TMI Tax Updates - e-Newsletter
July 29, 2013

Case Laws in this Newsletter:

Income Tax Customs Service Tax Central Excise CST, VAT & Sales Tax

Articles

1. Power To Amalgamate – “An inherent right of the Company”

   By: Ravi kapoor

2. SPECIAL PROVISIONS RELATING TO TAX ON DISTRIBUTION OF INCOME

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Good Response from FIIs in Government OFS Transactions

2. Macroeconomic and Monetary Developments - First Quarter Review 2013-14

3. RBI Reference Rate for US $ and Euro

Notifications

Companies Law

1. F. No. 11/04/2013-CL, VI - dated 15-7-2013 - Co. Law

Amendments in the notification, vide number G.S.R,601(E), dated the 16th July, 2010.

Customs

2. 38/2013 - dated 26-7-2013 - Cus

Amends Notifications No. 92/2009-Cus, 93/2009-Cus, 94/2009-Cus and 95/2009-Cus.

Income Tax

3. 55/2013 - dated 23-7-2013 - IT

SECTION 10(46) OF THE INCOME-TAX ACT, 1961 - EXEMPTIONS - STATUTORY BODY/AUTHORITY/BOARD/COMMISSION - NOTIFIED BODY OR AUTHORITY -UTTARAKHAND STATE AIDS CONTROL SOCIETY

SEZ

4. S.O. 2131(E) - dated 15-7-2013 - SEZ

Set up a sector specific Special Economic Zone for information technology and information technology enabled services at Villages Beharampur, Balola and Bandhwari, Tehsil –Sohna, District Gurgaon in the State of Haryana

5. S.O. 2144 (E) - dated 9-7-2013 - SEZ

Set up a sector specific Special Economic Zone for information technology and information technology enabled services at Kalwara & Newta village, Tehsil- Sanganer, District Jaipur in the state of Rajasthan

VAT - Delhi

6. F.7(433)/Policy-II/VAT/2012/530-541 - dated 29-7-2013 - DVAT

Regarding FORM T-2

Circulars / Instructions / Orders

VAT - Delhi

1. F. 5/Std. Instn./2013-14/556 - dated 23-7-2013

Vigilance Set up for Department of Trade & Taxes.

DGFT

2. 20 (RE-2013)/2009-2014 - dated 29-7-2013

Inclusion of Kattupalli Sea Port as a Port of Registration under Para 4.19 of HBP (Vol. I)

Highlights / Catch Notes

Income Tax

• Notice u/s 158BD Invalidated Due to Missing Mandatory Satisfaction Recording Requirement, Fails Legal Standards.

  Case-Laws - HC : Validity of notice u/s 158BD - Valid satisfaction - vital and mandatory requirement of recording the satisfaction under section 158BD were absent while issuing notice - HC
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• Court Clarifies Interest-Free Loan Conversion Not Taxable Revenue Under Income Tax Act Section 41(1) Interpretation.

  Case-Laws - HC : Application of Section 41(1) - Interest free unsecured loan from Government - onversion of the capital of one amount to another amount. - there is no provision in the Act that on conversion of one capital from another capital will be treated as revenue receipt - HC
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• TDS u/s 194LA not applicable to compensation for agricultural land u/s 28 of Land Acquisition Act.

  Case-Laws - HC : Deduction for TDS u/s 194LA on Compensation u/s 28 of Land acquisition Act - compensation being the value of agricultural land, the exclusion as provided shall be attracted. - Collector directed not to deduct TDS u/s 194LA - HC
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• High Court Upholds CIT's Non-Interference Order u/s 264; Petitioner Denied Relief Due to Conduct in Case.

  Case-Laws - HC : Revision u/s 264 - CIT passed non interference order - onduct of the petitioner in respect of the entire proceedings does not entitle the petitioner to have any interim order in this writ petition - HC
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• Amounts Treated as Undisclosed Income, Not Loans: Penalties u/ss 271D and 271E Deemed Inapplicable.

  Case-Laws - HC : Penalty u/s 271D and 271E - the amounts were treated as booking advance and therefore, taxed as undisclosed income - same would thereafter not bear the character of loan or advances. - HC
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• Taxpayer Must Justify Compounding Request u/s 276CC of Income Tax Act, Says High Court.

  Case-Laws - HC : Compounding of offences u/s 276CC – it is for the assessee to show sufficient cause or reason to support his request for the compounding of the offence - HC
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• High Court Appeal Admission Doesn't Justify Penalty Deletion u/s 271(1)(c) of Income Tax Act.

  Case-Laws - AT : Penalty u/s 271(1)(c) - Mere admission of an appeal by the High Court cannot without there being anything further, be an indication that the issue is debatable one so as to delete the penalty under Section 271(1)(c) - AT
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• Tribunal's Order u/s 254(2) Can't Be Reviewed, Only Rectified for Apparent Mistakes.

  Case-Laws - AT : Rectification/ Recall of order u/s 254(2) - the assessee is merely seeking a review of the order of the Tribunal, which is not possible in these proceedings under S.254(2) - AT
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• The excise duty refund received is classified as a capital receipt and is not subject to taxation.

  Case-Laws - HC : Excise Duty Refund - Revenue receipt or capital receipt - the excise duty refund received is in the nature of capital receipt and is not exigible to the tax - HC
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• No Evidence Found: Section 69A Additions on Hundi Transactions Overturned for Three Years Due to Lack of Proof.

  Case-Laws - AT : Addition under section 69A - Hundi - There is not even an iota of evidence which may lead to a conclusion embroiling the assessee in the alleged hundi transactions and, in the absence of evidence, there was no scope for slapping the additions on the assessee for all these three year - AT
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Customs

• Customs Commissioner Must Consider All Relevant Facts for Provisional Assessment Value Determination.

  Case-Laws - HC : Provisional relaease - it is but necessary that all relevant facts having a bearing on the determination of value even for the purposes of provisional assessment should be duly considered by the Commissioner of Customs (Preventive) - HC
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• Goods Classification for Duty Drawback Must Follow General Rules of Customs Tariff Act for Consistency.

  Case-Laws - CGOVT : Classification of goods - Duty Drawback – General Rules for Interpretation of the First Schedule to the Customs Tariff Act - mutatis mutandis apply for classifying the export goods listed in drawback schedule - CGOVT
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Service Tax

• Court Rejects Delay Condonation Application Due to Insufficient Justification, No Personal Circumstances Shown by Chartered Accountant.

  Case-Laws - AT : Condonation of delay application - The COD application does not advert to any insuperable personal circumstances of the C.A., which is desalted processing of the appeal - Condonation of delay are without substance and are accordingly dismissed - AT
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• Cenvat Credit Denied for Insurance Premiums on Turnkey Contracts for Materials from Open Market.

  Case-Laws - AT : Cenvat credit - Input service - insurance premium paid on turnkey contracts to the extent of cost of material procured from the open market - credit denied - AT
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• Extended Sugar Storage Doesn't Reclassify Mills as Warehouses; Government Not Considered a Client Under New Mandate.

  Case-Laws - AT : Classification of service - just because the storage period of free sale sugar had to be extended at the behest of Government of India - neither the sugar mills becomes `Storage and Warehouse keeper' nor the Government of India become their client - AT
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Central Excise

• Cenvat Credit Rules 6(6Xi) Applies to SEZ Goods from 2004, Aligning with Central Excise Tax Compliance.

  Case-Laws - AT : Rule 6 of the Cenvat Credit Rules,2004 – Clearance of goods to SEZ - The substituted sub-rule 6(6Xi) is enforced from the date the 2004-Rules came into force - AT
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• Factory Setup Input Services Eligible for Tax Credit; Cannot Be Denied as Factory Is Immovable Property.

  Case-Laws - AT : Input service - Credit on service tax paid - When the definition specifically includes services relating to setting up of factory, credit on such services cannot be denied prima facie based on the argument that factory is an immovable property - AT
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• Cenvat credit allowed for inputs sent to job workers directly; applies once processed goods are received per Rule 4(5)(a).

  Case-Laws - AT : Cenvat Credit on Input - Direct dispatch of material to Job Worker's premises -Rule 4(5)(a) that the appellant is eligible to avail cenvat credit on the receipts of processed goods from the job worker’s premises - AT
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Case Laws:

• Income Tax

• 2013 (7) TMI 778
  Validity of notice u/s 158BD - Valid satisfaction - Tribunal quashed notice - Held that:- for taking recourse to block assessment under section 158BC in relation to the person not searched, whenever search has been conducted under section 132 or the documents have been requisitioned under section 132A, the Assessing Officer of the searched person needs to record his satisfaction that undisclosed income belongs to the person, other than the person with respect to whom search was carried out under Section 132 of the Act. He is also required to hand over the books of account or other documents or assets seized, to the Assessing Officer having jurisdiction over such person and thereafter, the Assessing Officer who has the jurisdiction would proceed under Section 158BC against such person who has not been searched - vital and mandatory requirement of recording the satisfaction under section 158BD were absent while issuing notice - Following decision of MANISH MAHESHWARI and INDORE CONSTRUCTION P. LTD. Versus COMMISSIONER OF INCOME-TAX[2007 (2) TMI 148 - SUPREME COURT OF INDIA] - Decided against Revenue.

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• 2013 (7) TMI 777
  Application of Section 41(1) - Interest free unsecured loan from Government - Tribunal deleted addition on account of capital receipt - Held that:- no claim of loss expenditure of trade liability was made by the assessee in respect of the loan granted by the State Government. Therefore, question of considering the said loan cannot be considered as revenue receipt - the conversion of the loan given by the State Government into non refundable interest free unsecured loan was on capital account - when the loan was granted, it was of capital account. By converting it into non refundable interest free unsecured loan, it remain part of the capital account as appears from the balance-sheet of the assessee. The assessee has merely changed the description of the loan as per the direction of the State Government and no way it has treated it as a revenue receipt in its books of account - present case is regarding the conversion of the capital of one amount to another amount. So, conversion cannot be taxed, only when specifically provided in a book of statute, but there is no provision in the Act that on conversion of one capital from another capital will be treated as revenue receipt - Decided against Revenue.

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• 2013 (7) TMI 776
  Deduction u/s 80IB - A.O. granted deduction to assessee - CIT used revision power and made disallowance holding that A.O. failed to make necessary inquiries - Tribunal deleted disallowance - Held that:- assessee had filed the details and calculations about the built-up area of the residential units. It would be unreasonable to hold that the Assessing Officer ignored those details - The Assessing Officer was thus made aware of the dates on which the approvals were granted in respect of each of the four housing projects - determination of the question as to when the undertaking commenced development and construction, in the absence of any statutory prescription, has to be decided in a pragmatic and reasonable way. It would have been an entirely different issue had there been a statutory prescription of what would be the date of commencement of construction or development. It is certainly a debatable issue on which more than one plausible view is reasonably possible and merely because the Assessing Officer has taken one plausible view, it cannot be said that the assessment is erroneous or prejudicial to the interest of the Revenue - Decided against Revenue. Whether the respondents could have been assessed on the basis of ALV of the unsold flats - Held that:- Assessee could have been assessed on the basis of ALV of the unsold flats - Following decision of COMMISSIONER OF INCOME TAX Versus M/s ANSAL HOUSING FINANCE AND LEASING CO LTD & OTHERS [2012 (11) TMI 323 - DELHI HIGH COURT] - Decided in favour of the Revenue.

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• 2013 (7) TMI 775
  Refund of TDS - Held that:- year after year the petitioner has become entitled to substantial refunds on account of excess TDS deducted and the petitioner had to file three writ petitions for payment of refunds - Decided in favour of assessee. Assessee is entitled to file an application even before the commencement of the financial year for deduction of tax has to be made in the financial year itself by the payer.

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• 2013 (7) TMI 774
  Deduction for TDS on Compensation u/s 28 of Land acquisition Act - Held that:- interest under Section 28 is, unlike under Section 34 of the 1894 Act, an accretion in value and regarded as part of the compensation itself which is not the case of interest under Section 34 - any component of compensation that goes towards the discharge of liability under Section 28 must be taken as part of the compensation to which Section 194 LA shall apply and that compensation being the value of agricultural land, then the exclusion as provided under the Section shall also be attracted. - there was no requirement for collecting TDS for this amount. Any liability which goes towards interest calculated under Section 34 would not obtain the benefit and if there is any deduction for TDS for such a component of interest, it shall be perfectly justified. While any deduction made under TDS will not cause any serious prejudice even if the amount ought not to have been deducted by enabling a party applying for refund, if, it might involve a large number of cases, it shall be quite unnecessary for land owners to be directed to apply for income tax for refund in every case. Such a requirement is a needless circuitous exercise. What can be prevented even in the first place by not requiring a TDS to be applied for compensation relatable to Section 23 (IA), 23(2) and 28 of the Land Acquisition Act, in respect of the acquisition of agricultural land, it shall not be unnecessarily gone through. Collector directed not to deduct TDS - Decided in favour of assessee.

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• 2013 (7) TMI 773
  Revision u/s 264 - CIT passed non interference order - Assessee declared as defaulter - Held that:- There is no dispute that the discretion is to be exercised judiciously in the facts and circumstances of the case. The authorities cannot act as per their whims or peril either exercising the discretion and/or refusing to exercise the discretion. It is not in dispute that those powers are to be exercised on the four settled legal principles, namely, existence of prima facie case, balance of convenience and inconvenience and irreparable loss and injury and the in the light of the public interest - The revisioning authority has recorded in details the conduct of the assessee throughout the proceedings. The assessee has resorted all the measures to wriggle out the tentacles of the demands. One of the fact the revisioning authority has recorded that despite several requests being made in this regard, the assessee has refused to disclose the Pass Word and User I.D. of the Hard Disc confiscated and/or seized during investigation - conduct of the petitioner in respect of the entire proceedings does not entitle the petitioner to have any interim order in this writ petition - Following decision of Aluminium Corporation of India Ltd. vs. C. Balakrishnan & Ors. [1958 (8) TMI 47 - CALCUTTA HIGH COURT] - Decided against Assessee.

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• 2013 (7) TMI 772
  Penalty u/s 271D and 271E - Held that:- receipt for which revenue intends to invoke the provisions of section 269SS or 269T as the case may be for imposing penalty under section 271D or 271E as the case may be were during the assessment proceedings treated as the booking advance and consequently assessed as undisclosed income of the assessee invoking section 68 of the Act. Such amounts were treated as booking advance and therefore, taxed as undisclosed income - same would thereafter not bear the character of loan or advances. - Decided against Revenue.

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• 2013 (7) TMI 771
  Whether theTribunal is justified in confirming the addition of Rs. 5 lakhs to the income from business/profession – such addition illegal and perverse or not – Held that:- There was not any substantial question of law as the same findings had been only a question of fact. Whether the Tribunal is justified in confirming the addition as net long-term capital gains without allowing any deduction for cost and indexed cost of acquisition, in respect of the amount paid or obtaining the lease of the residential flat in 1961 and subsequent amounts spent on repairs – assesse contended that the Tribunal has proceeded in a very technical manner and not keeping in mind the ground realities - in Mumbai for a long time the practice of paying pugree has prevailed. In this regard, support is sought to be drawn from the order passed in I. T. A. No. 167 of 2006 - a copy of which is produced - the question relating to payment as pugree and consequently the need for calculating the cost of acquisition - reducing the incidence of capital gains is concerned - it is essentially a finding of fact – appeal decided against the assessee.

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• 2013 (7) TMI 770
  Compounding of offences u/s 276CC – review petition - the petitioner contended that there is no bar for considering the request of the assessee for compounding the offence even if the assessee had been convicted - a criminal appeal has also been filed against the order of conviction and it is still pending – Held that:- The assessee should have made a written request for the compounding of the offence in the prescribed pro forma as provided under the guidelines - the petitioner should also have satisfied the other conditions contained in the guidelines for the compounding of the offence - the guidelines prescribe that certain cases should not be compounded normally - it is for the assessee to show sufficient cause or reason to support his request for the compounding of the offence - court rejected the plea of the assessee for reviewing the order passed earlier and rejecting for the compounding of the offence u/s 276CC – petition decided against assessee.

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• 2013 (7) TMI 769
  Reopening of assessment u/s 148 - whether the conditions precedent for exercise of powers u/s 147 in the light of the proviso thereto are satisfied - The only aspect which is required to be considered is as to whether the provisions of section 150 of the Act would be attracted - the ingredients for invoking section 150 are clearly not satisfied – basic premise on which the assessment is sought to be reopened is erroneous – the very formation of belief that income chargeable to tax has escaped assessment is fallacious and there is no material on the basis of which the AO could have formed such a belief - there is no material on record to indicate any omission or failure on the part of the petitioner to disclose fully and truly all material facts necessary for his assessment - neither of the two conditions precedent for exercise of powers u/s 147 after the expiry of a period of four years from the end of the relevant A.Y. is satisfied - the very assumption of jurisdiction on the part of the Assessing Officer is invalid – notice set aside – petition allowed in favour of assessee.

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• 2013 (7) TMI 768
  Allowability of interest free security and loan - there was no reason to disbelieve that the assessee had given interest free security whom a sum as job charges was received by the assessee - the CIT(A) was not justified in confirming the disallowance made by the AO on account of notional interest on the security deposit given to the party from whom maximum job work was obtained by the assessee - thus notional interest worked out by the AO on the amount outstanding was not justified – the assessee was having sufficient amount of interest free loan - no disallowance was called for out of the interest and accordingly addition made by the AO on account of notional interest was also not justified and CIT(A) without appreciating the facts had confirmed the action of the AO - CIT(A) was not justified in confirming the disallowance made by the AO – appeal decided in the favour of assessee.

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• 2013 (7) TMI 767
  Reopening of assessment u/s 147 - reason to believe - change of opinion - jurisdiction -- Held that:- The AO reached the belief that there was escapement of income “on going through the return of income” filed by the assessee after he accepted the return u/S 143(1) without scrutiny, and nothing more - this is nothing but a review of the earlier proceedings and an abuse of power by the AO – the reasons recorded by the AO do confirm our apprehension about the harm that a less strict interpretation of the words “reason to believe” vis-à-vis an intimation issued under section 143(1) can cause to the tax regime – there is no whisper in the reasons recorded of any tangible material which came to the possession of the AO subsequent to the issue of the intimation - It reflects an arbitrary exercise of the power conferred u/s 147 - court relied on the judgement of CIT v. Kelvinator of India Ltd. (2010 (1) TMI 11 - SUPREME COURT OF INDIA) brought out the concept of “reason to belief” - the reopening of the proceeding, being merely based on ‘change of opinion’ should be considered as invalid and illegal and should be cancelled. Accordingly the notice issued under section 148 of the Income Tax Act is quashed and accordingly the order passed under section 147/143(3) is annulled –decided against revenue

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• 2013 (7) TMI 766
  Penalty u/s 271(1)(c) - Whether the CIT(A) erred in law and on facts in deleting the addition of penalty levied u/s.271(1)(c) - CIT(A) has erred in deleting the penalty on technical ground without considering the merits of the facts - Mere admission of an appeal by the High Court cannot without there being anything further, be an indication that the issue is debatable one so as to delete the penalty under Section 271(1)(c) even if there are independent grounds and reasons to believe that the assessee's case would fall under the mischief envisaged in the section 271(1)(c) - unless there is any indication in the order of admission passed by the High Court - held that the CIT (A) has erred in cancelling the penalty imposed u/s 271(1)(c) on the only issue that since the appeal of the assessee in the quantum case has been admitted the issue is debatable one, so as to delete the penalty under section 271(1)(c) – order of CIT set aside – appeal decided in favour of revenue.

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• 2013 (7) TMI 765
  Rectification/ Recall of order u/s 254(2) - The assessee seeks rectification/recall of the order of the Tribunal on its appeal for the A.Y. 2008-09 on the ground that certain mistakes apparent from record have crept into the same - any material omission or mistake on the part of the Tribunal in recording the contentions of learned Authorised Representative for the assessees before it cannot be found - It is neither expected nor practicable to expect an appellate authority to record all the contentions of the parties verbatim in the order of the Tribunal and it would be suffice and meet the ends of justice, if totality of the appellate order reflects the consideration of all the contentions urged by the parties before it. The contentions urged in the present application - the assessee is merely seeking a review of the order of the Tribunal, which is not possible in these proceedings under S.254(2) - the assessees by the present application is seeking a mere review of the earlier order of the Tribunal without pointing out any specific mistake therein - careful reading of the order of the Tribunal clearly reveals that all the contentions of the parties before it have been duly considered and findings have been given based on the material apparent from record – the present Miscellaneous Application of the assessee cannot be entertained – application decided against assessee.

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• 2013 (7) TMI 764
  Expenditure allowable under Section 37 of the IT Act - Assessee-respondent-Company was incorporated as a Company, which is a nodal agency for development of Information Technology in the State of Gujarat - When certain indents remains incomplete and money is unspent, the same is used by the respondent for the purpose of investment including parking such funds with the Gujarat State Financial Services Ltd - Two Government Resolutions, being dated 21/03/2004 and 14/03/2006 , were issued by the Department of Science and Technology, which required the respondent to pay the interest at the rate of 6% on the unspent amount – Held that:- Section 36(1)(iii) do not apply on these facts as the amount lying with the Assessee is not the borrowed fund. Held that:- On one hand the assessee has earned interest income on investment of the surplus fund and on the other hand made the provisions of interest, hence such a claim does fall under the provisions of Section 37(1) of the IT Act - Provisions made by the assessee is, meant for the purpose of the business, hence qualify for claim under Section 37(1) of the IT Act – Decided against the Revenue. Uncertain or Contingent liability – Held that:- The liability was necessarily ascertained for having come in a package, given to the assessee while disbursing the amount/grant as also by way of both Government Resolutions, therefore, by no stretch of imagination it can be said that there was uncertain or undetermined liability - Government Resolutions as mentioned hereinabove specify that the unspent amount of the grant shall bear the interest at the rate of 6% per annum and when appropriate provision had been made by the assessee making a request thereafter to treat the said amount as expenditure under Section 37(1) of the Income Tax Act – Decided against the Revenue.

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• 2013 (7) TMI 763
  Excise Duty Refund - Revenue receipt or capital receipt - liable to tax under the Income Tax Act – Held that:- Relying on the judgement of Hon’ble High Court of Jammu & Kashmir in the case of Shree Balaji Alloys [2011 (1) TMI 394 - Jammu and Kashmir High Court], the excise duty refund received is in the nature of capital receipt and is not exigible to the tax – Decided against the Revenue.

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• 2013 (7) TMI 762
  Addition under section 69A of the Income Tax Act, 1961 - Assessing Officer made the additions for the three years under consideration on account of transactions made by the assessee with one Shri Brij Mohan Gupta and his associates - As per the scheme of Section 69A, the onus to prove the ownership of the assessee over money etc, is on the assessing officer – Held that:- So far as regards the allegation that the assessee failed to prove that Shri B.M. Gupta was not known to it, the assessee's affidavit in this regard, filed before the Assessing Officer in the first round, is at APB 82-83. Therein, Shri Virender Kumar, partner of the assessee firm, has categorically stated on solemn affirmation and oath, inter alia, that the firm had never advanced any sums to, or taken loan from, anybody, which was not disclosed in its books of account; that neither the assessee firm, nor its partners ever had any financial or business relation with Shri Brij Mohan Gupta or his family members or any concern belonging to them; that neither the assessee firm, nor Shri Virender Kumar, its partner, had advanced/taken any sum to Shri Brij Mohan Gupta or his family or their concerns, if any, in Assessment Year 2001-02, as stated by the Assessing Officer. As against this affidavit, no other evidence was brought by the Assessing Officer against the assessee - The case of the department, has been built on a non-existent edifice. There is not even an iota of evidence which may lead to a conclusion embroiling the assessee in the alleged hundi transactions and, in the absence of evidence, there was no scope for slapping the additions on the assessee for all these three years. There is no corroborative evidence regarding the alleged cash loans or hundis – Decided against the Revenue.

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• Customs

• 2013 (7) TMI 761
  Provisional relaease - validity of the Order of provisional release was challenged - Held that:- Without expressing any view on the correctness of the contentions raised by the Petitioners –court deem it appropriate to direct that the Commissioner of Customs (Preventive) shall reconsider the basis on which provisional release of the goods has been ordered under the provisions of the Customs Act, 1962 - the matters involving a factual determination - it is but necessary that all relevant facts having a bearing on the determination of value even for the purposes of provisional assessment should be duly considered by the Commissioner of Customs (Preventive) – petition decided against the assessee.

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• 2013 (7) TMI 760
  Condonation of delay – assessee filed the application for condonation of delay of 216 in filing the appeal - Held that:- the delay in filing the appeal has not been properly explained and the plea of bonafide pursuing the appeal before Delhi High Court has no substance - There was no confusion as to the jurisdiction on the part of the assessee - the firm of which assessee was one of partners had filed an appeal before the Court and the appeal was disposed of and the matter was carried by the firm unsuccessfully before the Apex Court - This was also a strong circumstance which belies the contention of assessee that he was bonafide pursuing his remedy by way of appeal – court relied upon Ketan V. Parekh Vs. Special Director, Directorate of Enforcement and another, (2011 (11) TMI 62 - SUPREME COURT OF INDIA). There was no reason as to why the memo of appeal was not taken back by the counsel or the assessee shortly thereafter – they should had taken steps to get back the memo of appeal - The delay in between 22nd November, 2011 to 5th of March, 2012 is also not properly explained – application rejected – decided against the assessee.

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• 2013 (7) TMI 759
  Validity of order – whether the order of imprisonment and fine was valid - passed by the Appellant was convicted u/s 20(b)(ii) and 25 of the N.D.P.S. Act and sentenced to rigorous imprisonment for 14 years and fine - Appellant contended that the lower court committed serious error of law in accepting the statement recorded by Custom Officer Under Sections 107 and 108 of the Customs Act - In case under N.D.P.S. Act, sections of Customs Act are inadmissible - statement was recorded in illegal custody of unauthorised officer - Public witnesses were falsely introduced - Mandatory provisions of Section 42, 50 and 52 of the N.D.P.S. Act, were not followed - Recovered article was kept with Custom Officer till it was sent to chemical examination - Held that:- The conviction recorded by trial court of appellant under Section 20(b)(ii) of N.D.P.S. Act is justified - The trial Judge passed the judgment after taking much pains in deciding each and every arguments of the accused appellant. The learned trial court had analyzed the evidence in right prospective and has reached to the correct conclusion - the judgment was well discussed and he rightly relied on the prosecution witnesses and confessional statement of accused persons – Court followed the judgment of (2008) 1 SCC (Cri) Shanti Lal Versus State of M.P(2007 (10) TMI 554 - SUPREME COURT OF INDIA) - the witnesses of fact before whom Charas was recovered were Custom Officers and there was no reason to disbelieve their evidence - Their evidence was supported by the confessional statement of accused which was recorded before Custom Officers and as they are not police personnel - on the statement recorded before them reliance can be placed – appeal partly allowed as the term of imprisonment was reduced.

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• 2013 (7) TMI 758
  Legality of recovery notices – municipal corporation filed the petition to challenge the legality of recovery notices passed by adjudicatory authority - Held that:- The petitioners were entitled to full waiver of customs duty and the additional duties on the imports made – The notices seeking recovery of the unpaid duties on the petitioners are also set aside - the amendment order issued by the Government of India, the orders-in-original passed by the Adjudicating Authorities to be rendered ineffective - intervening developments in the circulars would not be of any consequence because these orders were also in challenge – both the orders-in-original and the consequent duty demand required to be set aside. Government of India had powers u/s 25(2) to grant exemption in individual cases from payment of customs duties even after the import is made and duty collected - C/G if satisfied that it was necessary in the public interest so to do may pass a special order and exempt any goods from payment of duty - under circumstances of exceptional nature to be stated in the order – the circular of the Ministry of Finance in this case was sufficiently clear – petition decided in favour of assessee.

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• 2013 (7) TMI 757
  Classification of goods - Duty Drawback – assessee exported baby caps and claimed drawback under Sl. No. 6505A and the same was sanctioned as per the declaration - the claimant sought for amendment of the drawback Sl. No. to 611107A on the ground that the same was earlier wrongly declared by mistake – Held that:- Drawback Sr. No. 6505 provides the most specific description and goods ‘‘baby caps” are rightly classified under Sr. No. 6505 - General Rules for Interpretation of the First Schedule to the Customs Tariff Act - mutatis mutandis apply for classifying the export goods listed in drawback schedule as per Condition No. 8 of the Notification No. 81/2006 - Rule 3(a) states that the heading which provides most specific description, is to be preferred to heading providing a more general description – revision decided against the assessee

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• Service Tax

• 2013 (7) TMI 783
  Condonation of delay application - The appellate order was received by the petitioner Cooperative Bank on 21/3/11. As per averments in the application, the petitioner handed over the papers to its C.A., Sumerpur, Pali for preferring an appeal alongwith several other appeals on the same aspect - The appeal was eventually preferred on 31/10/12 and thus occurred a delay of one year four months (16 months), beyond the period of limitation prescribed by provisions of the Finance Act, 1994 – Held that:- The COD application does not advert to any insuperable personal circumstances of the C.A., which is desalted processing of the appeal - Condonation of delay are without substance and are accordingly dismissed – Decided against the Assessee.

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• 2013 (7) TMI 782
  Levy of service tax - Assessee entered into license agreement with a foreign company - Royalty paid for disposal of valuable information - Department issued a show cause notice for non-levy of service tax - Held that:- services were being received by the respondent from foreign company - Demand has been raised in the show cause notice under 'reverse charge mechanism' from the recipient of the service as per Rule 2(1) (d) (iv) of the Service Tax Rules - Recipient of service is liable to service tax from 18.04.2006 only - Since in the present appeal demand is raised for the period prior to 18.04.2006 on recipient of service, Respondent in the present case is not liable to service tax for the period prior to 18.04.2006 - Following decision of INDIAN NATIONAL SHIPOWNERS ASSOCIATION Versus UNION OF INDIA [2008 (12) TMI 41 - HIGH COURT OF BOMBAY] - Decided against Revenue.

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• 2013 (7) TMI 781
  Cenvat Credit - input service - insurance service - Whether the input service of the assessee would be covered under CENVAT credit rules- assessee took the input service credit in respect of insurance premium paid on turnkey contracts to the extent of cost of material procured from the open market – Held that:- The services are not covered under input service as defined under Rule 2(1) of the Cenvat Credit Rules, 2004 - credit was not admissible to the assessee because they had opted for payment of service tax only on the value of Erection, Commissioning and installation and not included value of material used by availing benefit of Notification No. 01/2006-ST - the services are neither used by the assessee for providing any output service nor used in or in relation to the manufacture of final products and clearance of final products from the place of removal - it is specifically written that benefit shall be available if Cenvat Credit of duty on inputs and capital goods or service tax credit of input services has not been availed – appeal decided against the assessee.

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• 2013 (7) TMI 780
  Application for condonation of delay – Delay of 72 days – Held that:- As per the recent judgment Office of the Chief Post Master General vs. Living Media India Ltd. reported in [2012 (4) TMI 341 - SUPREME COURT OF INDIA], the Hon’ble Supreme Court observed that all Government bodies, their agencies and instrumentalities must furnish reasonable and acceptable reasons for the delay and disclose a bona fide effort and cannot offer the usual explanation that the file was kept pending on account of an endemic procedural red tape - Condonation of delay is an exception and should not be used as an anticipated benefit for government/bureaucratic negligence - Reason furnished for the delay is unsatisfactory – Decided against the Assessee.

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• 2013 (7) TMI 779
  Classification of service - storage of sugar - Whether service or not – Held that:- followed the judgement COMMR. OF C. EX., CHANDIGARH Versus NAHAR INDUSTRIAL ENTERPRISES LTD.(2010 (1) TMI 400 - PUNJAB & HARYANA HIGH COURT) - if The act of the Assessee can not be called as rendering of services - just because the storage period of free sale sugar had to be extended at the behest of Government of India - neither the sugar mills becomes `Storage and Warehouse keeper' nor the Government of India become their client - the storage of specific quantity of free sale sugar cannot be treated as providing `Storage and Warehousing' services to the Government of India – appeal decided against revenue.

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• Central Excise

• 2013 (7) TMI 756
  Rule 6 of the Cenvat Credit Rules,2004 – Clearance of goods to SEZ - The date since when the clarificatory rule 6 of CCR,2004 is applicable - Appellant had cleared finished goods i.e. cement to units who are functioning as developers and Special Economic Zone without payment of duty as reported under Section 26 of the Special Economic Zone 2005 - Appellant should have reversed the cenvat credit availed on the manufacturing of such final products or in the alternative, should have paid 10% of the value of the cement cleared without payment of duty to Special Economic Zone or Special Economic Zone developers – Held that:- As per the judgment in the case of Sujana Metal Products Ltd. & Ors. Vs. CCE Hyderabad[2011 (9) TMI 724 - CESTAT, BANGALORE], any inputs and the services cleared to Special Economic Zone or Special Economic Zone developers up to 31.12.08 is to be considered as cleared to the developers and not only to Special Economic Zone units and subsequent amendment in Rule 6(6) has to be considered as clarificatory in nature - The substituted sub-rule 6(6Xi) is enforced from the date the 2004-Rules came into force – Appeal allowed - Decided in favor of Assessee

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• 2013 (7) TMI 755
  Penalty under Rule 173Q(1)(d) of the Central Excise Rules, 1944 - In the second round when the penalty issue was being considered by the Commissioner some material/evidence was produced by the appellant in an attempt to discharge its burden and to establish its bona fides – Held that:- It was incumbent upon the Commissioner to have examined the evidence that was produced at the stage of remand by the appellant which would in any way alter the case for levy of penalty on the appellant - Burden to prove the defence of bona fides was on the appellant - impugned order ought to be set aside and the matter ought be remitted to the Tribunal for considering the said material while taking a view on the levy of penalty under Rule 173Q(1)(d) of the said Rules – Decided in favor of Assessee.

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• 2013 (7) TMI 754
  Cenvat credit - Outward transportation of the goods - Commissioner disallowed benefit - Held that:- Commissioner relied on decision of ABB Ltd. Vs. CCE [2009 (5) TMI 48 - CESTAT, BANGALORE] and rejected appeal however, this decision is now reversed by Karnataka High Court [2011 (3) TMI 248 - KARNATAKA HIGH COURT] - Therefore following this decision - Decided against Revenue. Longer period of limitation - Construction services utilised for the residential colony - Held that:- Whatever is required to be disclosed in the ER-I Return, the appellants have admittedly disclosed the same. As Such no suppression or mis-statement can be alleged to them so as to invoke the longer period of limitation - Decided against Revenue.

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• 2013 (7) TMI 753
  Default of duty - Commissioner deleted penalty holding that it was intentional offence - Held that:- Respondents nowhere accepted the clandestine manufacture and removal of their final product. Further, except the shortages, there is no corroborative evidence indicating any removal of the Respondents final product. The fact that the respondents have not disputed the duty confirmation and have deposited the same so as to avoid the litigation, does not lead to the fact of removal of goods without payment of duty. Further the duty stands paid by the Respondents, immediately on detection - Decided against Revenue.

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• 2013 (7) TMI 752
  Input service - Credit on service tax paid - Construction of coal shed for manufacturing sponge iron - Department held that coal shed has nothing to do with manufacture of sponge iron - Held that:- coal shed is where coal is stored and are covered by services of input service under Rule 2-1(ii) - When the definition specifically includes services relating to setting up of factory, credit on such services cannot be denied prima facie based on the argument that factory is an immovable property - Following decision of Coca Cola India Pvt. Ltd. Vs. CCE, Pune-III [2009 (8) TMI 50 - BOMBAY HIGH COURT] and Commissioner of Central Excise, Pune vs. Raymond Zambaiti Pvt. Ltd. [2010 (3) TMI 402 - CESTAT, MUMBAI] - Decided in favour of Assessee. Limitation period - Held that:- The credit availed is reflected in the appellant’s records maintained by them in the ordinary course of their business and was availed on the basis of bonafide belief Revenue has not adduced any evidence to show that such availment of credit by the appellant was with any malafide intention so as to justify invoking longer period of limitation - Decided in favour of Assessee.

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• 2013 (7) TMI 751
  Clandestine Removal of goods – Held that:- Allegation of clandestine removal are required to be proved by production of sufficient and tangible evidence. Recovery of kaccha slips from the gate keeper of another unit read with the inculpating statement of the authorized representative of third party cannot be held to be admissible evidence so as to uphold the allegation of clandestine removal, especially when such persons have not been tendered for cross-examination – Decided against the Revenue.

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• 2013 (7) TMI 750
  Cenvat Credit on Input - Direct dispatch of material to Job Worker's premises - M/s Aristo Exports, Daman (the unit) is engaged in the manufacture and hold Central Excise registration for the same - During the course of CERA audit observed that the inputs viz. PP REPOL supplied by M/s Reliance industries Ltd, Jamnagar/ were directly sent to M/s Aristo Plast Enterprise Pvt. Ltd., Palghar, Maharashtra, for job work – Held that:- As per sub rule 5(a) of Rule 4 of Cenvat Credit Rules, 2004, an assessee is eligible to avail the cenvat credit of the inputs if goods are manufactured out of the inputs delivered to the job worker - There is no dispute as to purchases of the inputs and receipt of the processed goods from the job worker’s premises in the hands of appellant - Rule 4(5)(a) that the appellant is eligible to avail cenvat credit on the receipts of processed goods from the job worker’s premises – Decided in favor of Assessee.

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• 2013 (7) TMI 749
  Stay Application – SSI exemption - Brand Name - Rural Area - Notification No. 8/03 - Appellant have a factory located at F-166 Industrial Area, Jhotwara Extension-I, Jaipur, Rajasthan – In the factory of the Appellant D.G. Sets were being manufactured by using Mahindra & Mahindra E-Tech Engines - On D.G. sets were affixed the brandname "Mahindra Powerol" alongwith logo of Mahindra & Mahindra - New point that the appellant's unit is located in a rural area and, therefore, they would be eligible for SSI exemption notwithstanding the fact that they were using the brand name of other person – Held that:- Appellant's final product bear the brand name and logo of M/s. Mahindra & Mahindra - Rural area means the area comprised in a village as defined in the land revenue records, excluding, any area that may be notified as an urban area by the Central Government or a State Government - In terms of Section 2(b) of Rajasthan Land Revenue Act, 1956 the term "urban area" covers among other areas, the areas falling within "Jaipur region", as defined in clause (8) of Section 2 of Jaipur Development Authority Act, 1982. According to Clause (8) of Section 2 of Jaipur Development Authority Act, 1982", "Jaipur region" means an area in the limits of the city, towns and villages specified in Schedule-I Sl. No.87 of the Schedule I to the Jaipur Development Authority Act covers village "Sarna Dungar" in which the appellant's factory is located - Village Sarana Dungar falls within the "Jaipur region" and, therefore, same be treated as urban area - Appellant have not been able to establish prima facie case in their favour – Decided against the Assessee – Stay application dismissed.

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• 2013 (7) TMI 748
  Cenvat credit - Benefit of Cenvat credit of service denied to authorities - Held that:- there is no dispute that service tax stand PAID by the service provider. The recipient of services is entitled to avail the credit paid by the service provider and the assessment at the end of the service provider cannot be reopened at the service recipient's end - Following decision of MILLIPORE INDIA LTD. Versus CCE, BANGALORE-II [2008 (11) TMI 97 - CESTAT, BANGALORE], V. G. Steel Industry Versus CCE [2011 (5) TMI 154 - Punjab and Haryana High Court] - Decided in favour of assessee.

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• 2013 (7) TMI 747
  Classification of capital goods - whether the welding electrodes, plates, channels and various other iron and steel items used for repair and maintenance of capital goods are eligible capital goods or not - Held that:- Following decisions of HINDUSTAN ZINC LTD. Versus UNION OF INDIA [2008 (7) TMI 55 - HIGH COURT RAJASTHAN], AMBUJA CEMENTS EASTERN LTD. Versus COMMISSIONER OF C. EX., RAIPUR [2010 (4) TMI 429 - CHHAITISGARH HIGH COURT], COMMISSIONER OF C. EX., BANGALORE-I Versus ALFRED HERBERT (INDIA) LTD. [2010 (4) TMI 424 - KARNATAKA HIGH COURT] and SREE RAYALASEEMA HI-STRENGTH HYPO LTD. Versus COMMR. OF CUS. & C. EX., TIRUPATI [2012 (11) TMI 255 - ANDHRA PRADESH HIGH COURT] - Decided in favour of assessee.

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• CST, VAT & Sales Tax

• 2013 (7) TMI 785
  Jurisdiction in the authority passing the order - legality of order questioned - Held that:- The present case is not one of lack of jurisdiction but is a case where the petitioners allege improper and illegal exercise of jurisdiction and, therefore, the petitioner must be relegated to availing the alternative statutory remedy of filing an appeal against the impugned order as the appellate authority is fully empowered and competent to look into the issues raised by the petitioner, scrutinize the facts and pass an order in accordance with law.

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• 2013 (7) TMI 784
  Revision of permission for compounded rate of tax - Revised permission granted for the year 2011-12 was withdrawn and the petitioner was issued fresh notice for that year - Held that:- Respondent directed to consider and pass appropriate orders in accordance with law after hearing the petitioner as expeditiously as possible by passing a 'speaking order' in this regard with reference to the relevant facts as well as the relevant provisions of law.

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