TMI Tax Updates - e-Newsletter
July 5, 2013

Case Laws in this Newsletter:

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

Articles

1. CONFIRMATION OF DEMAND WITH INTEREST AND PENALTY ON UNNECESSARY PERSON WITHOUT ISSUE OF NOTICE

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Infrastructure Debt Funds (IDFS) to Play a key role in the Financing of the Overall Requirements of Infrastructure Funding , says Arvind Mayaram, Secretary, Dea;

2. India’s Exports of Computer Services 75.2 per cent of Total Software Services Exports in 2011-12: RBI Survey

3. IOR-ARC Economic and Business Conference Press Communique

4. RBI Reference Rate for US $ and Euro

5. India Remains Committed to Ensure Oil Supplies to Mauritius: Anand Sharma

Notifications

DGFT

1. 27 (RE-2013)/2009-2014 - dated 5-7-2013 - FTP

Amendment in the Import Policy of Electrical Energy under Exim Code 2716 00 00

FEMA

2. 278/2013-RB - dated 7-6-2013 - FEMA

Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Ninth Amendment) Regulations, 2013

Circulars / Instructions / Orders

Income Tax

1. HRD/CM/102/3/2009-10/(Pt)/1112 - dated 3-7-2013

CORRIGENDUM - Implementation of Cadre Restructuring in Income Tax Department : Constitution of Sub-committee No. 3 : Restructuring of Directorates

2. HRD/102/1/2013-14/1115 - dated 3-7-2013

Implementation of the Cadre Restructuring of the Income Tax Department – reg.

FEMA

3. 02 - dated 4-7-2013

Risk Management and Inter-Bank Dealings- Liberalization of documentation requirements for the resident entities in the Indian Forex Market

4. 03 - dated 4-7-2013

Deferred Payment Protocols dated April 30, 1981 and December 23, 1985 between Government of India and erstwhile USSR

5. Press Note No. 3 (2013 Series) - dated 4-7-2013

Review of the policy on foreign direct investment in the Multi Brand Retail Trading Sector- amendment of paragraph 6.2.16.5(2) of 'Circular 1 of 2013-Consolidated FDI Policy'

6. 01 - dated 4-7-2013

Foreign Investment in India – Guidelines for calculation of total foreign investment in Indian companies, transfer of ownership and control of Indian companies and downstream investment by Indian companies

Highlights / Catch Notes

Income Tax

• Court Upholds Removal of SEZ Exemption from MAT; Tax Incentives Require Sunset Clause, Rejects Promissory Estoppel Argument.

  Case-Laws - HC : Removal of exemption from MAT (minimum alternate tax) on SEZ - Promissory estoppel - It is settled position of law that every tax exemption and incentive shall have a sunset clause - decided against the assessee - HC
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• Court Rules Against Excluding 90% of Export Gains from Forex Fluctuations u/s 80HHE of Income Tax Act.

  Case-Laws - HC : Deduction u/s 80HHE - there is no occasion to exclude 90% of the amount attributable to export gains from the foreign exchange rate fluctuation - HC
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• High Court Endorses 2:3 Profit-Volume Ratio for Allocating Business Expenses Between Speculation and Non-Speculation Activities.

  Case-Laws - HC : Allocation of business expenses amongst the speculation and non-speculation activities was not only necessary but inevitable - the basis of profit and volume of the business in the ratio of 2:3 is correct - HC
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• Court Emphasizes Consistency in Mercantile Accounting: Prior Period Expenditures Must Be Allowed When Crystallized.

  Case-Laws - HC : Prior period expenditure - mercantile system of accounting - Revenue is required to adopt consistent approach and allow the expenditure which was crystallized during the assessment year - HC
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• Section 2(22)(e) Not Applicable: Amount Not Classified as Loan or Advance; No Deemed Dividends Involved.

  Case-Laws - HC : Deemed dividends u/s 2(22)(e) -when the authorities found that the amount in question cannot be categorized as loan or advance, question of application of section 2(22)(e) would not arise - HC
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• High Court Denies Waiver of Interest for Assessee u/ss 234A and 234B Due to Insufficient Justification.

  Case-Laws - HC : Waiver of Interest u/s 234A and 234B - assessee failed to prove that there was a delay on the part of the Revenue in giving the seized material was the reason for the delay in filing the return - no waiver - HC
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• High Court Allows Deduction of Penalty as Business Expenditure u/s 37(1) of Income Tax Act for Export Obligation Failure.

  Case-Laws - HC : Deduction u/s 37(1) - penalty paid to the Apparel Export Promotion Council - Forfeiture of gurantee - failure to fulfil the obligation to export - deduction allowed - HC
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• Interest Reduction from Debt Restructuring Deemed Revenue Expenditure for Commercial Benefit.

  Case-Laws - AT : Revenue v/s Capital expenditure - by reducing the liability of interest on account of restructuring of debt the assessee has gained the commercial benefit - to be allowed as revenue expenditure - AT
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• Court Reverses CIT(A) Decision Due to Lack of Evidence on Disallowance of Interest-Free Advances.

  Case-Laws - AT : Disallowance qua interest free advances - CIT(A) deleted the part addition - CIT(A) has accepted assessee's oral submissions which are not based on any material on record - additions restored - AT
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• Section 88E Rebate Applies to MAT Calculations u/s 115JB; STT Deducted as Rebate Per Section 87.

  Case-Laws - AT : Tax rebate u/s 88E - MAT u/s 115JB - when tax chargeable on such income is arrived at & it is from that tax which is chargeable, the tax paid u/s 88E (STT) is given deduction, by way of rebate, u/s 87. - AT
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• Assessee Granted Section 54F Exemption for Paying Full Consideration Before Capital Gain Accrual on Residential Purchase.

  Case-Laws - AT : Entitlement to Exemption u/s 54F - assessee had admittedly paid the entire consideration for the purchase of the residential premises even before the capital gain accrued to him - exemption allowed - AT
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• Company's Rs. 58 Lacs Advance for Shareholder's Flat Not Taxable as Deemed Dividend u/s 2(22)(e.

  Case-Laws - AT : Deemed dividend u/s 2(22)(e) - advance of Rs. 58 lacs given to the assessee (beneficial shareholder) by the company for purchase of flat - it is a commercial transaction - not taxable - AT
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• Interest on Overdrawn Capital Disallowed u/s 57(ii) of Income Tax Act; Deduction Allowed from Interest Income.

  Case-Laws - AT : Disallowance u/s 57(ii) - interest paid on overdrawn capital with partnership firm - deduction allowed from interest income - AT
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• Seized Money Treated as Advance Tax from Seizure Date, Clarifies Recent Case Law Decision.

  Case-Laws - AT : Money seized during the search operation - whether be treated as advance tax from the date of its seizure - Held yes - AT
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Corporate Law

• Winding Up Petition Filed: KRIL's Defense on Dishonored Cheques Deemed Not Bona Fide in Company Law Case.

  Case-Laws - HC : Winding up petition - dishonoring of cheques - The defence of KRIL for not paying IFL the admitted liability is not bona fide. - HC
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Service Tax

• Refund Granted for CENVAT Credit on IT Software Service Export Due to Non-Taxable Status During Relevant Period.

  Case-Laws - AT : Refund of CENVAT credit - export of services - Information Technology Software Service' brought under the tax net for the first time in the year 2008 - not a taxable service during the period - refund allowed - AT
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Central Excise

• Claimants Must Comply with Notification No. 21/2004 for Input Rebate Eligibility u/r 18; Procedural Lapses Forfeit Claims.

  Case-Laws - CGOVT : Procedural lapses for claiming rebate under Rule 18 - claimant cannot claim the input rebate as a matter of right when he has failed to follow the provisions of Notification No. 21/2004 - CGOVT
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• Applicant Denied Additional Rebate on Exported Goods Due to Prior Duty Drawback; Double Benefit Not Permitted.

  Case-Laws - CGOVT : Simultaneous claim - since Applicant already availed input stage rebate of duty (excise portion) in the form of duty drawback - extending another benefit of rebate of duty paid on exported goods will definitely amount to double benefit. - CGOVT
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• Freight Costs from Factory to Port Cannot Be Deducted from FOB Value for Transaction Valuation, Court Rules.

  Case-Laws - CGOVT : Determination of value of export – the pleading of department that freight incurred from factory gate to port of export is required to be deducted from FOB value to arrive at transaction value, is not tenable. - CGOVT
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VAT

• Annual Taxable Turnover Assessment Required for Additional Sales Tax Levy; Evaluate Pre-Amendment Turnover with Specific Period Rates.

  Case-Laws - HC : Additional Sales Tax levy - after taking the taxable turnover for the entire year, the taxable turnover upto the date of amendment has to be assessed with reference to the relevant tax rate therein applicable to the period - HC
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Case Laws:

• Income Tax

• 2013 (7) TMI 122
  Rectification of mistake - Tribunal quashed entire assessement order - Held that:- The opening words of section 154, gives an indication of the scope of rectification proceedings. It is only with a view to rectify the mistake apparent from the record. The Income-tax authority may amend any order passed by it under the provisions of this Act or amend any intimation or deemed intimation under sub-section (1) of section 143. Therefore, this Section is very much limited. The error should be apparent from the record. If there exists a debatable issue, if two views are possible, it is not open to the authorities under this proviso to initiate proceedings and revise its opinion. All that it can do in these proceeding is to rectify the mistake apparent from the record. Assessing Authority re-appreciated the entire material on record and has come to a different conclusion than the conclusion which it had arrived at in the original Block Assessment order. Therefore, it is not a case of rectifying the error apparent from the record, it is only a case of reframing of the assessment giving reasons. Though the Appellate Authority partly allowed the appeal, merely because the assessee did not, challenge that portion of the order which is against him, would not render the appeal filed by the Revenue maintainable and findings recorded by the Tribunal are vitiated - Decided in favour of assessee.

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• 2013 (7) TMI 121
  Levy of MAT (minimum alternate tax) on SEZ - removal of exemption from MAT - Promissory estoppel - Judicial review - petitioners have prayed to declare the newly inserted proviso to Section 115JB(6) and 115-O(6) of the Income Tax Act in the second schedule to the Special Economic Zones Act 2005 as ultra vires, arbitrary, unfair and violative of Article 14 of Constitution of India. - Held that:- scope of judicial review power of this court under Article 226 of the Constitution is subject to certain conditions - Power of judicial review is to be exercised very rarely and in exceptional circumstances - Courts can invalidate the law made by the legislature only when the legislature lacks the competency to do and the law enacted is violative of any of the constitutional provisions - It will be wholly unwise for the court to encroach into the domain of the executive or legislative in economic and social spheres since they are essentials adhoc, experimental, extremely complicated and they are made under special situations. Jurisdiction of Ministry of Finance - Impugned amendments in the Schedule-II to the SEZ Act is made by the Ministry of Finance, Government of India through a money bill - Held that:- Government of India (Allocation of Business) Rules are not applicable to the proceedings and the business of parliament - These Rules are only applicable to the Government of India and not to the Parliament - A perusal of the Rules of Loksabha do not bar the Finance Minister from moving a bill for amendment to SEZ Act - reading of the Rules specifies that Finance Minister includes any minister and as such he is competent to move a bill seeking amendment of SEZ Act which comes under the domain of Ministry of Commerce - Following the decision of Madurai District Central Cooperative Bank Ltd. vs. Third ITO [1975 (7) TMI 4 - SUPREME Court] - Deceided in against assessee. Removal of exemption to SEZ units - amendments violation of Article 14 - Held that:- It is settled position of law that every tax exemption and incentive shall have a sunset clause - In the instant case by introducing sub-section 6 to Section 115JB and sub-section 6 to Section 115O of Income Tax Act a permanent exemption was given to SEZ establishments/units - Realizing this lapse on the part of the Government the impugned provisos were introduced restricting the exemption only for a particular period - On account of various concessions, exemptions and allowances under different statues companies started arranging their tax affairs in such a way as to become zero tax companies - This situation has lead to discrimination amongst SEZ establishment/units and other companies - Realizing this discrimination among the companies the legislature in their wisdom brought the impugned amendments to remove the discrimination - Decided against assessee. Removal of exemption to SEZ units - Promissory estoppel - Held that:- The concept of Promissory Estoppel and Legitimate Expectancy are not defined in any law - These two concepts are fashioned by the courts while reviewing the administrative acts in the field of administrative law - The Doctrine of Promissory estoppel and Legitimate expectation are the offsprings of equity and they are flexible in nature - Legislature can never be precluded from exercising its legislative power by resort to the Doctrine of Promissory Estoppel - Following the decisions of Motilal Padampat Sugar Mills Co. Limited. vs State Of Uttar Pradesh And Others [1978 (12) TMI 45 - SUPREME Court], Union of India vs. Godfrey Philips India Ltd [1985 (9) TMI 90 - SUPREME COURT OF INDIA] and Sales Tax Officer vs. Shree Durga Oil Mills STC [1997 (12) TMI 114 - SUPREME COURT OF INDIA] - Decided against assessee.

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• 2013 (7) TMI 120
  Deduction u/s 80HHE - Exclusion 90% of gains on foreign exchange fluctuations from the business profits - Held that:- amount which is sought to be attributed as gain from fluctuation of foreign exchange no-doubt might have been due to some fluctuation but as these are amounts received in Indian currency as the total amount that an exporter receives ultimately for the export of the goods, it should be taken together with the value of the goods itself in which event - Even the amount said to be attributable to the fluctuation in the foreign exchange rate forms part of the value of the export goods and cannot be distinguished there from - If the fluctuation in foreign exchange brought down the value, an assessee cannot claim that this amount should be excluded and the export value maintained at a higher figure - there is no occasion to exclude 90% of the amount attributable to export gains from the foreign exchange rate fluctuation - Decided in favour of assessee. Allowance of cross objection - Reduction in business profits unabsorbed depreciation and unabsorbed losses - Held that:- deduction can be claimed only against positive profits and positive profit necessarily implies the adjustments and set off of the depreciation allowance of earlier years and carried forward losses of earlier years and that Judgment having the binding effect on this court, it has to be necessarily ruled that the benefit under section 80HHC of the Act can be claimed only after the unabsorbed depreciation of the earlier years is adjusted against the profits of the current year and then only the benefit extended under section 80HHC of the Act can be given effect to - Following the decision of J.K Industries Ltd V/s Joint Commissioner of Income Tax [2013 (5) TMI 152 - KARNATAKA HIGH COURT], decided against the assesee.

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• 2013 (7) TMI 119
  Allocation of business expenses - amongst the speculation and non-speculation activities - Held that:- Authorities have not applied the provisions of section 73(1) to determine that the appellant was carrying on speculation business - It is only after having held that the appellant dealt with the speculative business, they proceeded to allocate the expenses incurred by the appellant in the ratio of its volume and activities and apportioned the expenses equitably - Administrative and other expenses incurred by the appellant are found to be common for both the speculative and non-speculative businesses, as these expenses related to both the streams, allocation of expenses was not only necessary but inevitable and moreover there had to be some rationale in bifurcating such expenses and when authorities have done it on the basis of profit and volume of the business in the ratio of 2:3 - No error is committed at all by the Tribunal warranting any interference - Decided in favour of Revenue. Case relied upon by the petitioner may not come to the rescue of the appellant in as much as there is no dispute to the fact that the appellant is dealing in the purchase and sale of the shares. It is not being disputed that the business of the appellant is both speculative and non-speculative - Commissioner of Income-Tax vs. Darshan Securities P.Ltd. [2012 (2) TMI 117 - BOMBAY HIGH COURT].

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• 2013 (7) TMI 118
  Deletion of disallowance - deduction on account of interest paid - investment in mutual funds - Held that:- investment in mutual funds was made by the Respondent-assessee out of its own funds and not out of interest bearing borrowed funds - Entire borrowed funds was utilized to repay the loan taken from Oil India Development Board so as to take advantage of lesser rate of interest - There was no borrowed funds available with the Respondent-assessee to be invested in mutual funds - When sufficient interest free funds were available with the assessee, the presumption has to be that investment was made out of such interest free funds - There is no requirement under the law that an assessee should have separate account in respect of non interest bearing funds from that of interest bearing funds to establish that the investments have been made out of its own funds - Following decision of CIT vs. Reliance Utility and Powers Limited [2009 (1) TMI 4 - HIGH COURT BOMBAY] - Decided against revenue. Disallowance of expenditure - prior period expenditure - mercantile system of accounting - Held that:- liability in respect of work/services rendered in earlier year was crystallized only on receipt of the bill in the current assessment year - Moreover, the method adopted by the respondent assesses has been accepted by the revenue for the earlier assessment year and also while accounting for the income earned in respect of the work done in earlier years - In the circumstances, the Revenue is required to adopt consistent approach and allow the expenditure which was crystallized during the assessment year under consideration as done in the earlier years - Decided against revenue.

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• 2013 (7) TMI 117
  Deemed dividends u/s 2(22)(e) - accumulated profit - loan or business transaction - Held that:- appellant had sold goods and had established that the amounts involved business transactions. Such amounts, therefore, cannot be categorized as loan as envisaged under section 2(22)(3) of the Act. Section 2(22)(e) of the Act, as is well known, treats certain loan or advance made by the company to a person who is the beneficial owner of the shares holding not less than ten per cent of the voting power under certain circumstances to be the deemed dividend. In the present case, when the authorities found that the amount in question cannot be categorized as loan or advance, question of application of section 2(22)(e) would not arise - Decided in favour of assessee. Tribunal in the impugned judgment has made a reference to a decision of the Ahmedabad Bench in the case of Sai Jyoti & Printing Ltd [2012 (8) TMI 36 - ITAT, AHMEDABAD]. The Tribunal has also reproduced a portion of that judgment. We are of the opinion that the said decision has no bearing in the present appeal. This order, therefore, would have no effect on the Revenues appeal against such order, which we are informed has been admitted

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• 2013 (7) TMI 116
  Undisclosed investment - CIT deleted addition of undisclosed income - Held that:- CIT deleted the entire amount by elaborate discussion of the issue - It was during the course of the search that such jewellery has been found at the residence of the assessee. The statements of different family members were recorded. The confirmation/ affidavit of the father, mother, wife of the assessee claiming jewellery were also recorded. In such background, the CIT (Appeals) noted that the jewellery belonged to different family members and it also relied on a circular of the CBDT, which permitted customary owning of such jewellery by the ladies. Resultantly, it deleted the entire amount - Decided in favour of assessee. Interest on cash loans - CIT deleted - Tribunal deleted entire amount of cash loans - Held that:- When the amount of cash loans itself had been deleted, the issue of making addition by way of interest on such question would not arise. Moreover, the Tribunal also regarded absence of any material worth the name to indicate any proof of charge of interest on cash loans and hence, the Tribunal committed no error at all in dealing with the issue in question - Decided in favour of assessee.

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• 2013 (7) TMI 115
  Waiver of Interest u/s 234A and 234B - Delay in filing return - Held that:- Delay in filing the return was on account of the seized materials not being returned to the assessee and if the said materials were very much available for filing return under Section 153A of the Act. Then it is open to the assessee to approach the Revenue Authorities for waiver of interest. Even after making out a case for waiver and the waiver is not granted by the Authorities, then it could be said that the assessee is aggrieved and then he can approach this Court. As rightly pointed out by the Tribunal that no material is brought on record to show that the absence of seized materials or the fact that there was a delay on the part of the Revenue in giving the seized material was the reason for the delay in filing the return of income, the assessee cannot be granted any relief as prayed for - Decided in favour of revenue.

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• 2013 (7) TMI 114
  Deduction u/s 37(1) - penalty paid to the Apparel Export Promotion Council - Forfeiture of gurantee - failure to fulfil the obligation to export - ITAT allowed the deduction - Held that:- respondent took a business decision not to honour its commitment of fulfilling the export entitlement in view of loss being suffered by it. The Assessing Officer does not dispute this fact nor does he doubt the genuineness of the claim of the expenditure being for business purpose. In these facts the Tribunal held that respondent assessee has not contravened any provisions of law and thus the forfeiture of the bank guarantee was compensatory in nature under section 37(1) of the Act - Decided in favour of revenue.

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• 2013 (7) TMI 113
  Expenses incurred on substitution of high interest bearing NCD's - revenue v/s capital - explanation of the assessee that there was a programme of "debt re-structuring" by the company, therefore an expenditure was incurred on pre-payment of NCDs of Bank of Baroda, hence there was reduction in interest rate which had improved the profitability of the company thus allowable as a deduction u/s.37(1) Held that:- There is no provision in the act which subscribe the claim of deferred Revenue Expenditure in one year. Amortization of certain expenses are allowable only u/s.35D, 35DD & 35DDA. Otherwise an expenditure is allowable in the year expended wholly and exclusively for the purpose of business. With this legal background,that for AY 2002-03 the Tribunal has also commented that the assessee-company had not deferred the payment rather the entire payment was made in that year. Due to this reason, hereby held that by reducing the liability of interest as claimed by the assessee on account of "restructuring of debt" the assessee has gained the commercial benefit, therefore the incurring of the expenditure in question can be said to be expended wholly and exclusively for the purpose of the business. The same is allowable u/s.37(1). The assessee has to establish the evidence in respect of the payment of the amount of Rs. 5 lacs claimed to have been made in full on 29/07/2002, therefore restore this ground back to the stage of the AO for the limited purpose of verification of the fact of date of full payment, so as to allow the same in that year as per law. Cost incurred on replacement of core engine of Captive Power Plant - revenue v/s capital - assessee was not the owner of the machinery in question but was used as a leased hold property - Held that:- As decided in CIT vs. Madras Auto Service (P) Ltd. [1998 (8) TMI 1 - SUPREME Court] a leased assets cannot be held as a property belonging to the assessee, therefore the expenditure incurred on that property is in the nature of Revenue Expenditure - not in agreement with the view taken by the AO & CIT(A) considering the nature of the business carried on by the assessee as demonstrated from the "flow diagram" and hereby hold that the replacement expenditure was in respect of one of the part of the machinery, being required to be replaced after every 24000 running hours, hence nothing but a revenue expenditure and to be fully allowed in the year expended by the assessee - in favour of assessee. Deduction u/s.80HHC while computing book profit in accordance with provisions of section 115JB - MAT - disallowance of claim - Held that:- As decided in Bhari Information Technology [2011 (10) TMI 19 - Supreme Court of India] deduction claimed by the assessee under Section 80HHE has to be worked out on the basis of adjusted book profit under Section 115JA and not on the basis of the profits computed under regular provisions of law applicable to computation of profits and gains of business - in favor of assessee. Depreciation in respect of leased out vehicles - Held that:- As decided in Shaan Finance (P) Ltd. [1998 (3) TMI 8 - SUPREME Court] where the business of the assessee consists of hiring out machinery and/or where the income derived by the assessee from the hiring of such machinery is business income, the assessee must be considered as having used the machinery for the purpose of business. In the present case, it is worth to mention that GNFC Ltd. has shown the lease rent as income in its hand under the head "business income". In the case of the lessor, i.e. GNFC Ltd. the issue has been consistently decided that the assets being under the ownership of GNFC Ltd., hence entitled for claim of depreciation and that the lease rent received from the assessee is required to be assessed as "business income". Thus the lease rent paid is in the normal course of business of the assessee on the leased assets, hence required to be allowed as deduction - in assessee's favour.

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• 2013 (7) TMI 112
  Disallowance qua interest free advances - CIT(A) deleted the part addition - Held that:- The assessee's case, being a financer/money lender had admittedly availed interest bearing loans and advanced it to the parties in question without any interest, amounts to special circumstances and it is for him to place on record the relevant material to the effect the business of the parties is export, their mutual understanding with him to share the profits arising therefrom. Nothing of this sort is forthcoming from the case file. Nor such material was produced before the AO or CIT(Appeals). This proves that CIT(Appeals) has accepted assessee's oral submissions which are not based on any material on record. Therefore, the findings of the AO in support of the addition have been wrongly interfered with by the CIT(Appeals). Accordingly, the additions restored Entitlement for deduction u/s 54F - CIT(A) allowed the claim - Held that:- There is no dispute between the parties on facts that the assessee had sold his land and raised construction on a plot owned by his wife. Since the section 54F of the 'Act' is a beneficial provision, it has be liberally construed. Therefore, CIT(Appeal)'s findings confirmed.

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• 2013 (7) TMI 111
  Disallowance u/s 14A r.w.r. 8D - whether net interest expense or gross interest expense be taken for the purpose of computing disallowance - Held that:- While making disallowance u/s 14A, the amount of expense is to be considered and in the present case, the amount of expense on account of interest cannot be said to be of gross amount as there is interest income also. Therefore, the assessee can be said to have incurred net interest only. Moreover the interest income was also taxed as business income and not as income from other sources. Therefore, CIT(A) has rightly accepted the contentions of assessee. In favour of assessee. Tax rebate u/s 88E - addition on account of MAT - whether tax under normal provision or as per book profit u/s 115JB is payable by the assessee - Held that:- As decided in CIT Versus Horizon Capital Ltd. [2011 (10) TMI 489 - KARNATAKA HIGH COURT] if the transaction on which STT is paid is included in the total income of the assessee where the total income is assessed either under the provisions of the Act or under Section 115JB when tax chargeable on such income is arrived at & it is from that tax which is chargeable, the tax paid u/s 88E is given deduction, by way of rebate, u/s 87. This is the legislative intent of giving deduction of the tax already paid - Decided against the Revenue.

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• 2013 (7) TMI 110
  Entitlement to Exemption u/s 54F - AO rejected the claim as the assessee had not acquired substantial domain on payment of consideration for the apartment - CIT(A) allowed the claim - Held that:- A bare perusal of Section 54F(1) (supra) shows that the requirement of the Section is, as relevant for the present case, ‘purchase’ of a residential house in accordance with the said Section. Ownership and possession thereof has nowhere been delineated in the Section. Now, ordinarily, ‘purchase’ would take in itself ownership as well as possession. However, the obtaining situation has been amply dealt with by the Hon’ble Supreme Court in ‘Aravinda Reddy’ (1979 (10) TMI 1 - SUPREME Court), wherein, it has been held that the word ‘purchase’ in Section 54F(1) of the Act must be given its common meaning as buying for a price or payment; and that in the Section there is no stress on cash and carry. In the present case, once the assessee had admittedly paid the entire consideration for the purchase of the residential premises even before the capital gain accrued to him, the requirements of Section 54F(1) are amply met. For the deduction under the Section, nothing further is required. CIT (A) correctly held that Section 54F is a beneficial provision designed to promote re-investment of sale proceeds of long-term capital assets in residential house properties; that its purpose is to give impetus to the house building activity in order to meet the acute shortage of housing and for this purpose, providing an incentive to tax payers by exempting from tax long-term capital gains arising from the transfer of other assets where the net consideration is invested by the tax payer in residential house. In favour of assessee.

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• 2013 (7) TMI 109
  Deemed dividend u/s 2(22)(e) - assessee is a beneficial shareholder in M/s Koradia Construction Pvt Ltd, and having 50% of shares holding with the advance of Rs. 58 lacs stated to have been given to the assessee by the company for purchase of flat - CIT(A) confirmed the partial addition - Held that:- From the books of accounts and audit report of M/s Koradia Construction P Ltd, it is evident that the company has shown this amount of Rs. 58 lacs as advance for the purchase of property aslo as per the Schedule E to the balance Sheet the amount of Rs. 58 lacs has been clearly shown as towards purchase of premises. Thus as company is engaged in the business of construction and dealing in properties and the purpose of advancing money to the assessee, therefore, falls under the business/commercial transaction between the company and the assessee therefore, the interest paid to the Sagar Construction for debit balance in the capital account is an allowable expenditure against the business income of the assessee and particularly against the interest/remuneration received from the partnership firm. In favour of assessee.

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• 2013 (7) TMI 108
  Money seized during the search operation - whether be treated as advance tax from the date of its seizure - levy of interest u/s 234B - Held that:- If the assessee has declared income during the year under consideration in that eventuality he is liable to pay advance tax as per law therefore the Assessing Officer is required to find out whether such liability was existing on the date of seizure. If such liability is existing then he is empowered to apply/adjust the money seized in discharge of the existing liability even without any written representation from the assessee. The issue whether the seized money should be applied towards advance tax liability of assessee and credit should be given credit there from the date of seizure of money has been decided in favour of the assessee by the decision Shri Ram S Sarda v. DCIT [2011 (12) TMI 146 - ITAT RAJKOT]. - Decided against the revenue.

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• Customs

• 2013 (7) TMI 107
  Anti-dumping duty levied in terms of Notification No. 52/2010-Cus. dated 19.4.2010 - Tetrafluoroethane or R-134a - Held that:- As in SRF Ltd. Vs. Refex Refrigerants Ltd. [2011 (1) TMI 713 - MADRAS HIGH COURT] the Notification No. 52/2010-Cus has been set aside also confirmed in [2013 (6) TMI 233 - SUPREME COURT OF INDIA] Thus set aside the impugned order and remand the matter back to the original authority to decide the case afresh after considering the judgment of SRF Ltd. (supra) as it was not placed before the Commissioner (Appeals).

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• Corporate Laws

• 2013 (7) TMI 106
  Winding up petition - dishonoring of cheques - KRIL has questioned the power attorney (‘POA’) issued in favour of the deponent of the affidavit in support of the present petition by stating that there is no specific authorization to file a winding petition - Held that:- There is an admission of liability by KRIL in the sum of Rs. 1,80,21,139 together with interest and that KRIL is unable to pay the said sum to IFL. The defence of KRIL for not paying IFL the admitted liability is not bona fide. The petition is accordingly admitted and the OL attached to this Court is appointed as a PL of KRIL. A complete set of the paper book be served on the OL. The OL is directed to take over all the assets, books of accounts and records of the Respondent from the date this order is made effective as indicated hereafter. The OL shall also prepare a complete inventory of all the assets of the Respondent before sealing the premises in which they are kept. He may also seek the assistance of a valuer to value the assets. He is permitted to take the assistance of the local police authorities, if required. Publication of the citation of the petition be effected in the Official Gazette, ‘The Times of India’ (English) and ‘Jansatta’ (Hindi). The cost of publication shall be borne by IFL. The Directors of KRIL are directed to strictly comply with the requirements of Section 454 and Rule 130 and furnish to the OL a statement of affairs in the prescribed form verified by an affidavit within a period of 21 days from the date of order. However, this order is kept in abeyance for eight weeks to enable KRIL to make payment to IFL of the sum of Rs. 1,80,21,139 together with up-to date interest, failing which this order will be made operational and further steps will be taken by the OL in terms of this order. The right of IFL to seek other available remedies to recover the balance sum owed to it by KRIL is reserved.

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• Service Tax

• 2013 (7) TMI 126
  Rate of Service tax – whether the rate of service tax applicable is one that is extant on the date of receipt of payments or the date the services were rendered - Held that:- As decided in Delhi High Court in CST, vs. Consulting Engineering Services (I) Pvt. Ltd (2013 (1) TMI 434 - DELHI HIGH COURT) the provisions of Rule 5B of the Service Tax Rules, 1994 will apply as same came into effect on 01.04.2011 - Rule 4(a)(i) of the Point of Taxation Rules 2011 is not applicable because those Rules came into effect on 01.03.2011. Business auxiliary service –Marketing support services – Held that:- As decided in Paul Merchants Ltd. vs. CCE, Chandigarh (2009 (7) TMI 736 - CESTAT, NEW DELHI) the services provided by the appellant therein constitute Business Auxiliary Service. Waiver of pre- deposit – The court allowed the stay application and waiver of pre deposit of service tax.

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• 2013 (7) TMI 125
  Stay petition – service tax liability not discharged – services rendered under erection, commissioning and installation services – appellant contended that there was no intention to suppress the amount and outsourcing of cabling work is not a taxable event in their account – the sub-contractor who is completing the job of cabling, is not discharging any Service Tax liability – Held that:- The amount of Service Tax liability is within the limitation period - the entire issue as regards activities conducted by the appellant would fall under Service Tax net or not needs to be considered in detail – small amount to be deposited by the appellant – stay granted.

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• 2013 (7) TMI 124
  Refund of CENVAT credit - export of services - The department was of the view that the services exported by the appellant were software development and software consultancy services falling under the taxable service category of ‘Consulting Engineer' – the services exported consideration was received in convertible foreign exchange - Held that:- The assessee is a 100% export oriented unit - The export of software at earlier date was not a taxable service – the assessee had paid input tax on various services – the assessee had accumulated CENVAT credit - The assessee is entitled to the refund of the CENVAT credit under Rule 5of the CENVAT Credit Rules, 2004 - As decided in Repro India Ltd. vs. Union of India(2007 (12) TMI 209 - BOMBAY HIGH COURT) that CENVAT credit would be available on input or input services used in the manufacture and export of exempted goods. Bar on Limitation – Held that:- Bar of limitation cannot be a ground to refuse CENVAT credit to the assessee - limitation under Section 11B not to be applied for refund of accumulated CENVAT credit. - Decision in the case of mPortal India Wireless Solutions P. Ltd. (2011 (9) TMI 450 - KARNATAKA HIGH COURT) followed. Exempted services Rule 2(e) of the CENVAT Credit Rules, 2004 - Held that:- Information Technology Software Service' brought under the tax net for the first time in the year 2008 - not a taxable service during the period - appeal allowed in the favour of assessee.

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• 2013 (7) TMI 123
  Pre-deposit of service tax – club and association service - Assessee main contention is that they are engaged in public service and are not a profit making organization - they have not collected any Service Tax from their Members - Held that:- Service Tax confirmed against the applicant on the ground that they are engaged in providing services falling under the category of club or association services - the fact that they are not making any profit will not take them out of said definition - the issue involved are arguable and contentious - full dispensation of pre-deposit could not be allowed - one third deposit was ordered - stay granted partly.

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• Central Excise

• 2013 (7) TMI 105
  Procedural lapses for claiming rebate under Rule 18 of Central Excise Rules,2002 for export of goods - non-observance of conditions No. (1) and (2) of the Notification No. 21/2004-C.E. (N.T.), dated 6-9-2004 i.e. condition regarding filing of declaration and conditions regarding verification of input-output norms was not followed - applicant is regularly procuring Hexane without payment of duty and obtains Annexure 45 from the department. - Held that:- claimant cannot claim the input rebate as a matter of right when he has failed to follow the provisions of Notification No. 21/2004-C.E. (N.T.) without explaining any valid reasons for some unintentional procedural lapses. Agaisnt the Assessee.

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• 2013 (7) TMI 104
  Rebate of duty paid on the finished goods exported under Rule 18 of the Central Excise Rules, 2002 - Simultaneous claim of duty drawback and rebate - Held that:- Hon’ble High Court of Bombay at Nagpur Bench, in the case of CCE, Nagpur v. Indorama Textiles Ltd. – [2006 (5) TMI 8 - HIGH COURT OF JUDICATURE (BOMBAY)] wherein it was held that Rebate provided in Rule 18 of Central Excise Rules, 2002 is only on duty paid on one of the stages i.e. either on excisable goods or on materials used in manufacture or processing of such goods. Hence, assessee is not entitled to claim rebate of duty paid at both stages simultaneously i.e. duty paid at input stage as well as finished goods stage. The drawback is nothing but rebate of duty chargeable on materials used in manufacturing of exported goods and therefore allowing rebate of duty paid on exported goods will amount to allowing both types of rebates of duty at inputs stage as well as finished goods stage which will be contrary to the abovesaid judgment - already availed Central Excise portion duty drawback, the rebate of duty paid on finished exported goods can not be held admissible - since Applicant already availed input stage rebate of duty (excise portion) in the form of duty drawback - extending another benefit of rebate of duty paid on exported goods will definitely amount to double benefit. - Decided against the Assessee.

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• 2013 (7) TMI 103
  Procedural lapses - CT-1 certificates issued to applicant for procurement of excisable goods without payment of duty and to export them from JNPT Nhava Sheva. Applicant instead, exported the goods from New Customs House, Mumbai and submitted valid proof of export to Assistant Commissioner, Central Excise, Raigad where the bond was executed. - Held that:- where export of said goods is established and department has also not disputed the export of goods, so the substantial requirement of law is complied with - For violation of conditions of Notification, adjudicating authority has imposed penalty of Rs. 5000/- so as to regularize the matter – As per Hon’ble Supreme Court in M/s. Suksha International case [1989 (1) TMI 316 - SUPREME COURT] had held that interpretations/restrictions so as to defeat the very purpose of Govt. policy should be avoided - The applicant is already penalized for procedural violations - substantial benefit cannot be denied for procedural infractions. - Decided against the Revenue.

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• 2013 (7) TMI 102
  Determination of value of export – FOB Value or CIF Value in the case of export – Applicant submits that Section 4 value arrived at after deducting the freight incurred from Dehradun to Delhi as the corresponding invoices show the terms of delivery as “FOB Delhi”. As such, the ARE-1 value does not appear to represent the correct value as per Section 4 of the Central Excise Act, 1944 - all the commercial invoices in respect of ARE-1s mentioned in the table indicate the terms of delivery as “FOB, New Delhi” or “FOB Mumbai” and there is no term as to payment of freight by the buyer. - Held that:- the place of removal is the port of export where sale takes place - place of removal in this case is the port of export i.e. ICD, Delhi since the sale has taken place at the port of export - all expenses incurred upto the place of removal i.e. port of export are part of transaction value - freight expenses incurred beyond the place of removal i.e. port of export will not form part of transaction value - the pleading of department that freight incurred from factory gate to port of export is required to be deducted from FOB value to arrive at transaction value, is not tenable. - Decided in favor of Assessee.

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• CST, VAT & Sales Tax

• 2013 (7) TMI 127
  Additional Sales Tax levy - Held that:- As both sides agree that the issue as regards the levy of additional sales tax in respect of the assessment year 1996-97 is covered by the decision of State of Tamil Nadu Vs. National Time Company [2010 (7) TMI 842 - MADRAS HIGH COURT] that after taking the taxable turnover for the entire year, the taxable turnover upto the date of amendment has to be assessed with reference to the relevant tax rate therein applicable to the period. Thus setting aside the order of the Sales Tax Appellate Tribunal, the matter is remanded back to the AO to work out the liability based on the decision (supra). Thus, taking the taxable turnover for the entire year, the taxable turnover up to the period 31st July 1996, has to be worked out to attract the liability at the rates specified therein and beyond that, the liability of the turnover has to be worked out based on the amended provision depending on the taxable turnover crossing Rupees 100 crores for the whole year.

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