TMI Tax Updates - e-Newsletter
July 8, 2013

Case Laws in this Newsletter:

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

Articles

1. EXEMPTION TO SPECIAL ECONOMIC ZONE FROM SERVICE TAX

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Auction for Sale (Re-Issue) of Government Stocks

2. Agreement Signed between the Republic of India and the Republic of Albania for the avoidance of double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and on Capital

3. RBI Reference Rate for US $ and Euro

4. Department of Disinvestment asks the Government of Tamil Nadu to Nominate Senior Official for further discussions with SEBI with regard to its proposal to buy stake in Neyveli Lignite Corporation (NlC) through its State Undertakings

5. Finance Minister to Leave for Four Day Official Tour to USA Tomorrow; to deliver Key Note Address at US-India Business Council 38th Leadership Summit; to meet US Business Leaders During his Visit

Notifications

Customs

1. 17/2013 - dated 5-7-2013 - ADD

Seeks to extend the levy of anti-dumping duty imposed vide notification No. 92/2011-Customs, dated the 20th September, 2011 on imports of ‘Rubber Chemical’, originating in, or exported from, Korea RP for a further period of one year i.e. upto and inclusive of 4th May, 2014

2. 16/2013 - dated 5-7-2013 - ADD

Seeks to extend the levy of anti-dumping duty imposed vide notification No. 133/2008-Customs, dated the 12th December, 2008 on imports of ‘Rubber Chemicals’, originating in, or exported from, Peoples's Republic of China for a further period of one year i.e. upto and inclusive of 4th May, 2014

FEMA

3. 275/2013 - dated 8-5-2013 - FEMA

Foreign Exchange Management (Foreign Currency Accounts by a Person Resident in India) (Amendment) Regulations, 2013

Income Tax

4. 50/2013 - dated 4-7-2013 - IT

Double Taxation Agreement - Agreement for Avoidance of Double Taxation and Prevention of Fiscal Evasion with Bangladesh- Amendment in Notification No. GSR 758(E), Dated 8-9-1992

5. 49/2013 - dated 3-7-2013 - IT

Himachal Pradesh Electricity Regulatory Commission

6. 48/2013 - dated 3-7-2013 - IT

Odisha Electricity Regulatory Commission

VAT - Delhi

7. F.3(352)/Policy/VAT/2013/371-382 - dated 5-7-2013 - DVAT

Regarding last date for submission of information online in Form DP-1

8. F. 7(400)/Policy/VAT/2011/383-396 - dated 5-7-2013 - DVAT

22 Banks authorized for payment of VAT

9. F. 7(433)/Policy-II//VAT/2012/Part file/353-364 - dated 28-6-2013 - DVAT

Extension of date of filing Stock Statement in Form Stock -1 online

Highlights / Catch Notes

Income Tax

• AO's Rejection of Bad Debts Claim Contradicts Section 36(1)(vii) of Income Tax Act.

  Case-Laws - HC : Writing off bad debts - The ground taken by the AO for not accepting the said bad debts during the assessment year under consideration is contrary to the provisions of Section 36(1)(vii) - HC
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• High Court Affirms Eligibility of Subsidies for Deductions u/ss 80IB and 80IC of Income Tax Act.

  Case-Laws - HC : Deduction u/s 80IB and 80IC - Transport subsidy - Power subsidy - Interest subsidy - Insurance subsidy - are operational in nature - related to the production - deduction allowed - HC
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• High Court Rules Personal Hearing Unnecessary for Special Audit Orders Under Income Tax Act Section 142(2A.

  Case-Laws - HC : Special Audit u/s 142(2A) - Personal appearance - proviso to Section 142(2A) does not envisage any personal hearing before an order under sub-section (2A) can be passed - HC
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• Claim for Commission Denied Due to Insufficient Material; No Penalty Imposed u/s 271(1)(c) of Income Tax Act.

  Case-Laws - HC : Penalty u/s 271(1)(c) - AO had come to the conclusion that for want of suppling sufficient material by the assessee, the claim of commission cannot be accepted - No penalty - HC
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• High Court Denies Tax Exemption u/s 80-IA for Canal Bank Protection Construction and Maintenance Projects.

  Case-Laws - HC : Exemption u/s 80-IA - construction of permanent bank protection measures to the Udyog Mandal canal and the Champakara canal and maintaining the same for a period of three years - No deduction - HC
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• Court Confirms Goodwill as Depreciable Asset Under Explanation 3(b) to Section 32(1) of Income Tax Act.

  Case-Laws - HC : Depreciation on goodwill - business or commercial rights acquired - goodwill is an asset under Explanation 3(b) to section 32(1) - the depreciation allowed even on the goodwill - HC
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• High Court Rules Interest u/ss 234B and 234C Cannot Be Retrospectively Imposed with Section 115JA MAT.

  Case-Laws - HC : Assessment u/s 115JA - MAT - Levy of interest u/s 234B and 234C on retrospective levy of tax - Interest cannot be levied with retrospective effect - HC
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• High Court Reinforces Monetary Limit for Appeals to Curb Revenue's Attempts to Bypass CBDT Circular Exceptions.

  Case-Laws - HC : Monetary limit for filing appeal by revenue - The entire purpose would be frustrated if the Revenue were to attempt to by-pass the circular of CBDT by raising artificial contentions to fall within the exceptions - HC
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• Company's Share Issue Fee Not Deductible Under Income Tax Act Section 35D.

  Case-Laws - AT : Disallowance u/s 35D - the fee payment made by the assessee company in connection with the issue of shares is not eligible for deduction under section 35D. - AT
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• Tax Deduction Eligibility: Software Sales Qualify u/s 80IB, But Service Charges Do Not.

  Case-Laws - AT : Deduction u/s 80IB - Trading - sale of software need to be taken for the purpose of deduction u/s 80IB whereas service charges are not to be taken for the purpose of deduction. - AT
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Customs

• Drawback Claim Denied: Relabeling Without Added Value Violates Section 75 of the Customs Act.

  Case-Laws - CGOVT : Assessee removed original packing and relabelled the goods without making any value addition. - drawback claim u/s 75 of Customs Act denied. - CGOVT
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Corporate Law

• Court Admits Winding Up Petition Against KIPL for Dishonored Cheques; Full Settlement with Interest Required to IFL.

  Case-Laws - HC : Winding up petition - dishonoring of cheques - petition admitted subject to the contingent upon KIPL being able to make good the entire amount together with interest owing to IFL. - HC
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Service Tax

• Tribunal Orders Appellant to Predeposit 75% of Tax on Free Telephone Services to Employees for Financial Benefits.

  Case-Laws - AT : Taxability of free services - telephone services - Merely creating a fiction of no consideration received, the appellant appears to have been immensely benefited by reduction of monetary package of remuneration to its eligible, employees - 3/4 of demand ordered to be predeposited - AT
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• Fly Ash Sale Classified as Sale, Not Service; Central Excise Duty Applies Under Relevant Tax Regulations.

  Case-Laws - AT : Business support services – the transaction is not a service but is sale of fly ash on which central excise duty was being paid - same activity cannot be termed as sale as well as service - AT
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• Air Travel Agent Services to Foreign Airlines Classified as Export u/r 3 of Export Service Rules.

  Case-Laws - AT : Air travel agent - The services to the foreign airlines have to be treated as export of service in terms of Rule 3 of the Export of Service Rules - AT
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• International Roaming Services Ruled as Export When Billed to Foreign Telecom Providers, Not Directly to Subscribers.

  Case-Laws - AT : Export of services – international roaming – service is rendered to the foreign telecom service provider who is charged for the services and not to the subscriber of the foreign telecom service provider. - AT
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Central Excise

• Court Rules Bagasse-Based Electricity Not Excisable Goods, Alters Cenvat Credit Applicability for Exempted Goods.

  Case-Laws - HC : Cenvat Credit - Excisable goods vs. exempted goods - electrical energy emerges from the bagasse and sold to U.P. Power Corporation Ltd. does not fall within the ambit of excisable goods. - HC
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• Cessation of Cenvat Credit and Duty Drawback Doesn't Mean Automatic Compliance with Notification No. 30/2004-C.E.

  Case-Laws - CGOVT : Cenvat Credit - Even if the applicant have stopped availing Cenvat credit on inputs and switched over to duty drawback claim facility, that does not automatically mean that the applicant has decided to work under Notification No. 30/2004-C.E. - CGOVT
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VAT

• High Court Rules Timing and Place of Delivery Irrelevant in Hire Purchase Agreements u/s 3(b) Central Sales Tax Act.

  Case-Laws - HC : Transfer of goods under hire purchase - whether the issue of time of passing of property and place of delivery are irrelevant for the purpose of section 3(b) of the Central Sales Tax Act? - Held yes - HC
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Case Laws:

• Income Tax

• 2013 (7) TMI 176
  Writing off bad debts - AO add the same on the grounds that these debts were to be written off in the Financial Year 2004-05 relevant to the Assessment Year 2005-06, as the decision with regard to the said debt being bad and was irrecoverable had been taken on 30.3.2005. - Held that:- where account books are not closed and not signed by the Board of Directors and not adopted by the shareholders as per the Companies Act, it is legally permissible to make adjustments before they are finally adopted - After audit had taken place and report of the Auditors was accepted, revised return was filed and it is only in the revised return, the debts to the tune of Rs.2 crores and odd had been declared as bad - The ground taken by the Assessing Authority and Appellate Authority for not accepting the said bad debts during the assessment year under consideration is contrary to the provisions of Section 36 (1) (vii) - Following decision of Kerala State Industrial Development Corporation Ltd. versus Commissioner of Income-Tax [2012 (9) TMI 805 - SUPREME COURT] - Decided in favour of Assessee.

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• 2013 (7) TMI 175
  Deduction u/s 80IB and 80IC - Transport subsidy - Held that:- transportation of the raw materials as well as transportation of the finished goods, does go to reduce the cost of production of an industrial undertaking, the resultant effect of such a reduction, on the cost of production, would, obviously, help generate profits and, at times, higher profits - it is transparent that there is a direct nexus between the transport subsidy, on the one hand, and the profits earned, and gains made, by the industrial undertakings, on the other - Following decision of Jai Bhagwan Oil whereas the subsidies, in the present set of cases, are operational in nature inasmuch as the subsidies are related to the production of the industrial undertaking concerned.

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• 2013 (7) TMI 174
  Special Audit u/s 142(2A) - Personal appearance - whether requirement of hearing envisaged under Section 142 (2A)includes personal hearing - Held that:- it is required for the Assessing Officer to give a reasonable opportunity of being heard to the assessee before passing an order to get the accounts audited under section 142 (2A) - opportunity of hearing does not always include personal hearing - The same must depend on the statutory provisions from which such right flows; the nature of the proceedings and the consequences likely to follow from such proceedings - when complex and technical questions of law and facts are involved, such hearing would be necessary - the Assessing Officer had issued notices to the assessee under section 142 (1) - When there was no compliance, notice for appointment of special auditor came to be issued. Petitioner’s objections were considered, approval from the Commissioner was sought. On the strength of such approval so granted by the Commissioner, the Assessing Officer on the basis of his opinion that the accounts of the assessee were complex and in the interest of the Revenue, it was so required, directed that the accounts be audited by the special auditor - proviso to Section 142(2A) does not envisage any personal hearing before an order under sub-section (2A) can be passed - Following decisions of F.N Roy v. Collector of Customs, Calcutta & Ors. [1957 (5) TMI 1 - SUPREME COURT OF INDIA], Union of India v. Jyoti Prakash Mitter [1971 (1) TMI 108 - SUPREME COURT] and Smt. Ambeydevi v. State of Bihar & Anr. - Decided in favour of Revenue. Special audit - 142(2A) - Complexity of accounts and complexity of the question whether accounts are complex or not - Held that:- petitioner had been given previous notices under section 142 (1) of the Act with respect to its accounts but for a long time, the petitioner did not comply with such notices - Assessing Officer, therefore, issued notice why considering the complexities in the accounts, the same may not be audited by the special auditor - authorities have highlighted several aspects of the matter to indicate that the accounts were complex and that interest of revenue would be served if the special audit report is obtained - notice was issued in December 2012 where admittedly, the proceedings were getting time barred on 31st March 2012. There was thus sufficient time to complete the assessment even without the extended time limit - according to the own showing of the petitioner, when it was asked to give explanation/reply to the various points raised in the notice dated January 29, 1999, it had taken a stand that it would take several months in compiling the information - Commissioner of income-tax had applied his mind and had also come to the conclusion that it is essential to know the actual state of affairs of the Corporation as the books of account are complex and enormous anomalies and discrepancies have also been pointed out by the statutory auditors in their audit report - it cannot be said that the preconditions for appointment of the special auditor, as envisaged under section 142 (2A) of the Act, have not been fulfilled - Following decision of U.P Financial Corporation v. Joint Commissioner of Income Tax & Ors. [2004 (10) TMI 22 - ALLAHABAD High Court], Jhunjhuwala Vanaspati Ltd. Versus Assistant Commissioner of Income-Tax And Another [2004 (2) TMI 56 - ALLAHABAD High Court] and Uttaranchal Welfare Society Versus Commissioner Of Income-Tax And Others [2004 (4) TMI 60 - ALLAHABAD High Court] - Decided in favour of revenue.

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• 2013 (7) TMI 173
  Penalty u/s 271(1)(c) - concealment of income - Held that:- Assessing Officer in the order of penalty also did not come to a clear finding regarding penalty being imposed on concealment of income or on furnishing inaccurate particulars of income. Even otherwise in the order in original of the assessment or in the penalty order, being the original order of assessment, the Assessing Officer had come to the conclusion that for want of suppling sufficient material by the assessee, the claim of commission cannot be accepted. He had not come to any definite finding that the claim was not genuine or totally bogus. - Decided in favour of assessee.

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• 2013 (7) TMI 172
  Exemption u/s 80-IA - Nature of the contract - construction of permanent bank protection measures to the Udyog Mandal canal and the Champakara canal and maintaining the same for a period of three years - Held that:- terms of the contract and nature of the work executed by the assessee is a works' contract - It is not a case where the assessee has made any investment in an infrastructure project. The authority owning the infrastructure project has entered into a contract with the assessee for repair and maintenance for a period of three years. In fact the terms of the agreement shows that the assessee has to furnish the bank guarantee and the assessee has been paid mobilization advance and, therefore, it is not a case of the assessee investing its money in development of infrastructure or operating and maintaining an infrastructure, which is already developed or developing and maintaining of any infrastructure development. It is an agreement entered into effect repairs to infrastructure by construction of permanent bank protection measures to the Udyog Mandal canal and the Champakara canal and maintaining the same for a period of three years - Decided in favour of revenue.

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• 2013 (7) TMI 171
  Assessment of income - Whether subject property is property belonging to the Hindu Undivided Family or belonging to its members as individual property - Held that:- property originally belonged to Hindu Undivided Family. One of the members of the family went out of the joint family under a Release Deed and the remaining members continued to the members of joint family - After the death of Laxmaiah Reddy, the assessee became the sole surviving co-parcener and he had executed a Will, in favour of the adopted son. On his death, the Will has become unenforceable - Assessee has given a portion of the property to his wife, that is permissible only if it is Hindu Undivided Family. If it is self-acquired property, he should have given that property only by registered document. In that view of the matter, the Tribunal properly appreciating the material produced before the court has rightly came to the conclusion that the property is a joint family property not the separate property of the assessee or his wife - Decided in favour of assessee.

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• 2013 (7) TMI 170
  Whether subject property belongs to the joint family or to the karta in his individual capacity - Tribunal holding that the property belongs to the joint family and not to the karta in his individual capacity and therefore the lower appellate authority was justified in not granting the relief to the assessee - Held that:- this is question of fact and no substantial question of law do arise for consideration in this appeal.

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• 2013 (7) TMI 169
  Depreciation on goodwill - business or commercial rights acquired - ITAT allowed the depreciaion - Held that:- goodwill is an asset under Explanation 3(b) to section 32(1) - Therefore, the depreciation is leviable even on the goodwill - Following decision of CIT v. SMIFS Securities Ltd [2012 (8) TMI 713 - SUPREME COURT] - Decided in favour of Assessee.

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• 2013 (7) TMI 168
  Assessment u/s 115JA - MAT - Levy of interest u/s 234B and 234C on retrospective levy of tax - Held that:- The liability to pay interest would only arise on default and it is in the nature of a quasi punishment. Such liability although created retrospectively could not entail punishment by payment of interest with retrospective effect. payment of interest for delayed payment of tax is compensatory in nature. It is a suffered liability. Though such a liability could be created retrospectively. When such a liability is retrospectively created. The assessee cannot be accused of committing default and he cannot be charged wit interest for such default. As the assessee was under no obligation on the date of the alleged default to pay tax at that particular rate, he cannot be accused of having committed default and made to pay interest as compensating the revenue for having not paid the money - Following decision of Star India Private Limited Vs. CCE [2005 (3) TMI 10 - Supreme Court] - Decided in favour of the assessee.

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• 2013 (7) TMI 167
  Monetary limit for filing appeal by revenue - Exception to CBDT circular - CBDT in its circular has issued revised instructions for limiting tax appeals involving low tax effect - it is provided that no appeal shall be filed before the High Court in cases where tax effect does not exceed Rs. 10 lakhs, however some exception are laid down - Held that:- simply because the Tribunal held that section 40(a)(ia) of the Act is not applicable, would not bring the case within the said exception. Said exception would apply where the issue decided by the Tribunal arises out of a statutory provision whose validity is in question - The very purpose of laying down the limitations of tax appeal permitting the Revenue to carry issues before the higher forum is to save public time and to enable the Tribunal and the Courts to focus on appeals involving larger revenue. The entire purpose would be frustrated if the Revenue were to attempt to by-pass the circular of CBDT by raising artificial contentions to fall within the exceptions - Decided in favour of Assessee.

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• 2013 (7) TMI 166
  Expenses for issue of shares to Qualified Institutional Buyers - Disallowance u/s 35D - Held that:- Assessee has not complied with any one of the conditions laid down under section 35D. No merit in the contention of the assessee that fee paid is the nature of brokerage or other issue expenses, as fee, brokerage and other expenses are distinct in nature. Hence, the fee payment made by the assessee company in connection with the issue of shares is not eligible for deduction under section 35D. Also of the view that the alternative contention of the assessee for allowing the entire expenses as of revenue nature, is devoid of merit, since the expenses, which are incurred in connection with the issue of shares to increase the capital base of the company, are obviously of capital nature. Remit the entire issue back to the file of the CIT(A) for reconsideration.

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• 2013 (7) TMI 165
  Agricultural land - whether assessee provide any evidence to show that the land in question was situated beyond 8 kms of the municipal limits - Held that:- CIT(A) while confirming the addition made by the AO noted that the assessee did not provide any evidence to show that the land in question was situated beyond 8 kms of the municipal limits. Even now the assessee did not establish that the land in question was situated beyond 8 kms of the municipal limits. Therefore, remit the issue back to the file of the AO with a direction to decide the issue following the said decision of Smt. Gousia Begum and Others (2011 (11) TMI 475 - ITAT HYDERABAD) wherein held assessee submitted that cultivation is carried on said land, offered inspection of land, produced certificate issued by the VRO Certificate same has to be relied upon and it is not possible to reject the same without examining the deponent. Thus, agricultural income declared by the assessee is to be accepted as agricultural income only - in favour of assessee statistical purposes. Addition on account of difference in sale consideration u/s 50C(1) - Held that:- Sale consideration as per the sale deed with respect to the house property in question is Rs. 17,50,000/- whereas the value arrived at by the Jt. Sub-Registrar is Rs. 17,78,000/-. Since the value arrived at by the Jt. Sub-Registrar is authenticated, the addition of Rs. 14,000/- on account of assessee's share made on account of difference in sale consideration is made by the AO and CIT(A) is hereby confirmed. Against assessee.

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• 2013 (7) TMI 164
  Assessment of income - investment activity or business activity - Short term capital gain v/s Long term capital gain - Held that:- The assessee has made both purchases and sales, on a continuous basis, during the year. Even while the assessee was selling the shares, it continued to purchase them and again sold them. This is not the normal behaviour expected of an investor. While it is reasonable to expect that even an investor would seek to sell his shares if the conditions so warrant, the action of the Assessee in purchasing the shares even while he was engaged in selling them, speaks of a trading motive. Thus respectfully following the decision of ACIT Vs. Anil Kumar Jain (2013 (1) TMI 11 - ITAT HYDERABAD) order of the CIT(A) upheld in holding that the assessee as a trader in shares, not an investor and sustaining the taxability of gains arising out of purchase and sale of shares as being 'income from business' as against 'income from capital gains' as disclosed by the assessee. - Decided in favor of assessee.

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• 2013 (7) TMI 163
  Software maintenance service - whether eligible for deduction u/s. 80IB though the transaction is in the nature of trading activity and not manufacturing activity - CIT(A) allowed the claim - Held that:- CIT (A) has rightly held that sale of software need to be taken for the purpose of deduction under section 80IB whereas service charges are not to be taken for the purpose of deduction under section 80IB. No infirmity in the Order of the CIT (A) as the sale of software consists of sales which are effected of the articles produced by the industrial undertaking and are derived from the industrial undertaking and are first degree source and therefore, eligible for the purpose of deduction under section 80IB as per the decision of the Liberty India [2009 (8) TMI 63 - SUPREME COURT]. In the case of service charges as decided in Unicorn Appliances Ltd. vs. CIT [2009 (1) TMI 764 - ITAT MUMBAI] has held that receipts by way of service charges is classified as other income which cannot be held as income derived from the industrial undertaking. Thus service charges are not profits derived from the industrial undertaking and therefore, receipts on account of service charges to be excluded while computing the profit eligible for deduction under section 80IB - Decided against the revenue.

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• 2013 (7) TMI 162
  Unaccounted cash credit - Addition u/s 68 - CIT(A) deleted the addition - Held that:- The assessee has received share application and furnished full particulars of the same before the AO. The identity of the subscriber is proved beyond doubt. The details of income-tax returns were also field before the AO. Confirmations were also filed before Assessing Officer either directly by investor or by assessee. The copy of the share application form was also furnished. The payments have been made by the account payee cheques through banking channels. In such a situation, the genuineness of the transaction is also established. Once the assessee has furnished the income-tax particulars of the concerned subscribers then the Assessing Officer is duty bound to investigate the creditworthiness of the subscribers. All these facts show that the assessee was able to discharge the onus lay on it in terms of section 68. Thus no fault in the order of CIT (A) to delete the addition - in favour of assessee.

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• Customs

• 2013 (7) TMI 161
  Rebate Claim u/s 75 of the Customs Act – goods are re-exported after re-packing and re-labelling - before exporting the said imported input, they had removed the original packing and labels of the foreign country and relabelled and affixed the said input with their factory’s name and address and exported the same goods under claim of rebate under Rule 18 of the Central Excise Rules, 2002 on payment of Central Excise duty and education cess. - Held that:- Assessee removed original packing and relabelled the goods without making any value addition. So drawback claim under Section 75 of Customs Act denied. However, applicant could have re-exported the goods under Section 74 and availed drawback benefit subject to compliance of provisions of Section 74 - matter should be considered and proceeded in the light of Hon’ble Supreme Court’s observations in the case of M/s. ITC Ltd. v. CCE [2004 (9) TMI 103 - SUPREME COURT OF INDIA] that the simple and plain reading of statute may be strictly construed without any intendment and any liberal interpretation - Further, Hon’ble Supreme Court in case of M/s. Indian Aluminium Co. [1991 (9) TMI 162 - SUPREME COURT OF INDIA] and Hon’ble Tribunal in case of M/s. Avis Electronics have conclusively opined that when provisions are stipulated for doing a particular act in a specific manner then it would mean that any deviation therefrom are not permitted at all and it should be performed in that manner itself as per Rules. - Decided against the Assessee.

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• Corporate Laws

• 2013 (7) TMI 160
  Winding up petition - dishonoring of cheques - Admissibility of winding petition - Held that:- The Court is satisfied that IFL has made out a case for admission of the petition and for appointing a provisional liquidator ('PL') for KIPL. The defence of KIPL is not bona fide. It is a case of an admission of liability and the demonstrated inability of KIPL to make good the liability. On behalf of IFL it was submitted that to the extent that KIPL is able to pay the amount owing to IFL, the claims against KRIL to that extent would stand abated. In any event, that is contingent upon KIPL being able to make good the entire amount together with interest owing to IFL. Thus the petition is admitted. The Official Liquidator ('OL') is appointed as a PL of KIPL. 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. A complete set of the paper book be served on the OL. 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), cost of publication shall be borne by IFL. The Directors of KIPL are directed to strictly comply with the requirements of Section 454 of the Companies Act, 1956 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 the order & also file affidavits in this Court, with advance copies to the OL, within four weeks thereafter setting out the details of all the assets, both movable and immovable of KIPL However, this order is kept in abeyance for eight weeks to enable KIPL to make payment of the sum as set out in the petition, failing which this order will be made operational and further steps will be taken by the OL in terms of this order.

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• Service Tax

• 2013 (7) TMI 182
  Taxability of free services - free telephone / mobile services to the employees and elective relatives of such employees - the eligible employees were treated as regular post - paid customers - Service provided by the appellant was mobile phone connection/fixed line and Broad Band services and fixed wireless phone as well as Black Berry services or push mail service. - "Telecom service" received free of cost by the employees, family member of such employees as well as employees of associate companies did not make any contribution to the business of the appellant company – Held that:- The policy was designed by appellant to circumvent the law granting personal benefit to them at the cost of Revenue - No nexus with evidence was established by appellant that its case falls under free calls provided were exclusively meant for providing any taxable out put service - the language of the policy does not grant immunity to the appellant when substance of the matter is looked into – there was a planned evasion made by the Appellant in the name of "employees' phone policy" and assessable value of free calls escaped taxation. Merely creating a fiction of no consideration received by the appellant in respect of the aforesaid nature of free service provided by it, the appellant appears to have been immensely benefited by reduction of monetary package of remuneration to its eligible, employees, their relatives and employees of Bharti Group of companies. Such undisclosed benefit of appellant was at the cost of Revenue. The appellant failed in the course of hearing to satisfy that value of service were disclosed perquisite to its employees in its account and disclosed to Income tax Authority. The circular on which appellant was relying was withdrawn – and the withdrawn circular cannot over ride the law relating to taxation of taxable service provided - the appellant misconceived the circular for a misplaced sympathy. Plea time barred - extended period of limitation – Held that:- Time bar plea of appellant was baseless - the appellant deliberately suppressed material facts without providing details to the department nor it was registered - Show cause notice were issued to the appellant consequent upon audit finding relating to the period - going to the facts of the case the notice is not time barred – thus the appellant cannot escape from taxation. The appellant is a very big concern and its accounts are computerized by well-built software - it cannot plead its innocence after deliberately delaying to furnish information to the department - Motive of evasion of appellant was well established. Revenue neutrality - Held that:- When the appellant pleaded that there should be Revenue neutrality that was also discarded by the learned Adjudicating Authority in Para 41(ii) of the order bringing out that there was no integral connection between the calls allowed free by the appellant and the taxable output service that produced. Therefore appellant's failure to furnish relevant facts and figures denying liability proved suppression. Separate proceedings to be initiated in relation to the services provided by the appellant in different states. Stay application – two third amount of service tax was ordered to be submitted – stay granted partly.

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• 2013 (7) TMI 181
  Penalty - revenue neutral - the appellant is manufacturing the final products on which excise duty liability is discharged – Held that:- d the entire amount of service tax liability with interest after the issuance of show cause notice but before the adjudication. - The appellant can avail the CENVAT credit on the amount of service tax paid by him under reverse charge mechanism - revenue neutrality is a strong ground which can be taken for setting aside the imposition of penalty u/s 76 - penalty imposed u/s 78 also waived off – appeal allowed in the favour of assessee.

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• 2013 (7) TMI 180
  Business support services – appellant was installing the machinery for evacuation of cement and the storage silos for its storage – service tax demanded as administrative charge - Held that:- The activity of the appellant cannot be termed as business support service - Commissioner himself has held that the transaction is not a service but is sale of fly ash on which central excise duty was being paid - same activity cannot be termed as sale as well as service - the appellant have provided their land, approach roads and also the use of their weighbridge, water etc. to enable the cement companies to install their machinery for evacuation of the fly ash from the thermal power plant and its storage. - prima facie case is in favor of applicant - stay granted.

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• 2013 (7) TMI 179
  Air travel agent - business auxiliary service Section 65 (105) (zzb) r.w. Section 65 (19) - appellant provided service of issuing air tickets and receives commission – service tax paid on commission – main issue is about taxability of the commission – Held that:- The services to the foreign airlines have to be treated as export of service in terms of Rule 3 of the Export of Service Rules – as decided in Paul Merchants Ltd. Versus Commissioner of Central Excise, Chandigarh (2012 (12) TMI 424 - CESTAT, DELHI (LB)). - Prima facie case is in favor of assessee - stay granted.

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• 2013 (7) TMI 178
  Export of services – the appellant rendered the telecom service of international roaming – Held that:- The activity constitutes export service - service is rendered to the foreign telecom service provider who is charged for the services and not to the subscriber of the foreign telecom service provider. - Following the decision in Paul Merchant's case [2012 (12) TMI 424 - CESTAT, DELHI (LB)] decided in favor of assessee.

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• Central Excise

• 2013 (7) TMI 159
  Cenvat Credit - Excisable goods vs. exempted goods - dutiability of electricity generated using bagasse as fuel - According to the petitioners, since electrical energy is not an excisable goods in view of definition of excisable goods in Section 2 (d) of Central Excise Act, 1944 read with Section 2 of the Central Excise Tariff Act, therefore, it is not exempted goods within the meaning of Rule 2 (d) of CENVAT Credit Rules, 2004 but even then, the Commissioner, Central Excise issued notices to the petitioners under Rule 6 (2) and Rule 6 (3) of the Central Excise Tariff Act, demanding the duty in respect of the electrical energy, sold outside the factory. Held that:- Perusal of Section 2 (d) of Central Excise Act shows that the excisable goods are only those goods which are subjected to duty of excise as specified in the first Schedule or second schedule of the Central Excise Tariff Act. - Since Column of rate of duty is blank, therefore, in view of Section 2 of the Central Excise Tariff Act, 1985, electrical energy is not being subjected to excise duty for the purposes of being excisable goods under Section 2 (d) of the Central Excise Act. The electrical energy generated from Naphtha, furnace oil, coal, etc., has been included under Chapter 27 as excisable goods on which the excise duty is being paid and the credit is taken respect of the excise duty paid on such inputs but in the instant case, no direct inputs are involved nor any input services have been availed/used and the Commissioner, Central Excise, without any basis observed that the petitioners have admitted that they have availed the CENVAT credit on inputs and input services used in relation to generation of electricity. The petitioner has only used bagasse as raw material which is a waste product, as already held by this Court in writ petition [2013 (1) TMI 525 - ALLAHABAD HIGH COURT] and no other inputs or input services has ever been used by the petitioner for generation of electricity which was only generated from bagasse. - electrical energy emerges from the bagasse and sold to U.P. Power Corporation Ltd. does not fall within the ambit of excisable goods. Geetanjali Woolens Mill judgment [2007 (6) TMI 112 - CESTAT, AHMEDABAD] relied upon by the Commissioner in the impugned orders have no relevance as Geetanjali Woolens Mill's judgment [2007 (6) TMI 112 - CESTAT, AHMEDABAD] was in respect of custom duty and was only concerned with the 'tariff item and not with respect to the 'excisable goods' as defined under Section 2(d) of Central Excise Act, 1944. Rule 6 of the 2004 Rules, which is applicable only to excisable goods, can alone be treated as exempted goods for the purposes of Rule 6 (3) of 2004 Rules, does not apply to electrical energy. Jurisdiction of Court under Article 226 of the Constitution of India, if alternative remedy is available. - Held that:- Alternative remedy does not oust the jurisdiction of this Court under Article 226 of the Constitution of India, if it is found necessary for promotion of justice and prevention of injustice as decided in Collector of Customs vs. Ramchand Sobhraj Wadhwan[ 1955 (8) TMI 1 - HIGH COURT OF JUDICATURE AT BOMBAY] - all the writ petitions are liable to be allowed.

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• 2013 (7) TMI 158
  Denial of modvat credit on the ground that the same was claimed beyond the period of six months - Second proviso of Rule 57G of the Rules provides that the manufacture shall not take credit after six months of the date of issue of any of the documents specified in the first proviso to this sub-rule - Assessee applied modvat credit for the first time in its notification on 4-9-1996 i.e., during the year in which modvat credit was claimed under the provision contained in Rule 57H. - Held that:- Under Rule 57H of the Rules, there is no provision for claiming such modvat credit beyond the period of six months from the date of issuance of documents. The aforesaid rule begins with the non obstante clause `Notwithstanding anything contained in Rule 57G', meaning thereby that the provision of Rule 57G of the Rules were specifically excluded from the provision of Rule 57H and nothing contained in Rule 57G of the Rules was applicable for the applicability of Rule 57H - Denial of modvat credit to the assessee merely on the ground that the same was claimed beyond the period of six months was not justified. - Decided against the Revenue.

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• 2013 (7) TMI 157
  Cenvat Credit - supplier paid the duty on clearance of goods procured locally under ARO or Invalidation Letter - Revenue's contention is that since the appellant along with suppliers were entitled to clear the goods duty free by following the procedure prescribed under Notification No. 44/2001-CE(NT) dated 26.6.2001, the duty paid by the supplier has to be considered as deposit with Government and the appellants are not entitled to avail the credit of the same. - Held that:- Rules do not require the appellants to necessarily clear the goods duty free by following the procedure under Notification No. 44/2001-CE(NT) dt 26.6.2001. We also note that overall there is no loss to the Revenue as the credit is being taken of the duty paid. - the issue is exactly the same as directed by the Tribunal in the case of Shakun Polymers Ltd. Vs. CCE [2009 (3) TMI 693 - CESTAT, AHMEDABAD] - Decided in favor of Assessee.

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• 2013 (7) TMI 156
  Rebate claim under Notification No.19/2004- C.E.(NT) dated 6.9.2004, When manufacturer is availing benefit of Notification No. 39/2001 C.E. i.e. area based exemption notification - Held that:- Commissioner (Appeals) has allowed the rebate claim on the ground that exported goods have been manufactured from plant and machinery after 31-12-2005 on which benefit of Notification No. 39/2001-C.E., dated 31-7-2001 as amended have not been availed and therefore the condition 2(h) of Notification No. 19/2004-C.E. (N.T.) as amended is not applicable. In this regard, Government notes that prior to amendment of Notification No. 19/2004-C.E. (N.T.), vide Notification No. 37/2007-C.E. (N.T.), dated 17-9-2007, there was not such restriction on grant of rebate to unit availing are based exemption Notification. The said condition does not say anything about the availment or non-availment of benefit of Notification No. 39/2001-C.E. on the exported goods. Respondent has admitted himself that they are availing benefit of said area based exemption Notification. Rebate claim is not admissible to the respondent under Rule 18 of Central Excise Rules, 2002 read with Notification No. 19/2004-C.E. (N.T.), dated 6-9-2004. - Decided in favour of Revenue.

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• 2013 (7) TMI 155
  Cenvat Credit - Separate Books of Accounts – textile manufacturers - While availing benefit of both the Notifications 29/2004-CE & 30/2004-CE – Held that:- Considering practical difficulties of textile manufacturers in maintaining separate account of inputs, the Board issued Circular No. 845/3/2007-CX., dated 1-2-2007 and advised the assessee not to take credit initially and instead take proportionate credit on inputs used in the manufacture of finished goods that are cleared on payment of concessional duty under Notification No. 29/2004-C.E., dated 9-7-2004. The Board vide circular dated 1-2-2007, waived the requirement of maintaining separate account in the case of manufacturers, who wish to avail benefit of both the Notification No. 29/2004-C.E., dated 9-7-2004 and Notification No. 30/2004-C.E., dated 9-7-2004 simultaneously. Not availing benefit of Notification No.30/2004-C.E., dated 9-7-2004 – Assessee opted for claiming higher duty drawback, the applicant stopped availing Cenvat credit on inputs. The Commissioner has perhaps assumed that by not availing facility of Cenvat credit on inputs, the applicant have automatically opted for exemption of duty under Notification No. 30/2004-C.E., dated 9-7-2004 in respect of export clearances. Held that:- Even if the applicant have stopped availing Cenvat credit on inputs and switched over to duty drawback claim facility in respect of export shipment in question, that does not automatically mean that the applicant has decided to work under Notification No. 30/2004-C.E., dated 9-7-2004 in respect of export clearances. Also, the conclusion drawn by the lower authorities is based on assumptions and presumptions. It is a settled law that any order passed by an authority on the basis of surmises and conjectures, is not maintainable under law. It is well settled proposition of law that claim of any exemption notification in respect of any specific clearance is a matter of choice with the assessee and any beneficial piece of legislation cannot be forced on the assesse as held in Commissioner of Income-Tax Versus Arun Textile 'C' And Another [2000 (3) TMI 3 - SUPREME Court]. Decided in favor of assessee.

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• CST, VAT & Sales Tax

• 2013 (7) TMI 183
  Transfer of goods under hire purchase - whether be included in the definition of sale - Time of passing of property and place of delivery - whether the issue of time of passing of property and place of delivery are irrelevant for the purpose of section 3(b) of the Central Sales Tax Act? - Held that:- Given the fact that the definition of 'sale' under the State enactment is pari materia with the definition of 'sale' under the Central Sales Tax Act, and that the issue considered therein also related to a case of hire purchase, the decision of JAY BHARAT CREDIT AND INVESTMENT CO LTD v. COMMISSIONER OF SALES TAX AND ANOTHER [2000 (8) TMI 1013 - SUPREME COURT OF INDIA] would squarely apply to the case on hand referring to the definition of sale under Section 2(g) and pointed out to the use of the two expressions viz., "transfer of property in goods" and "transfer of goods". The definition of 'sale' under the Central Sales Tax Act as however amended under Section 150 of the Finance Act, (No.20 of) 2002 with effect from 11.5.2002. Even therein, delivery of goods on hire purchase or in system of payment by instalments is treated as deemed sale. Considering the categorical pronouncement of the Apex Court on a similarly worded provision, which was also seen in the context of the provision of definition of 'sale' under the Central Sales Tax Act no hesitation in accepting the case of the assessee that the claim of transit sale merits acceptance. As there is an endorsement of title to the goods while in transitm no hesitation in accepting the case of the assessee.

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• Indian Laws

• 2013 (7) TMI 177
  Extension of time - Repair work not completed - construction of a world class Museum - Held that:- State Government would not chase the applicant; nor would forcibly evict him from his present residence at 6, Bailey Road, Patna. However, keeping in view the fund available to the applicant and the machinery available to him, the applicant ought to have adhered to the time-frame decided by the Court with consensus - applicant will make sincere efforts to complete the necessary repairs and renovations and will hand over the vacant possession of the residential bungalow at 6, Bailey Road in his occupation latest by 30th April 2013.

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