Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
July 6, 2012
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
-
Income-tax (seventh Amendment) Rules, 2012 - Amends rule 12(1) - Notification
-
Dis-allowance u/s 40A(2) - assessee has not discharged its primary onus to prove that entire interest-bearing funds including partners’ capital account were entirely used for the purposes of the business. - AT
-
Expenditure incurred on sponsorship & other expenses of Polo tournament - there was no business benefits to the assessee by making such expenditure on advertisement. - treated as personal expenditure - AT
-
Salary versus Commission - Amount paid to be treated as salary even though it was reflected as commission - No TDS u/s 194H - AT
-
Reduction of addition made by the AO by CIT(A) - the reasoning given by the CIT(A) namely that the documents were lost in theft in the face of the departmental objection that the theft took place subsequently may not be relevant reasoning - AT
-
Levy of penalty u/s 271(1)(c) - mere withdrawal of depreciation by the assessee at the assessment stage itself does not amount to be a valid reason for treating the transaction as non-genuine and for coming to a conclusion that it had concealed income or furnished inaccurate particulars of such income. - AT
-
Valuation of Closing stock - method of weighted average rate adopted by assessee - A.O. without giving any observation /calculation has finalized the valuation on an add-hoc basis. Said approach of assessment of the A.O cannot be approved. - AT
-
Benefit u/s 80-IB - The assessee has sold these apartments to various purchasers who in turn are using it as service apartments for which the assessee cannot be held liable in any way and on that ground he cannot be denied the benefit. - HC
-
development and construction of residential flats - joint development agreement - benefit of Section 80IB(10) in proportion to the share to which they are entitled to in the built up area allowed - HC
-
Deduction under Section 80-IB (10) - If that area does not exclusively belong to the owner of residential unit and if he has to share that common area with the owner of another residential unit, then that common area has to be excluded from the built-up area.
- HC
-
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
-
Petition against dismissal of stay petition by CIT(A) - CIT(A) has to follow the parameters for granting stay - HC
-
Software expenses - revenue or capital expenditure - real intent and purpose - expenditure incurred by the assessee on software is allowable as revenue expenditure. - AT
-
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
-
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
-
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
-
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
-
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
Customs
-
Verification of genuineness, of duty credit scrips issued under Chapter 3 of FTP, before registration. - Circular
-
Amendment in para (4) of Circular No. 38/2010-Customs, dated 27.09.2010-Served From India Schemes(SFIS) – reg:- - Circular
-
Amends Notification No.52/2012-CUSTOMS (N.T.) - Rate of exchange of conversion of each of the foreign currency with effect from 22nd June, 2012. - Notification
-
Import of Crude Palm Sterin - Classification - Chapter Heading 15.11 or 38.23. - matter remanded back to decide afresh in view the case Jocil Ltd (2010 (12) TMI 24 (SC)) - AT
-
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
DGFT
-
Removal of Minimum Export Price (MEP) of Basmati rice. - Notification
Service Tax
-
GTA - receiver of goods transport services - 75% abatement - instructions issued in the Circular by the Board cannot be a mandatory condition when the notification does not have such conditions - AT
-
Cenvat Credit - If invoice is addressed to the head office of a company cannot be a reason enough to deny cenvat credit if it is otherwise available to assessee. - AT
-
Demand of service tax - advertisement agency service - activity for arranging the celebrities for promotion – covered under BAS category - AT
-
Cenvat Credit on Capital goods used for providing output services - the tipper used cannot be treated as capital goods. - AT
Central Excise
-
CENVAT Credit – M.S. Channels and M.S. Beams - same were used as rollers to move the finished goods - cenvat credit allowed - AT
-
Cenvat Credit - Rule 6 - Press-mud is a by-product or waste. - Just because the press mud is processed further resulting in exempted product, it cannot be said that the appellant is required to maintain separate accounts - AT
-
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
-
Defect in adjudication order – Corrigendum issued - Corrigendum is a total departure from the confirmation of duty demand in the adjudication order - AT
-
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
Case Laws:
-
Income Tax
-
2012 (7) TMI 104
Unexplained Investment - advance for construction of vessel - addition made on ground of difference in value shown as advance in balance sheet of assessee and amount shown in books of holding foreign company - rejection of books of accounts - Held that:- In present case, assessee in its books of accounts has recorded the investment of ₹ 18.85 crores and such investment is fully supported by relevant material, simply because M/s Coeclerici Logistics S.P.A. has recorded different amount i.e. ₹ 23.22 crores in its balance sheet for the year ended on 31st March 2006 on the basis of its own accounting method and considering the fact that the assessee was not required to make such payment before the delivery of the vessel and further the assessee has filed relevant material to show that such payment was made by the assessee as per the terms of the agreement in the subsequent assessment years which has also accepted by the Revenue in the said assessment years, we are of the view that in the absence of any material to show that the assessee has made such payment of ₹ 4.36 crores during the FY relevant to AY under consideration, the A.O. was not justified in rejecting the books of accounts and in making such addition. Section 69 is attracted when investment is not recorded in books of accounts, assessee fails to explain or explanation is found unsatisfactory. None of conditions are existing. Order of CIT(A) deleting addition upheld - Decided in favor of assessee. Preliminary expenses - establishment expenses - dis-allowance on ground that assessee has not commenced its business activities and as such the question of claiming deduction u/s 35D does not arise - Held that:- Since agreement with M/s Coeclerici Logistics S.P.A. has taken place on 11-2-2006, therefore, business of the assessee has commenced on 11-12-2006 i.e. the year under consideration and hence both the claims made by the assessee are allowable - Decided in favor of assessee.
-
2012 (7) TMI 103
Validity of revisionary order passed u/s 263 - order revised on ground that interest bearing funds has been utilized for non-business purposes - assessee, a partnership firm, had shown payment of interest to partners of Rs.72,65,894/- on their current accounts, and had made investment in non business asset viz residential building to the tune of Rs.5,84,60,738/-- Held that:- In the present case, though the AO had made certain enquiries, but such glaring feature of the balance sheet was not confronted to the assessee. Such an assessment which has been made without taking into account the position of the outstanding balances as shown in the balance-sheet and the related consequence on the profit disclosed as per the P&L account can give rise to an automatic suspicion that an erroneous order has been passed causing prejudice to the Revenue. Revisionary powers u/s.263 has rightly been invoked - Decided against assessee. Dis-allowance of proportionate interest expenditure on the ground of interest bearing funds have been utilized for non-business purpose - Held that:- The only explanation of the assessee was that the building used for the purposes of the business as well as for the purpose of providing stay for partners. But simultaneously, this fact has also been brought on record that the said building was not treated as a business asset because the assessee has not claimed depreciation on the same. Thus a nexus has been established the non-business assets have factually been funded from the current accounts of the partners. Further, assessee has not discharged its primary onus to prove that entire interest-bearing funds including partners’ capital account were entirely used for the purposes of the business. Dis-allowance made upheld - Decided against assessee.
-
2012 (7) TMI 102
Share application money - addition u/s 68 on ground that identify and creditworthiness of the investors and the genuineness of the transactions was not established - Held that:- In the present case, the assessee has provided to the A.O. not only the names of the shareholders but their addresses along with PAN and Bank statements etc. Hence, the assessee has discharged its primary onus and, therefore, in the light of judgment in case of Lovely Exports (2008 (1) TMI 575 (SC)) and also in the case of Divine Leasing and Finance Ltd. (2006 (11) TMI 121 (HC)), the addition made by the A.O. with regard to receipt of share application money cannot be sustained. The same is deleted - Decided in favor of assessee. Unsecured loan - addition - AY 02-03, 03-04 - Held that:- Since assessee has not provided any confirmation of this loan creditor or his address or PAN etc. and nothing has been provided to establish the creditworthiness of this loan creditor. Therefore, addition made is upheld - Decided against assessee. Unsecured loan - addition - AY 04-05 - Held that:- Since all the three ingredients i.e. identity, creditworthiness of loan creditors as well as genuineness of transaction were established. No adverse material had been brought on record by the A.O. and, therefore, the addition made by the A.O. simply on the basis of this aspect hat the notice issued were received back unserved is not justified. Addition deleted. Repairs to plant and machinery - factory expenses - dis-allowance of excess expenditure in comparison to expenditure incurred in previous year - Held that:- Unless it is established that the claim of expenditure is either bogus or is of capital/personal in nature, dis-allowance is not justified. In absence of any contrary material on record, addition made is deleted - Decided in favor of assessee. Unexplained advances - addition made of notional interest - Held that:- When there is no finding to the effect that actually the loan had been granted on interest or that interest has actually been collected and collection of interest was not reflected in the account, no addition can be made on account of notional interest. Addition is deleted. See B & A Plantations and Industries Ltd Vs CIT (1999 (12) TMI 43 (HC)) - Decided in favor of assessee Bad debts and advances written off - dis-allowance - Held that:- Issue is covered in favor of assessee in respect of bad debts by decision in case of TRF Ltd(2010 (2) TMI 211 - SUPREME COURT). However, since assessee could not explain the nature of these advances and unless the nature of advances is business advance, same cannot be allowed - Decided partly in favor of assessee.
-
2012 (7) TMI 101
Expenditure incurred on sponsorship & other expenses of Polo tournament - dis-allowance - assessee contended it to be advertising and corporate image building expenditure - Held that:- Majority of the clients of the assessee were sister concerns under the same family management, therefore, there was no business benefits to the assessee by making such expenditure on advertisement. Further promoting the brand SONA is also not of any help to the assessee as most of the clients are from the same group. aforesaid are personal expenses. Dis-allowance upheld Legal & professional charges - Held that:- Assessee has completely failed to establish or to produce any evidence which can prove the fact that this expenditure was incurred wholly and exclusively for the business purpose of the assessee company. Assessee had also failed to contradict the fact that these expenses were personal in nature - Dis-allowance upheld Traveling expenses incurred on travel of company's President for business meetings - dis-allowance on ground that assessee has failed to establish the purpose of such meetings with the prospective clients - Held that:- No details of the prospective clients have been filed. Also, assessee was not having any business connection in those countries. Dis-allowance upheld. Expenditure incurred on training of employees - revenue or capital expenditure - Held that:- Same is revenue in nature - addition made is deleted.
-
2012 (7) TMI 100
Addition u/s 68 - unsecured loan - creditworthiness of creditor - Held that:- A.O. examined the creditworthiness of Creditor and found him to be salaried person, earning gross salary of Rs.82,240/-. During the span of two months only, Rs.3,45,000/- in cash was deposited in his bank account before issuing cheque of this amount to the assessee. AO therefore, doubted the creditworthiness of the creditor and ignored the confirmation in respect of this credit filed by the assessee. Hence, CIT(A) was justified in upholding the action of the A.O. in adding a sum of Rs.3,45,000/- and also the interest of Rs.30,695/- on this deposit to the income of the assessee. Business expenditure - tractor hire charges, labour purchase and salary expenses - dis-allowance - Held that:- Since assessee failed to produce supporting evidence for incurring impugned expenses for business purposes, hence CIT(A) was justified in restricting dis-allowance to Rs 1 lac. Appeal of assessee dismissed.
-
2012 (7) TMI 99
Salary versus Commission - Treating the commission paid by the assessee as salary by CIT(A) even though it was reflected as commission in his books of account - Revenue contested that CIT ignored the provisions of section 194H r.w.s 40(a)(ia) - the assessee firm was engaged in the trading of mobile and fixed phone connections on commission basis - Held that:- The payment of salary is in line with the specific condition contained in the appointment letter. That being so, the AO obviously erred in observing that the stand taken by the assessee was a mere after-thought so as to avoid taxability. The employees of the assessee firm were given training with the probation period of six months. Thereafter, the employee was to activate the connections sold by the assessee. The payment was as per the activated connections. Section 17 (1)(iv) provides for “salary” to include, inter alia, any commission in view of or in addition to any salary. The payment in the present case being on the basis of the activated connections, was a part of salary - as the payments in question are covered within the definition of “salary” in terms of section 17 it cannot be hit by the provisions of section 194 H - against revenue.
-
2012 (7) TMI 98
Reduction of addition made by the AO - revenue contested that CIT(A)allowed the assessee’s claim of expenses without any documentary evidences - Held that:- The explanation pertaining to non judicial stamp paper and loan interest necessarily have to be allowed as non-withstanding the alleged claim of loss of documents in the theft of car which is disputed by the department the fact remains that these are evidences available before different Governmnetal authority namely purchase of non-judicial stamp paper. The factum of loan interest is an evidence available in the bank account of the assessee. The remaining claim of legal charges of deed writer, repair, carpentry, white wash etc. may be examined in the light other than the theft of car also as the Paper Book relied upon before the CIT(A) has not been placed as before - the reasoning given by the CIT(A) namely that the documents were lost in theft in the face of the departmental objection that the theft took place subsequently may not be relevant reasoning as such we restore the issue back to the file of CIT(A) with the direction to pass a speaking order in accordance with law after due verification - in favour of revenue for statistical purposes.
-
2012 (7) TMI 97
Levy of penalty u/s 271(1)(c) - AO stated that assessee had claimed depreciation at 100% on special grade steel rolls purchased by it and such castings were leased by the assessee to one - the lease transactions were not genuine, but was only a sham arrangement for providing finance and claiming depreciation - Held that:- As per the lease deed it was clear that the lessor was to purchase equipments selected by the lessee from the supplier chosen by the lessee. According to him, the lessees concerned selected suppliers and based on such selection, assessee had purchased items from the suppliers - The lessor is not a manufacturer nor a dealer and the equipment was to be selected and examined by lessee, the equipment was to be received by the lessee directly from the supplier. In such a situation, assessee cannot fault the assessee if it had believed the documents furnished by the lessee for receipt of the items at their premises. Assessee might have chosen to withdraw the depreciation based on subsequent developments - mere withdrawal of depreciation by the assessee at the assessment stage itself does not amount to be a valid reason for treating the transaction as non-genuine and for coming to a conclusion that it had concealed income or furnished inaccurate particulars of such income. Incorrect claim by itself will not tantamount to furnishing of inaccurate particulars - thus, levy of penalty u/s 271 (1)(c) was not warranted - decided in favour of assessee.
-
2012 (7) TMI 96
Challenge the reopening of the assessment by assessee - assessee contested that the change of opinion would not constitute valid information for assumption of jurisdiction u/s 147 - Held that:- Commissioner of Income Tax(Appeals) was not justified in holding that issuance of notice in the instant case was on the basis of change of opinion when it is an admitted fact that no assessment under Section 143(3) was made in the instant case, on the date of issue of notice under Section 148. Keeping in view the facts of the case that Form 10CCB filed during the year, the assessee has installed a wind mill costing Rs.3.02 crores on which depreciation at Rs.1.21 crores was claimed, but as per Schedule E, income from windmill was admitted at Rs. 6,31,000/- which in toto was claimed as deduction under Section 80-IA without taking into account the above depreciation of Rs. 1.21 crores. thus, the issue of notice under Section 148 cannot be held as invalid or on the basis of change of opinion - as decided in ACIT vs. Rajesh Jhaveri Stock Brokers Pvt Ltd [2007 (5) TMI 197 (SC)] - in favour of revenue. Eligibility for deduction on under Section 80-IA - Held that:- The profit derived from eligible unit is to be computed as if such eligible unit were the only source of income of the assessee during the relevant year,the assessee and CIT(A) has taken only a part of the revenue of the eligible undertaking whereas AO has taken as part of the revenue of the eligible undertaking and entire depreciation and interest ignoring the other expenses of the undertaking, for computing the profit derived from the eligible undertaking - as everybody ignored the value of power generated by the eligible undertaking used by the assessee in its other undertaking where activity of publishing of books were carried out as well as ignoring other expenses incurred for the eligible business except depreciation and interest,it shall be fair and in the interest of justice that the issue should be restored back to the file of the Assessing Officer for proper computation of profit derived from the eligible business.
-
2012 (7) TMI 95
Disallowance made u/s 14A r.w.r.8D - assessee submitted that investments were made out of own funds and no borrowed funds have been utilized and no other expenses were incurred - Held that:- The A.O. has not given any clear finding of incurring of expenses, and has not established nexus of expenses incurred with the earning of exempt income - The satisfaction of the A.O. as to the incorrect claim made by the assessee is a pre-condition and a necessity for invoking the applicability of Rule 8D whereas in this case A.O. has directly invoked provision of Rule 8D without rendering any opinion on the correctness or otherwise of the assessee’s claim - in favour of assessee. 1/4th ad-hoc disallowance of various expenses holding it to be of personal nature - Held that:- The assessee has incurred various expenses as listed in his paper book and suo-moto disallowed expenses from them. The A.O. has in addition to the disallowance made by assessee further disallowed the expenses. The disallowance of expenses by A.O. was adhoc in nature as he has not pointed out the expenses which are of non business in nature - as in the assessee’s own case in earlier years ITAT had restricted the disallowance pertaining to motor car and telephone expenses and the assessee has on the same basis suo-moto disallowed the expenses no point of any further disallowance - in favour of assessee.
-
2012 (7) TMI 94
Valuation of Closing stock - method of weighted average rate adopted by assessee - Revenue contended undervaluation of stock - Held that:- It is an undisputed fact that the assessee has valued the stock at weighted average cost in the current year and the same method was followed by assessee in earlier years and it was accepted by the Department while finalizing the assessment u/s. 143(3). The assessee has also adopted the same method for arriving at the “cost of goods sold”. The method of valuation is also in consonance with the I.T. Act and the Accounting Standards prescribed by ICAI. Similar valuation method of stock has been accepted by the Department in case of its sister concern. The amount of sales tax and VAT embedded in the value of purchase and sale has also been reflected in the weighted average cost. No material has been brought on record by Revenue before us to controvert the aforesaid facts. A.O. without giving any observation /calculation has finalized the valuation on an add-hoc basis. Said approach of assessment of the A.O cannot be approved. Hence, CIT (A) has rightly deleted the addition - Decided in favor of assessee.
-
2012 (7) TMI 93
Validity of second reopening of assessment - capital gain on sale of two plots of land - assessment reopened firstly on 27.9.2002 on the ground that the assessee has made certain deposits which comes from sale proceeds of plots, but while completing the reassessment, no addition is made either under the head capital gain or u/s 68 - Held that:- In present case, after almost 1˝ years, AO intended to reopen the assessment again for the same transaction after having recorded reasons that the assessee has earned capital gain on transfer of two plots of land. When the Assessing Officer has already applied his mind while framing the reassessment consequent to the first reopening and did not make addition under the relevant head. Therefore, he cannot reopen the assessment again for the same reason by simply making changes in the format of the reasons recorded without looking to the fact that the transaction for which he wants to form a belief is the same. Therefore, second reopening was done only on account of change of opinion which is not permissible under the law. Accordingly, the reassessment orders framed consequent to issuance of notice u/s 148 are hereby annulled and additions made therein are also deleted - Decided in favor of assessee
-
2012 (7) TMI 92
Rule 46A - Admission of additional evidences By Commissioner(Appeals) - Revenue contended violation of Rule 46A since on opportunity of rebutting the evidences has been given to Assessing officer - Held that:- CIT (A) while admitting additional evidences had not given any findings under which exception of Rule 46A these evidences were admitted. Additional evidence can be produced at the first appellate stage only when conditions stipulated in the rule 46A are satisfied and a finding is recorded. The conditions prescribed in rule 46A must be shown to exist before additional evidence is admitted and every procedural requirement mentioned in the rule has to be strictly complied with so that the rule is meaningfully exercised and not exercised in a routine or cursory manner. Sub-rule (3) of Rule 46A, interdicts the Commissioner (Appeals) from taking into account any evidence produced for the first time before him unless the AO has had a reasonable opportunity of examining the evidence and rebut the same. Therefore, we set aside the issue to the file of the Assessing Officer to be decided de novo - Decided in favor of Revenue for statistical purposes.
-
2012 (7) TMI 91
Whether the Tribunal was correct in holding that the Assessing Officer had failed to prove that the residential flats exceeded built-up area of 1500 sq. feet each and penthouse flats – Held that:- All the 84 or 83 flats constructed are less than the 1,500 sq. ft., the assessee cannot be denied the benefit and taxed on the ground that it exceeds 1,500 sq. ft. Hence this question of law is answered in favour of the assessee and against the revenue. Whether the definition of "built-up area" as inserted by Finance (No.2) Act of 2004 with effect from 01.04.2005 is prospective or retrospective in nature – Held that:- Object behind enacting this provision, namely to bring in investments and to encourage the infrastructure development of middle income housing projects - Courts have to harmonize these provisions and interpret the same in a manner to achieve the object of the legislature than to distress the said object - definition of built-up area as inserted in sub-Section 14(a) of Section 80-IB by Finance No.2 Act of 2004, which came into effect from 01.04.2005 cannot be held to be retrospective; it applies only to such housing projects, which are approved subsequent to 01.04.2005 - Assessee, in the instant case, is entitled to the benefit of the aforesaid provision and hence the said substantial question of law is answered in favour of the assessee and against the revenue. Whether a housing project includes a commercial complex - if in the housing projects approved by the local authority, a commercial complex is also constructed, does it cease to be a housing project so as to disentitle the assessee from the benefit of Section 80-IB (10) of the Act - by way of amendment, introduction of clause 'd' of sub-Section 10 of Section 80-IB, it is clear that the housing project contemplated under sub-section 10 of Section 80IB includes commercial establishments or shops also – Held that:- By way of an amendment, an attempt is made to retract the size of the shops or commercial establishments - Therefore, necessarily the said provision also has to be read prospectively and not retrospectively. As is clear from the amendment, this provision came into effect only from the day the provision was substituted. Therefore, it cannot be retrospective - In favour of the assessee
-
2012 (7) TMI 90
Denial of benefit u/s 80-IB - project was not completed within four years,deviations in the sanctioned plan and flats are used as service apartments, the housing project is only in an area of 38 guntas and some of the flats exceed 1,500 sq. ft - Held that:- Though the assessee owned only 38 guntas of land when he started the construction, he acquired an extent of 1,440 sq. ft. of land adjoining the said land, thus making the total land in which the project was put up to 44,470 sq.ft. more than 43,480 sq.ft. which is prescribed under the law. The modified housing project was approved in the year 2001 after the aforesaid provision was inserted On 20.5.2003 occupancy certificate is issued, therefore, the construction is within the 4 years period stipulated. The assessee has sold these apartments to various purchasers who in turn are using it as service apartments for which the assessee cannot be held liable in any way and on that ground he cannot be denied the benefit. Out of 63 flats as it is stated 8 flats exceed the built-up area in excess of 1,500 sq. ft the authorities have taken into consideration the balcony area and the common area whereas prior to 1.4.2005 as law stood then balconies and common areas have to be excluded for the purpose of calculating the built-up area - deleting these two areas admittedly the apartments measure less than 1,500 sq. ft - no ground of denying the exemption to the assessee - against revenue.
-
2012 (7) TMI 89
Whether assessee is entitled for reduction under Section 80-IB(10) of the Act - flats were exceeding 1500 sq. ft. of built up area contrary to Section 10-IB(10) of the Act – Held that:- Residential units and the built up area of the residential units, even in the case of disputed flats do not exceed 1500 sq. ft. - appeal by revenue stands dismissed.
-
2012 (7) TMI 88
Denial of grant of benefit of Section 80IB(10) as the assessee has not built the housing project - joint development agreement - assessee firm is engaged in the business of development and construction of residential flats - Held that:- Considering the procedure adopted is that assessee in turn entered into a joint development agreement with the builder and the owner of the land was made a party to the said proceedings, thus the assessee contributed to the land, undertook the aforesaid developmental activities in the said land and thus, complied with all other conditions, which have to be fulfilled before claiming benefit under Section 80IB(10) - as the builder has invested the money in the construction, it is after completion of the building in terms of the agreement, the assessee was given 22% share of the building area. It is after sale of the built area, in terms of Section 80IB (10), the assessee is claiming deduction - it is clear from the joint development agreement, the undertaking of developing and building housing project was jointly undertaken by the assessee and the builder the persons who undertook this undertaking are entitled to the benefit of Section 80IB(10) in proportion to the share to which they are entitled to in the built up area - against revenue.
-
2012 (7) TMI 87
Denial of claim of deduction under Section 80-IB (10) - flats whose built-up area was more than 1500 sq. ft - Held that:- In calculating the built-up area it is only the inner measurements of the residential unit on the floor level, which has to be taken into consideration and if there are any projections and balconies which exclusively belongs to the residential units, then, that also has to be taken into consideration for deciding the built-up area.If that area does not exclusively belong to the owner of residential unit and if he has to share that common area with the owner of another residential unit, then that common area has to be excluded from the built-up area. In respect of 16 flats whose built-up area was considered more than 1500 sq. ft, the common area is shared by these 16 owners of residential units as this common area is not the subject matter of sale as is clear from the recitals in the sale deed, the owners of the residential units do not have exclusive right to use these balconies as they have to share it with others, that area cannot be taken into consideration to decide the built-up area, thus it is clear that if this balcony space is excluded all the 160 units are less than 1500 sq.ft and therefore the assessee was entitled to 100% tax exemption on this project - decided in favour of assessee.
-
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.
-
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.
-
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.
-
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.
-
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.
-
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
-
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.
-
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.
-
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.
-
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
-
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.
-
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.
-
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.
-
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.
-
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
-
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
-
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.
-
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.
-
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
-
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
-
Customs
-
2012 (7) TMI 86
Import of Crude Palm Sterin - Classification - Chapter Heading 15.11 or 38.23. - benefit of Notification No.21/2002-Cus, dt.1.3.2002. - differential duty - Board s circular dt.26.7.2011 - held that:- pre deposit ordered - matter remanded back to decide afresh in view of the Board's circular dt.26.7.2011 and Hon'ble Supreme Court's judgment in the case of Jocil Ltd (2010 (12) TMI 24 (SC))
-
Corporate Laws
-
2012 (7) TMI 105
Recovery of loan - mortgaged goods subject to hire-purchase agreements - cheques issued by the Respondent towards payment of the hire-charges were dishonoured on presentation vehicles recovered by use of force from the loanees Held that:- recovery process has to be in accordance with law and the recovery process referred to in the Agreements also contemplates such recovery to be effected in due process of law and not by use of force - As the ownership is not transferred to the purchaser, the hirer normally continues to be the owner of the goods, but that does not entitle him on the strength of the agreement to take back possession of the vehicle by use of force. By its order, the District Forum, directed the Appellant to pay a sum of Rs. 1,50,000/-, along with interest at the rate of 9% per annum, from the date of filing of the complaint till the date of payment, together with a further sum of Rs. 5,000/- towards harassment and cost of litigation. Aggrieved by the said order, the Appellant preferred Appeal before the State Commission, Delhi. By its order, the State Commission, Delhi, affirmed the order of the District Forum and directed payment of a further sum of Rs. 50,000/- on account of punitive damages. In the instant case, the situation is a little different, since after the vehicle had been seized, the same was also sold and third party rights have accrued over the vehicle. It is possibly on such account that the Appellant Bank chose to comply with the directions of the District Forum notwithstanding the pendency of this case. Since the Appellant Bank has already accepted the decision of the District Forum and has paid the amounts as directed, no relief can be granted to the Appellant.
-
2012 (7) TMI 85
Oppression and mismanagement - respondent forged Memorandum of Understanding - permission of the CLB, under Section 235(b) of the Act, to investigate the affairs of respondent no.1 Company – CLB dismissed the application – petitioner again filed petition – Held that:- Pending disposal of said application before CLB, High Court allowed appellant's pending appeal filed earlier and after setting aside order of CLB remanded matter to CLB for fresh decision - Thereafter CLB dismissed pending petition/application - Appellant filed appeal against this order of CLB – since all allegations made by appellant were to be decided afresh by CLB and appellant would have all opportunity of substantiating same before CLB, it could not have any grievance against impugned order - Court does not consider it to be appropriate to make any observations about any of the allegations made by VLS in the pending C.P.No.45/98 in which VLS is fighting its independent battle - No occasion for this Court in this appeal to undertake the exercise which CLB is expected to do
-
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.
-
Service Tax
-
2012 (7) TMI 110
Violation of principle of Natural justice - demand confirmed by Commissioner as a revisionary authority, on revision of the order in original which was in favour of the assessee without waiting for reply of assessee and consideration of his defense - Held that:- This is a serious violation of principles of natural justice. Suffice it to say that the reviewing authority should have given sufficient opportunity to the appellant to file the reply and then considered the issue in a proper perspective. Impugned order set aside and assessee is directed to file reply to the show cause notice within stipulated time - Decided in favor of assessee.
-
2012 (7) TMI 109
Renting out of immovable property - demand - assessee contended correct payment of service tax on ground of retrospective amendment to Section 65 of Finance Act, 2012 and extension of benefit of Notification No. 24/2007-ST in respect of property tax paid - Held that:- Issue needs to be considered by the adjudicating authority from the point of view of retrospective amendment and also for the extension of benefit of Notification No. 24/2007-ST, as regards the calculation of the gross value excluding the property tax paid by the appellant. Appeal is allowed by way of remand to the adjudicating authority.
-
2012 (7) TMI 108
GTA - receiver of goods transport services - 75% abatement for the purpose of payment of service tax on Goods Transport Agency service paid by the receiver - Notification No. 32/2004-ST - department has taken a view that abatement cannot be allowed after the issue of Circular by the Board, if the service provider did not make declaration in the consignment note itself, even if he made a separate declaration and the same is available with the service receiver – Held that:- instructions issued in the Circular by the Board cannot be a mandatory condition when the notification does not have such conditions and such Circular cannot used to deny substantive rights which arise from the notification.
-
2012 (7) TMI 107
Cenvat Credit - denial of credit – Held that:- If invoice is addressed to the head office of a company cannot be a reason enough to deny cenvat credit if it is otherwise available to assessee. In favor of assessee.
-
2012 (7) TMI 106
Demand of service tax - advertisement agency service - activity for arranging the celebrities for promotion – Held that:- Applicants does not cover under definition of advertising agency service and from 1.7.2003 they are paying service tax under the category of business auxiliary service as the service has been brought under the service tax with effect from 1.7.2003. In favor of assessee.
-
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.
-
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.
-
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.
-
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.
-
Central Excise
-
2012 (7) TMI 84
Dismissal of appeal for non-compliance of the pre-deposit ordered - issue regarding reversal of proportionate amount of CENVAT Credit attributable towards inputs which were consumed in the manufacture of exempted goods - Held that:- Issue is covered by the retrospective amendment as well as various decisions, the first appellate authority should have considered the appeal itself and passed an order on merit instead of insisting on pre-deposit. Appeal allowed by way of remand.
-
2012 (7) TMI 83
Penalty u/s 11AC - reduction of penalty at appellate stage - Revenue contesting the same on ground that such option can be given only at the adjudication stage - Held that:- Where the original adjudicating authority did not extend such option in writing, option can be given at the appellate stage. See Akash Fashion Prints Pvt. Limited (2009 (1) TMI 113 (HC)) - Decided against the Revenue.
-
2012 (7) TMI 82
CENVAT Credit – alleged that M.S. Channels and M.S. Beams on which the credit was taken by the appellant are neither the capital goods or the components, spares, accessories of capital goods as defined under Rule 2(b) of CENVAT Credit Rules, 2004 – Held that:- Beams have been used to keep the electric motor in the elevated position and the motor is connected to the roller to facilitate the movement of the finished goods manufactured by the appellant. If the motor is required to be put in the elevated position for requirement of machinery, it cannot be said as a supporting structure, but treated as a structural part. As regards the M.S. channels, the ld.Consultant submitted that the same were used as rollers to move the finished goods, would show that they have not been used as supporting structure - appellant is eligible for the credit availed by them – In favor of assessee
-
2012 (7) TMI 81
Cenvat Credit - Rule 6 - Non maintenance of Separate account – input used for manufacture of waste - appellant is engaged in the manufacture of sugar and during the course of manufacture of sugar, a product press-mud emerges which is actually a waste and by itself cannot be of much use, which is further processed and mixed with Spent Wash and Bio-compost emerges – Held that:- Press-mud and spent wash emerged during the course of sugar have been further processed which resulted in exempted product Bio-compost. Just because the press mud is processed further resulting in exempted product, it cannot be said that the appellant is required to maintain separate accounts - appellant was not required to reverse the 10% of the value of press mud under Rule 6 of CENVAT Credit Rules, 2004 - appeal is allowed with consequential relief to the appellant.
-
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.
-
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.
-
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
|
9911796707
