in the interim period – held that temporary suspension of business can not be taken as closure of business and necessary expenditure was allowed – court followed the principle thereon direct the AO to allow loss which is reduction in value of shares held as stock in trade. TDS u/s 194J - Whether the disallowance u/s 40(a)(ia) valid - the issue of disallowing amount being legal fees paid to advocate u/s 40(a)(ia) - the AO and the CIT(A) erred in mixing up the facts - As far as fees there was TDS which was paid belatedly - Even though AO mentioned the same he did not disallow the amount - Only disallowance in the order is of the amount paid to advocate on which provisions of sec. 194J are not applicable as the amount was less than the limit - Provision of section 40(a)(ia) cannot be applied to amount paid to the advocate as there was no need to make TDS on that amount under the provisions - AO to allow the deduction. Cessation of liability - Writing off Income from other sources - treatment of interest income as 'income from other sources' – The amount was written back to P/L Account under provisions of sec.41(1) – the AO and the CIT(A) treated the same as other income - Even though there is no details filed with reference to amount written back, it was the contention that write back of business liability provided in earlier years was considered as income under section 41(1), which falls under the head business - the amount has to be considered as business income as the amount was written back u/s 41(1) - to that extent the orders of the AO and the CIT(A) was modified. Nature of loss - Treating the business loss as speculation loss by invoking provisions of Explanation-2 to sec.73 - assessee is entitled to claim business loss - income from business. Assessee is entitled set off net business loss if any - Explanation to section 73 does not apply to the facts as there are no purchases and sale of shares during year and loss is of reduction in valuation of closing stock. Expenses claim - expenses claimed by the assessee were not allowed on the ground that the assessee has not carried out any business activity during the year there by not allowing carry forward of loss - Since the expenses were incurred in connection with the business activity to keep business alive, to the extent of business loss determined during the year is to be carried forward for setting off if any in later years – decided in favour of assessee.

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• 2013 (7) TMI 731
  Credit of Advance Corporation Tax, paid in United Kingdom on dividend paid to the assessee by UK companies - Article 11[1(2)] of the DTAA. - the tribunal has dismissed the appeal of the assessee by holding that the matter had already been decided by CIT (A) in appeal against order u/s 154 applying the principle of res judicata - the appeal for the same amount of refund against order u/s 143(3) and against section 154 read with section 143(1) (a) are different proceedings – the assessee had the right to appeal against order passed u/s 143 (3) and had the right to agitate the same issue as already agitated in proceedings against order passed u/s 154 r.w section 143(1) (a) as order passed u/s 154 against order passed u/s 143 (1) (a) is an extension of proceedings u/s 143 (1) (a) - the interest of justice we set aside the matter to the office of Assessing Officer who will readjudicate the case on the basis of facts of the case and as per law – appeal allowed in favour of assesse

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• 2013 (7) TMI 730
  Whether the assessment framed is bad, illegal, void and without jurisdiction, as the necessary conditions for assuming jurisdiction and/or for initiating the assessment and/or for completion of the assessment were not fulfilled - Held that:- The assessment completed cannot be held as bad in law on the issue that there was no material found during the course of search as the assessment has been completed u/S 153A, which is a new provision in the law by which it has been provided that the assessment for six years has to be completed independently - If there was any material then on the basis of material or any material gathered after search was to be considered while computing the assessment u/s153C - rejected the legal ground for all the three assessment years raised by the assessee after admitting the same as the ground raised was purely a legal ground. The next issue is against confirming the addition on the basis of valuation in respect of jewellery - on the basis of difference in valuation report - the addition should not have been made - the quantity of jewelley has already been shown in the earlier years - there is no difference in quantity of items as the difference is only on account of the valuation report. - Additions deleted. Whether confirming the addition on account of shoppers stop card is valid - most of the additions have been made in the routine manner as the issue has not been discussed in right perspective in taking into consideration the submission and other evidences filed -It is also a matter of fact that no incriminating material was found during the course of search as only during the assessment proceeding these expenses were found made through credit cards – Additions deleted. Whether confirming the addition of loan taken from an NRI businessmen in Russia -Held that:- There is no material to hold that the assessee has shown bogus loan - Similar addition was made for assessment year 2000-01 and after discussing the issue in detail, court deleted the loan shown by the assesse - For the same reasoning - Additions deleted. Whether confirming the addition on account of credit card payment made by the mother of the assesse - It is stated that the payment was made through credit card of her mother - This aspect has not been examined, therefore, to meet the end of justice – court remand the matter back to AO to examine this issue afresh – appeal decided in favour of assessee.

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• 2013 (7) TMI 729
  Disallowance of the royalty on sales paid as capital expenditure - Held that:- Payment towards royalty which was dependant on the quantum of the items manufactured was a revenue expenditure - the quantum of royalty depends upon the sales. - the royalty is paid at a certain percentage of sales it cannot be said that it gives an enduring benefit to the assesse – relying upon the judgement of CIT Vs Kanpur Cigarettes (P) Ltd. (2005 (3) TMI 61 - ALLAHABAD High Court) and Mewar Sugar Mills Ltd. Vs CIT (1972 (9) TMI 12 - SUPREME Court) - royalty payments paid based on sales are allowable as deduction u/s. 10(2)(xv) - royalty payment based on sales are of revenue in nature – court direct the AO to allow the claim of the assesse. Disallowance of 50% being expenses incurred through the credit card by employees for subscription, hotel, lodging and other expenses - Held that:- CIT(A) has allowed the claim of expenditure to the extent of 50%, therefore there is no reason to tamper with the findings of the CIT(A) - Nothing has been brought on record to show the nature of the membership , whether the assessee has taken corporate membership in the various clubs or the individual directors/employees are members of these clubs as no such details are available on record – ground dismissed – appeal decided partly in favour of assessee

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• 2013 (7) TMI 728
  Exemption u/s 10(23C) - Whether the CIT(A) has erred in allowing exemption under section 10(23C) even when a number of other objects are included in it object clause and section 12A was not available for A.Y. 2009-10 – Held that:- The CIT(A) after considering the material found that the assessee society exists solely for education purposes - they had also considered a resolution passed by the assessee trust wherein the alleged clause were dropped from the Memorandum of society – the society has also given in writing that society has not used any part of the building and/or funds of the society on the activities - CIT(A) categorically held that the assessee society exists for educational activities - Revenue has failed to point out any contrary material to the finding of the CIT(A) - the other conditions for exemption u/s 10(23C) have been complied with by the assessee trust - there was not find any informality in the order of CIT(A). Validity of donations- Whether the CIT (A) erred in treating all donations as explained and for corpus even identity of donors were not established - Court set aside the orders of Revenue authorities and contention of the assessee is allowed that if any addition is sustained, the assessee is entitled to benefit of Section 11/10(23C) - Court relied upon the judgement of Director of Income Tax vs. Raunaq Education Foundation, (2007 (4) TMI 61 - HIGH court) – appeal decided against revenue.

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• 2013 (7) TMI 727
  Charitable Trust having spent excess amount in the preceding assessment years has been wrongly rejected –Whilst computing assessee's incomes from assessment year 1999-2000 to preceding assessment year ie. 2008-09 corpus donations totaling Rs.24,999,000/- have been taken as income as per Commissioner(A) order - Thereafter, Commissioner(A) has calculated total application of income which has resulted in short fall of Rs.2,18,31,054/- - It is manifest from the latter portion of the abovesaid Order of Comm(A) that the corpus donations have been held as not part of the income – Held that:- The said findings are mutually contradictory ie. on the one hand the corpus donations have been taken as income; on the other, they have been held not to be treated as part of assessee's income by quoting relevant provision {sec.11(1)(d) of the Act} - Issue requires a detailed adjudication at the hands of the Assessing Officer – Matter remanded back to the Assessing Officer – Decided in favor of Assessee. Depreciation on Fixed assets under section 32 of I.T.Act,1961 – Held that:- Since the main issue has been restored to the Assessing Officer, this claim of the assessee would also be decided afresh after taking into consideration the case law cited – Also, in case it turns out that the assessee is carrying on any business, then only, while computing business income, it would be entitled for depreciation on assets used in the business.

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• 2013 (7) TMI 726
  Deduction under section 35D of IT Act – Held that:- The claim was rejected by relying on the judgment of the Hon'ble Delhi High Court in the case of Hindustan Insecticides Ltd. [ 2001 (2) TMI 75 - DELHI High Court] - The mere fact that no addition was made on this issue in the earlier year cannot be determinative in the succeeding year because of the rule of res judicata not applying to the tax proceedings. Further there can be no estoppel against the Act – Decided against the Assessee. Deduction u/s 80D – Held that:- When the tribunal in the earlier year has decided this issue against the assessee, we fail to see how the facts of the current year can be different necessitating departure from the earlier order – Decided against the Assessee. Rectification of mistake u/s 254 – Held that:- Issue raised is against the confirmation of disallowance of Rs.81,31,389/- on account of write off of small debit balances. Assessee contended that such ground was not pressed - The rectification of such types of mistakes committed by the rival parties cannot be brought within the purview of the proceedings u/s 254(2) of the Act. Disallowance of advertisement expenses - Tribunal dismissed the assessee's ground by holding such expenses to be of the earlier year. He submitted that the assessee was following such consistent practice in earlier years as well which stood accepted by the Tribunal – Held that:- A mistake is said to apparent from record when it is so glaring so as to be deduced without entering into long deliberations. If two legally sustainable views exist on a point and one of such possible views has been taken, the issue becomes debatable and goes beyond the ken of rectification proceedings

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• 2013 (7) TMI 725
  Amount received from the Assessee to be treated as Royalty under Article 12 of the DTAA – Held that:- The crucial words used in para 4 of the Article 12 of the DTAA are, the 'consideration for the use of or right to use …..'. It therefore, becomes vivid that in order to cover any amount within the purview of "royalties" as per Article 12 (4) of the DTAA, it is imperative that the payment must be a consideration for use or right to use any copyright of the literary artistic work etc. or any patent, trademark etc. (collectively referred to as the 'defined property'). Payment can be made as a consideration for the use or right to use of the defined property only when such property is in existence at the time of use. If a property does not pre-exist or is likely to come into existence because of the given payment, the same cannot qualify as 'royalties' because it would, in such circumstances, lack the condition of 'use or right to use'. In other words, the term 'royalties' as per article 12(4) contemplates a consideration for the use of or right to use of the defined property which is already in existence and the payment is agreed for its use or right to use. If the payment made is of such a nature which helps in the creation of the defined property, that cannot fall within the ambit of Article 12(4) of the DTAA. When admittedly contribution at the rate of 1.5% by AHL to the assessee, amounting to Rs. 38.59 lacs, is towards marketing activities, it can not be characterized as 'royalties' falling within the ambit of Article 12 of the DTAA – Decided in favor of Assessee.

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• 2013 (7) TMI 724
  Deduction of cost of improvement of land from the Capital Gains - The assessee purchased land at VGP Golden Beach South Part VIII, a Tambaram, Dist., Kancheepuram, Tamilnadu admeasuring about 80400 sq.ft. purchased as per purchase deed dated 23.4.1981 showing aggregating amount of Rs.6,86,550/-. The assessee stated that there was an expenditure incurred towards cost of improvement of said land in Financial Year ending 31.3.1989 of Rs.8,54,325/- and in the year ending on 31.3.1990 of Rs.14,86,751/- . Thus, the assessee claimed aggregating amount of Rs.23,41,076/- towards cost of improvement of the said land - The assessee sold 66000 sq.ft. area of the said land for a total consideration of Rs.1,38,75,000/- during the Financial Year relevant to the assessment year under consideration - the assessee claimed cost of improvement of land and after taking into account the indexation cost of the said improved land considered it at Rs.69,33,151/- - Held that:- Appellant ought to be given atleast partial benefit if not fully. It is seen that the appellant has been borrowing funds from other sister concerns whether it be for the purchase of the land or for making improvements in land - It is a general practice that the vacant plot of land is fenced and boundary wall constructed for the safety of the property as also to separate the property from others. Considering the fact that at the time of purchase of the land, no such cost was incurred as could be seen from the debit note raised by VGP Housing P. Ltd., it would be fair and reasonable to allow the appellant some benefit of cost of improvement in absence of the direct evidences to this effect – Decided against the Revenue. Considering the total area of land of 80,400 sq. ft., I hold that it would meet the end of justice if the appellant is allowed total expenditure of Rs.20 lacs towards the fencing, main gate, etc., which amount is directed to be bifurcated by considering Rs.7 lacs in year ending on 31/3/1989 For 31/3/1990 - 1067164 x 497/172 = 30,83,607/- - the aggregate figure of indexed cost of improvement of Rs.48,57,456/-, which would be reduced from the sale consideration to arrive at the long term capital gains.

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• 2013 (7) TMI 723
  Allowable deductions under Section 23 & 24 of Income Tax Act,1961 in computing ‘Income from House Property’ – Held that:- Relying upon the decision of Kolkata High Court in the case of CIT Vs Sreelekha Banerjee [1988 (12) TMI 53 - CALCUTTA High Court], the legal position that as per the provisions of sections 23 & 24 of the Act, income chargeable under the head 'income from house property' shall be computed after making the deductions of municipal taxes paid by the owner, a sum equal to thirty per cent of annual value and the amount of interest payable on borrowed capital where the property has been constructed, repaired, renewed or re-constructed with borrowed capital - Remaining expenses claimed by the assessee do not qualify for deduction from the ALV of the property as these expenditure are incurred by the assessee are not permissible under the provisions of sections 23 and 24 of the Act – Decided against the Assessee. Principle of estopple and res-judicata - Since all similar expenses have been allowed in the earlier years - The assessee is entitled for deduction of all the impugned expenditure this year also – Held that:- Principle of estoppel or res-judicata is neither applicable against the statute nor against the settled position of law – Decided against the Assessee.

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• Customs

• 2013 (7) TMI 722
  Validity of order - Confiscation of goods – panelty u/s 111 - show cause notices were issued and adjudication orders were passed holding that the petitioners had smuggled gold into India which was liable to be confiscated under Section 119 and penalty was imposed u/s 111 – Held that:- the order was valid and no interference could be made - the authorities had taken precaution by taking expert opinion of a certified gold smith and jewellery appraiser – The jewellery appraiser was cross-examined by advocate – decided against the assesse.

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• 2013 (7) TMI 721
  Interest on pre- deposit - whether interest can in law be directed to be paid on a delayed refund of a pre deposit made before the CESTAT during the pendency of an appeal – Held that:- Court directed the revenue to pay interest to the assessee on the refund of the amounts of pre-deposit until payment of pre-deposit was effected at the rate stipulated in the relevant notification issued under Section 27-A of the Customs Act, 1962 - Pre-deposits must be returned within three months from the date of the order passed by the Appellate Tribunal or court unless there was a stay on the order by a superior court and that the Board had decided to implement CESTAT orders already passed for payment of interest in compliance of which interest payable would be paid forthwith - In CCE, Hyderabad Vs. I.T.C. Limited (2004 (12) TMI 90 - SUPREME COURT OF INDIA ) - Section 27-A applies to a claim of refund of duty or interest and does not specifically refer to the payment of interest on a refund of penalty or on pre-deposit effected before the Appellate Tribunal or before the appellate authority – appeal decided in favour of assessee.

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• 2013 (7) TMI 720
  Validity of notice - recovery - circular dated 1.1.2013 - refund of amount with interest – encaching bank guarantees - Assessee filed a petition for quashing of notices dated 21.05.2013 issued by department to its bankers - to refund the amounts recovered by enforcing the notices and encashing the bank guarantees along with interest thereon - Held that:- Revenue required to be directed to remit the proceeds of the Bank Guarantees so recovered and collected to the respective bank accounts of the petitioner – court relied upon MAHINDRA & MAHINDRA LTD vs. UNION OF INDIA reported in (1992 (4) TMI 42 - HIGH COURT OF JUDICATURE AT BOMBAY ) - the assessee shall furnish Bank Guarantees - Bank Guarantees shall be kept current and alive for such period as may be called-upon by the department. Initiating recovery proceeding - circular dated 1.1.2013 - to refrain them from initiating any recovery proceedings based on impugned notice till the expiry of statutory period of appeal and thereafter, till the disposal of stay application to be filed before the Appellate Authority - the department would be at liberty to initiate recovery proceedings in accordance with the circular - It was not proper on the part of the respondents to encash the Bank Guarantees even before the period of appeal was over or the conditions stipulated in circular was not attracted – department’s action in invoking the Bank Guarantees was contrary to their own declared policy – petition decided partly in favour of assessee

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• 2013 (7) TMI 719
  Amendment in name in Import General Manifest (IGM) - An unaccompanied baggage was booked – he did not come for delivery – summons were issued but no response was received and goods were seized under the provisions of the customs Act – petition was filed to allow amendment in impugned AWB in their name - Held that:- amendment in IGM was not permissible where fraudulent intention was involved - applicants have not come out with any reason or motive for the carrier to ‘lie’ against them. Instead, the logics advanced to reiterate that the AWB issued by M/s. Tri Royal Forwarding (S) Pte. Ltd.- applicants are not substantiated with any other corroborative evidence there were no labels at all on the packages booked and there was no receipt of packages by the Registered Air Cargo agents or by their co-loaders - the claim was not supported by their RCA – court relied upon J.B. Trading Corporation v. Union of India (1987 (6) TMI 65 - HIGH COURT OF JUDICATURE AT MADRAS) - evidence available as on records proved that the applicant did not make a genuine request for amendment in IGM as they had fraudulent intention on their part to claim the goods - they had no locus standi to file request for amendment in IGM as Section 30(3) of Customs Act authorises only carrier to apply for such amendment – decided against assessee.

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• Corporate Laws

• 2013 (7) TMI 718
  Scope of section 141 of NI Act – whether the officers of the company could be held vicariously liable for the criminal liability u/s 138 on account of dishonor of cheque - Held that:- U/S 138 only the drawer of the cheque can be prosecuted - the appellant was not a drawer of the cheque and had not signed the same - court relied upon Raghu Lakshminarayanan vs. Fine Tubes (2007 (4) TMI 367 - SUPREME COURT OF INDIA ) - a bare reading of the complaint as also the affidavit of examination-in-chief of the complainant and a bare look at the cheque would show that the appellant had not signed the cheque - the interpretation sought to be advanced by the respondents would add words to Section 141 and extend the principle of vicarious liability to persons who are not named in it - if it is a Company, then Drawer Company and is extended to the officers of the company - normal rule in the cases involving criminal liability is against vicarious liability - exceptions on account of specific provision being made in statutes extending liability to other - section 141 is a specific provision that in case an offence u/s 138 is committed by a company the criminal liability for dishonour of a cheque will extend to the officers of the company - it contains conditions which have to be satisfied before the liability can be extended – the conditions have to be strictly complied with – appeal decided in favour of appellant.

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• Service Tax

• 2013 (7) TMI 744
  Condonation of delay – assessee pleaded for condonation of delay of 104 days in filing the appeal – Held that:- The appeal cannot be considered as submitted by the learned Superintendent (AR) - the question of condonation of delay becomes irrelevant - the appeal has to be rejected on the ground of delay and merits - The question of considering the stay application also does not arise - Commissioner (A) could not have condoned the delay at all - the question of entertaining the appeal before the Tribunal also does not arise as held in SINGH ENTERPRISES Versus COMMISSIONER OF C. EX., JAMSHEDPUR( 2007 (12) TMI 11 - SUPREME COURT OF INDIA) – appeal decided against assessee.

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• 2013 (7) TMI 743
  Interest on delayed refund claim - First appellate authority held appellant not eligible for interest - Held that:- Following previous decision in assessee's case in NIRMA LTD. Versus COMMISSIONER OF CENTRAL EXCISE, AHMEDABAD [2011 (3) TMI 1257 - CESTAT, AHMEDABAD] - Decided in favour of Assessee.

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• 2013 (7) TMI 742
  Validity of show cause notice – assessee was engaged in the activity of Consulting Engineer's Service' to M/s Ispat Industries Ltd. during the period 1999-2000 – Held that:- There is no valid show cause notice against the appellant towards any service tax demand - the entire proceedings are vitiated and consequently the order passed against the appellant is not sustainable in law - there is no demand from the appellant towards any service tax liability - Without issue of a notice, no order can be passed against the appellant - in the show cause notice, the demand for service tax has been made against assessee as the recipient of the services - there is no mention of the appellant anywhere in the body of the show cause notice and only at the beginning, the appellant's name figures –appellant was not heard and personal hearing was granted only to the recipient of the service - demands were dropped - appellant had rendered services in relation to installation, commissioning and erection. ‘Erection, Installation and Commissioning Service' came into the tax net only w.e.f July, 2003 whereas the impugned demand pertains to the period 1999-2000 – appeal allowed in the favour of assessee

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• 2013 (7) TMI 741
  Condonation of delay – assessee provided the services of ‘Consulting Engineer's Service' and the demands were made along with interest – assessee pleaded for condonation of delay - Held that:- Delay cannot be condoned mechanically merely because government or its wing is a party before the Court - it is not the length of the delay but the adequacy of the explanation for the delay that is relevant criteria while considering the COD application - Ignorance of law is not an excuse - In the absence of plausible and acceptable explanation, government cannot plea that there was no gross negligence or deliberate inaction or lack of bona fide and liberal concession has to be adopted to advance substantial justice - following the decisions in N.Balakrishnan vs. M.Krishnamurthy (1998 (9) TMI 602 - SUPREME COURT OF INDIA) and Chief Post Master General vs. Living Media India Ltd. (2012 (4) TMI 341 - SUPREME COURT OF INDIA), application for cononation rejected - decided against assessee.

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• Central Excise

• 2013 (7) TMI 717
  Waiver of Pre-deposit - CENVAT Credit of duty paid on M.S. plates, round bars and pipes, which were used for repair and maintenance in refinery – Held that:- Appellant had a bonafide belief and had taken the credit, relying upon the Stay Order in the case of HNG Float Glass Ltd. Vs CCE Vadodara[2013 (7) TMI 716 - CESTAT AHMEDABAD] - and submit that it is a stay order passed in identical situation by Division Bench and hence it is binding on Single Member Bench. Also reliance is placed upon the Stay Order of the Principal Bench in the case of Bajaj Hindustan Ltd. Vs CCE Allahabad [2013 (7) TMI 671 - CESTAT NEW DELHI] and submit that in that case, the Principal Bench has themselves granted unconditional stay on identical goods which were used for fabrication of machinery – On bonafide belief as well as on merit, the appellant has a strong prima facie case, hence the Stay Petition be allowed – Also, view has not been negated by lower authorities, nor any contrary evidence is produced - Appellant can avail the CENVAT Credit of the items like M.S. plates, round bars and pipes – Stay granted - Waiver of pre-deposit allowed - Decided in favor of Assessee. Limitation - Credit was availed by the appellant in February, April and June 2009 while the show cause notice has been issued on 06.09.2011, which was received by the appellant on 26.09.2011 - Show cause notice is hit by limitation, in as much as the appellant has always informed the Department about CENVAT Credit having been availed by them.

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• 2013 (7) TMI 716
  Waiver of Pre-deposit - CENVAT Credit of duty paid inputs on such goods under capital goods as the items which get fabricated/manufactured in the factory premises are used in the factory premises for manufacture of final product i.e. float glass – Held that:- Limitation point - Most of the credit has been taken by the appellant prior to 01.07.2009, when the definition of inputs undergone the change, indicates that CENVAT Credit on cement, TMT bars and structural sheets is not allowed. The credit taken by the appellant on 01.04.2010 is in respect of the items which were procured by the appellant prior to 01.07.2009. While taking the CENVAT Credit of these items during the relevant period, the appellant could have, prima facie, entertained a bonafide belief that there were various decisions holding that CENVAT Credit of Central Excise duty paid on supporting structures which are fabricated in the factory premises are eligible for CENVAT Credit - Appellant has made out a prima facie case for waiver of pre-deposit of the amounts involved only on the ground of limitation – stay granted.

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• 2013 (7) TMI 714
  Bail for an offence under section 9AA of the Excise Act – There were four accused, stating that the accused are charged for the offence of manufacture of biris and the removal of the same, illicitly, to the tune of Rs.15,50,88,000/- biris (inclusive of 86,400/- biris under seizure) and evasion of payment of central excise duty to the tune of Rs.5,76,726.15/- in contravention of Rule 9(1), 52-A, 53, 94 and 226 of the Central Excise Rules 1944 - The accused has filed discharge petition under Section 245 of Cr.P.C., to discharge them from the proceedings - Dismissed the said discharge petition - Against the dismissal of the said discharge petition, the third and fourth accused have filed the above revision. Held that:- As per the partnership deed registered on 01.06.1992, all the four accused have been listed as partners and have agreed to keep themselves actively engaged in conducting the business of the first accused company, as working partners. As such, admittedly, all the partners are actively taking into participation to manage the day to day affairs of the first accused company. The second accused is the Managing Partner, who has given statement that all the partners are engaged in business activity as working partners. Therefore, the prosecution case has been levelled against all the accused - The prosecution case is at a partly heard stage. Under the circumstances, this Court is not inclined to interfere with the impugned order passed by the learned Magistrate. However, the accused are entitled for speedy trial as per Article 21 of the Constitution. Therefore, this Court directs the learned Magistrate to dispose the case on merits on the topmost priority basis – Decided against the Assessee.

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• 2013 (7) TMI 713
  Waiver of pre-deposit – Held that:- It is admitted facts are that the applicants issued invoices on the strength of which credit has been availed without receiving the inputs, therefore, we find that it is not a case for total waiver of pre-deposit of the penalty – Decided against the Assessee.

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• 2013 (7) TMI 712
  Penalty under Rule 25 of Central Excise Rules, 2002 – Held that:- No documents found, for movement of goods, which would indicate that there is no conclusive evidence that consignment was sent for weighing purposes, except for some statement recorded by the authorities - The statement indicates that the goods were removed without any preparation of invoices or recording them in the statutory records - The goods are liable to duty, their confiscation is upheld under the provisions of 25 of the Central Excise Rules, 2002 – Decided against the Assessee. Quantum of redemption fine - Redemption fine imposed by the adjudicating authority of Rs.1,15,000/- - Held that:- Duty liability on the quantity of the goods is only Rs.24,000/- - The ends of the justice will be met if the redemption fine is reduced from Rs.1,15,000/- to Rs.40,000/-. The impugned order upholding the confiscation of the goods, is correct, but the amount of redemption fine is reduced to Rs.40,000/-. Penalty under Rule 26/ Rule 24 of Central Excise Rules, 2002 - Appellant Mr. Manoj Kumar, stated that the vehicle was going for weighing purposes and there was no document and has admitted the mistake of the removal of the excisable goods without valid documents/invoices to avoid central excise duty – Held that:- The Second appellant penalised under the provisions of Rule 26 of the Central Excise Rules, 2002 - The second appellant being an employee of the company, need not be saddled with heavy penalty imposed on him which needs to be reduced to Rs.2,000/- as it is seen that he has specifically stated that the vehicle has gone for weighing purposes – The provisions of Rule 24 of the Central Excise Rules, 2002 also been invoked against him on the ground that he had not prepared any invoice and has not recorded the clearances in the statutory records nor any kaccha documents prepared.

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• 2013 (7) TMI 711
  Cenvat Credit on Input services - Cenvat credit availed on courier services and C&F agent services - Definition of input services does not include the services availed from place of removal but is up to the place of removal. In short, Revenue’s case is that C&F agent services and courier services are utilised by the respondent only after the goods are cleared from the factory premises, which is the place of removal – Held that:- Period involved in this case is from September 2004 to October 2007 i.e. prior to the date on which provisions of definition of Rule 2(l) of the Cenvat Credit Rules, 2004 was amended from 01.03.08 - Therefore relying upon the decision of Hon’ble High Court of Karnataka in the case of ABB Ltd. [2011 (3) TMI 248 - KARNATAKA HIGH COURT] and the judgment of the Hon’ble High Court of Gujarat in the case of Parth Poly Wooven Pvt. Ltd. [2011 (4) TMI 975 - GUJARAT HIGH COURT]- Cenvat Credit allowed – Decided against Revenue. Board s circular No.390/MISC/63/2010-JC dated 17.08.11 - Not to file an appeal to the Tribunal if the amount is less than Rs. 1,00,000/- - Held that:- Amount involved in the appeal is Rs. 95,009/- - Appeal also needs to be dismissed in limine as per the Board s circular dated 17.08.11 – Decided against Revenue.

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• 2013 (7) TMI 710
  Refund - Benefit of exemption Notification No.4/2006-CE dated 01.03.06 - Actual user condition - procurement at concessional rate of duty - conditions - unjust enrichment - For manufacturing of fertilisers, respondents were procuring sulphuric acid following the procedure as laid down in Central Excise (Removal of goods at concessional rate of duty for manufacturing of excisable goods) Rules, 2001 - For following the procedures of the said Rules, respondents are required to take permission from the Jurisdictional Assistant Commissioner, which they applied for - During the pendency of such permission, the respondents in order to continue their production had to prefer to procure quantity of sulphuric acid on payment of appropriate rate of duty. After consuming the same in the manufacturing of fertilisers, respondents filed a refund claim with the authorities below for the refund of the amount of central excise duty paid by them as per provisions of Section 11B of the Central Excise Act, 1944. Held that:- As per the decision in the case of UOI v. Suksha International, [ 1989 (1) TMI 316 - SUPREME COURT ], the Hon'ble Supreme Court has observed that an interpretation unduly restricting the scope of beneficial provision is to be avoided so that it may not take away with one hand what the policy gives with the other - In the Union of India v. A.V. Narasimhalu, [ 1969 (9) TMI 41 - SUPREME COURT OF INDIA], the Apex Court also observed that the administrative authorities should instead of relying on restrictive interpretations and technicalities, act in a manner consistent with the broader concept of justice - Appellant has followed the procedure as laid down in Central Excise (Removal of goods at concessional rate of duty for manufacturing of excisable goods) Rules, 2001 - Only the permission from the Asst. Commissioner was received late. Since the permission was not received in time they cleared the goods on payment of duty. Had the permission been obtained in time, they would have cleared the goods without payment of duty. Since the goods are otherwise entitled for clearance without payment of duty, they are entitled for the refund – Decided against the Revenue.

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• 2013 (7) TMI 709
  Appellant clearing the goods did not exported the same – Held that:- Extent of examination done by learned Authority below show no export of goods made by the appellants - No export done came to record – Also, for repeated absence of appellant – Appellant has no evidence to prove and explain the shortage of goods and rebut the clandestine removal of goods – Decided against the Assessee.

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• 2013 (7) TMI 708
  Clandestine Removal of finished goods as well as Input - Respondent are engaged in the manufacture of MS Bars falling under chapter 72 of the Central Excise Tariff Act - On checks and verification, a shortage of 187.685 MT of finished goods and 11.335 MT of inputs was detected – Director of the company accepted the shortages of goods but did not accept that the finished goods were cleared by them without payment of duty – Held that:- There was no actual weighment in the stock or MS Bars of Ingot. Such stock-taking was done on the basis of assumption and the calculations made upon the basis of number of bundles available and the average weight of one bundle - It is well settled law that Revenue cannot allege clandestine removal based upon the shortages detected at the time of physical stock taking, without there being any independent corroborative evidence - There is nothing on record to show the clandestine removal – Decided against the Revnue.

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• 2013 (7) TMI 707
  Cenvat Credit - Commissioner denied benefit and imposed penalty - Held that:- the welding electrodes used for repair and maintenance of the machinery are cenvatable items - Following decision of Gobind Sugar Mills Ltd. Versus Commissioner of Central Excise, Lucknow [2012 (6) TMI 71 - CESTAT, New DELHI] - Decided in favour of assessee.

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• CST, VAT & Sales Tax

• 2013 (7) TMI 746
  Penalty u/s 45 A of the KGST Act - Court remitted matter back for re-assessment - Held that:- Despite the lapse of nearly 5 years, no counter affidavit has been filed from the part of the respondents, nor is there any report filed by the second respondent after examining /verifying the assessment records of the fourth respondent to confirm and conclude the position - Decided in favour of assessee.

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• 2013 (7) TMI 745
  Registration fee on the import of coal - U.P. VAT Act - petitioner brings coal from the collieries of Coal India Limited as per sale policy of E-auction & also purchasing coal from the traders of Jharkhand, Bihar and Assam - Held that:- There is no provision under the Indian Forest Act, 1927, and the Rules of 1978 for registration of any dealer. There is only a provision of registration of marks for issuance of foreign passes. The petitioner is not the importer of coal from outside the India nor exports the coal within the country to outside India. Thus the insistence for registration and for charging the registration fees is beyond the authority conferred upon the respondents under the Indian Forest Act, 1927 and the Rules of 1978. If any registration fee is charged from the petitioner, the same shall be returned to him. He will, however, continue to obtain transit passes and pay transit fee on the transportation/movement of coal, held to be forest produce in accordance with the U.P. Transit of Timber and other Forest Produce Rules, 1978.

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• Indian Laws

• 2013 (7) TMI 715
  Cancellation of licence of liquor shop - Transaction or carrying of illicit liquor recovered from Petitioner’s vehicle – Such transportation is within his knowledge - One of the accused arrested from the spot had clearly stated that the petitioner who is the owner of the vehicle, carries business of transportation of illicit liquor through this vehicle and that he had been working for him. He had further stated that the petitioner had allowed the use of the vehicle for transportation of the illicit liquor and whatever profits are earned are shared with the petitioner – Held that:- The aforesaid statement of one of the accused clearly proves the tacit consent of the petitioner and that he had knowledge of such illegal activity. The said statement has not been controverted by any material, evidence or is proved to be false otherwise - The recovery of illicit liquor from the petitioner's vehicle though he may not be present or using the vehicle at the relevant time, would amount to recovery from his possession as the vehicle continues to be in his persuasive possession – Decided against the Petitioner.

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