Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
July 5, 2012
Case Laws in this Newsletter:
Income Tax
Corporate Laws
Service Tax
Central Excise
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Applicability of principle of mutuality - consumer co-operative society, engaged in trading in consumer goods to its members as well as non-members - The doctrine of mutuality cannot be applied to the Assessee. - HC
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Petition against dismissal of stay petition by CIT(A) - CIT(A) has to follow the parameters for granting stay - HC
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Software expenses - revenue or capital expenditure - real intent and purpose - expenditure incurred by the assessee on software is allowable as revenue expenditure. - AT
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Short term Capital Loss arising from re-purchase and sale of shares - In the absence of any material explained as regards the repurchase of shares at Rs. 30/- per share and subsequently sold it at Rs. 8.50 paise, same cannot be construed as genuine transactions. - HC
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Deduction u/s 10A - receipt of foreign exchange after expiry of time stipulated u/s 10A(3)- statute does not prescribe any time-limit within which the application is to be made for such an extension of time and the period within which the competent authority has to pass an order - HC
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Principle of res-judicata - AO could have made a departure from past even in earlier years. - AO was well within his right to examine the facts of this year independently. - AT
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No business activity had been carried out during the relevant previous year - not entitled to a set off of the administrative expenditure incurred as business expenses u/s 71(1) of the Act - AT
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Capital gain – transfer of property where title is not absolute and clear - section 2(47)(v) - the assessee is liable to pay the capital gain tax during the year under consideration - AT
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Non-compete fees - payment received as non-competition fee under a negative covenant is a capital receipt and not taxable under the Act. - HC
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AO noticed that assessee company has paid huge salary to the ladies who are relatives of Directors / CEO - as assessee failed to justify the reasonableness of salary payments made, the additions need to be made - AT
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Exclusion of three items by CIT(A) in computing the deduction u/s. 80P (2)(a)(i) - interest from employees - Income of`jeep charges - Income from No Dues Certificates - AT
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Unexplained cash credit – credit worthiness of donor – Assesseefailed to establish relationship with so-called donor and also failed to establish the occasion for receiving such gift - In favor of Revenue. - AT
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Addition u/s 68 - It cannot be held that suppliers were not genuine only because summons u/s 133(6) were not served. - AT
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Doctrine of merger - Rectification of assessment order u/s 154 despite the fact that CIT(A) has passed an order - issue of deduction under section 80HHD - Decided in favor of revenue - Tri
Customs
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Originating in, or exported from, People’s Republic of China, European Union, Kenya, Iran, Pakistan, Ukraine and United States of America (hereinafter referred to as the subject countries) and imported into India. - Notification
Corporate Law
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Extension of time in Filing of annual return by Limited Liability Partnerships(LLPs). - Circular
Indian Laws
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FEMA - Master Circulars
Service Tax
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Cenvat Credit on Capital goods used for providing output services - the tipper used cannot be treated as capital goods. - AT
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‘Management Consultancy Service' - If he himself is managing the affairs of the organization, it does not fall under the ‘Management Consultancy Service'. - AT
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‘Consulting Engineering Services' - it is onus on the department to prove that the appellant has received this amount as “Consulting Engineering Firm” which the department has failed to prove - AT
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Commercial Training or Coaching Service - appellate Society working under Governmental patronage - Entire cost of the courses was met out of the fees collected from students/trainees on a Commercial basis. - prima facie against the assessee - AT
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Input Service Distributor (ISD) - ISD can distribute the credit even to only one unit - AT
Central Excise
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Captive consumption - Valuation of wire rods manufactured and supplied to sister units - cost of production cannot be equated to the conversion charges charged by the appellants in respect of goods supplied to TISCO. - AT
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Defect in adjudication order – Corrigendum issued - Corrigendum is a total departure from the confirmation of duty demand in the adjudication order - AT
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Cenvat credit – invoice number was handwritten or rubber stamped but not printed – no requirement in the rules that the invoice number should be printed on the invoice. - credit allowed - AT
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As physician samples manufactured and cleared to brand owners/ buyers on principal to principal basis for a consideration, further distributed free of cost to physicians/doctors, the same is required to be assessed to duty on the transaction values - AT
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Genuineness of the review order - in the absence of any valid review order produced the applications filed before the Tribunal are not maintainable as appeals against the impugned Order-in-Original. - AT
Case Laws:
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Income Tax
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2012 (7) TMI 76
Applicability of principle of mutuality - consumer co-operative society, engaged in trading in consumer goods to its members as well as non-members - Held that:- Principles of mutuality have been recognized in the Act in relation to trade, professional or similar associations which are not profit making bodies. A consumer co-operative society, which sells commodities of daily use to members and nonmembers at the same price and makes profits out of such business, cannot be brought u/s 44A. Such associations would be covered u/s 80P for exemption of income, when it fulfills the criteria mentioned in section 80P. In present case, assessee is involved in commerciality and that from the moneys received from the members, services are offered to members and non-members, in the nature of profit sharing by the members and not for the purposes of any conveniences to the members. The amount which comes to the society is distributed amongst the members as dividend. The doctrine of mutuality cannot be applied to the Assessee. Order of Tribunal set aside and quashed.
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2012 (7) TMI 75
Petition against dismissal of stay petition by CIT(A) - Held that:- This court in the matter of KEC International Ltd. v. B.R. Balakrishnan & Ors., (2001 (3) TMI 32 (HC)) has laid down the parameters for granting stay pending the disposal of the Appeals. It is laid that while considering/deciding the stay application, the authority must (i) briefly state the case of the party; (ii) consider whether the party has made out a case for unconditional stay; (iii) the financial difficulty if pleaded be considered and (iv) in case the authority concerned comes to the conclusion that by granting of stay the assessee is likely to defeat the claim of the department then brief reasons for the same be indicated. In the present case, CIT(A) has completely ignored the parameters laid down by this court in the matter of KEC Ltd. and has passed an order without considering all the submissions of the petitioners and also failing to point out as to why the interim payment of 50% of demand is necessary in the facts of the present case. Therefore, order of CIT(A) is set aside and is directed to pass a fresh order with reasons on the petitioner’s stay application. Notices issued u/s 226(3) to the various bankers of the petitioners will continue.
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2012 (7) TMI 74
Software expenses - revenue or capital expenditure - Held that:- What is required to be seen is the real intent and purpose of expenditure and whether the expenditure results in creation of fixed assets for the assessee. Expenditure which is incurred and which enables the profit making structure to work more efficiently leaving the source of profit making un-touched would be the expense in the nature of revenue expenditure. Therefore, expenditure incurred by the assessee on software is allowable as revenue expenditure. See CIT v. Asahi India Safety Glass Ltd (2011 (11) TMI 2 (HC))- Decided in favor of assessee. Since facts in the present case are identical with the facts of the case pertaining to A.Y. 2006-07, therefore following the order of earlier AY, royalty to M/s Honda Co. Ltd., Japan for providing technical know how, provision for warranty and sales services, cost of air ticket booked by the appellant for technicians and forming part of technical guidance PE, entry tax paid by the assessee under protest and provisional is allowed as revenue expenditure - in favor of assessee.
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2012 (7) TMI 73
Maintainability of application for rectification u/s 154, when the matter has been considered and decided in any proceeding by way of appeal or revision - availability of deduction u/s 35D - matter had been considered and dropped in proceedings initiated u/s 263 - reassessment order u/s 147, dis-allowing deduction had been invalidated on ground of change in opinion - Held that:- Issue of availability of deduction u/s 35D(2)(iv) in the facts of the present case is a matter of opinion depending upon the exact nature of the issue, which had been subject matter of appeal and the same has been considered and decided by the Appellate Authorities. Consequently, no rectification proceeding would lie in such a case in view of Sub Section 1(A) to Section 154. Also, it becomes debatable even on questions of fact and therefore outside the purview of Section 154 as it is not a mistake apparent from the record.
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2012 (7) TMI 72
Short term Capital Loss arising from re-purchase and sale of shares - dis-allowance on ground that modus operandi adopted to purchase shares at high price and sale thereof at low price to a sister concern were all colourable device - shares of Premier Mills Ltd purchased from UTI for Rs 30/- per share when market rate was Rs 8.50 per share, subsequently sold within a short span of time to BIPL(sister concern of PML) at Rs. 8.50 - no involvement of the assessee in the negotiation process - no correspondence exchanged between the assessee and UTI - no movement of funds from the assessee for purchase of shares from UTI, paid by PML through adjustment against dues of assessee firm - incentive for the turnover given to the assessee firm by PML to make good the loss resulting from the share transaction, which was withdrawn after the share transactions were completed. Held that:- Premier Mills Limited merely used the assessee firm as a special vehicle for the purpose of achieving, what it would not be possible for it to achieve in a legal way. It was found that as PML could not purchase its own shares and in order to circumvent Section 77 of the Companies Act, it decided to repurchase the shares through the assessee herein, which subsequently sold the same to the sister concern, wherein the spouse of Managing Director of Premier Mills Limited was a Managing Director of the sister concern. In the absence of any material explained as regards the repurchase of shares at Rs. 30/- per share and subsequently sold it at Rs. 8.50 paise, same cannot be construed as genuine transactions. Further, there are hardly any material to show that the funds for the purchase of these shares really went from the assessee firm - Decided against assessee.
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2012 (7) TMI 71
Unexplained cash credit – creditworthiness – Held that:- Assessee has furnished the relevant documents to discharge his primary onus of explaining the nature and source of credit entries - name and address of the creditor - confirmation of loan from the said creditor - address of the creditor - assessment particulars of the creditor - copy of legal notice served by the above loan creditor on the appellant, as the assessee failed to repay the loan - Since the disputed loan transaction had been through the account payee cheques and the address and PAN of creditor were before the AO, the question of identity of the creditor becomes irrelevant - action of the ld. AO was not justified and on the other hand, the ld. CIT(A) rightly held that the assessee has discharged his burden of proof regarding identity and creditworthiness of the creditor and genuineness of the transactions
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2012 (7) TMI 70
Justification in allowing the deduction u/s.80IB(10) - AO observed that as per the Completion certificate produced by the assessee was in respect of Part Completion of the project the assessee is not entitled for deduction - Held that:- The assessee originally obtained the Commencement Certificate on 14.12.2004 to construct 19,328.40 sq. mtrs. of FSI for the construction of buildings i.e. A-1 to A-6, B-1 to B-3 and C-4. The assessee purchased TDR and got the plan modified vide new commencement certificate dated 30.03.2007 for additional construction of 12,166.09 sq. mtrs. and the said approval was given for construction of four buildings i.e. C-1 to C-3 and D, thus those were two independent projects though the land was the same i.e. project utilising the original FSI and project by purchasing by obtaining TDR - admittedly, the first phase itself is a separate “project” and the assessee completed the building shown in the first phase within four years from the financial year in which the commencement certificate was issued i.e. in F.Y. 2004-05 and as the plot of land is common for both the phases, hence, as per their regulations the Municipal authorities have issued part completion certificate - in favour of assessee.
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2012 (7) TMI 69
Disallowance the claim of expenses invoking the provisions of S.40(a)(ia)- Held that:- Considering the submission of assessee that he has paid freight charges and TDS was also deductible but, on the same the lower authorities have not given any finding as to whether the assessee has made all the payments of freight charges before the year end - remit the issue to the file of A.O. for verification as only outstanding amount or the provision for expenses (and not the amount already paid) is liable to disallowance if TDS is not deducted - in favour of assessee by way of remand. Addition made u/s. 40A(3) - Held that:- As the assessee has not been able to conclusively demonstrate that its case falls under the exceptions as provided under Rule 6DD, invoking the provisions of Sec. 40A(3) and disallowed 20% of the payment made in cash as the assessee had made payments aggregating to Rs.2,52,800 by cash/bearer cheque each of which were more than Rs.20,000 - against assessee. Partly confirmation of addition on account of gross profit - Held that:- As the assessee has started dealing in cement business in the present assessment year and the turnover of the assessee increased due to it is an accepted fact that to penetrate into an already existing market, the businessmen has to offer competitive rates - as CIT (A) has granted the relief to the extent of 50% of net profit estimated by A.O. on estimation basis in view to meet the ends of justice the disallowance need to be reduced to the extent of Rs.1.50 lacs as against Rs.1,73,289 sustained by CIT(A) - partly in favour of assessee.
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2012 (7) TMI 68
Disallowance in respect of interest u/s 36(1)(iii) - assessee submitted that the advances were given to protect the investment of the company as well as directors, the interest relating to advance to this party is need to be allowed - Held that:- As per the balance-sheet available against shareholders funds of ₹ 872.96 lakh, losses is of ₹ 4492.25 lakhs. Hence, no interest free fund is available with the assessee-company, so interest bearing borrowed funds were used for giving interest free advance. Therefore, no infirmity into the order passed by Ld. CIT(A) as the explanation offered by the assessee with regard to advance is not convincing as what was the commercial expediency for making such advances, when the assessee, itself has to pay interest on the borrowed capital - against assessee. Charging of Minimum Alternate Tax and not allowing deduction u/s. 115JB - Assessee contested that it is sick company as declared by the BIFR - Held that:- As the appellant filed a reference with BIFR on 11-4-2000 and the decision to file the reference was taken in company’s Board of Directors Meeting held on 17-2-2000. As the first reference of the company was dismissed as time barred by the Board vide order dt. 26-11-2002, and on 8.11.2005 AAIFR remanded the case back to BIFR to consider the case of the appellant. Thereafter the appellant filed another reference on 17.3.2003 in the BIFR. Then the order of BIFR dated 4.1.2006, it was held that the company had become a sick company. The effective date from which the company has been declared as sick has not been mentioned - case is remitted back to the file of CIT(A) directing assessee to establish the effective date when it became sick as per the order of BIFR. Addition of deferred tax for working out book profit u/s. 115JB - Held that:- Since there is retrospective amendment in this regard, this issue is decided against the assessee. Claim of process loss by assessee - Held that:- As appellant has produced the stock registers shown day to day purchase, consumption, production, opening and closing stock duly certified by the Civil & Supply Department along with books of accounts and no defects have been pointed out, the same is allowed and the consequent addition made by the A.O is deleted - process loss has been allowed upto 2% by the A.O in A.Y. 1996-97 to 1998-99 and has been allowed in full as claimed by the appellant by the ITAT for A.Y. 1987-88 to 1995-96, the process loss claimed by the appellant at 1.61% is found to be within the reasonable limit - in favour of assessee. Deletion of disallowance of interest expenses u/s 36(1)(iii) by CIT(A) - Held that:- As the fresh advance has been given to Metal Form Industries for business consideration as the assessee was purchasing tins from the said concern for filling oil.Therefore, CIT(A) has returned a categorically finding that the advance has been given for business consideration - in favour of assessee. Disallowance of various expenses on estimate basis - Held that:- As AO as well as CIT(A) has made this addition merely on the basis of estimation, this ground of assessee’s appeal is remitted back to the file of Assessing Officer to verify the claim - in favour of assessee by way of remand. Rejection of books of account - Held that:- As the assessee failed to get its account audited u/s 44AB and explanation offered by the assessee is not convincing, no infirmity into the order passed by CIT(A)confirming the action of AO in respect of rejection of books of account - decided against the assessee.
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2012 (7) TMI 67
Admission of additional evidences by CIT(A) without recording in writing the reasons thereof - assessee failed to produce any vouchers of expenses before the AO at the assessment stage - Rule 46A - Held that:- Since no regular books of account were found maintained by the assessee in survey and no vouchers were produced during the course of survey and the assessment proceedings, therefore, there was chance that the assessee would have prepared the self-made vouchers for the first time at the appellate stage. Therefore, such self made vouchers and unsupported vouchers should not have been admitted at the first appellate stage and that too without assigning any reason for admission of the same. It, therefore, appears that CIT(A) without appreciating the facts of the case and without properly examining the material on record, has wrongly allowed the appeal of the assessee partly. The matter, therefore, requires reconsideration at the level of the CIT(A) and is directed to give reasons for admission of additional evidence in the appellate order as required u/r. 46A of the IT Rules - Decided in favor of Revenue
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2012 (7) TMI 66
Validity of reopening of the assessment - CIT(A)canceled the reassessment order concluding that an issue on which reasons are not specifically recorded at the time of reopening of assessment, the said issue cannot be considered at all during the course of completing the reassessment proceedings - Held that:- As the AO issued notice u/s 148 on the ground that the assessee had purchased an immovable property for a consideration for which the stamp valuation authority had fixed different value which was accepted by the assessee without any dispute. Therefore, income has escaped assessment to tax by difference in value. However, in the reassessment order made u/s 143(3) r.w.s. 147(a), no addition was made on account of undisclosed investment in the purchase of immovable property and the disallowance of bad debts originally allowed to the assessee was stated. Thus, when the reasons on which reassessment proceedings were initiated were not found to exist the assumption of jurisdiction under Section 148 r.w.s.147 becomes invalid and consequently, the reassessment order passed in pursuance thereto also becomes invalid. CIT Versus Jet Airways (I) Ltd. [2010 (4) TMI 431 (HC)] clearly states that if after issuing a notice u/s.148 AO accepts the contention of the assessee and holds that the income which he has initially formed a reason to believe had escaped assessment, which has as a matter of fact not escaped assessment, it is not open to him independently to assess some other income. If he intends to do so, a notice u/s.148 would be necessary in any event of challenge by the assessee - decided against revenue.
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2012 (7) TMI 65
Whether the income earned by the assessee on profit arriving on purchase and sale of shares is capital gain or business income – investment in shares was shown under the head investment - claim of the assessee that only a faction of total investment was made in shares - as against the total long term capital gain of Rs. 25,08,196/- major portion i.e. Rs. 19,22,696/- is out of sales of units in mutal fund and sale of TCS shares which were allotted to the assessee under ESOP - Held that:- Long term capital gain admitted has to be accepted especially when the AO had accepted such long term capital gain in AY 2004-05 - profit on sale of shares held for more than 12 months is assessable under the head 'long term capital gain' - appeal of the revenue is dismissed.
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2012 (7) TMI 64
Entitlement for deduction u/s 10A - receipt of foreign exchange after expiry of time stipulated u/s 10A(3)- Held that:- the assessee to be entitled to the benefit of Section 10A, the sale proceeds would have to be brought into the country within a period of six months from the end of the previous year, however, the legislature has consciously in express words has vested the power to extend the time-limit for the said benefit, if the competent authority chooses to allow the said benefit. Therefore, the six months' period prescribed is not mandatory. As the statute does not prescribe any time-limit within which the application is to be made for such an extension of time and the period within which the competent authority has to pass an order Tribunal was justified in setting aside the order of the Appellate Commissioner as well as the Assessing Officer and in extending the said benefit - in favour of assessee. Entitlement to claim expenses - revenue contested that when admittedly forfeiture took place on 18.04.2002, the assessee can claim loss only for the accounting year 2002-03 and not for 2001-02 - Held that:- As the assessee was allotted a site by KIADS against a sum deposited, assessee further deposited a charge for delay in not utilizing the said land for the purpose for which it was allotted and subsequently decided to surrender the land to the KIADB as the project could not be commenced - Considering the terms of the contract once the assessee surrendered the land in terms of the contract between the parties, the amount paid towards allotment of site land and the penalty is liable to be forfeited by the KIADB that accrued in the financial year 2001-02 for the assessment year 2002-03 - Merely because the actual order of forfeiture was passed on 18th April 2002, that date has no relevance insofar as the date of accrual is to be considered - in favour of assessee. Brought forward business loss and unabsorbed depreciation - Revenue contested that it should be adjusted before computing deduction u/s 10A - Held that:- The loss incurred by the assessee under the head profits and gains of business of profession has to be set off against the profits and gains if any, of any business or profession carried on by such assessee. Therefore, as the profits and gains under section 10-A is not be included in the income of the assessee at all, the question of setting off the loss of the assessee of any profits and gains of business against such profits and gains of the undertaking would not arise - in favour of assessee.
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2012 (7) TMI 63
Disallowance of expenditure u/s 14A r.w.r. 8D - expenditure in relation to dividend income - assessee contested that Rule 8D could not be adopted for allocation of expenditure as no expenditure had been incurred for earning dividend income - Held that:- There is no dispute that Section 14A and Rule 8D were applicable to the assessee for the impugned assessment year 2008- 09 - Assessee had itself made a computation of disallowance that could be made under Rule 8D and after giving a computation of possible disallowance which, inter-alia, included the interest outgoes also, assessee cannot now turn around and say that such a computation was incorrect - though the statement was given by the assessee at the insistence of the A.O. and if if interest or any other expenses was not relatable to the exempt income, assessee by itself would have excluded such amounts from the said computation - An assessee cannot be allowed to approbate or reprobate according to its choice - against assessee.
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2012 (7) TMI 62
Exemption under section 11(1)(a) - assessee-trust was created under a Will with a view to undertake two objects of spreading Sanskrit language and practicing ayurvedic system of medicines - with efflux of time, the main activity of the assessee has become predominantly of providing medical relief through allopathic system of medicines – Held that:- for claiming exemption u/s 11(1)(a) the assessee will have to adhere to the objects for which it was formed. Accordingly, it is held that since medical relief through allopathic treatment does not fall within the ambit of the objects mentioned in the Will, the income and expenditure from this activity will have to be treated separately. A consequence of this finding is that surplus from this activity cannot form subject matter of exemption u/s 11. Principle of res-judicata - Action of cancelling registration - held that:- The conduct of the revenue itself shows that cognizance was taken of the fact that the trustees exceeded their authority under the Will. However, due to inadequacy in legal framework, the department had to ultimately assess income under Chapter III. The decision in the case of Allahabad Agricultural Institute (2007 (3) TMI 208 (HC)) shows that the AO could have made a departure from past even in earlier years. In the light of the aforesaid decision, grant of benefit u/s 11(1)(a) would be beyond the purview of law. In such a situation, the rule of consistency cannot prevail over the well entrenched principle of res-judicata. As discussed earlier by references to the decision in the case of Pragati Construction Co. (2003 (12) TMI 281 (Tri)) and All India J.D. Educational Society (2010 (11) TMI 668 (HC)). Therefore, we are of the view that the AO was well within his right to examine the facts of this year independently. Since there were pressing reasons to make a departure, he was well within his right to do so. Whether deduction of depreciation on fixed assets is allowable when full cost of the assets had been allowed in earlier years u/s 11 as application of income, thereby allowing the deduction of the same expenditure twice over - assessee is not entitled to exemption u/s 11 in respect of expenditure incurred on medical relief through allopathic system of medicine. The income and expenditure from these activities have to be segregated, which has to be taken as profit available for the purpose of pursuing the main object of Sanskrit and ayurvedic system of medicines – Held that:- depreciation on assets used for providing relief through ayurvedic system of medicine or research are entitled to deduction of depreciation notwithstanding the fact that the cost has been allowed to be written off in the past u/s 11(1)(a). Thus, this ground is also partly allowed - appeal is partly allowed
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2012 (7) TMI 61
Disallowance of expenditure including depreciation as business expenditure - on the ground that no business activity had been undertaken during the year - asseessee-company has undertaken a project of providing infrastructure facilities - Development work for Phase II was proceeding satisfactorily, and had reached 90% completion - report dated 21-12-2002, the Board of Directors of the assessee company, commenting on the present status of the project, state that Phase I of the project is complete, though the licence for distribution of power is awaited – Held that:- no business activity had been carried out during the relevant previous year, and all the activities undertaken were only in the nature of setting up of business - assessee is not entitled to a set off of the administrative expenditure incurred as business expenses u/s 71(1) of the Act – Power of the ITAT to consider the issues not raised before it - held that:- The same would necessarily require of us to issue a finding as to the date of the commencement of business in the present case, or at least the basis for its determination, and which would be valid for all the years under reference. Also, it is well settled that the tribunal is fully competent to determine the actual issue arising for determination in appeal, as also allow to relief on a ground different from that being urged before it. It is well-settled that it is the correct legal position that is relevant, and not the view that the parties may take of their rights in the matter. Claim of expenditure to be set off against interest income - held that:- we are unable to see as to how the said admitted business expenditure is now being claimed as laid out wholly and exclusively for earning bank interest, so as to be deductible u/s 57(iii), qua which there is no finding by the first appellate authority in any the years, and which claim, where admitted by him, would have required a remission to the A.O., i.e., after satisfying himself that a prima facie case is made out. - Decided against the assessee. Direct or indirect cost - Architect's fee - income from sale of forms and trees can not be treated as independent of the project, and even if no costs are attributable thereto (which is impractical), or such costs stand already capitalized as part of the project cost (and not included in the impugned administrative expenditure), the same cannot be assessed as income - Held that:- Matter remanded to the file of the AO to allow the assessee an opportunity for verification of the assessee's claims
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2012 (7) TMI 60
Disallowance u/s.14A - CIT(A)deleting the disallowance made by AO - Held that:- As assessee had raised the loan up to 1997-98 and majority of investments have been made before 1997-98 claiming deduction u/s.80M - as there is no dispute to the fact that assessee is having the non-interest bearing funds the nexus between borrowed funds and investments can be said to be established only where it is shown that interest free funds are not available with the assessee - as there is no nexus of such kind proved by the AO, thus as per the past history where the Department itself has been taking the view that no expenses including the interest has been attributed to dividend for computing deduction u/s.80M the disallowance made by the AO is to be deleted - in favour of assessee. Rejection of revised return filed - Held that:- If the assessee discovers any omission or any wrong statement in the return of income, he may furnish revised return as prescribed u/s. 139(5) provided the original return having been furnished by the assessee u/s.139(1)- as before the expiry of the limitation to file the revised return, the assessee had discovered that no income had accrued to the assessee and accordingly the return had been revised for the reasons of withdrawal of the scheme by the Government, the action of the assessee in revising the return on principle of real income cannot be said to be false or against the provisions contained in Section 139(5) - in favour of assessee Considering the service charges as income of the year under consideration - Held that:- The matter is restored back to the file of AO to decide the taxability of income and exclusion of service charges, in the assessment year 2004-06 in view of decision regarding revised return - in favour of assessee.
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2012 (7) TMI 59
Rejection of claim u/s 54F - no possession of the residential premises by the assessee and no sale deed was executed till the due date of filing the return of income - Held that:- No merit in the argument of DR as the assessee has made all efforts to acquire new asset stipulated u/s 54F and made the payments towards purchase of the property by entering into an agreement with the developer - if the AO had any doubt regarding the completion of the construction within the time stipulated, he could have very well inspected the premises and have called for the information like sanction plan of the building, construction details, power connection details, etc. The assessing officers without carrying out all these enquiries, straightaway rejected the claim of the assessee - set aside this issue to the file of AO to verify the completion of the construction - in favour of assessee. Tax on interest received of advances made - the assessee has paid Rs. 2 crores to a party and in return was allotted 52 acres 34 guntas of land at the rate of Rs. 4 lakh per acre - Held that:- Considering a clause in MOU that the seller agreed to buy back the said agricultural land within four months from the date of registration with the further grace period of two months and if there is delay beyond the period of six months in buying back the interest at 2% would be paid - as the party did not exercised their option to purchase the property and in view of this, the assessee is at liberty to sell the property to whomsoever it wants, being so, in the present case, it cannot be said that the income from this transaction has been accrued to the assessee - is no scope for addition on notional basis without really accruing the income to the assessee - in favour of assessee. Sustaining an amount on account of the interest receivable - The assessee had advanced Rs. 3 crores to party at the rate of 2% per month - assessee contented that he has been following cash system of accounting - Held that:- Set aside this issue to the file of AO to see whether the assessee is following cash system of accounting to this head of income and whether this impugned income was offered to tax in the next assessment year.
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2012 (7) TMI 58
Capital gain – transfer of property where title is not absolute and clear - land was transferred during the financial year 1999-2000 - sale transaction of the land completed during the relevant previous year under consideration, only the registration has been done subsequently - assessee has received 50% of the total consideration as "partial Payment" against the sale of property Second Part and another remaining 50% of the sales consideration was kept in an interest bearing escrow account with the agreement that the said amount shall be delivered on-or before the registration – Held that:- assessee was always ready and willing to perform his part of contract - assessee has also granted an unrestricted exclusive right to use and build upon this land - assessee has transferred a capital asset as defined under section 2(47)(v) of the Income-tax Act. Consequent upon this transfer of capital asset, the assessee is liable to pay the capital gain tax during the year under consideration - Revenue's appeal is allowed. Depreciation - assessee has not claimed the depreciation on the bulk of assets with the contention that the claim of depreciation is at the option of the assessee - assessee also did not claim any depreciation allowances – Held that:- By not claiming any depreciation allowances, the assessee company had adopted a colorable tax planning devices and hence the case of the assessee is squarely covered within the purview of the decision of the Supreme Court in the McDowell's case (1985 (4) TMI 64 (SC)) - assessee is granted depreciation as per Annexure "A" to this order. The depreciation shall be allowed to be carried forward for eight succeeding years as per section 32(2) of the I.T. Act and the written down value of the assets/additions to the asset's shall accordingly be reduced and this would be the opening WDV for the assessment year 1999-2000 Expenditure incurred under the VRS - capital or revenue – Held that:- Expenditure on the voluntary retirement scheme is an allowable expenditure as the same has been incurred on account of commercial expediency - compensation paid to the workmen who retired prematurely and such expenditure incurred by the assessee for commercial expediency in order to facilitate carrying out the business is allowable u/s 37(1) of Income-tax Act, therefore, it cannot be said to be an expenditure of capital in nature - expenditure incurred on VRS is allowable as revenue expenditure – In favor of assessee
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2012 (7) TMI 57
Extended period of exemption / deduction u/s 10A / 10B - held that:- had the period of five years not yet expired, the assessee would have been entitled for a larger period of ten years which is exactly the case of the assessee before us. Ad-hoc disallowance of manufacturing expenditure - manufacturing expenditures have increased by more than 100% in this year as compared to the previous year - increase of production is hardly 25% and reduction of salary is marginal - appellant has contended that increase in expense was largely attributable to increase in production for exports – Held that:- Appellant has failed to discharge its onus to justify such huge expenditure paid to its related sister concerns covered u/s. 40A(2)(a)/410A()(b) of the I.T. Act - assessee has not produced details and evidence to support the claim of such huge expenditure incurred - Necessary evidences were not furnished – disallowance of 20% reduced to 10% - ad-hoc disallowance sustained - assessee's appeal is partly allowed Foreign exchange gains - whole of the gain is attributable to export sale realization of the current year - Held that:- receipt by way of exchange rate fluctuation is includible in the total turnover of the assessee Employees' and employer's contribution to P.F. and ESIC were made within the grace period – Held that:- payments were made after the due date but within the grace period allowed under P.F./ESIC Acts - CIT(A) erred in fact and in law in confirming disallowance of Employers contribution to PF and ESIC made before filing Return of Income u/s. 139(1) - Assessing Officer be directed to allow Employers contribution to PF and ESIC made before filing Return of Income u/s. 139(1). Whether the assessee is entitled to relief under section 10B on such interest income – Held that:- Assessing Officer directed to recompute the income accordingly - assessee is not eligible for deduction on this interest income under section 80HHC in view of clause (baa) to explanation to section 80HHC Whether the assessee is entitled to deduction under section 80HHC - no relief has been claimed under section 10B, and to the extent the aggregate does not exceed the gross total income – Held that:- Exemption under section 10A of the Act is limited to 90% of the profits of the undertaking and the balance 10% of the profits on non-refundable as part of gross total income of the assessee is to be subjected to the deduction provided under Chapter VI-A of the Act before computing the total income of previous year relevant to the assessment year in the hands of the assessee - Assessing Officer directed to allow the claim of the assessee in respect of the deduction claimed under section 80HHC of the Act on the balance profits in proportion to total turnover and recompute the income of the assessee in accordance with the provisions of the Act
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2012 (7) TMI 48
Non-compete fees - whether the same can be presumed to include element of goodwill, when no other consideration is specified in the main agreement for the goodwill - assessee, a private company entered into an agreement with M/s R for transfer of its business as a going concern and also entered into another non-compete agreement - AY 01-02 - Held that:- Tribunal was right in holding that the amount received for intangible assets under a separate agreement, is only a non-compete fee, and does not contain any element of goodwill, especially when there is no other consideration specified in the main agreement for the goodwill and there is no evidence to show that the amount received was towards transfer of Goodwill. Therefore, payment received as non-competition fee under a negative covenant is a capital receipt and not taxable under the Act. The same was always treated as a capital receipt till AY 2003-2004 - Substantial question of law is answered against the Revenue
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2012 (7) TMI 47
Violation of Rule 46A - admission of additional evidences by Commissioner (Appeals) without allowing reasonable opportunity to the AO to examine the evidence and to rebut the same - ex-parte assessment completed by AO making addition on account of unexplained investment in relief RBI Bond - Held that:- It is observed that CIT(A) admitted the additional evidence after considering the remand report from AO on just and reasonable grounds as the notices issued by the AO were not duly served on the assessee and due to this reason, the assessee was prevented from filing relevant evidence before the AO but the CIT(A) did not comply with the mandatory procedure as per Rule 46A (3) of the Rules as the AO has not been allowed reasonable opportunity to examine the evidence and to produce any evidence or documents in rebuttal of the additional evidence produced by the assessee. Therefore, matter remitted back to the file of CIT(A) for fresh adjudication - Decided in favor of Revenue for statistical purposes.
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2012 (7) TMI 46
Violation of principle of natural justice - exparte order passed by CIT confirming order of AO - rejection of application under Rule 46A to admit additional evidences - assessee contended prevention by sufficient cause from producing the books of accounts before the AO - Held that:- It is observed that CIT(A) noted that a notice dated 26.08.2010 has been issued u/s 250 to the assessee for the date of hearing on 07.09.2010 but we are unable to observe this finding in the impugned order that despite due and proper service of the notice (upon the assessee) neither the assessee nor his representative attended the hearing. Accordingly, finding of the CIT(A) that the appellant was not interested in pursuing the appeal before him cannot be upheld. On the contrary, CIT(A) violated the principles of natural justice in passing an ex-parte order which disallowed the appeal of the assessee as the notice of hearing cannot be said to be served for the date of hearing and accordingly assessee was prevented to pursue his appeal before CIT(A) due to sufficient cause. Matter restored to the file of CIT(A) to adjudicate the matter afresh - Decided in favor of assessee for the statistical purposes.
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2012 (7) TMI 45
Deduction u/s 80IB - denial on ground that assessee was not the owner of the property and deduction is not available to developer - Held that:- For the purpose of claiming deduction u/s 80IB(10) it is not necessary for the assessee to own the land since such condition is not mentioned in the Section, it would not be correct to deny deduction on this ground. Order of CIT(A) allowing deduction upheld. See Faquir Chand Gulati Vs. Uppal Agencies Pvt. Ltd (2008 (7) TMI 159 (SC)) - Decided in favor of assessee. Sundry Balances written off - exclusion for computing deduction u/s 80IB - Held that:-In case of supplier payments sometimes the Appellant deducts some amounts and pays the bills. Since the amounts are generated during the course of business the same are eligible for deduction u/s 80IB(10). Interest received on delayed payments from customers - exclusion - Held that:- Issue is now directly covered by the decision in case of Nirma Industries Ltd. v. Dy. CIT (2006 (2) TMI 92 (HC)), wherein it was held that “Interest received from trade debtors for late payment of sales consideration – interest received from trade debtors for late payment of sales consideration is income derived from the business of the industrial undertaking and it cannot be excluded from the profits of the industrial undertaking while computing deduction u/s 80-I" - Decided in favor of assessee. Sale of scrap - exclusion - Held that:- Deduction u/s 80IB(10) cannot be allowed on income generated from sale of scrap - Decided against the assessee.
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2012 (7) TMI 44
Disallowance of salary paid - AO noticed that assessee company has paid huge salary to the ladies who are relatives of Directors / CEO - Held that:- Except the oral statement that the services were rendered by this four relatives of the Directors, no other material is placed which reveal that any services were rendered by these persons to the assessee - as assessee failed to justify the reasonableness of salary payments made, the additions need to be made - against assessee. Disallowance of 100% depreciation of mobile phones - A.O. allowed depreciation @ 15% - Held that:- As the items which are entitled to 100% depreciation are specifically mentioned in the Income Tax Act/Rules and since assessee has failed to show any provision in the Rules related to 100% depreciation is justified on the mobile phones they can be allowed depreciation only at the rates applicable to plant and machinery - against assessee. Disallowance on account of provident fund being employees’ contribution paid before the due date of filing the return of income - Held that:- As decided in CIT vs. AIMIL Limited [2009 (12) TMI 38 (HC)]that as soon as employees' contribution towards PF or ESI is received by the assessee by way of deduction or otherwise from the salary/wages of the employees, it will be treated as 'income' at the hands of the assessee and on making deposit with the concerned authorities, the assessee becomes entitled to deduction under the provisions of s. 36(1)(va) - if the employees' contribution is not deposited by the due date prescribed under the relevant Acts and is deposited late, the employer not only pays interest on delayed payment but can incur penalties also, for which specific provisions are made in the Provident Fund Act as well as the ESI Act. Therefore, the Acts permit the employer to make the deposit with some delays - Insofar as the IT Act is concerned, the assessee can get the benefit if the actual payment is made before the return is filed - Since the amount has been paid prior to the date of filing the return ground of assessee is allowed.
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2012 (7) TMI 43
Levy of interest u/s 201(1A) for non deduction/delay in deposit of TDS - assessee contested that since the recipient of income had duly paid tax on its entire income including the income received by assessee, there was no reason to deduct tax on the income paid by assessee - Held that:- Considering the submission of assessee that Recipient of income has no liability of taxes and all the assessments of recipient of income have been made u/s 143(3)and “NIL” tax liability was assessed therefore, where there is no liability to pay any tax, there shall be no actual payment, resultantly, no interest is payable u/s 201(1A) - As decided in M/s. Hindustan Coca Cola Beverage Pvt. Ltd versus CIT [2007 (8) TMI 12 (SC)] no demand visualized u/s 201(1) be enforced after the tax deductor has satisfied the office in charge of TDS that taxed due have been paid by the deductee assessee - restore the matter back to the file of AO for deciding afresh to find out if the Recipient of income have no tax liability as per assessment framed u/s 143(3)- in favour of assessee for statistical purposes.
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2012 (7) TMI 42
Peak investment for unaccounted purchases - CIT(A) deleted the additions made by AO - Held that:- The assessee had claimed that in his wholesale business of edible oil, cash and credit purchases were made however the goods were sold only on cash basis at very low margin of profit. The low margin of profit in this nature of trade is accepted by the revenue. In this circumstance the Revenue ought to have probed further to establish that the assessee had made investments for his trading activity outside the books with some reliable materials, thus the revenue has not looked into the nature of business and transactions and come out with any concrete evidence to establish that the assessee had made investment for such purchases made outside the books of accounts - in favour of assessee. Addition u/s 40A(3) on account of cash payments - CIT(A) deleted the additions - Held that:- As the Act vividly stipulates that twenty percent of the expenses for which payment is made by cash exceeding rupees twenty thousand shall be disallowed, AO had rightly came to the conclusion for making the disallowance of Rs.14,82,877 since it was established that the assessee had made cash purchases of Rs.71,88,782/- which were more than Rs.20,000/- outside the books of accounts - against assessee. Addition on account of profit earned from purchases and sales of goods outside the books of accounts - CIT(A) deleted the addition - Held that:- As the AO made addition on account of difference in physical cash balance and book balance as per the books of accounts there is no dispute to the fact that assessee is earning profit from purchases and sales made outside the books of accounts. It is obvious that such profit will remain in the hands of the assessee outside the books of accounts and requires to be taxed. However, in such situation the surplus cash found during the course of survey which was not recorded in the books of accounts can be obviously pointed out to be the profit earned from the purchases and sales of goods made outside the books of accounts - in favour of assessee.
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2012 (7) TMI 41
Exclusion of three items by CIT(A)in computing the deduction u/s. 80P (2)(a)(i) - interest from employees - assessee being a cooperative society - Held that:- Considering the interest income as attributable to the activity of provision of credit facilities by the assessee to its members, by no stretch of imagination, it a part of the assessee’s operational income by providing and accommodating their employees by giving loans. The income so earned would only be assessable u/s. 56, and cannot be considered as undertaking of an activity incidental to its principal or operational activity/s - against assessee. Income of`jeep charges’- Held that:- Whether the collection is from the debtors or from the members, the same is not in fact a source of revenue but only a recoupment of cost. If at all there is a net gain, which could well be, it is only the net income which would in that case stand to be excluded, and that too if the same is not a part of the lending activity to its members - The Revenue has not stated any reason, much less a cogent one, in denying the assessee’s claim, apart from stating of it to be an income from other sources - against revenue. Income from `No Dues Certificates’- Held that:- As the assessee charges a nominal fee from the borrower to issue `no dues certificate’ who wishes to transfer his borrowing or switch to another bank or cooperative society consequently that same cannot be assessed as income from other sources, being only integral to the assessee's principal business of lending - against revenue.
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2012 (7) TMI 40
Deletion of penalty levied u/s 271(1)(C) - assessment was completed u/s 143(3) r.w.s 147 determining the income of the assessee with making addition - AO levied the penalty on addition of Rs.14 lakhs to cash credit as assessee failed to file PAN or confirmation in respect of the depositors - Held that:- As assessee could not substantiate the source of deposits to the satisfaction of the A.O. therefore, an addition was made by him. However, the law is now well settled that assessment proceedings and penal proceedings are separate and addition does not automatically leads to imposition of penalty for concealment. Before imposing penalty the A.O. is required to bring on record certain facts which lead to reasonable conclusion that the amount does represent the assessee’s income which was shown as deposit from other persons. In this case the deposits of Rs.14 lakhs were accepted by the assessee by account payee cheques from the depositors and copies of accounts of these depositors were also furnished to the A.O. during assessment proceedings, thus A.O. neither established that the money in fact belonged to assessee nor proved that the explanation/evidence adduced by assessee was false - penalty imposed is thus deleted - in favour of assessee.
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2012 (7) TMI 39
Validity of reassessment proceedings u/s 148 - invalid jurisdiction - additions made on grounds not recorded in notice - Held that:- CIT(A) has rightly held that the Assessing Officer had no jurisdiction to reassess issues other than the issue in respect of which reassessment proceedings were initiated when no addition was made in respect of the amounts of income escaping assessment for which the assessment was reopened. Therefore, it is held that the assumption of jurisdiction u/s 147 for making additions on account of long term capital gains and low withdrawals for household expenses in the reassessment order is without the authority of law and same is hereby quashed - Decided in favor of assessee.
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2012 (7) TMI 38
Treatment of interest income – business income or income from other sources - deduction u/s 80IB of the Act – Held that:- FDRs were made out of borrowed funds, there is a direct nexus between the borrowings and the interest generation. This being so and keeping in view the provisions of section 57(iii) of the Act which provides that in computing the income under the head income from other sources any other expenditure (not being in the nature of capital expenditure) laid out or expended wholly and exclusively for the purpose of making or earning such income, we are of the view that the assessee is entitled to the deduction of interest paid on borrowed funds – Assessee partly allowed Addition made by the AO u/s 145A of the Act - AO observed that as per the provisions of section l45A, all the taxes and duties paid are to be included for the purpose of valuation u/s 145A – Held that:- Assessee is following consistent method of accounting and there is no change in accounting system followed by the assessee in the year under consideration - CIT(A) was fully justified in deleting the addition made by the AO u/s 145A of the Act – In favor of assessee
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2012 (7) TMI 37
Validity of re-opening of assessment – Held that:- Assessment orders passed in the regular assessment proceeding - no evidence to suggest that the Assessing Officer did examine about the applicability of the provisions of sec. 194C of the Act - no reason to presume that the impugned notices issued by the Assessing Officer u/s 148 of the Act are on account of change of opinion - order of Ld CIT(A) of reopening of assessment upheld Applicability of provisions of sec.40(a)(ia) on the freight charges paid on the lorries hired by the assessee – Held that:- Assessee has hired the trucks/lorries for transporting of the consignment booked by it under its own supervision and control with all responsibility and liabilities. Therefore, the hiring of truck and lorries cannot be called to be the work as per definition given in explanation 3 of section 194C of the Act and consequent thereto, the assessee is not liable for deduction of TDS on payment to lorry/truck owners as per section 194C of the Act - Assessee is not liable to deduct tax at source on the freight charges as per the provisions of sec. 194C of the Act – In favor of assessee
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2012 (7) TMI 36
Unexplained cash credit - validity of issuance of notice under section 148 – AO issued notice u/s 148 on the basis of information received from investigation wing – addition on the ground of unaccounted money in the garb of bogus entry of Capital Gain/Gift is without any evidence – Held that:- for any return processed under section 143(1)(a), only one condition is required to be satisfied that the Assessing Officer must have reason to believe that income chargeable to Income tax has escaped the assessment. Notice issued by the Assessing Officer under section 148 of the Act is a valid notice as per the provisions of sections 147 & 148 of the Act. Unexplained cash credit – credit worthiness of donor – Held that:- documentary evidences filed by the assessee were not certified by concerned authority or by the author of the document and, therefore, these documentary evidences are not admissible as per sections 62 & 63 of the Evidence Act, 1872. Assessee failed to discharge the onus to establish the genuineness of the gift shown by her in the Income tax return. Assessee has failed to establish her relationship with so-called donor Shri Govind Ram and also failed to establish the occasion for receiving such gift as per the evidences produced by the assessee. In favor of Revenue.
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2012 (7) TMI 35
Justification of deletion of penalty under section 271(1)(c) - provision for obsolescence - Disallowance of 25 per cent by AO - Held that:- It is not in dispute that disallowance has been made by the Revenue only to the extent of 25 per cent. of the total claim on the ground that the old model could easily be sold in the market to the customers since the customers of this line also purchased old model even after launching new model in the market - as assessee’s claim has not been fully rejected AO has not given any such finding that the assessee’s claim was otherwise a false claim and the addition made by the AO could at best be considered due in difference of opinion between the assessee and the Department but cannot be said to be a claim of such a nature which could be considered to be false and in respect of which the penalty under section 271(1)(c) is to be levied - uphold the order of the learned CIT(A) in deleting the penalty - in favour of assessee.
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2012 (7) TMI 34
Additions made on the ground that since the confirmations from creditors have not been produced except one creditor, creditors balances are being added as income - nottice u/s 133(6) - held that:- For 133(6) compliance assessee had no control over third parties. - once the AO issued summons u/s 133(6), as held by Hon'ble Supreme Court in the case of CIT v. Orissa Corporation (P) Ltd. (1986 (3) TMI 3 (SC)), it is his duty to ensure that the proess of issue of summons is brought to a logical conclusion by enforcing summons. The enforcement can be achieved in many ways including taking action on uncomplied summoned persons, by appointing commission on the income-tax authorities having jurisdiction over them and getting the verification from their returns or accounts. - Decided in favor of assessee It cannot be held that suppliers were not genuine only because summons u/s 133(6) were not served. The I.T. Act does not cast absolute burden on the assessee, sec. 68 cast a preliminary burden, which, in our view, has been duly discharged by the assessee by filing the confirmations, bank statements, invoices and transport details of supplies and goods. - the additions made u/s 68 on account difference in balances or non-receipt of reply to summons etc. cannot be made in the hands of the assessee. Disallowance of technical fee and reimbursement - Assessee orally explained that it was the amount payable on account of consultancy services to Continental Carbon Co. USA – Held that:- assessee received the bills in March 2003 and by general entry entered the liability - There is no dispute about the rendering of service and the last bill drawn by Continental Carbon Co. USA - liability has crystallized in this year and cannot be called as relating to earlier year and is allowable expenditure Disallowance on account of expenses for annual chamber membership fee paid to Taj Mahal Hotels – Held that:- Amount is allowable revenue expenditure as the assessee availed the membership offered by Taj Mahal Hotels which was economical, providing the facility to use the chamber at any time during the year for meetings of clients and officers. It is a business decision for avoiding room rent expenses, the same is allowable - Addition is deleted Depreciation on computer peripherals – Held that:- 60% depreciation is to be allowed on computer peripherals Depreciation on capital stores – Held that:- no infirmity in the order of CIT(A) who has allowed the depreciation on the basis of accounting standard AS-10 - expression used for the purposes of business appearing in section 32 of the Act also takes into account emergency spares which even though ready for use are not as a matter of fact consumed or used during the relevant period, as these are spares specific to a fixed asset and will in all probability be useless once the asset is discarded – revenue appeal is dismissed accordingly. while computing the book profits u/s 115JB, the doubtful debts, obsolete / non moving stores and leave encashment are to be excluded.
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Corporate Laws
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2012 (7) TMI 56
Petition for oppression and mismanagement - transfer of shares to the third respondent who is the wife of the second respondent done purposefully to capture the management and control over the company by the second and third respondents - assets of the company have been sold even though the liabilities of the company are yet to be cleared - removal of a partner/director is a gross act of oppression - Held that:- From the perusal of the deed of assignment it is evident that the first petitioner has signed the deed and he is having full knowledge of the sale of assets and receipt of consideration - as winding up of the company is concerned, it is for the company to take decision if the company is not doing any business and they feel that the company should be wound up - in the event of making profits by the company, the company can declare dividend to its shareholders as decided by the directors, therefore the contention of the petitioners that they should have logically paid one-third of the sale consideration is not correct - the appointment of 3rd Respondent was done away back in the year 1993 and the petitioner signed the annual returns and there is no document to show that the petitioner expressed his concern with regard to misrepresentation by the respondents. Raising of such issue after lapse of 16 years is completely unwarranted and an after thought - extraordinary general meeting to propose a resolution to remove the first petitioner reason given in the explanatory statement that the first petitioner has acted against the interest of the company, respondent’s intention to remove the petitioner as a director is quite evident and obviously the statutory provision, viz., section 283(1)(g) applied to remove the petitioner as a director, thus even in a quasi partnership, a partner/director can be removed if his acts are prejudicial to the interest of the company – against petitioner.
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2012 (7) TMI 33
Whether a management that is found guilty of converting the majority group of shareholders in a company into a minority by issuing further shares in the company without notice to the majority group is liable to be dislodged - group of shareholders represented by the petitioners before the Company Law Board was, admittedly, the majority shareholders in the company prior to the first of the impugned allotment of shares - Agarwal group, by issuing/allotting further shares in company to its group concern without notice to petitioners, had converted petitioners into minority shareholders and had acquired management/control of company - CLB found that issuance of further shares was without convening shareholder's meeting and without passing appropriate resolutions therefor, yet it did not set aside impugned allotment and directed a shareholders' meeting to be convened by company on basis of shareholding as on October, 2003 – Held that:- Sarda group, had promoted the company and were at the helm of its affairs till the arrangement with the Agarwal group by which the Agarwal group was installed in the management ; but the Sarda group continued to hold the majority shares in the company - Agarwal group was to remain in the management of the company at the pleasure of the Sarda group - Agarwal group then to have taken advantage of its managerial position in the company to issue further shares unto itself and to denude the Sarda group of its majority control, was a grave act of oppression - CLB found as a matter of fact, that allotments were made without complying with legal requirements therefor and without notice to petitioners, allotments to be cancelled
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Service Tax
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2012 (7) TMI 80
Levy of service tax on the tickets -'Airport Service'- assessee submitted that SCN issued is barred by limitation - Held that:- On verification of the records it was revealed that it does not cover the amount of tickets sold prior to 01.05.2006 for the journey carried out on or after 01.05.2006 - as there exists suppression of fact on the part of the applicants the extended period of limitation has rightly been invoked - failure to make out a case for waiver of pre-deposit of amounts involved - against revenue.
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2012 (7) TMI 79
Demand for service tax - Container Freight Station - department wants to levy service tax for storage of cargo under the category of storage and warehousing service rendered by the applicant – Held that:- in the case of Gateway Distriparks Ltd.( 2009 (2) TMI 181 (Tri)) Tribunal granted unconditional waiver of pre-deposit to the applicant. Waiver of pre-deposit granted.
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2012 (7) TMI 78
Penalty u/s 76 - appellant has already paid the full amount and interest as well as penalty u/s 78 - Held that:- Considering the approach adopted by the appellant this is a case where even penalty under Section 78 was not payable, even then the appellant paid 25% of service tax towards penalty so that unnecessary litigation is avoided and dispute does not arise and thereby paid of all the dues resulting from the adjudication order passed by the Additional Commissioner this is a fit case for waiver of penalty under Section 80 - as a confusion in the minds of the operators of service stations up to 31.10.04 as to whether service tax was payable on this service or not it and after the amendment of the law on 10.09.04, the service tax was being paid regularly by the appellant it cannot be held to be deliberate defiance - in fvaour of assessee.
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2012 (7) TMI 77
Cenvat Credit on Capital goods used for providing output services - Waiver of pre-deposit – Cenvat credit demand in respect of MS Angles, Channels, Beams, Joists, HR Sheets, HR Plates - these items had been used for fabrication for various machinery or parts thereof of their crushing plant - Since, the dispute on this point is of facts and the same can be decided only at the time of regular hearing, pre-deposit waived. Regarding Cenvat credit demand in respect of tippers – Held that:- activities as unloading of iron ore lumps at the railway siding, arranging its transportation to the factory and loading of the processed or into the trucks are auxiliary activity and unless the appellant's contract with their clients are mixed contract prescribing separate races for their different activities, their activity would have to be classified as Business Auxiliary Service only and in that event the tipper used by them cannot be treated as capital goods. Directed to make deposit.
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2012 (7) TMI 52
‘Management Consultancy Service' - demand of a service tax - assessee contested that they are engaged in the activity of running and managing the Hotel - Held that:- Considering the definition of Management Consultancy Service u/s 65(65) a person who is engaged in providing any service in connection with the management of any organization which means he should provide a service for managing the day to day affairs of the organization. If he himself is managing the affairs of the organization, it does not fall under the ‘Management Consultancy Service'. Considering the case of BASTI SUGAR MILLS CO. LTD. Versus COMMISSIONER OF C. EX., ALLAHABAD [2007 (4) TMI 25 (Tri)] that the agreement entered entrusting operation of factory and not for advice or consultancy,Appellant being in-charge of operation of factory was performing management functions. The activity was not falling within the scope of taxable service - decided in favour of assessee.
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2012 (7) TMI 51
‘Consulting Engineering Services' - demand of service tax along with penalty - Held that:- As it is revealed that the appellant is the manufacturer of PVC lamination film and are not a “Consulting Engineering Firm" it is onus on the department to prove that the appellant has received this amount as “Consulting Engineering Firm” which the department has failed to prove - in favour of assessee.
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2012 (7) TMI 50
Waiver of pre-deposit – whether appellant liable to pay service tax under 'tour operators' service’ - applicants were engaged in the business of travels and providing its buses on hire on contractual basis to various customers for an agreed commercial consideration – Held that:- In the case of Sharma Transports (2010 (10) TMI 417 (Tri)) unconditional waiver of pre-deposit has been granted to the applicants relying on the letters dated 4.11.2009 and 29.3.2010 issued by the Finance Ministry relating to transport of passengers on point to point basis - issue is stated to be kept in abeyance till such time the matter is examined and suitable clarification issued by the Board – waiver of pre-deposit granted.
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2012 (7) TMI 49
Waiver of pre-deposit - Consulting Engineers' Service – Held that:- No question of levy of service tax from the appellant under the head 'Consulting Engineer's Service' in respect of the activities like SET, LET, KGTE and CAB. Regarding demand of service tax under the head 'Commercial Training or Coaching Service - appellate Society has been working in the educational field under Governmental patronage - all the expenses, whether in the conduct of courses/training programs or in the award of diplomas/certificates, were met by the appellant out of the fees collected by them from the students/trainees. Entire cost of the courses was met out of the fees collected from students/trainees on a Commercial basis. Demand of service tax under the head 'Commercial Training or Coaching Service' is sustainable on merits. - pre deposit ordered.
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2012 (7) TMI 30
Cenvat credit - services of the commission agent - services under the category of Business Auxiliary Services –Held that:- Even after the activities related to business, stand deleted from the definition of inputs credit as per the Board's Circular No. 943/4/2011-C.X., dated 29-4-2011, the Service tax paid on commission on agent services would be available - period involved in the present case is prior to the amendment to the definition of input services – In favor of assessee
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2012 (7) TMI 28
Stay application – waiver of pre-deposit – whether Input Service Distributor (ISD) cannot distribute the credit for only one manufacturing premise, when they have various manufacturing units – Held that:- In the case of Ecof Industries (P.) Ltd. (2009 (10) TMI 171 (Tri)) provisions of Rule 7 has been analysed in depth and has been settled that the ISD can distribute the credit even to only one unit - Application for waiver of pre-deposit allowed – stay application allowed
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Central Excise
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2012 (7) TMI 55
Captive consumption - Valuation of wire rods manufactured and supplied to sister units - Revenue contended difference between the cost of conversion adopted in respect of interplant transfer to sister units and the conversion cost actually charged from unrelated party (TISCO Jamshedpur) - Held that:- On perusal of debit notes and invoices it is found that appellants have shown the amount as conversion charges and not the conversion cost and it is the stand of the appellant that the conversion charges are inclusive of conversion cost + profit element. This explanation given by the appellants is reasonable and needs acceptance. Since for the purpose of valuation under rule 8 of the Central excise Valuation Rules, the cost of production is required to be taken, this cost of production cannot be equated to the conversion charges charged by the appellants in respect of goods supplied to TISCO. Accordingly, conversion charges shown in debit note/invoices issued to TISCO cannot be taken as a conversion cost and taken as a basis for the purpose of assessments of wire rods cleared to sister units - Decided against the Revenue.
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2012 (7) TMI 54
Defect in adjudication order – Corrigendum issued - the contention of the appellants that the duty liability is fastened by issuing a Corrigendum without affording opportunity of hearing whereas in the adjudication order the differential duty is demanded from Contractor – Held that:- The Corrigendum by which the duty liability now stands confirmed against M/s Kilitch Co (Pharma) Ltd cannot be considered as the Corrigendum is a total departure from the confirmation of duty demand in the adjudication order which was against M/s Kilitch Drugs (I) Ltd - the matter requires reconsideration by the adjudicating authority afresh - order is set aside and the matter is remanded back.
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2012 (7) TMI 53
Cenvat credit – denial of Cenvat credit on the ground that invoice number was handwritten or rubber stamped but not printed – Held that:- There is no requirement in the rules that the invoice number should be printed on the invoice. The only requirement is that invoice should be serially numbered - appellant have fulfilled the requirement of CENVAT Credit Rules, 2004. Accordingly, they are entitled to avail input credit on the strength of the invoices in question – In favor of assessee
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2012 (7) TMI 32
Valuation of physician samples manufactured under contract on job work basis – Revenue stand that such samples are being cleared by the appellants on payment of Central Excise duty in terms of the provisions of Section 4 – Assessee contested the assessable value is to be arrived at on the basis of such transaction values – Held that:- The case of Themis Laboratories Pvt. Ltd. and Meghdoot Chemicals Ltd. Vs CCE Mumbai [2011 (2) TMI 713 (Tri)] decided that where physician samples are not distributed free of cost by the manufacturer, but are cleared on receipt of consideration, the excise duty is required to be paid on the transaction value – as physician samples manufactured and cleared to brand owners/ buyers on principal to principal basis for a consideration, further distributed free of cost to physicians/doctors, the same is required to be assessed to duty on the transaction values – in favour of assessee. Valuation of physician samples manufactured and cleared as free samples - Held that:- As decided in Cadila Pharmaceuticals Ltd. Vs CCE Ahmedabad [2008 (9) TMI 98 (Tri)] that valuation of such physician samples is required to be made on the basis of pro rata value of the regular pack of the comparable goods in terms of the provisions of Rule 4
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2012 (7) TMI 31
Genuineness of the review order - Held that:- An unsigned order of the Board communicated by a junior official like the Superintendent cannot be held to be a valid review order passed by the Board under the statute, specially when after availing many chances and adjournments, the representative of the Revenue is not able to produce the original copy of the order signed by the Board Member nor the review file of the Board despite several directions - in the absence of any valid review order produced the applications filed before the Tribunal are not maintainable as appeals against the impugned Order-in-Original.
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2012 (7) TMI 29
Demand of duty – confiscation - 100% EOU - Search - Shortages of imported goods – diversion of goods – Held that:- duty free imports were through regular channels, and were duly assessed and cleared by proper customs officers - Domestic Tariff Area (DTA) procurement, all the clearances were authorised/supervised by the proper Central Excise officers - Officers were supervising the clearances and the Respondent had documents showing satisfactory accounting of the goods and that they had exported goods earning sufficient foreign exchange, the case made out by Revenue cannot be sustained in the absence of evidence showing sale of the imported goods in the local market - Appeal filed by Revenue is rejected
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