TMI Tax Updates - e-Newsletter
August 1, 2012

Case Laws in this Newsletter:

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

Articles

1. Fishing inquiries unconnected with reasons recorded in income tax reassessment proceedings not allowed

   By: AMIT BAJAJ ADVOCATE

2. Electricity is an item produced as an article , thing or goods and process of generation of electricity is akin to manufacture - initial depreciation allowed to NTPC.

   By: DEVKUMAR KOTHARI

3. Whether employees sent on deputation amount to manpower recruitment or supply service before or after 1st July, 2012

   By: Bimal jain

4. Offences under Central Excise and Customs

   By: JAMES PG

News

1. CBDT Relaxes Compulsory E-Filing of Return of Income for Assessment Year 2012-13 - for Representative Assessees of Non-Residents and in the Case of Private Discretionary Trusts.

2. Order under Section 119 of the Income Tax Act, 1961.

3. First Quarter Review of Monetary Policy 2012-13

4. Further Relaxations to Exchange Earners, Exporters and AD Category-I Banks

5. First Quarter Review of Monetary Policy 2012-13 Press Statement by Dr. D. Subbarao, Governor, Reserve Bank of India

6. Prime Minister sets up Committee to Review Taxation of Development Centres and the IT Sector Safe Harbour Provisions to be Finalised soon

7. Taxation of Portfolio Investments referred to GAAR Committee

8. Auction for Sale of Government Stocks.

9. Filing of Cost Audit Report and Compliance Report in the Extensible Business Reporting Language (XBRL) Mode.

10. CCI issues order against cement manufacturers, imposes penalty of Rs.397.51 crores on M/s Shree Cement Limited.

Notifications

Customs

1. F.No. 437/31/2012-Cus. IV - dated 27-7-2012 - Cus (NT)

Appointment of Common Adjudicating Authority in respect of M/s Shree Krishna Impex, 23/253, Jagdamba Vihar, New Delhi.

2. F.No. 437/35/2012-Cus. IV - dated 26-7-2012 - Cus (NT)

Appointment of Common Adjudicating Authority in respect of M/s Mahek Enterprise, Mumbai.

Circulars / Instructions / Orders

Income Tax

1. F.No. 225/163/2012/ita-ii - dated 31-7-2012

Order under Section 119 of the Income Tax Act, 1961.

DGFT

2. 13 (RE:2012)/2009-2014 - dated 30-7-2012

Amendment in General Note for Fuel for the Product Group at Sl. No. 23.

Highlights / Catch Notes

Income Tax

• CBDT Circular No. 789 clarifies distinction between tax liability and actual payment, impacting tax compliance understanding.

  Case-Laws - HC : The circular issued by CBDT No. 789 dated 13th April draws a distinction between “liability to pay tax” and “actual or de facto payment of tax”. - HC
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• Royalty Payment of 3% on Net Ex-Factory Sales Deemed Revenue Expense for Licensee or Assessee.

  Case-Laws - HC : Royalty payment as 3% of the net ex-factory sale by the licensee/assessee - the expenditure has to be treated revenue in nature - HC
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• Charitable Income Outside India Disallowed Without CBDT Approval, Leading to Tax Implications for Organizations.

  Case-Laws - AT : Application of income outside India - Charitable activity - there is no bar in applying for charitable purpose outside India, if there is an approval from CBDT which is not there. - disallowed - AT
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• High Court Rules Corporate Membership Renewal Fees as Revenue Expenditure for Tax Purposes.

  Case-Laws - HC : Corporate membership fees - revenue in nature or capital? - no reason why the renewal membership fees should not be allowed as revenue expenditure - HC
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• Non-resident SEL not providing consultancy services; no tax deducted at source for remittances due to limited involvement.

  Case-Laws - AT : Non deduction of tax at source - remittances to a non-resident company - SEL, NRI company nowhere is involved in the above identification of the exporter or in selecting the material and negotiating the price, thus it cannot be said that SEL is rendering any of the consultancy services. - AT
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• Sales Tax Subsidy Ruled as Capital Receipt, Not Taxable by Commissioner of Income Tax (Appeals.

  Case-Laws - AT : Treatment of sales tax subsidy - CIT(A) treated it as revenue receipts - , it would be in the nature of capital receipt not liable to tax - AT
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• Managing Director's Commission and Bonus Confirmed as Allowable Business Expenses u/s 36(1)(ii) of Income Tax Act.

  Case-Laws - AT : Disallowance u/s section 36(1)(ii) - payment in lieu of dividend - amount of commission and bonus paid to the Managing Director was an allowable business expenditure - AT
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• Court Clarifies Deduction Calculations u/ss 80HH and 80I of Income Tax Act, Impacting Business Tax Liabilities.

  Case-Laws - HC : Deduction u/s 32AB while computing the eligible profits and gains for the purpose of working out the deduction u/s 80HH and 80I - HC
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• Court Upholds Attachment of Bank Accounts, Including Minors', in Income Tax Case; Writ Petition Dismissed.

  Case-Laws - HC : Attachment of the Savings Bank Accounts – bank account of the minors were also attached - no merit in the writ petition - HC
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• Evaluating Assessee's Residency: Does Starting a Business Abroad Qualify as Employment u/s 6(1)(c) of Income Tax Act?

  Case-Laws - AT : Determination of assessee's Residential status - taking up own business by the assessee abroad satisfies the condition of going abroad for the purpose of employment covered by Explanation (a) to section 6(1)(c). - AT
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• Court Exempts Assessee from Penalties for Not Deducting TDS on Employee Tips Due to Good Faith Conduct.

  Case-Laws - HC : Admissibility of TDS on tip to the employees - as the assessee acted in a bona fide manner therefore no penalty can be imposed on the assessee u/s 221 - HC
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• Contractors acting as developers must use Accounting Standard 9 (AS9) for revenue recognition, not Accounting Standard 7 (AS7).

  Case-Laws - AT : Revenue recognition - AS7 vs. AS9 - in a situation when a contractor is also working as a developer, then the basis for recognition of Revenue should be relied on AS 9. - AT
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• Loan to "N" Trust not taxable as deemed dividend under IT Act Section 2(22)(e); only a registered shareholder.

  Case-Laws - AT : Deemed dividend - the loan obtained in the “N” Trust had 20% share holding from a company in which “N” Trust had 10% share holding, could not be taxed as deemed dividend u/s.2(22)(e) since “N” Trust was only a registered shareholder and not a beneficial shareholder - AT
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• Court Affirms AO's Discretion in Estimating Income Based on Household Withdrawals; Emphasizes Need for Evidence to Challenge.

  Case-Laws - AT : Addition on account of household withdrawal – assumptions and presumptions - The presumption made by the AO and estimation made was very much realistic - AT
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• Reassessment Order Invalid: Notice u/s 143(2) Issued After Deadline in Income Tax Act Sections 143(3) & 147.

  Case-Laws - AT : Re-assessment order u/s. 143(3)/147 - reassessment proceedings are invalid, as the time of issuance of notice u/s. 143(2) had not expired- AT
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• Interest on enhanced compensation u/s 194A must be taxed annually, not in a lump sum, per court ruling.

  Case-Laws - HC : TDS u/s 194A - interest on enhanced compensation cannot be taxed all in a lump sum as having accrued on the date on which the Court passes order for enhanced compensation; the interest has to be spread over on annual basis right from the date of delivery of possession till the date of order on a time basis - HC
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Customs

• Tribunal's discretion on delay condonation must not excuse delays without credible justification.

  Case-Laws - AT : Condonation of delay - Just because the Tribunal is vested with the discretion to condone the delay, exercise of such discretion is not meant to grant premium to the default of delay when neither cogent nor believable reason exist. - AT
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• Appellant's Penalties Overturned: Incorrect Classification Not a Misdeclaration, No Confiscation of Goods.

  Case-Laws - AT : Penalty - Confiscation of the goods – Merely because the appellant had claimed a wrong classification, it cannot be held that the appellant has mis-declared the goods - AT
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Indian Laws

• Tax Authorities Issue Order Under Section 119 to Boost Efficiency and Compliance in Tax Administration Framework

  News : Order under Section 119 of the Income Tax Act, 1961.
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Service Tax

• Appellant Wins Appeal: Cenvat Credit Allowed for Courier Services in Export; Evidence Supports Genuine Claim.

  Case-Laws - AT : Cenvat Credit on courier service connected with export - Once the sample copy of the evidence submitted on record, does not rule out genuineness of claim of the appellant, the appellant succeeds in the appeal - AT
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• Value of Spare Parts in Maintenance Contracts Qualifies for Exemption Under Notification No.12/2003-ST.

  Case-Laws - AT : Eligibility for Notification No.12/2003-ST - value of spare parts form a part of contract for maintenance and repair and exemption under the Notification No.12/2003-ST is available - AT
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• Assessee Corrects Error by Repaying Double Benefits Claimed Under Notification 01/2006 ST and CENVAT Credit with Interest.

  Case-Laws - AT : Availing double benefit - benefit of Notification 01/2006 ST and also availing CENVAT credit - The assessee on the mistake coming to their notice promptly paid the amount involved along with interest due thereon - AT
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• Ex-Servicemen Society Faces Service Tax Demand After 2006 Amendment Expands 'Security Agency' Definition.

  Case-Laws - AT : Demand of service tax - Society of ex-servicemen - service of Security Agency - definition of Security Agency was changed w.e.f. 18.4.2006 referring "any person" - AT
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Central Excise

• Interest on Delayed Refund Begins Three Months After Application Receipt, Not From Refund or Appellate Order Date, Sec 11B(1).

  Case-Laws - AT : Interest on delayed refund – payable on the expiring of period of three months from the date of receipt of application under Section 11B(1) and not from the date of order of refund or Appellate Order allowing such refund - AT
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• Refund Claims Barred by Unjust Enrichment u/s 11B; Consistent Pricing Doesn't Prove Non-Transfer of Duty to Buyers.

  Case-Laws - AT : Refund claim - Their claim is hit by the bar of unjust enrichment under Section 11B of the Act as the uniformity of the price before and after assessment does not lead to the conclusion that incidence of duty has not been passed on to the buyers - AT
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• Court Considers if Treated Tamarind Kernel Powder Production is a Manufacturing Process Subject to Excise Duty.

  Case-Laws - AT : Whether the Treated Tamarind Kernel Powder produced by the assessees is excisable – prima facie the processes constitute a manufacturing process - AT
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VAT

• Tribunal Orders VAT Officer to Verify 'C' and 'F' Forms Submitted in Appeals Process.

  Case-Laws - HC : Verification of ‘C’ & ‘F’ Forms produced during the appellate proceedings - enquiry had to be done by the VATO which was rightly directed by the Tribunal. - HC
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Case Laws:

• Income Tax

• 2012 (7) TMI 806
  Initiation of reassessment proceedings u/s 147 r.w.s. 148 - DTAA between India and the UAE - as there was no tax regime in UAE and as the assessee was not liable to taxation in UAE, the question of benefit under the said DTAA was not applicable - Held that:- In terms of Circular No. 732 dated 20th December, 1995, the petitioner was issued an ‘annual no objection certificate’ and in terms thereof, the ships operated and owned by the petitioner were allowed to leave the ports. The certificate as itself was treated as valid and binding and in compliance with the Section 172. As the AO has relied upon judgments of ARR in Cyril Eugene Pereira, In Re (2005 (5) TMI 12 - AUTHORITY FOR ADVANCE RULINGS ) for the proposition that benefit under DTAA is only meant for taxpayers who are liable to pay tax twice in two countries on the same income and not where tax is not payable in one country but failed to notice the decision of the Supreme Court in Azadi Bachao Andolan [2003 (10) TMI 5 - SUPREME COURT]disapproving the reasoning/ratio mentioned in Cyril Eugene Pereira The circular issued by CBDT No. 789 dated 13th April draws a distinction between “liability to pay tax” and “actual or de facto payment of tax”. Phrase ‘liable to taxation’ it has been held is not the same as ‘payment of tax’. The test for liability for taxation is not determined on the basis of an exemption granted in respect of any particular source of income but by taking into consideration the totality of provisions of income tax law - Merely because at the given time there is an exemption from income tax in respect of any particular head, it cannot be contended or held that the assessee is not liable to tax - For the purpose of application of article 4 of the DTAC, what is relevant is the legal situation, namely, liability to taxation, and not the fiscal fact of actual payment of tax. If this were not so, the DTAC would not have used the words, “liable to taxation”, but would have used some appropriate words like “pays tax” - the company incorporated in Dubai and carrying on shipping business in India is entitled to benefit under Article 8 of the DTAA and there is no scope of taxing them in any port of India - in favour of assessee.

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• 2012 (7) TMI 805
  Royalty payment as 3% of the net ex-factory sale by the licensee/assessee - Held that:- From the terms of the agreement the ld. CIT (A) came to the conclusion that assessee had right to access the technical knowledge as against absolute transfer of technical knowledge and information and the payment for which has been made on turnover basis, the expenditure has to be treated revenue in nature - no substantial question of law arises for consideration

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• 2012 (7) TMI 804
  Disallowance of Depreciation on renovation - AO stated that capital expenditure incurred in respect of a premises that were taken on lease after the end of the previous year are not eligible for depreciation - Held that:- Mrs. Radhika Sehgal, the land lady and Mr. Mukesh Sehgal director of the company traveled together to India. In fact, as per argument of assessee that they are close relatives. Therefore, it can be said that there was oral understanding between them for lease of the above building. Moreover, the various licenses issued by various authorities like Customs Department STPI had given licenses with the same property as its address. Moreover, business was also started from the same premises before 31st March, 2006. Therefore, we do not see any reason to interfere in the order of Ld CIT(A)in deleting the addition made by the A.O on account of disallowance of depreciation - in favour of assessee Disallowance of expenditure on account traveling - Held that:- Mr. Mukesh Shegal was one of the first director of the company and he had traveled to India for completion of various formalities for getting various approvals - there is every possibility that traveling expenses incurred by assessee on the travel of its director were to enable him to attend Board meetings and to file various documents before various authorities - as genuine business expenditure has been incurred CIT(A) was correct to allow the expenditure - in favour of assessee. Disallowance of exemption u/s 10B - Held that:- As assessee had claimed exemption for the profits only from 1.2.2006 to 31.3.2006 and all the conditions for availment of exemption u/s 10B were complied. Therefore no reason to interfere in the order of Ld CIT(A)for allowing the exemption - in favour of assessee.

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• 2012 (7) TMI 803
  Penalty u/s 271(1)(c) - disallowance of deduction claimed u/s 80HHC - Held that:- As noticed by the Tribunal all the foundational facts which ultimately led to the disallowance were revealed by the assessee in the return no occasion to concealment of income arise here - if the claim of assessee is ultimately found to be legally unacceptable, it does not mean that the assessee has concealed the particulars of its income - in favour of assessee.

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• 2012 (7) TMI 802
  Disallowance u/s 68 - Held that:- As the CIT (A) elaborately took into account considerable material furnished by the assessee including income tax returns, balance sheets, ROC particulars and bank account statements it can be concluded that the share application money or the source of the share application money had been satisfactorily explained - the only sentence in ITAT’s order mentioning that some shareholders were refunded the amounts initially given by them to the assessee should not be a ground to conclude that the findings recorded by the lower authorities are not on the basis of evidence - in favour of assessee. Charging the interest u/s 234B is mandatory and therefore, this plea of appellant is dismissed and interest u/s 234D cannot be levied as interest under section 234D could not be charged in respect of assessment years falling prior to assessment year 2004-05.

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• 2012 (7) TMI 801
  Challenge the reassessment orders - Held that:- AO had recorded detailed reasons in order to arrive at the conclusion that provisions of section 68 are applicable and thus resulted in escapement of income and there is nexus between the specific information and reasons recorded by the AO. Therefore AO is justified in reopening the assessment - no substantial question of law arises for consideration

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• 2012 (7) TMI 800
  MAT - Book profit u/s 115JB - Reopen the assessment u/s 147 - writ petition under Article 226/ 227 of the Constitution of India to quash the notice - provision for gratuity and the provision for diminution in the value of the investment and claim of settlement amount as capital receipt - Held that:- Petitioner in the present case had placed all the primary and relevant facts before the AO in the original assessment proceedings but has not alleged, in the reasons recorded, what further primary, material or relevant fact was omitted or had not been disclosed by the petitioner - the reasons recorded show that the only thing remained to be disclosed by the petitioner was the inference that the three items in question were to be added back to the book profit, a duty which is not placed on the assessee. The reasons also show that it was from the same facts which were disclosed by the petitioner, the first respondent formed the view or drew the inference that the items were to be added to the book profit. Nothing more was required to be done by AO except to read the audited profit & loss account, balance sheet etc. along with the schedules and notes on accounts in order to draw the inference whether the three items in question were to be added back to the book profit or not. The tax audit report and audit report in Form No.29B along with its annexures including the settlement agreement were also before him - The alleged escapement of income cannot be attributed to any failure on the part of the petitioner to furnish full and true particulars - Writ petition allowed - in favour of assessee.

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• 2012 (7) TMI 799
  Application of income outside India - Charitable activity - Disallowance of amounts spent outside India for participating in Hannover Fair in Germany - the mischief u/s 11(1)(a) & 11(1)(b) - Held that:- The words "to the extent to the which such income is applied to such purposes in India" appearing in section 11(1)(a) only require that the charitable purposes should be confined to India on the application of the income of the trust to the execution of such purposes can be outside India, appears to us to be also opposed to the natural and grammatical meaning that can be ascribed to the words - it is mandatory that the amount should be spent and applied in India. As regards plea taken by the assessee, it has participated in Hannover Fair at the instance of the Ministry of Commerce, cannot override the Income-tax Act and there is no bar in applying for charitable purpose outside India, if there is an approval from CBDT which is not there. So, in the absence of such approval, disallowance in this regard could validly be made. Disallowing the deprecation - Held that:- The income of the assessee being exempt, the assessee is only claiming that depreciation should be reduced from the income for determining the percentage of funds which have to be applied for the purposes of the trust. There is no double deduction claimed by the assessee as canvassed by the Revenue - in favour of the assessee

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• 2012 (7) TMI 798
  Disallowance of corporate membership fees - revenue in nature or capital? - Held that:- The club membership enable the nominated executives to meet people and develop relationship for smooth conduct of day to day business. The Tribunal followed its order for the Assessment year 1998-99 in respondent's own case where both entrance and renewal fees paid for club membership were allowed as revenue expenditure and as the earlier order of the Tribunal has not been challenged by the revenue no reason why the renewal membership fees should not be allowed as revenue expenditure - against revenue. Disallowance of excess provision on account of free service provided - Held that:- Quantification of the provision as done on the basis of the unencashed valid coupons was on a reasonable and consistent basis - the provision is of a estimate and if subsequently the same is found to be in excess then the excess is added back and offered to tax. Further, this has been a practice followed by the respondent assessee and accepted by the department for many years - against revenue. Depreciation in respect of telephone trolleys, furniture and equipment as plant and machinery in factory - Held that:- The issue is settled by the Tribunal in the earlier year in respect of the same assessee and the revenue has not been able to point out any change in the circumstances. Appeal admitted only on deleting disallowance by ITAT being expenses incurred by the assessee on account of taxes and fees not pertaining to year under consideration.

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• 2012 (7) TMI 797
  Addition made on account of work in progress - Held that:- As decided in CIT Versus MAHAVIR ALLUMINIMUM LTD. [2007 (11) TMI 41 - HIGH COURT, DELHI] whenever any adjustment is made in the valuation of inventory, this will affect both, the opening as well as the closing stock - thus it is evident that AO has not taken into account working of the opening stock of work in progress, therefore no merit into this ground of appeal of the Revenue against CIT(A)in deleting the addition - in favour of assessee. Addition on account of bogus purchases - Held that:- The material produced in the form copies of bills which were recorded into the books of assessee but were not recorded into the accounts of M/S Aggrawal Enterpries - that the assessee has submitted the copies of delivering challans and weighing slips it can be concluded that the assessee had shown all the purchase bills while M/S Aggrawal Enterprise has not shown all the purchases bills while M/S Aggrawal Enterprises has not shown cash sales - no proof of bogus purchases - in favour of assessee. Addition on account of rebate and discount - Held that:- Considering the contention of the assessee that such huge discount and rebate would not have been given as the seeing the value of material & CIT(A) has given a finding that M/S Aggrawal Enterprises has not recorded the correct transaction in his books of accounts. The Revenue has not brought any material to rebut the finding of CIT(A) - in favour of assessee. Disallowance on breach of sec.40(a)(ia) - non-deduction of TDS on transportation charges - Held that:- The sum credited or paid or likely to be paid are credited to the account of the contractor or the contractor if such sum exceed 20,000/- tax is deductible in terms of Section 194C(5) - Since the aggregate amount paid exceeds the limit prescribed under Section 194C(5) of the Act, therefore, first argument of the assessee is not acceptable - the opening line of Section 194(C)(1) makes it clear that the assessee was liable to deduct tax since it reads any person responsible for paying any sum to any resident. In this case admittedly the assessee was responsible for paying sum to the transporter - against assessee.

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• 2012 (7) TMI 796
  Reassessment proceedings - disallowance of the deduction u/s 80IA(4) - Held that:- CIT(A) expressly stating that the action of the AO of not allowing the deduction for the A.Y. 2008-2009 was erroneous inter-alia in view of the judgment in Commissioner of Income Tax v. Paul Brothers [1992 (10) TMI 5 - BOMBAY HIGH COURT] that a deduction could not have been denied in subsequent years without first withdrawing it in the initial year - in favour of assessee.

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• 2012 (7) TMI 795
  Non deduction of tax at source - remittances to a non-resident company incorporated in Hongkong - services rendered by M/s SEL, NRI company to the assessee company are technical, managerial or consultancy as per sec. 9(i)(vii) - Held that:- The agreement between the assessee and NRI company stipulates that it shall be responsible for the shipment of raw material to the assessee from its importers within the stipulated time and as per the specific quality and quantity - it is the assessee, in the consultation with its exporters, which identifies the manufacturer and the quality and the price of the material to be imported. Therefore, SEL nowhere is involved in the above identification of the exporter or in selecting the material and negotiating the price, thus it cannot be said that SEL is rendering any of the consultancy services. As the quality of material is already determined by the assessee and the SEL is only to make a physical inspection of the material to see if it resembles the quality specified by the assessee it is thus not much of technical knowledge is required in it.SEL is not required to employ any skilled technical personnel to discharge its obligation under the agreement and, therefore, we hold that the assessee is not discharging any technical services - it is seen that SEL is acting on behalf of the assessee as its agent and there is no independent application of thought process in any of the activities to be carried out by SEL no managerial services being rendered by SEL to the assessee - above payments do not fall within the ambit of fee for technical services and, therefore, the provision of sec. 195(1) is also not attracted - in favour of assessee.

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• 2012 (7) TMI 794
  Dis allowance of interest paid on capital borrowed for the acquisition of capital assets (WIP) - CIT stated that the assessment order u/s 143(3) should be treated as “erroneous and prejudicial to the interest of the revenue"- Held that:- Undisputed fact that the Assessee had made written submissions both before CIT & AO that though the assessee had made acquisition of assets during the year under consideration but had not borrowed funds for its acquisition and hence the provisions of sec 36(1)(iii) are not applicable and accordingly no part of interest was required to be capitalised the Commissioner did not adequately deal with these contentions, and rejected the same by observing that the interest payment should not have been allowed as a deduction. The A.O. has after considering all the facts and after satisfying himself accepted the contentions of assessee and made no disallowance u/s. 36(1)(iii). CIT has not been able to establish and pin point unequivocally the error or the mistake made by the A.O. which makes the order unsustainable in law as the finding of the CIT must be clear, unambiguous and not debatable - A.O. having exercised his mind over the issue, it cannot be termed as erroneous and prejudicial to the interest of the Revenue - in favour of assessee.

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• 2012 (7) TMI 793
  Penalty u/s 271 (1)(c) - Held that:- A.O. after detecting the concealment of income on the basis of cash book and deposit in the Bank account & considering the all transactions for working of peak and finally he made addition of Rs. 4 lakhs as conceal income u/s 68 after detecting unaccounted deposit in the Bank account, which was confirmed by the ITAT ‘B’ Bench - no reason to interfere in the order of CIT(A) for confirming the penalty on quantum addition of Rs. 4 lakhs, however the addition of Rs. 5 lakhs has accepted by the A.O. as explained, therefore, penalty on addition of Rs. 5 lakhs is deleted - partly in favour of assessee.

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• 2012 (7) TMI 792
  Treatment of sales tax subsidy - CIT(A) treated it as revenue receipts - Held that:- As decided in M/s Indo Rama Synthetics (I) Ltd. Versus ACIT (2012 (7) TMI 406 - ITAT, DELHI) the intention of granting sales tax incentive is not to increase the viability of the eligible units but to promote development of further industry and infrastructure in processing/developing the backward area, it would be in the nature of capital receipt not liable to tax - no difference between the sales tax subsidy scheme of 1979 vis-a-vis the sales tax subsidy scheme of 1993 - in favour of assessee. Charging of interest u/s. 234B - Held that:- Interest u/s. 234B is not leviable in the instant case as decided in the case of DCIT vs. Uttam Sugar Mills Ltd. [2010 (12) TMI 625 - ITAT, DELHI ] in view of retrospective amendment made by the Finance Act, 2008 inserting section 115JB(2), Explanation 1(h) which provided that the book profit be increased by the amount of the deferred tax w.e.f. 1.4.2001, interest u/s. 234B and 234C could be levied by the AO on the income computed u/s. 115JB - It is only on account of subsequent retrospective amendment in law that the advance tax paid by the appellant would faIl short as it was not possible for the appellant to foresee the retrospective amendment to take place and pay advance tax on the basis of the amended law - in favour of assessee.

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• 2012 (7) TMI 791
  Levy of penalty u/s 271(1)(c) - addition u/s 92CA(3) in relation to international transactions - Held that:- Addition made by AO had been disputed by the assessee before CIT(A)by filling detailed submission giving full details of cost for providing professional services and I.T. implementation services as well as the related working of the international transactions. The very fact that CIT(A) remanded the issue to the AO - a perusal of the remand report shows that the CIT(A) himself was not clear as to whether the amount was representative of ALP of the services was examined by TPO on merit. Remand report was not received even till the date of order of CIT(A). Withdrawal the ground relating to management fee and I.T. implementation fees for expeditious disposal consequent to Hon'ble High Court direction to the CIT(A) to dispose off the appeals for assessment years 2004-05 and 2005-06 within a period of 4 months can not be considered as acceptance of addition by the assessee - Though the appeal has been decided without remand report the contentions raised in the submissions leading to remand of the issue is required to be examined objectively to make proper assessment of case of penalty - no reasons have been given as to how the assessee had not proved to satisfaction that international transactions had been computed in accordance with the provisions of section 92C - it is a settled legal position that penalty proceedings are different from assessment proceedings - allowed in favour of assessee for statistical purposes.

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• 2012 (7) TMI 790
  Disallowance of claim of bad debts - Loan given to party - As per assessee’s claim that party turned out insolvent, therefore, the assessee had written off the loan – Held that:- Assessee is in the line of money lending business and this amount had been advanced as loan - assessee has written off this amount as per Section 36(1)(vii) in the books of account - disallowance rightly deleted - In favor of assessee

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• 2012 (7) TMI 789
  Addition on account of estimation the cold storage rent – alleged that assessee was suppressing the rental receipt by showing under utilization of the capacity of cold storage – Held that:- There is nothing on record to suggest that the receipts shown by the assessee on account of rent of cold storage are less than what the appellant actually received. The addition made by the AO is based on suppositions and conjectures and not on any credible evidence to support the case of the AO – Addition deleted Whether AO was justified in invoking the provisions of section 145(3) of the I.T. Act – Rejection of books of accounts – on the basis of non-maintenance of records of loading/unloading expense, excessive consumption of power – AO alleged that actual rent received by the assessee was Rs.40 per bag and rebate of Rs.5 per bag shown in the bill was not genuine – Held that:- It has not been established by the AO that it is not Rs.35 per bag but actually Rs.40 per bag has been received by the appellant - same cannot be a reason for rejection of books of account. Under utilization of capacity – Held that:- Unless and until it is proved that there was full capacity utilization, but the same has been suppressed before the department then only there would be a case with the AO for rejection of books of account. Excess consumption of power – Held that:- Fuel and power expenses are directly related to the running of cold storage, some cold storage might run for longer time than the others particularly in view of the fact that rent is relatable to whole year and is not charged on day to day basis - AO was not justified in invoking the provisions of sec. 145(3) of the Act Addition on account of interest income earned on the loans given to farmers – alleged that other cold storage of Agra and nearby locality are also showing income on this account – Held that:- Assessee has given advance to farmers to keep their potato in cold storage of the assessee. The assessee did not charge interest on such advance given to farmers - such interest free advances to the farmers is in accordance with commercial expediency – Addition deleted – In favor of assessee Addition on account of payment made to National bank Handling Corporation – alleged that payment for acquiring the membership was given once for all and is of capital nature – Held that:- It is mentioned in the certificate itself that the membership is valid for one year - such type of payment is revenue in nature and the CIT(A) has rightly deleted the addition – In favor of revenue Addition on account of interest on the loans taken from concerns of Ganga Ram Group – alleged that this group is famous for giving accommodation entries on commission basis and the assessee could not prove the genuineness of these loans – Held that:- When addition itself is deleted accepting the loan taken as genuine, therefore, the related interest disallowed is not justifiable – Decided in favor of assessee

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• 2012 (7) TMI 788
  Disallowance u/s section 36(1)(ii) - bonus and commission payment to the Managing Director as payment in lieu of dividend - payment is for services rendered as per terms of appointment as Executive/Managing Director of the appellant company – assessee contended that the bonus and commission paid to Managing Director was a regular business expenditure of the company and the assessee has been paying it regularly for the last 20 years – Held that:- In the case of AMD Metplast Pvt. Ltd. (2011 (12) TMI 320 (HC) ) it was held that the amount of commission and bonus paid to the Managing Director was an allowable business expenditure - facts for are same - Therefore, appeals filed by the assessee are allowed - decided in favour of the assessee.

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• 2012 (7) TMI 787
  Rejection of accounts of the Assessee u/s.145 of the I.T. Act - flat rate of net profit to the gross receipt of the assessee – Held that:- Merely because there was a fall in net profit rate, there is no reason to reject the books of account of the assessee - difference in TDS figures as per certificates and as per books of account have been reconciled by the assessee and the reconciliation has been accepted as correct by the Assessing Officer - appeal of the assessee are allowed CIT(A) was not justified in directing to take the Net Profit @ 4% on the declared receipts

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• 2012 (7) TMI 775
  Deduction u/s 32AB while computing the eligible profits and gains for the purpose of working out the deduction u/s 80HH and 80I - assessee's contention that relief under Section 32AB has nothing to do with the profits and gains derived from the industrial undertaking - Held that:- Section 80HH shows that from the gross total income, deduction at a particular percentage is granted under the said Section to the eligible assessee from the profits and gains derived from that industrial undertaking - the phrase "derived from", being narrower and in contradistinction to the term "attributable to" income which do not have a direct nexus to the industrial undertaking, cannot be regarded as having been derived from the industrial undertaking. the scheme of deduction under Chapter VIA and the decisions of the Apex Court in M/s Liberty India Versus Commissioner of Income Tax [2009 (8) TMI 63 - SUPREME COURT]no hesitation in holding that the relief under Section 32AB, relatable to plant and machinery installed in other units, could not be deducted from the profits of the new industrial undertaking for the purpose of computing the relief under Section 80HH and 80I. Computation of Section 80AB - Held that:- Not all the profits and gains of the assessee's business forming part of Section 32AB, would be included under Section 80HH. For the purpose of deduction under Section 80HH and 80I, necessarily one has to undertake the exercise of identifying from the book profits, the income derived from the industrial undertaking qualifying for relief under Section 80HH, included in the working of Section 32AB so as to consider it for computation as per Section 80AB - remit the matter back to the Assessing Officer working out the relief under Section 32AB.

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• 2012 (7) TMI 774
  Addition under Section 69 of the Income Tax Act - unexplained investments in shares – alleged that assessees had not explained the nature and source of acquisition for the purchase of shares - grievance of the assessees herein is that without giving any adequate opportunity to explain the nature of holding of the shares arising under a family arrangement, the assessment had been held against the assessees – Held that:- Present assessees before this Court are parties to the family arrangement, based on which the other assessees' case stood remanded back to the Assessing Officer for de novo consideration, in fitness of things, the proper course herein would be to set aside the orders of the Tribunal in these appeals also and remand the matter back to the Assessing Authority to consider the claim of the assessees along with the claim of the other assessees – matter remanded

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• 2012 (7) TMI 773
  Writ petition - attachment of the Savings Bank Accounts – petitioner submitted that there is absolutely no rhyme or reason on the part of the respondents in causing the bank account of the minors to be attached - account maintained by the petitioners with the respondents 3 and 4 is not being operated by the minors and the nature of transactions clearly reveal that it is part of the running business by the concerned firm - attempt of the petitioners to club the above liability in respect of different firms, as explained by the respondents 1 and 2 in their statement, by filing the present writ petition is not liable to be entertained - no merit in the writ petition - writ petition is dismissed

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• 2012 (7) TMI 772
  Determination of assessee's Residential status - Held that:- Going abroad for the purpose of employment only means that the visit and stay abroad should not be for other purposes such as a tourist, or for medical treatment or for studies or the like. Going abroad for the purpose of employment therefore means going abroad to take up employment or any avocation which takes in self-employment like business or profession. Thus taking up own business by the assessee abroad satisfies the condition of going abroad for the purpose of employment covered by Explanation (a) to section 6(1)(c). Therefore the Tribunal has rightly held that for the purpose of the Explanation, employment includes self employment like business or profession taken up by the assessee abroad - The determinative test for the status of Non Resident being number of days of stay in India and in assessee's case in these three years, the days of stay being less than 182 days; the status to be applied in this case is to be held as Non Resident as claimed by assessee. Thus, the assessee will be liable to tax on income accrued in India only. The assessee's grounds in this behalf are allowed. Addition on account of unexplained source of funds - hand written page containing debit and credit entries in assessee's account with Deutsch Bank, Singapore - Held that:- Assessee has demonstrated that paper contains details of transfer of his own funds from foreign bank accounts maintained for the investment and business activities carried out in those countries - admittedly the assessee being a non-resident claims to have activities and bank accounts in these countries, thus in these circumstances the burden to prove that assessee's explanation if false or the receipts outside India were as a result of any income which accrued in India was on the Department which AO has failed to discharge the burden and no adverse material has been brought on record - remittances from the assessee's own account outside India to Indian bank accounts cannot be taxed u/s 68 - in favour of assessee. Addition on account unaccounted cash credits - Held that:- Share capital and loans had been received by C-I India from its holding company Y2K Systems Ltd Mauritius through banking channels - C1 India has been held as a separate entity held by department by way of assessments as it is not been held to be a Benami concern of the assessee. The addition have been made on account of Share application moneys and loan in both the cases i.e. assessee and C1 India without examining the relevant aspects like identity, creditworthiness, issues about genuineness of transaction and the issue of separate status of the entities - in favour of assessee. Alleged income from arms deals made on account of searches - Held that:- there is a presumption in law that the person from whom the document is found is the owner of the document. The Department should discharge their burden before seeking to tax the assessee on the basis of documents found from Dr. M.V. Rao or shri Mohan sambhaji Jagtap. Since the assessee has not been provided necessary material including their statements, opportunity of cross examination and hearing based thereon, interest of justice will be served if the issues about income from commission/ business of dealings in arms are decided afresh by AO in the light of these observations - in favour of assessee by way of remand. Addition in respect of the estranged wife of assessee - Held that:- Unable to uphold this addition inasmuch as both were separated by way of deed of settlement and the payments based thereon on were already made - the addition has been made not based on any evidence or incriminating material, indicating that any payment was made out of books. The sole basis of addition is an assumption that there was some unwritten understanding between the assessee and his estranged wife, therefore, it has been assumed that lesser amount for support was paid by the assessee as compared to earlier years - addition being only on presumptions, there being no material what so ever, the addition is deleted - in favour of assessee. Unexplained expenditure on the wedding ceremony of assessee's daughter - Held that:- The assessee and his wife are assessed to tax and are persons of means. The reconciliation of availability of cash in hand of Rs. 53.66 lacs with the assessee and his wife has been ignored by AO without giving any reasons - that proper factual verification has not been done by AO. Besides the issue of availability of cash with assessee and his wife needs to be considered in the light of CIT Versus Kulwant Rai [2007 (2) TMI 185 - DELHI HIGH COURT ]- in favour of assessee for statistical purpose.

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• 2012 (7) TMI 771
  Admissibility of TDS on tip to the employees - Held that:- The issue is decided in favour of Revenue relying on CIT v. ITC Ltd [2011 (5) TMI 310 - DELHI HIGH COURT] - as the assessee acted in a bona fide manner therefore no penalty can be imposed on the assessee u/s 221 - as the exact quantum of the default needs to be computed it would, therefore, be necessary to remand the matter to the AO computing the exact quantum of default and the interest payable.

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• 2012 (7) TMI 770
  Addition made on the basis of percentage of completion method as per revised Accounting Standard-7 (AS-7) - CIT(A) deleted the addition holding that AS-9 is applicable - the method of accounting employed by the assessee is ‘Completed Contract Method’ - Held that:- As per the revised AS-7 of 2002 which is effective from 01/04/2003, a project completion method has been recognized and AS-7 has not approved completed contract method, although with certain riders, but in a situation when a contractor is also working as a developer, then the basis for recognition of Revenue should be relied on AS 9. AS-9 has prescribed that the recognition of Revenue requires that Revenue is measurable and that at the time of rendering of service it would not be unreasonable to expect ultimate collection. Where the ability to assess the ultimate collection with reasonable certainty is lacking, then Revenue recognition is to be postponed to the extent of uncertainty involved. It has therefore been prescribed vide para-9 that it is appropriate to recognize revenue only when it is reasonably certain that the ultimate collection will be made. As per the statement made from the side of the assessee, it was wrong on the part of the AO to assess the income irrespective of the year of completion of project when the amount received in advance has not reached certainty and that too the AO has merely estimated 10% as the recognition of Revenue of the construction contract, without assigning any specific basis of such an estimation, the such an estimation is not approved, resultantly the view taken by the ld.CIT(A) is upheld - in favour of assessee.

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• 2012 (7) TMI 769
  Disallowance of depreciation on electric fittings - Held that:- As both the parties have not brought on record details of the Asset under question so as the issue can be completely adjudicated - thus it shall be in the interest of the justice to restore this issue back to the file of AO for proper verification. Addition on account of deemed dividend - Held that:- It is the definition of dividend which is enlarged by the deeming provision of s.2(22)(e) and not that of “shareholder” and, therefore, a concern which is given loan or advance by a company cannot be treated as shareholder/member of the latter simply because a shareholder of the lender company holding voting power of 10 per cent or more therein has substantial interest in such concern, and such loan or advance cannot be treated as deemed dividend under s.2(22)(e) at the hands of such a concern - the loan obtained by assessee-company in the “N” Trust had 20% share holding from a company in which “N” Trust had 10% share holding, could not be taxed as deemed dividend u/s.2(22)(e) since “N” Trust was only a registered shareholder and not a beneficial shareholder - in favour of assessee.

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• 2012 (7) TMI 768
  Penalty u/s. 271(1)(c) of the Act - disallowance of adjustment/set off of short term capital loss incurred in sham transaction of purchase and sale of shares – Held that:- Addition made on account of transaction has been deleted - assessee had made claim of short term loss, and merely claim of the assessee has been rejected by the Assessing Officer would not be sufficient to levy of the penalty - penalty provisions u/s. 271(1)(c) of the Act can not be invoked solely on the ground that a claim made in terms of income is rejected by the AO - Assessment proceedings and penalty proceedings are distinct and independent - Revenue’s appeal is dismissed

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• 2012 (7) TMI 767
  Addition on account of cash credits us. 68 of the Act - disallowance of interest thereon - CIT(A) for rejected the ground of appeal simply on the basis that the depositors who are summoned were leady member and they could not earn the income as claimed by them in the return of income - Revenue has not placed anything on record showing that those lady depositors were not having any source of income - lady depositors are assessed to tax and income tax return filed by them was duly accepted by the Department – addition deleted - assessee’s appeal is allowed. Addition on account of household withdrawal – assumptions and presumptions - assumption regarding inadequacy is drawn on the basis of the expenditure that any ordinary middle-class family is likely to incur in course of the year. Therefore, simply because the AO did not bring any material evidence on record to show that household expenses had been incurred from out of unaccounted income, the addition cannot be deleted. The presumption made by the AO and estimation made was very much realistic - factum of earning and withdrawal of money by the parent is not taken into account - addition reduced from Rs.73,000/- to Rs.48,000 - Assessing Officer is directed to re-compute the same accordingly - assessee’s appeal is partly allowed.

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• 2012 (7) TMI 766
  Penalty U/s. 271(1)(c) of the Act – alleged that assessee was not able to substantiate its wrong claim of technical know-how - Assessing Officer while framing assessment for the year under consideration disallowed assessee’s claim for royalty payment under the provisions of Section 40(a)(ia) of the Act and also disallowed 1/6th of Technical know-how expenses under the provisions of Se4ction 35AB of the Act - CIT(A) deleted the disallowance of claim of deduction u/s. 35AB of the Act - mere making of the claim which is not sustainable in law, by itself will not amount to furnishing inaccurate particulars of income - Revenue’s appeal is dismissed

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• 2012 (7) TMI 765
  Disallowance out of interest expenses - The assessee had voluntarily disallowed interest of Rs.2,52,278/- u/s. 14A - Held that:- Disallowance that the assessee could not make out a case that there was any commercial expediency to take the loan at higher rate @ 12% and giving loan @ 9% CIT(A) had not examined whether the advances given by the assessee were out of interest free fund or from the interest bearing borrowed capital - as the assessee has demonstrated that the advances were out of interest free funds available with him no addition was called for in respect of the advances given to Shri Boney N Dalal and Niranjan V Dalal. In respect of Mohit Overseas (P) Ltd. that the assessee had been giving as well as taking loan from the said party and interest was being paid and charged at the same rate, therefore we find force into the contention of the assessee that such transactions were for business purposes. In view of this, no addition was called for - in favour of assessee.

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• 2012 (7) TMI 764
  Challenging the penalty levy u/s.271(1)(c) - Held that:- Considering the conduct of the assessee company at the assessment / re-assessment stage revised return was filed under which income u/s.115JB was declared and the normal provision but assessee did not add back the provision for risk inventory - It was only when the A.O. pointed out in the reassessment proceedings then the assessee agreed for the disallowance of the provisions for risk inventory. The above factual matrix clearly show that the intention of the assessee company was not bonafide - assessee submission that in the earlier year such a provision was added back in the computation of income which again show that the omission for not adding back the provision this year is not a bonafide mistake - When the assessee in computation of income claim expenses/provisions not allowable as deductions, the assessee is liable to pay penalty - against assessee.

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• 2012 (7) TMI 763
  Additions u/s 145A and allowing deductions - assessee filed copies of tax audited report of the current year as well as the last year to show that the assessee has been following the exclusive method of accounting and thereafter prepared adjustments u/s 145A regularly - claim of the assessee was correct – In favor of assessee Disallowance of bad debt - assessee’s contention was that the bad debts now claimed were part of its income in earlier years which has also been admitted by the A.O. and the same have been now written off in their books of accounts and this is sufficient for claiming deduction for bad debts – Held that:- As only two conditions are required to be satisfied for claiming deduction for bad debts; one is that it should have been part of income in the earlier year and that it should be existing and it should be written off in the books of accounts. Since both these conditions are fulfilled in this case, ld. CIT(A) has rightly allowed the claim of the bad debts of the assessee – In favor of assessee

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• 2012 (7) TMI 762
  Addition made on account of unaccounted investments - Held that:- Losses incurred by the respondent company by the sales of certain shares in two companies belonging to the same group were trading losses, the Appellate Tribunal treated the respondent company as a dealer in shares for the relevant year as in the earlier years it had been so treated by the Department, found that there was nothing on record which would suggest that the acquisition and sale of those shares was for anything other than commercial purposes, considered that the mere circumstance that those shares were shown by the respondent as investments in its balance-sheet was not conclusive, pointed out that there was nothing to show that the purchase of the shares had anything to do with the control of the companies concerned, and relied upon the circumstance that the sales were at market rates or at going rates - Misc. Application filed by the assessee seeking recalling of the order of the Tribunal for rectification u/s 254(2) does not have any merit.

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• 2012 (7) TMI 761
  Unverifiable purchases - addition by estimating the gross profit (G.P.) rate at 30% - Held that:- On accepting the assessee's trading results, i.e., except qua unverifiable purchases (Rs. 8.34 lacs) which have already disclosed a gross profit at the reflected rate of 18.62% on those purchases additional gross profit of 5% on such purchases would be justified, so that an addition to that extent becomes sustainable. The gross profit rate is with reference to the sales, i.e., as relatable to such purchases (approximated at 75% of sales), which is worked out at Rs. 11.12 lacs (834199 x 100/75), so that the trading addition works out to Rs. 55613/- [i.e., Rs. 11.12 lacs x 5%]. Adhoc addition in each of the two proprietary concerns - It is apparent that the same is without relation to the assessee's disclosed trading results, which are progressive, as well as the quantum of unverifiable purchases, thus there is no basis for disturbing the assessee's trading results for the year, which have been itself accepted despite the rejection of books of accounts in respect of the intervening year. Disallowance effected @ 10% qua certain expenses, viz. on staff welfare, conveyance, telephone, repair and maintenance, general office expenses. The reason stated, which is the same for all the assessment years, is lack of proper supporting vouchers, being self-made, and without proper authentication - where a disallowance qua such expenses has been made earlier, or subject to examination under sec. 143(3) assessment there can be no review of the matter in sec. 153A proceedings

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• 2012 (7) TMI 760
  Disallowing the claim for deduction u/s 80 P (2)(a)(i) - interest income from providing of credit facilities to its members - Held that:- As both the parties has not brought on record copy of Memorandum of Association and Articles of Association of the assessee-society nor produced copy of returns as filed by the assessee nor the relevant audit reports. In the absence of the above documents it is not possible to adjudicate the issue completely - as issue requires verification of records and therefore, the issue should be restored to the file of the AO for proper verification - in favour of assessee for statistical purposes.

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• 2012 (7) TMI 759
  Addition as unexplained cash - CIT(A) deleted the addition - Held that:- It is an admitted fact that assessee company has accepted the fact that the cash belong to the company. Hence, once when the amount has been assessed in the hands of assessee company no infirmity in the CIT(A)’s finding that addition in the hands of the assessee on protective basis is not required. The documents seized during the survey operation from the premises of the assessee show difference between cash balance as per the cash book & the ledger account of the imprest account - The books of account maintained in the computer emanated during the course of search support the contention of the assessee in respect of the transactions made through the imprest account & how the imprest account is merged with the final accounts. There was a cash withdrawal of Rs.30,00,000/- just a month before the cash found - as revenue has failed to bring anything on record which could show that money withdrawn from bank was spent somewhere else. The purpose for which the money was carrying out to Goa is well explained. Additions made only on the basis of statements recorded during operation u/s 133A may be liable to be quashed in absence of any corroborative evidence - There was no doubt about the fact that the seized money was belonging to the assessee only. The proceedings u/s 153C r.w.s. 153A has to be taken in the case of assessee only.

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• 2012 (7) TMI 758
  Re-assessment order u/s. 143(3)/147 - Held that:- It is well settled law that unless the return of income already filed and disposed of notice for reassessment u/s. 148 cannot be issued - no reassessment proceedings can be initiated so long as the assessment proceedings pending on the basis of the return already filed are not terminated. In this case, it is admitted fact that the AO could have issued notice u/s. 143(2) at the time of reopening of the assessment. Therefore, reassessment proceedings are invalid, as the time of issuance of notice u/s. 143(2) had not expired - in favour of assessee.

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• 2012 (7) TMI 757
  Addition on account of variation of closing stock - machinery lying in closing stock - assessee contended that average price of the machines could not be taken - Held that:- No reason to dispute the fact that the machines lying in stock were sold to M/s. Finolex Cables Limited for Rs.30,72,000 as AO did not provide any evidence in support of its contentions the machines lying in stock were different than the ones supplied to M/s. Finolex Cables Limited. The Single Spoolers Type S 631 -2 numbers, which are part of the finished goods valued at Rs.13,32,448 were sold to Finolex Cables Ltd. sale invoice bearing Rs.30,72,000 in the month of October, 2007 and not in the month of April, 2007. Considering the G.P. rate of 17.8% in respect of the said machines and also considering the sale price of Rs.30,72,000, the finished pronlduct valued at Rs.13,32,448 is certainly a case of under valuation. Therefore the said order of the CIT(A) is reasonable and it does not call for any interference - in favour of assessee.

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• 2012 (7) TMI 756
  Deduction of tax under Section 194-A - Interest received on delay payment of compensation - award was passed on 7.9.2001 and the compensation was paid somewhere in the years 2009 – Held that:- Interest received on delayed payment is a revenue receipt exigible to Income-tax - where a compensation awarded under the Land Acquisition Act or on further appeals, interest on enhanced compensation cannot be taxed all in a lump sum as having accrued on the date on which the Court passes order for enhanced compensation; the interest has to be spread over on annual basis right from the date of delivery of possession till the date of order on a time basis - Income-tax Department shall while assessing the liability of tax of the individual assessee shall take into consideration the fact that the interest received is from the years 2001 to 2009

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• 2012 (7) TMI 755
  Disallowance of depreciation - ownership - lease out of the vehicles - lease rental taken as income of the appellant – Held that:- Merely because they did not respond or the assessee did not furnish the correct addresses of those persons to be summoned, it does not lead to an inference that the assessee ceased to be a owner - ownership of the assessee is demonstrated by the purchase receipt as well as the agreement - no other person other than the assessee claims the ownership of the vehicles. Therefore, the authorities were not justified in drawing an adverse inference and in holding that the assessee is not the owner. Merely because the vehicles were used by the lessees in their business, the assessee cannot be denied the depreciation @ 40% - If the authorities were of the view that the assessee has failed to prove his ownership over those vehicles, then, if depreciation is to be disallowed then they also should not have taken that lease rental agreement for the purpose of making the assessment - subsequent years, the assessee had been granted the benefit of depreciation. Therefore, the order to be passed by the authorities should be consistent. The approach of the authorities in so far as current assessment year is concerned is contrary to law and requires to be set aside - appeal is allowed

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• 2012 (7) TMI 754
  Lease rental – capital or revenue - assessee had reduced the aforesaid amount representing the lease equalisation account from the lease rental of Rs. 11,84,21,434/-. - disallowance made by the lower authorities on the claim of the appellant with regard to the lease equalisation account – Held that:- amount received towards capital recovery constitute the capital expenditure, whereas, the financing charge represents the revenue receipt, which is the real income. It is as per the accounting standards prescribed by the ICAI. Therefore, the assessee under the Act has to offer to tax only the real income and not the total receipt. - He is not liable to pay any tax under the Act on the capital recovery - assessee was justified in adopting the accounting standards and he is entitled to claim the said amount as deductions – In favor of assessee

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• 2012 (7) TMI 753
  Addition on account of credits in the capital accounts of the three partners – Held that:- Amounts in question have been brought into the firm by the partners themselves, there is no dispute with regard to the identity of the persons - no justification for the adverse inferences drawn by the lower authorities, considering the statements of the partners and their capital accounts, copies of which are filed in the paper-book - partners, admittedly, are income-tax assessees and have given plausible explanation for the sources for the investments claimed to have been made by them in the firm - no justification for the additions under S.68 of the Act, made by the assess Addition on account of credits in the account of Ms. Priyanka, sister of the partner – Held that:- assessee discharged the onus that lies on it to establish the identity of the creditor, her credit-worthiness and the genuineness of the transaction - assertion of the assessee before us that substantial portion of the amount of Rs. 10,75,000 has been received by the assessee from Ms. Priyanka Gadodia by way of cheques - matter remaded to the file of the assessing officer Deduction under S. 80-IB of the Act - Held that:- Assessee failed to make claims u/s. 80IB in the earlier assessment years - assessee has not furnished all the relevant particulars of the relevant year for claiming deduction u/s. 80IB of the IT Act - relief under S.80IB of the Act has not been claimed in the return - there was no valid reason given by assessee for not making such a claim in earlier years, there was no infirmity in order of Commissioner (Appeals) - ground of the assessee rejected Interest under S.234B of the Act – Held that:- Provisions of S.234B of the Act come into play only if there was a liability under S.208 of the Act – in favor of assessee

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• 2012 (7) TMI 752
  Search - undisclosed income - Assessee explained that initial investment made by him in his proprietary firm was declared under provisions of Voluntary Disclosure of Income Scheme, 1997 – Held that:- search was conducted in case of assessee prior to voluntary disclosure, as per section 64(2) of the Finance Act, 1997 - no immunity to the appellant Search – Held that:- Authorities were competent to conduct search in the premises of the partners of the firm when the names of all the partners were specifically mentioned in the warrant of authorization - appeal is dismissed.

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• Customs

• 2012 (7) TMI 786
  Condonation of delay - the signatory was not in charge of day-to-day activities - He was living in Coimbatore which is 450 kms. from the factory. - held that:- No one has preemptory right to get the delay condoned on one plea or the other. We are conscious that there cannot be presumption of deliberate delay on account of culpable negligence or malafide. But when the appellant as a Managing Director did not visualize that he may run in risk when SCN resulted in adjudication of demand and penal consequences, he became a silent spectator. Present application is abuse of process of law for no reasonable cause advanced. Condonation of delay of unexplained nature shall be premium to the lapse. There is no sufficient cause to condone the delay of 603 days made in the present case to seek appeal remedy. Just because the Tribunal is vested with the discretion to condone the delay, exercise of such discretion is not meant to grant premium to the default of delay when neither cogent nor believable reason exist.

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• 2012 (7) TMI 751
  Application for condonation of delay - delay of 697 days - no good reason to condone delay – Held that:- Order was passed on 18/12/2008 and the said order has to be reviewed by the Commissioners of Customs within 90 days from the communication of the order. Same has not been done - delay cannot be condoned - application for condonation of delay is dismissed

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• 2012 (7) TMI 750
  Valuation of the goods – redetermination of value – Held that:- determination of value has not been done either under Rule 7 or Rule 8 as proposed in the show-cause notice but on the basis of transaction value of similar goods under Rule 5 - imports in this case have been made in March, 2010. The value adopted for comparison relates to bill of entry no. 809005 dated 10.7.2009. The import made in July, 2009 cannot be said to be contemporaneous to the imports made in March, 2010 - importer has given details of 10 bills of entry wherein polyester corduroy fabrics have been imported at prices ranging from US $0.32/mtr to US $0.51/mtr - There is no other evidence adduced by the department to show that the value of US$0.65/mtr declared by the importer in the import documents is incorrect - redetermination of value as proposed in the impugned order set aside. Penalty - Confiscation of the goods – Held that:- Merely because the appellant had claimed a wrong classification, it cannot be held that the appellant has misdeclared the goods, as it is for the customs authorities to assess the bill of entry and correctly classify the imported goods - description given in the bill of entry is in conformity with those given in the various import documents, namely invoice, packing list and bill of lading. Therefore, it cannot be held that the appellant tried to mislead the department - no misdeclaration on the part of the appellant attracting the provisions of Section 111 (m) of the Customs Act - confiscation and fine of penalties imposed on the appellant set aside

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• Corporate Laws

• 2012 (7) TMI 785
  Application for Dissolution of the company - Held that:- When the affairs of the company had been completely wound up or the court finds that the Official Liquidator cannot proceed with the winding up of the company for want of funds or for any other reason, the Court can make an order dissolving the Company from the date of that order. This puts an end to the winding up process - the facts and circumstances of this case, the liquidation proceedings deserve to be brought to an end.

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• Service Tax

• 2012 (7) TMI 811
  Demand of service tax - Extended period of limitation – Held that:- Show-cause notice was issued on 22.9.2006 demanding service tax for the period 16.7.2001 to 31.3.2005 - demand beyond the normal period is not sustainable

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• 2012 (7) TMI 810
  Waiver of predeposit of service tax - commission and discount received – non-payment of service tax on business auxiliary services - applicant's plea was that they were registered as sub-broker of mutual fund distributors and that the said income was on account of distribution of mutual fund on which service tax liability had been discharged by the authorized body – Held that:- They have procured mutual fund subscription - applicants are not mutual fund distributors nor they are agents thereof. The applicants could not produce any evidence in this regard - applicants also could not produce any evidence that they have received commission directly from mutual fund companies being a registered mutual fund distributors - applicants have not produced any documentary evidence in support of their contentions - applicant is directed to make pre-deposit 25 per cent of the service tax

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• 2012 (7) TMI 809
  Penalty – non-payment of service tax – appellant provided the services of helping the financee/bankers in financing the vehicle purchasers and they were getting a commission - they are not challenging the service tax liability having discharged the service tax liability and also interest thereof – Held that:- Provisions of section 80 invoked as there is a substantial justification for non-discharge of service tax liability on a bona fide belief – in favor of assessee

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• 2012 (7) TMI 808
  Whether when courier service is connected with export and relevancy thereof was not doubted, the appellant cannot be denied relief of credit relating to tax paid for appropriate consequence under different law – Held that:- When the authority recorded that certificates from courier agency were presented by the appellant, authority could have made an enquiry with the courier agency for further clarification in the matter if he was not satisfied with those certificates - Once the sample copy of the evidence submitted on record, does not rule out genuineness of claim of the appellant, the appellant succeeds in the appeal, accordingly that is allowed.

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• 2012 (7) TMI 807
  Condonation of delay - order dated 21-01-2009 was received by the applicant on 18-2-2010 by fax – Held that:- Appeal was filed on 24-03-2010 and there is a delay of more than one year filing the appeal - Commissioner (Appeals) has no power to condone the delay beyond the period prescribed under the Act - appeal is dismissed

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• 2012 (7) TMI 780
  Eligibility for Notification No.12/2003-ST - According to Notification No.12/2003 what is required is that the goods and materials must have been sold by the service provider to the recipients of services and evidence should be available – Held that:- Invoices have been raised for the value of spare parts - Having accepted the invoice submitted at the time of import and having determined the transaction value at that time, if the department makes a claim that spare parts have not been sold, it will not be acceptable unless it is shown that the transaction value was rejected and arrived at on some other basis or before the Customs it was declared that there were no sale. No such evidence has been placed before us nor does it form a part of memo of appeal - value of spare parts form a part of contract for maintenance and repair and exemption under the Notification No.12/2003-ST is available – In favor of assessee Repair or Maintenance service in respect of movable or immovable goods - held that:- While the respondents have produced photographs of gas turbines to submit that they are nothing but immovable property, other than relying on the contract and submission that the Commissioner has misconstrued the contract to be for maintenance and repair of power plant, the Revenue has not come up with any evidence or document to support the view that turbines is a movable property. - Decided in favor of assessee.

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• 2012 (7) TMI 779
  Availing double benefit - benefit of Notification 01/2006 ST and also availing CENVAT credit - Original authority confirmed the demand and appropriated the amount already paid and Commissioner proposed revision and imposed penalty u/s 78 - Held that:- The assessee on the mistake coming to their notice promptly paid the amount involved along with interest due thereon - as there was nothing irregular in taking the credit of the CENVAT on the "input services", the original authority rightly did not impose the penalty - Order-in-Revision cannot be sustained inasmuch as there was no allegation in the original show-cause notice about wrong availment of the benefit of the notification - in favour of assessee.

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• 2012 (7) TMI 778
  Advisory fees for merchant banking service - appellant submitted that service tax has been demanded on these services on the ground that these services are to be categorized under ‘Management Consultancy Service' - application for waiver of pre deposit - Held that:- Circular no. 1/1/2001-ST dated 27.06.2001 issued in exercise of the powers vested in the Board Section 37B to ensure that there is uniformity in the classification of excisable goods in this case service tax - the appellant have made out a case to show that the appellants had a bona fide belief that the services rendered by them were not taxable prior to 16.07.2001 thus,pre-deposit is required to be waived and stay against recovery of the dues during the pendency has to be granted.

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• 2012 (7) TMI 777
  'Security Agency Services' - Cooperative society - Assessee contested that they are not the commercial concerned engaged in providing security services - Held that:- As decided in BHOOTPURVA SAINIK SOCIETY Versus COMMISSIONER OF C. EX. & S.T., ALLAHABAD [2011 (9) TMI 736 (Tri)]that prior to 18.04.06, the definition of security agency was in relation to a commercial concerned engaged in the business of rendering services - the confirmation of service tax against the appellant for the period prior to 18.04.06 is not sustainable as appellant is a cooperative society - as definition was amended w.e.f. 18.04.06 and included 'any person' engaged in the business of rendering services related to the security of property or any person etc the appellant is liable to pay service tax w.e.f. 18.04.06 - case remanded for re-quantification of the demand.

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• 2012 (7) TMI 776
  Demand of service tax - Society of ex-servicemen - service of Security Agency - definition of Security Agency was changed w.e.f. 18.4.2006 referring "any person" engaged in the business of rendering services instead of 'commercial concern'. With effect from 18.4.06, they have started paying service tax – Held that:- Society of ex-servicemen engaged in providing security services so as to provide reemployment of ex-servicemen, cannot be held to be a commercial concern. Security agency services rendered by commercial concern was liable to pay service tax and the appellant not being a commercial concern, cannot be held to be liable to pay tax

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• Central Excise

• 2012 (7) TMI 784
  Interest on delayed refund – Held that:- Interest on delayed refund is payable under Section 11BB of Central Excise Act, 1944 on the expiring of period of three months from the date of receipt of application under Section 11B(1) ibid and not from the date of order of refund or Appellate Order allowing such refund - order is set aside and appeal allowed

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• 2012 (7) TMI 783
  Refund claim - bar of unjust enrichment – assessee submitted that if the increase amount of excise duty is not charged as increased sale price, this itself proved that the incidence of excise duty has been borne by the seller – Held that:- Their claim is hit by the bar of unjust enrichment under Section 11B of the Act as the uniformity of the price before and after assessment does not lead to the conclusion that incidence of duty has not been passed on to the buyers – Against assessee

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• 2012 (7) TMI 782
  Cenvat credit - appellants were having a D.T.A. manufacturing unit - availed modvat credit on the capital goods installed in the unit - no such capital goods were found therein - capital goods were indeed found in the newly set up 100% E.O.U – Held that:- From this letter of approval, it is noticed that it permits the conversion of D.T.A. unit into an 100% EOU - It is not clear from the case records, whether there was any correspondence between the appellants and the Ministry of Commerce & Industry - whether the Ministry of Commerce & Industry has permitted the appellants to convert the existing D.T.A. unit into an 100% E.O.U.unit - case is remanded back to the Commissioner for de novo adjudication after verifying the facts with the Ministry of Commerce & Industry about the conversion of D.T.A. unit into an 100% E.O.U - appeals are allowed by way of remand.

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• 2012 (7) TMI 781
  Penalty - Cenvat credit on raw materials and services used for non-excisable goods – Held that:- Goods containing alcohol are not final product since the same are not excisable goods under the Central Excise Act - They submitted that since they were reversing 10% of the price of price of non-excisable goods - amount reversed under Rule 6(3)(b) of the Cenvat Credit Rules was Rs. 90,86,941/- which is much more than the amount paid by them on being pointed out by the Revenue - no finding has been given by the Commissioner on this aspect of their submission - matter remanded back to Commissioner Cenvat credit - services used for traded goods was admissible - trading activity undertaken by the appellants from their Head Office - Commissioner has stated that the method prescribed under Rule 6(3)(d)(iii) of the Cenvat Credit Rules, 2004 for apportioning common services between dutiable service and exempted services can be taken as a guideline on a rational basis - appellants had paid back the ineligible credit as per work-sheet prepared by them and they contended that the work-sheet was not rejected by the Commissioner – Held that:- Work-sheet submitted by the appellants has not been rejected by the Commissioner and it is open to the Commissioner to call upon the appellants to substantiate their computation of the work-sheet in respect of the credit availed and the appellants should be given an opportunity of being heard to explain their case in respect of the calculation as mentioned in the work-sheet - matter remanded back to the original authority - appeal is allowed by way of remand

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• 2012 (7) TMI 749
  Duty on waste and scrap - appellant is a manufacture and exporter of cycle parts - held that:- there is nothing in the Notification No.41/2001-CE(NT) to availment of benefit to waste and scrap under any other Notification. As such by observing that in as much as the assessee was below the ceiling limit subscribed under SSI Notification, it stands held that the benefit of the same would be available to the assessee in respect of waste and scrap. - Decided in favor of assessee.

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• 2012 (7) TMI 748
  Whether the Treated Tamarind Kernel Powder produced by the assessees is excisable – Held that:- Chemical process carried out gives the product a different molecular structure and makes it suitable for a different use. Any person wanting to use Tamarind Powder as thickener in textile industry will not buy and use such powder unless it is subjected to the processes that the appellants are carrying out. So prima facie the processes constitute a manufacturing process Classification – Held that:- Goods are manufactured goods and its classification was under sub-Heading 1301.10 of the Central Excise tariff Extended period of limitation – Held that:- Extended period of 5 years cannot be invoked for demanding duty - matter relates to a period where the system of filing of classification list in advance and seeking its approval by the department was in vogue and the officers of the department were expected to visit factories and conduct necessary verification for approval of classification list - demands invoking the extended period of time limit is not maintainable

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• 2012 (7) TMI 747
  Demand of duty – extended period of limitation - nylon crimped yarn - central excise duty on ad valorem basis – Held that:- Classification list was amended on 1.6.2001 by filing the revised declaration showing the ad valorem rate of duty in respect of nylon crimped yarn, but duty was not paid according to this declaration and thereafter this declaration was withdrawn on 11.6.2001. The correct rate of duty was applied by the appellants only from 1.10.2001. This only shows that they were aware of the correct rate of duty applicable on their products - contention of the appellants that duty is not required to be paid on Rs.5/- as twisting charges, it is found from the records that the goods in fact were manufactured on job work basis and they were charging Rs.15/- per kg. as job charges. Therefore, the entire Rs.15/- per kg. is required to be added in the value and their contention on the valuation is not acceptable. Cenvat credit – Held that:- W.e.f. 1.10.2001 the cenvat credit was admissible to them and prior to this date, they were not eligible for any credit since they themselves have withdrawn the letter under which they have requested for availing the credit - duty has rightly been demanded from the appellants in the show cause notice and accordingly the confirmation of the demand for the extended period is upheld - w.e.f. 1.10.2001, they are eligible to modvat/cenvat credit subject to filing of the duty paying documents in respect of the raw materials/inputs and verification by the departmental officers - matter remanded back to the adjudicating authority - appeals are allowed by way of remand

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• 2012 (7) TMI 746
  Demand of duty – Export of goods manufactured - Cenvat credit – goods unconditionally exempted from payment of excise duty w.e.f 01/03/2007 vide notification No.6/2006-CE – Held that:- Assessee, manufacturing goods chargeable to nil duty, is eligible to avail Cenvat Credit paid on the inputs under the exception clause Rules 6 (1), as contained in Rule 6 (5) of the Cenvat Credit Rules, 2002 and Rule 6 (6) of Cenvat Credit Rules, 2004, used in the manufacture of such goods if the goods are exported - demand of the department towards Cenvat Credit on the inputs used in the manufacture of export goods is not sustainable in law - assessee entitled for the credit. Reversal of credit - inputs cleared as such by the appellant both in respect of inputs lying in stock as on 01/03/2007 and also in respect of inputs received after 01/03/2007 - assessee’s contention is that they have cleared the same on reversal of credit to their sister unit, which is a 100% EOU and the 100% EOU has taken the credit – Held that:- Whether this amount includes the reversal of credit taken on inputs lying in stock as on 01/03/2007 or received after 01/03/2007 requires corroboration through documentary evidences. Therefore, the appellant has to lead evidence in respect of the supplies of inputs as such to 100% EOU, duty involved thereon and the reversal of credit made in the RG-23 register, so that their claim of reversal of credit is substantiated - matter remanded to adjudicating authority for reconsideration

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• 2012 (7) TMI 745
  Disallowance of cenvat credit towards service tax on insurance premium paid - authorities opined that the evidence relating to payment of insurance was not in the name of the appellant and service tax paid in respect of clearing and forwarding service by Yadav Associates also does not relate to the appellant – Held that:- Appellant has evidence to show payment of service tax, on the insurance policy taken against the goods in question - Department is required to find out whether the service tax was realised by M/s Yadav Associates and if so, whether paid to the treasury - Original authority has to be satisfied that requirement of Rule 9(5) of the Cenvat Credit Rules is fulfilled and service tax paid was relating to input service that was ultimately used in manufacture of excisable goods - matter is remitted back to the Original authority

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• CST, VAT & Sales Tax

• 2012 (7) TMI 812
  Verification of ‘C’ & ‘F’ Forms produced during the appellate proceedings - remitting the matter to the VATO - forms were initially produced before the VATO, but without application for extension which invited rejection - Held that:- No doubt in the year 2005, the Parliament amended Section 8(4), and correspondently a period of three months were prescribed thus assessee had furnished the application along with ‘C’ form as required by law - enquiry had to be done by the VATO which was rightly directed by the Tribunal.

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