TMI Tax Updates - e-Newsletter
August 11, 2012

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws FEMA Service Tax Central Excise

Articles

1. ADVANCE TAX

   By: DR.MARIAPPAN GOVINDARAJAN

2. EMPLOYERS FACE CHALLENGE ON SERVICE TAX FRONT.

   By: Dr. Sanjiv Agarwal

News

1. Rs. 4,72,894 Crore Outstanding Farm Loans by PSBs.

2. New Services in Banks’ Priority Area.

3. Over 74.50 Lakh Women Self Help Groups.

4. Policy for Unclaimed Fund.

5. Guidelines for Basel-III Capital Requirement Norms.

6. CCI Investigating Anti - Competitive Practices by Car Makers.

7. National Competition Policy.

8. Finance Minister Says Quick Estimates of IIP for June 2012 are Disappointing; Calls for Focus on the Critical Sectors, Removal of Bottlenecks and for Fillip to Production.

9. Unfair Trade Practices.

10. Multi- State Societies Registration Bill, 2012.

11. E-SERVICES.

Notifications

Companies Law

1. S.O. 1747(E) - dated 7-8-2012 - Co. Law

Product Group Classification .

2. G.S.R. 617(E) - dated 7-8-2012 - Co. Law

Amendment to the Companies (Fees on Applications) Rules, 1999 .

Customs

3. 73/2012 - dated 9-8-2012 - Cus (NT)

Appointment of Common Adjudicating Authority.

4. 72/2012 - dated 9-8-2012 - Cus (NT)

Appointment of Common Adjudicating Authority in respect of the Additional Commissioner of Customs(Export), Jawaharlal Nehru Custom House, Nhava Sheva, Post-Uran, District-Raigad, Maharashtra; and the Assistant / Deputy Commissioner of Customs, Export, ACC, Ahmedabad.

5. 71/2012 - dated 9-8-2012 - Cus (NT)

Appointment of Common Adjudicating Authority in respect of the Joint Commissioner of Customs, ICD (GRFL), Sahnewal, Ludhiana; and the Additional Commissioner of Customs, ICD, Tughlaqabad, New Delhi.

6. 70/2012 - dated 9-8-2012 - Cus (NT)

Appointment of Common Adjudicating Authority.

7. 69/2012 - dated 9-8-2012 - Cus (NT)

Appointment of Common Adjudicating Authority in respect of M/s SAP India Systems, Applications and Products in Data Processing Pvt. Ltd. Mumbai.

8. 68/2012 - dated 8-8-2012 - Cus (NT)

Amends Notification No. 63/1994-Customs (N. T.) - Land Customs Stations and Routes for import and export of goods by land or inland water ways.

VAT - Delhi

9. F.5(54)/Policy-II/VAT/ 2011-12/451-463 - dated 7-8-2012 - DVAT

Regarding Republic of Niger in New Delhi.

10. F.5(54)/Policy-II/VAT/ 2011-12/ 438-450 - dated 7-8-2012 - DVAT

Regarding Republic of Seychelles in New Delhi.

Highlights / Catch Notes

Income Tax

• Cash Payments for Milk by Agents Exempt from Section 40A(3) Restrictions u/r 6DD Clause (l.

  Case-Laws - AT : Invoking provisions of section 40A(3) - cash payment - As it is the requirement of these agents to make the payment in cash for goods, i.e. milk, to the cattle owners, who belong to economically weaker section, on behalf of the assessee the impugned payments are squarely covered by the exceptions provided in clause (l) of Rule 6DD - AT
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• India-UAE DTAA: Consideration Classified as Fees for Technical Services, Not Royalty u/s 9(1)(vi) of Income Tax Act.

  Case-Laws - AAR : India UAE DTAA - Whether the consideration received by the applicant has to be deemed to be “royalty‟ under section 9(1)(vi) - as the Revenue itself in its objection suggested that the consideration received would be fees for technical services to be dealt with as such in this state it no ruling on this question required. - AAR
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• High Court Rules: Income Tax Appeals Cannot Be Withdrawn Once Initiated, Must Proceed to Conclusion.

  Case-Laws - HC : Withdrawal of appeal before CIT(A) - once the machinery is set in motion, the assessee cannot withdraw the appeal - HC
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• Tribunal Corrects Self-Evident Error u/s 254(2); No Detailed Evidence or Argument Needed.

  Case-Laws - HC : Tribunal was justified in correcting its mistake in exercise of its jurisdiction u/s 254(2) as a patent, manifest and self-evident error which does not require elaborate discussion of evidence or arguments to establish it - HC
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• Court Upholds Disallowance of Depreciation on Goodwill in Amalgamation Case; Assessee Fails to Prove Goodwill Purchase.

  Case-Laws - AT : Disallowance of depreciation on goodwill - scheme of amalgamation - the very purchase of goodwill is not proved by the assessee - Disallowance of depreciation is thus warranted - AT
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• High Court Rules Against Reopening Assessment u/s 148; No Justification for Reassessment Found.

  Case-Laws - HC : Reopening of assessment u/s 148 - no exercise by appellate jurisdiction under Section 260-A is warranted to hold that the very reopening cannot be sustained - HC
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• Tribunal Orders Stand: No Rectification Allowed for Subsequent Contradictory Decisions u/s 254(2.

  Case-Laws - AT : Rectification of the orders passed by the Tribunal on ground that subsequent decision of the Tribunal arrived at a contrary view - there is no mistake apparent on record to invoke the provisions of section 254(2) - AT
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• Section 69C Addition Upheld: Assessee Fails to Justify Household Expenses Claim, Withdrawal Evidence Inadequate.

  Case-Laws - AT : Addition u/s 69C - household withdrawals - contention of the assessee towards household expenses is not capable of acceptance. Addition confirmed - AT
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• Assessee's Provision for Warranty Claims Allowed as Deduction Under Mercantile Accounting System.

  Case-Laws - AT : Provision for Warranty claim - assessee was following the mercantile system of accounting - adjustment is made in future fore excessive provision - claim of deduction allowed. - AT
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• Section 54F Exemption Valid: Wife's Name Added for Convenience; Payment Made by Assessee's Account.

  Case-Laws - AT : Deduction u/s 54F -Since, name of the wife has been added only for the sake of convenience and total consideration has been met from the account of the assessee. - the exemption cannot be denied. - AT
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• Section 10A Excludes Profits from Income, Prevents Setting Off Business Losses Against Them.

  Case-Laws - AT : STPI Unit - set off of losses - As the profits and gains under section 10A were not to be included in the income of the assessee at all, the question of setting off the loss of the assessee from any business against such profits and gains of the undertaking would not arise - AT
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• Assessee Rightly Excludes Postage, Email, Lease Line, and Courier Costs from Fringe Benefit Tax Calculations.

  Case-Laws - AT : FBT – assessee has rightly excluded the amount of expenditure debited under the head postage, email, lease line and courier from the FBT - AT
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• Company's Foreign Travel and Medical Expenses for Managing Director Deemed Personal, Not Commercial Necessity.

  Case-Laws - HC : Expenditure on foreign travel and medical treatment of the Managing Director and his wife - in the absence of any obligation on the part of the company to meet the medical and traveling expenses, the payment made could not be treated as one of commercial expediency & was purely a personal one - HC
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• Section 43B: Only Actual Bonus Payments Deductible, Not Notional Ones, Says High Court Interpretation.

  Case-Laws - HC : Deduction u/s 43B - payment of bonus - u/s 43B only actual payment and not any notional or deemed payment that would be relevant for considering the deduction - HC
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• Tenant Maintenance Payments to DSL Not Taxable as Income from House Property for Assessee.

  Case-Laws - HC : Addition to the income under the head “income from house property” - amount paid by the tenants to DSL, another group company, towards maintenance charges is not taxable in the hands of assessee. - HC
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• Tax Officer Adds Unused Consumer Deposit Funds to Taxpayer's Total Income Calculation.

  Case-Laws - HC : Treatment of unutilized balance available in "consumer deposit account" - AO added the unutilized balance of such account to the total income of the assessee - HC
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• BIFR Rightfully Granted Relief u/s 72A Without Income Tax Officer's Evaluation; Decision Upheld as Correct.

  Case-Laws - HC : BIFR - relief flowing from Section 72A - it cannot be said that the BIFR fell into an error by directing the concession to be granted itself, rather than requiring the Income Tax Officer to examine this aspect of the concession - HC
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• CIT cannot revise banking company's deduction u/s 36(1)(viii) as Assessing Officer's interpretation is valid.

  Case-Laws - AT : Deduction u/s 36(1)(viii) - banking company - when one of the possible views has been taken by the Assessing Officer, the CIT cannot exercise his jurisdiction u/s 263 on that aspect of the matter. - AT
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• TDS Provisions u/s 194C: Consortium's Role in Contract Procurement Without Independent Execution Analyzed.

  Case-Laws - AT : Applicability of TDS provisions u/s 194C - the assessee is a CONSORTIUM - assessee are created to procure a contract and never to execute the same by themselves with the intention to earn income - AT
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• Company Directors' Guarantee Commission Approved as Allowable Expense for Income Tax Deduction.

  Case-Laws - AT : Guarantee commission paid to the Directors of the Company – whole of the guarantee commission shall be allowed - AT
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• Excise Duty Adjustments for Inventory Valuation Required u/s 145A of Income Tax Act for Accurate Tax Reporting.

  Case-Laws - AT : Adjustment of Excise Duty on purchase, sales and closing stock u/s 145A are required to be made - AT
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• Sponsorships for media coverage are business expenses, not donations, enhancing brand image and tax-deductible.

  Case-Laws - AT : Donation versus expenses - Whenever newspaper coverage or radio or TV coverage took place, the name of assessee would be mentioned as one of the sponsors, thus the expenditure is therefore clearly for the enhancement of the brand value and image of the company. - allowed as expense - AT
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• Family Property Used in Business Doesn't Automatically Belong to Firm, Even If Used by Legal Heirs.

  Case-Laws - AT : It is not possible to presume that the undivided family property becomes the property of the firm for the reason that some of the legal heirs have used the property to carry on the business of the firm constituted by them. - AT
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• Assessee Reinstates and Wins Deduction Claim u/s 80IB of Income Tax Act After Initial Withdrawal.

  Case-Laws - AT : Assessee has withdrawn its claim of deduction under Section 80IB, which was accompanied by revised return – assessee again claimed deduction - deduction allowed - AT
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Customs

• Amendment to Notification No. 63/1994-Customs (N.T.) enhances customs operations for smoother cross-border trade via land and waterways.

  Notifications : Amends Notification No. 63/1994-Customs (N. T.) - Land Customs Stations and Routes for import and export of goods by land or inland water ways. - Notification
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• Commissioner Upholds Valuation of Imported Used Digital Printers Lacking Chartered Engineer's Certificate from Load Port.

  Case-Laws - AT : Valuation of import of old/used digital multifunction print and copying machines. - goods were not accompanied by the Chartered Engineer's certificate from the load port - The valuation done by the adjudicating Commissioner is upheld. - AT
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• Drawings and Designs Under Heading 49.06 Qualify for Duty-Free Import Benefits, Impacting Customs Valuation in Project Imports.

  Case-Laws - AT : Project import - valuation - Drawings and designs are rightly classifiable under Heading No. 49.06 and the benefit of duty-free import under this Heading has to be extended to the goods in question - AT
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FEMA

• High Court Clears Appellant of Violating Section 9(1)(b) FERA in Non-Resident Indian Flat Sale Case.

  Case-Laws - HC : Whether the appellant had violated Section 9(1)(b) of FERA - transaction to sell the flats to the two directors were non resident Indians - decided in favor of appellant - HC
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Corporate Law

• Businesses Alerted to New Product Group Classifications and Tax Updates Under Company Law, Compliance Urged

  Notifications : Product Group Classification . - Notification
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• Amendment to Companies (Fees on Applications) Rules, 1999: Updated Fee Structure for Company Law Applications Announced.

  Notifications : Amendment to the Companies (Fees on Applications) Rules, 1999 . - Notification
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Service Tax

• Court Rules Incentives to Advertising Agency Not Taxable Services Due to Lack of Clear Justification.

  Case-Laws - AT : Taxability of incentives received by an advertising agency services - Incentive is a receipt for appreciation of performance of services provided. - How such forms part of taxable service remained unexplained. - Decided in favor of assessee. - AT
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• Refund Available for Exports Post "Let Export" Order Per Notification No.42/2001; Conditions Met for Assessee's Claim.

  Case-Laws - AT : Refund - Notification No.42/2001 - export made after obtaining the necessary “let export” order from the proper officer of customs,thus, the relevant condition of the Notification was complied with and hence the assessee could claim the refund - AT
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• Service Provider Ineligible for Exemption After Availing CENVAT Credit on Capital Goods Under Notification 6/2005-ST.

  Case-Laws - AT : Small service provider -once the appellant avail CENVAT Credit on the capital goods, the benefit of exemption under Notification No. 6/2005-ST, would not be available - AT
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• Appellant Must Pay Service Tax on Solar System Installation Despite No Separate Charge to Dealers.

  Case-Laws - AT : Appellant are clearing the solar system through dealers - appellant are not charging installation charges separately, but for installation activity, they are liable to pay service tax - AT
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Central Excise

• Cenvat Credit Reversal Not Applicable for DTA-EOU Merger u/r 10 of Cenvat Credit Rules, 2004.

  Case-Laws - AT : Reversal of cenvat credit during the period when assessee were DTA - two units - Merger with EOU unit - the provisions of Rule 10 of Cenvat Credit Rules, 2004 would not be applicable. - AT
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• Central Excise Warehousing Registration Rejection Overruled; Decision Favors Assessee, Found to Be Without Jurisdiction.

  Case-Laws - AT : Rejecting of application for registration of Central Excise for warehousing - rejection is without jurisdiction - in favor of assessee - AT
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• Revenue Challenges Refund Claim u/r 5; Refund Allowed Despite Exempt Product and Cenvat Credit Dispute.

  Case-Laws - AT : Claim of refund under Rule 5 - Revenue was of the view that since final product was exempted from excise duty they could not have exported the goods under bond and they could not have taken Cenvat credit on inputs used in the manufacture of such exempted goods. - Refund allowed. - AT
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• CENVAT Credit Applies to Stockbroker Services, Establishing Nexus with Manufacturing; Qualifies as 'Input Service' for Tax Credit.

  Case-Laws - AT : CENVAT credit on stockbroker's service - there is clear nexus between the stockbroker's service and the manufacture of the goods - service clearly fell within the ambit of 'input service' - AT
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• Cenvat Credit Rule 6(3) Lacks Clarity on Credit Reversal for Waste Generated in Sponge Iron Manufacturing Process.

  Case-Laws - AT : Reversal of Cenvt Credit - Rule 6(3) - generation of waste - fine was resulted while manufacture of Sponge Iron – Proportionality aspect not being dealt by Rule 6(3) of Cenvat Credit Rules, 2004 - AT
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VAT

• Seychelles Tax Update: Key Changes in VAT and Sales Tax for Transactions in New Delhi. Stay Informed.

  Notifications : Regarding Republic of Seychelles in New Delhi. - Notification
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• New Delhi Issues Notification on VAT and Sales Tax Updates for the Republic of Niger.

  Notifications : Regarding Republic of Niger in New Delhi. - Notification
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Case Laws:

• Income Tax

• 2012 (8) TMI 284
  India-Singapore tax treaty - Gains arising from early settlement of forward foreign exchange contract - 'capital gain' or 'income from other sources' - Held that:- As decided by Special Bench of the Tribunal in Apollo Tyres Ltd. Versus Assistant Commissioner Of Income-Tax [2004 (3) TMI 345 - ITAT DELHI-E ]gains arising from early settlement of forward foreign exchange contract has to be treated as capital gain - consequently, the gains realized from early settlement should be regarded as capital gains and not income from other sources - Such capital gains are not liable to tax in India as per Article 13(4) of the India -Singapore tax treaty - in favour of assessee.

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• 2012 (8) TMI 283
  Invoking provisions of section 40A(3) - additions made in respect of the payments made for purchase of milk from the milk producers - Held that:- AO made the impugned additions without examining the relevant evidences in detail as noted if the payments at the level of milk producers are considered, each payment never exceeded the specified sum of 20,000. There is, therefore, no violation of S.40A(3) - it is a fact that the representative of milk collection centre functions in a dual capacity, both for the assessee as well as the milk supplier for incentives 23.78 crores, as against only 42,25,796 for assessment year 2005-06 this vast difference in the disallowance between these two years is on account of deviation in the approach of the assessing officer and acceptance of the assessee’s arguments mentioned above. Therefore, on fairer side, the AO should not have considered the payments made in cash to the ‘representative’ for applying the provisions of section 40A(3)and he should have considered the payments made in cash at the stage of the supplier/producer of the milk - in favour of assessee.

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• 2012 (8) TMI 282
  Disallowance of depreciation - iron rolls purchased by the assessee and leased back to the same party - CIT(A) allowed claim of depreciation - Held that:- Tribunal in this case had set aside the issue to the file of AO, to look into the fact as to what happened to the roll after expiry of lease period who has given a clear finding that the rolls remained with the original seller even after expiry of lease period. CIT(A) has however neither considered this aspect nor has given any finding on this issue - The transactions can not be considered as genuine merely on the ground that the same are supported by bills and agreements asfor a transaction to be a colourable device, it is not necessary that there should be pre-existing relationship between parties. As the Original seller had claimed 100% depreciation on the assets which shows that these were highly depreciable asset and the assessee however, has shown the purchase price of Rs. 34,97,500/- when ISIM had purchased the same at Rs. 36,88,540/- i.e. almost at the same price even after use and claim of 100% depreciation - as observations suggest that transaction may not be a genuine lease transaction but only a financial transaction order of CIT(A)for allowing the claim of depreciation is set aside and the issue is restored back for passing a fresh order after necessary examination - in favour of revenue.

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• 2012 (8) TMI 281
  Disallowance u/s 14A - assessee claimed dividend income as exempt u/s 10(33) - Held that:- On considering the magnitude of profit with the company and the investments made in these shares of Kothari group, it can be easily noticed that the profit for the relevant year itself was much more than the amount of investment & coming to the investments in the shares of Dena Bank in financial year 1996-1997 it is observed that the share capital of the company far exceeds the amount of investment in shares as at the end of such financial year - that if there be interest free funds available to the assessee sufficient to meet its investments and at the same time loan has been raised, it can be presumed that the investments were made from interest free funds - no disallowance u/s 14A in respect of the investments made by the assessee in the shares of three domestic companies - in favour of assessee. Disallowance u/s 43B - the assessee defaulted in depositing employees' contribution to provident fund and ESI within the permissible time - Held that:- Any amount referred to in section 43B, being the sum payable by the employer shall be allowed as deduction if it is paid before the due date of filing of the return - as the assessee has paid the sum though belated but before the date of filing of return the grievance of the assessee is accepted and objection of the Revenue is overruled - in favour of assessee. Disallowance foreign travel expenses - CIT(A) deleted the disallowance - Held that:- As immediately preceding assessment year in the Tribunal has held that no disallowance on account of foreign travel expenses can be sustained - in favour of assessee. Deduction u/s 80-IA(9) - whether relief u/s 80-IA/80-IB should be adjusted before allowing deduction u/s 80HHC - Held that:- As decided in Associated Capsules P. Ltd. Versus DCIT [2011 (1) TMI 787 - BOMBAY HIGH COURT ]that restriction u/s 80-IA(9) is not applicable at the stage of computing deduction u/s 80HHC but only at the stage of allowing deduction u/s 80HHC - in favour of assessee. Netting of interest receipts for the purpose of deduction u/s 80HHC - Held that:- As decided in Associated Capsules Pvt. Ltd. v. CIT [2012 (2) TMI 101 - SUPREME COURT OF INDIA ] netting of interest is permissible - in favour of assessee. Exclusion of amount of excise duty from 'total turnover' for computing deduction u/s 80HHC - Held that:- As decided in Commissioner of Income-Tax Versus Lakshmi Machine Works [2007 (4) TMI 202 - SUPREME COURT ]the excise duty is not includible in the 'total turnover' in the formula contained in section 80HHC - in favour of assessee. Treatment of profit on sale of DEPB license - deduction u/s 80HHC - Held that:- As decided in M/s Topman Exports Versus Commissioner of Income Tax, Mumbai [2012 (2) TMI 100 - SUPREME COURT OF INDIA ]that when DEPB is sold by a person, his profit on transfer of DEPB will be sales value of DEPB less its face value. It has further been held that DEPB is chargeable as income u/s 28(iiib) in the year in which such person applies for DEPB against the exports and profit on sale of DEPB is chargeable u/s 28(iiid) in the year in which he transfers DEPB - in favour of assessee. Reduction of 10% export incentives from the gross indirect cost - Held that:- As decided in HERO EXPORTS Versus C. I. T [2007 (11) TMI 13 - SUPREME COURT OF INDIA ]the principle of attribution is applicable to cases falling u/s 80HHC(3)(b) and therefore, part of indirect cost has to be apportioned to expenses incurred for earning export incentives. 10% of total income has been held as fair estimate in this case - in favour of assessee. Computation of 'book profit' liable for MAT u/s 115JB - reduction of book profit by deduction allowable u/s 80HHC (Export Benefit) - difference between eligibility and deductibility of deduction - Held that:- CIT(A) directed to reduce export profits based on book profit in the ratio of export turnover to total turnover and not the quantum of deduction as worked out u/s 80HHC relying on Ajanta Pharma Ltd. Versus Commissioner of Income Tax-9, Mumbai [2010 (9) TMI 8 - SUPREME COURT ]in which it has been held that clause (iv) of the Explanation to section 115JB covers full export profits of 100% as 'eligible profits' and the same cannot be reduced to 80% by relying on section 80HHC(1B) - in favour of assessee. Treatment to sale of scrap - computation of deduction u/s 80HHC - Held that:- As decided in CIT v. Bicycle Wheels (India) [2010 (10) TMI 496 - PUNJAB AND HARYANA HIGH COURT ] the sale of scrap cannot be excluded from 'total turnover' which shall increase the denominator of formula for determining the extent of benefit admissible to an assessee u/s 80HHC - CIT(A) was correct to direct the assessee in treating sale of scrap as part of 'total turnover' - against assessee. Levy of interest u/s 234D - Held that:- As there is no merit in the contention found raised by the assessee as the regular assessment in this case was completed on 16.02.2004 which is well after the cut off date of 1st June, 2003, in our considered opinion, the Assessing Officer was justified in charging interest u/s 234D - against assessee. Entitlement for credit in respect of minimum alternate tax paid by the amalgamating company - Held that:- As no factual details in this regard are available it will be just and fair if the Assessing Officer is directed to look into these aspects as per law and then decide the matter afresh - in favour of assessee by way of remand.

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• 2012 (8) TMI 280
  India UAE DTAA - contract with the UAE Company for seismic data acquisition on Cauvery and Krishna Godavari basin - can the income derived by the applicant be construed in the nature of "Fees for technical services u/s 9(1)(vii) - Held that:- The applicant is engaged in the business of providing services or facilities in connection with the prospecting for oil but clearly the applicant cannot be said to have undertaken a mining or like project or the work of prospecting for extraction or production of mineral oil, therefore, satisfied that the exception contained in Explanation (2) to section 9(1)(vii) of the Act is not attracted in the case of the applicant -Since the consideration received by the applicant is for rendering technical or consultancy services, on question no. 1, it has to be ruled that the income derived by the applicant has to be construed to be in the nature of "fees for technical services in terms of section 9(1)(vii). Whether the consideration received by the applicant has to be deemed to be "royalty under section 9(1)(vi) - as the Revenue itself in its objection suggested that the consideration received would be fees for technical services to be dealt with as such in this state it no ruling on this question required. Whether the income derived by the applicant from the contract from UAE company is liable to be assessed under section 44BB(1) - Held that:- The income derived by the applicant is from a UAE company and not from the Government or an Indian concern - On the wording of section 44D, 44DA, or 115A the income cannot be brought within their purview, because they only speak of income by way of fees for technical services received from Government or an Indian concern, thus contention of the Revenue that the income derived by the applicant is independently assessable under section 115A or 44DA has to be rejected - as income derived by the applicant is from an activity of mineral oils and from a foreign company, the applicant would be entitled to claim to be assessed under section 44BB(1).

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• 2012 (8) TMI 279
  Levying penalty u/s 271(1)(c) - Held that:- The assessee had himself agreed for the amount to be assessed on the ground that the parties to whom it had offered commission did not respond to the notices - as the assessee countered the penalty proceedings on no concealment by him, the AO should have rendered a finding on the aspect of concealment - In the absence of any material to prove the concealment in the penalty order, the levy of penalty could not be sustained - the explanation must be preceded by a finding as to how and in what manner the assessee had furnished the particulars of his income and to impose penalty, element of mens rea was essential - penalty is thus liable be deleted - in favour of assessee.

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• 2012 (8) TMI 278
  Dismissal of the appeal - relying upon the letter of the AR seeking permission to withdraw on the ground that the matter is pending before the Settlement Commission - Held that:- No dispute on the fact that the assessee had filed an appeal on time, challenging the merits of the assessment and if the Commissioner (Appeals) has to go into the merits of the assessment, certainly, all the enumerated powers would have been available to an appellate authority to consider the merits of the appeal, including those matters which were not specifically raised before the Commissioner. The assessee herein sought for withdrawal of the appeal to go before the Settlement Commission, which dismissed the petition on the ground that there was no appeal pending a mandatory requirement as on the date of taking up a required application. Thus, on the question as to whether there could be withdrawal of the appeal by the assessee, the decision of the Apex Court reported in CIT v. Rai Bahadur Hardutroy Motilal Chamaria [1967 (4) TMI 8 - SUPREME COURT ] gives the answer that once the machinery is set in motion, the assessee cannot withdraw the appeal - after filing an appeal, the tax payer could not, at his option or at his discretion, withdraw an appeal to the prejudice of the Revenue - if a contingency of the nature contemplated u/s 245D(6) is to arise, then the power of the Appellate Authority under Section 251 to enhance the assessment thus available, the question of considering the withdrawal with or without objection from the Revenue does not arise - no hesitation in setting aside the order of the Tribunal and restoring the matter back to the file of the Commissioner of Income Tax (Appeals) for considering the assessment on merits and pass orders thereon in accordance with law.

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• 2012 (8) TMI 277
  Exclusion of the Fixed Deposit Receipts in the business profit for granting deduction u/s 80HHC -Miscellaneous Petition - Held that:- Provision of applicability of Explanation (baa) to Section 80HHC(4A)was brought in as effective from 1.4.1992 and applicable to the assessment year under consideration - the nexus between the business activity of the assessee and the receipt of interest was established and that they formed part of the profits of the business. - the assessee would be entitled to treat it as deductible and to be included in the business income for the purpose of Explanation (baa) to Section 80HHC(4A). Apex Court in ACIT vs. Vs. Saurashtra Kutch Stock Exchange Ltd. (2008 (9) TMI 11 - SUPREME COURT) held that the Tribunal was justified in correcting its mistake in exercise of its jurisdiction u/s 254(2) as a patent, manifest and self-evident error which does not require elaborate discussion of evidence or arguments to establish it, can be said to be an error apparent on the face of the record and can be corrected while exercising certiorari jurisdiction.

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• 2012 (8) TMI 276
  Disallowance of depreciation on goodwill - scheme of amalgamation - Held that:- As the assets and liabilities have not been valued in this case the consideration in the form of cancellation of investments cannot be said to have been made for purchase of assets at book value, when the fair value of each asset and liability is much higher - As the primary asset was land and a building thereon thus, the market value of this asset should have been considered. If the assessee had paid more than the fair market value of assets minus the fair market value of liabilities, then the company would have a case to claim that certain amounts were incurred for goodwill. In the absence of such an exercise there is no goodwill in the nature of commercial rights purchase by the assessee. This is only a book entry and it is only another way of disclosing the intrinsic value of the fixed asset of the company - the very purchase of goodwill is not proved by the assessee - Disallowance of depreciation is thus warranted - against assessee. Disallowance of claim of cessation of liability - Held that:- Provisions of sec. 41(1) will apply when the liability provided has ceased and assessee gets benefit whereas in this case in the amounts were provided as a liability to pay rent in respective assessment years as a ‘provision’ and the assessee has not paid the amounts due to disputes with the land owner and it was informed that no deduction was claimed/allowed in the respective years. Therefore, question of addition u/s 41 does not arise - as the amount has to be considered in AY 2008-09 as the relevant date on which the liability will crystallized and the liability does not pertain to the year under consideration - against assessee.

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• 2012 (8) TMI 275
  Reopening of assessment u/s 148 - addition u/s 68 for unexplained cash credit - Held that:- Re-opening of the assessment proceedings of the firm was because of the submission offered by one of its partner Rishabchand Bhansali, who claimed that an amount found in his books of accounts which was in turn advanced to some other person, was drawn by this partner from the account of the firm, is by none other than the partner of the very firm and it is in the wake of such a stand taken by the partner, there was an occasion for investigating the transactions of the firm, who had claimed the amount as its amount and which was the very version of the assessee and its partner. Issue of notice has been proceeded by a follow up action taken by the AO subsequent to the search of the premises of one of the partners and ultimately AO was of the opinion that a firm, which had the capacity to lend an amount of Rs.71,50,000/- that too, to one of its partners or others is reasonably presumed to have the taxable income and if the assessee had never disclosed its expenditure or otherwise earlier & if the officer records that he has reason to believe that assessee had taxable income and a non-filing of the return, is not merely suspicion and therefore in bringing to tax such amount by re-opening - no exercise by appellate jurisdiction under Section 260-A is warranted to hold that the very reopening cannot be sustained - against assessee.

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• 2012 (8) TMI 274
  Petition seeking rectification of the orders passed by the Tribunal on ground that subsequent decision of the Tribunal arrived at a contrary view - denial of deduction u/s 80IA on ground that business activity carried on by the assessee was not manufacturing activity - assessee engaged in business of manufacturing and filling of argon gas - denial - Held that:- The subsequent decision of the Tribunal arriving at a contrary view cannot render the earlier decision of the Tribunal suffer from mistake apparent on record particularly when the earlier decision of the Tribunal was delivered after sensibly considering the materials available before it and relying upon various decisions of the Apex Court and the jurisdictional High Court. Further Tribunal has dissected the activities involved in the processing/manufacturing/ filling of argon gas in cylinders and with the relevant materials on record came to a thoughtful conclusion that the applicant does not deserve the benefit u/s. section 80 IA since it was not carrying on any activity of manufacturing as envisaged under the Act, we are of the considered view that there is no mistake apparent on record to invoke the provisions of section 254(2) even though the decision of the Tribunal is subsequently held to be incorrect - Decided against assessee

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• 2012 (8) TMI 273
  Violation of principle of natural justice - no opportunity of being heard provided by CIT(A) to AO before deleting the addition - non-return of form ITNS 51 by A.O. - held that:- It is not in dispute that ITNS 51 was not returned by the AO, hence CIT(A) is not justified in presuming that the AO or his representative is not interested in appearing before CIT(A). It is also not in dispute that the date of hearing of the appeal is neither mentioned in ITNS 51 nor informed to the AO by a separate notice. Under these circumstances, without going into the merits of the case, we hold that the order passed by CIT(A) is in violation of principles of natural justice and hence we set aside the matter with a direction to him to give the AO a proper opportunity of being heard and to decide the issues before him afresh.

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• 2012 (8) TMI 272
  Addition u/s 69C - addition on account of low household withdrawals - Held that:- It is observed that assessee did not furnish the details of household expenses incurred. Even the study expenses of her son in USA were not properly indicated. When all the relevant facts and circumstances including the total family withdrawals and the income declared by the assessee are concerned, we find that the contention of the assessee towards household expenses is not capable of acceptance. Addition confirmed - Decided against assessee. Undisclosed income reflected in the form of gift - addition u/s 68 - Held that:- In case of gift of 5000 dollars it is found on perusal of the copy of bank statement of donor that there is no withdrawal for 5000 dollars from his account. We, therefore, uphold the addition. However in case of gift of 10,000 dollars, the same was made through foreign remittance to the assessee, hence addition to this extent is deleted - Decided partly in favor of assessee

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• 2012 (8) TMI 271
  Provision for Warranty claim - dis-allowance on ground that assessee was following the mercantile system of accounting - Held that:- As soon as the sale is made, the assessee incurs the liability on account of warranty claim even though the expenditure may be actually incurred in subsequent years. Therefore, the claim of deduction on account of provision for warranty claim is allowable as deduction in mercantile system of accounting and this view is also supported by the judgment of Supreme Court in case of Rotork Controls India (P) Ltd(2009 (5) TMI 16 - SUPREME COURT OF INDIA ). As regards quantum of claim the assessee had been consistently making claim @ 2% of sales and, in case, in the subsequent year, the provision made is found to be excessive, balance amount is offered for income and, in case, expenditure actually incurred is found to be more, further deduction is claimed in subsequent year. Since assessee has consistently followed the system and adjustments have been made in future, no reason is seen to interfere with the system being consistently followed by the assessee - Decided in favor of assessee.

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• 2012 (8) TMI 270
  Penalty u/s 271(1)(c) - expenditure claimed in relation to IPO issued many years ago dis-allowed on ground that company had been incorporated more than 10 years ago and claim made by the assessee was patently a wrong claim - Held that:- Case of penalty is to be evaluated under the provisions of Explanation -1 to section 271(1)(c) as per which, in case, in respect of any addition, the assessee offers Explanation which he is not able to substantiate and is also not able to prove that the Explanation is bonafide and all necessary details in relation to claim have been given, penalty is leviable. In this case, it has not been shown as to how claim can be made in this year u/s 35D or u/s 37 when the claim relates to issue of share capital which is of the nature of capital. Further, no material has been placed to substantiate the claim that it has been made on the basis of legal advice. Therefore, Explanation of the assessee on the facts of the case, in our view, cannot be considered as bonafide and penalty u/s 271(1)(c) is leviable - Decided against assessee

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• 2012 (8) TMI 269
  Treatment of capital gain earned by the assessee - AO stated Profit on Sale of Shares should not be treated as Business Income - Held that:- The assessee was investing in shares and securities and also applying for initial public offer. After holding the shares for reasonable period, whenever occasion arose, the assessee sold the same and offered short term capital gain on sale of shares - the assessee has earned capital gains only in respect of delivery based shares - existence of profit motive cannot be taken as decisive test for treating any share dealing transaction as business activity as investments are also made with the motive and intention on earning profits - where the assessee has shown income from delivery based transaction as capital gains and non delivery based transaction as business income that intention of the assessee was to make investment in shares and that the assessee can have two portfolios with the one for investment and other for share trading - Investment in shares were made for earning dividend income which was also offered by assessee in his return of income - in favour of assessee.

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• 2012 (8) TMI 268
  Best Judgement assessment - rejection of books of accounts - estimation of income - assessee contesting claim of various expenses not allowed by CIT - Held that:- It is found that direction of the CIT(A) to adopt 7% of the net profit on gross receipts is based on the decision of the ITAT in the case of Atulraj Builders Pvt. Limited. As CIT(A) has given reasons for his findings, no interference is called for. Further, when CIT(A) has directed to adopt the net profit rate of 7% , such estimation of profits covers all the expenses which are allowable u/s. 30 to section 37 of the Act i.e. all the related expenses are deemed to be allowed.

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• 2012 (8) TMI 267
  Validity of reopening of assessment u/s 148 - same set of facts - assessee contended change of opinion - Held that:- It is observed that actually the issue had been gone into by the AO who framed the regular assessment u/s 143(3). Details filed by assessee before AO, the manner in which the replies have been filed, along with supporting documents, simply prove that these could not have been filed suo moto. These details “had” been called for by the AO and in response to which these replies had been filed. Since the AO has initiated the reassessment proceedings on the same facts and on the same figures, as shown by the assessee in its books, we are of the considered opinion that no “tangible material” had been brought on record by the AO, which could have given him some valid reason to initiate the reassessment proceedings. Therefore, notice issued u/s 148 is held to be void, and consequently the proceedings are void ab initio - Decided in favor of assessee.

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• 2012 (8) TMI 266
  Interest on borrowed funds - dis-allowance on ground that same has been used to provide interest free loans and advances - assessee contended that interest free advances were made out of mixed funds consisting of borrowed and own funds - Held that:- When mixed pool of funds is utilised and no specific borrowed funds are used for investment and sufficient non-interest bearing funds are available, presumption is that investment is made out of own non-interest bearing funds. Deletion of dis-allowance upheld. See CIT vs Reliance Utilities and Power Ltd. (2009 (1) TMI 4 - HIGH COURT BOMBAY ) - Decided in favor of assessee. Employees’ contribution to PF and ESIC - dis-allowance - belated payment - Held that:- If the employee’s share of contribution is paid before the due date of filing of the return u/s 139(1), then no dis-allowance can be made. See CIT V/s Alom Extrusions Ltd (2009 (11) TMI 27 - SUPREME COURT) - Decided in favor of assessee. Dis-allowance u/s 40(a)(ia) - belated payment of TDS - Held that:- Amendment made u/s 40(a)(ia) requires to be treated with retrospective operation. Hence, since TDS has been deposited before the due date of filing of the return of income u/s 139(1), therefore, we delete the addition made u/s 40(a)(ia) - Decided in favor of assessee.

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• 2012 (8) TMI 265
  Deduction u/s 80IB - denial on ground that commercial area constructed in the project is more than 2000 sq. ft - reference made to amendment to section w.e.f. 1-4-2005 ceiling built up area of the shops and other commercial establishments included in the project to 5% of the aggregate built up area of the housing project or 2000 sq. ft. whichever is less - project of the appellant started in 1999 - first phase completed on 1-10-2005 including the commercial area - entire scheme approved by the Government of Maharashtra and SRA - Held that:- Since the project was started in 1999 i.e. prior to the amendment by the Finance Act, 2005 and the deduction u/s 80IB(10) is on the profits derived from the housing project approved by the local authority as a whole, the A.O. was not justified in disallowing the claim of the assessee and hence we are inclined to uphold the findings of the ld. CIT(A) in allowing the same - Decided in favor of assessee.

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• 2012 (8) TMI 264
  Deduction u/s 54F - Long term capital gains on sale of shares - assessee invested sale proceeds in purchase of row houses located at the ground floor and at the 1st & 2nd floor in joint name along with his wife - denial of deduction on ground that exemption u/s 54F is available in respect of one residential house and that to in the name of the individual - Held that:- It is found that AO rejected the claim without making any physical verification. Therefore, matter is restored back to the files of the A.O to verify whether the dwelling unit bears a single municipal number. The A.O. is further directed to verify whether the dwelling units have only one access and common entrance. If the answers to both the aforesaid questions are in affirmative, then the ground floor and the first and second floor cannot be regarded as a separate residential house and to be treated as a single dwelling unit entitled for exemption u/s 54F. Since, name of the wife has been added only for the sake of convenience and total consideration has been met from the account of the assessee. Moreover, provisions of section 45 of the Transfer of the Property Act which provides that the share in the property will depend on the amount contributed towards the purchase consideration and as in the present case, the total contribution has come from the assessee, the exemption cannot be denied. Short-term capital loss on redemption of units - date of realization of cheque issued for purchase of units taken for determination of period of holding whereas assessee contending for date of tendering of cheque to be taken - revenue contended period of holding to be less than 3 months and thus hit by provisions of Section 94(7) - Held that:- Date of tendering the cheque should be taken as the date of the purchase of units. Once this date is taken for consideration, then the provisions of section 94(7) would ultimately not apply on the facts of the transaction - Decided in favor of assessee.

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• 2012 (8) TMI 263
  Condonation of delay - firm of assessee was dissolved - order of CIT misplaced because of voluminous paper work involved pertaining to partnership period owning to dissolution of the firm and it could not be handed over to the counsel for filing the appeal – Held that:- Assessee had sufficiently explained the delay in filing the appeal before the Tribunal and had made out a case for condonation of delay in filing the appeal - in favour of the assessee

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• 2012 (8) TMI 262
  Penalty u/s 271(1)(c) of the Act - AO has made addition u/s 68 of I.T Act - AO has called for confirmation letters – CIT held that assessee has explained the reasons by saying that it fell into a debt trap and had no time to look into the affairs which itself is enough to prove that creditors are not genuine and evade tax thereon. It is also a case of filing of inaccurate particulars of income – Held that:- Order passed by the learned CIT(A) is a non-speaking order in the eyes of law – matter remanded back to the file of the learned CIT - assessee is allowed for statistical purposes.

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• 2012 (8) TMI 261
  Deduction under section 10A of the Act – Held that:- When the miscellaneous income was not relating to export and was reduced from the export turnover, it should have also been reduced from the total turnover for the purposes of working out the deduction under section 10A of the Act - if the income is to be reduced from the export turnover, the same should also to be reduced from the total turnover while working out the deduction under section 10A of the Act. In that view of the matter, we direct the Assessing Officer to reduce the miscellaneous income in question from the export turnover as well as the total turnover while computing the deduction under section 10A of the Act. Deduction under section 10A of the IT Act - Setting off of the loss of Mumbai STPI undertaking from the profits of the business of Bangalore STPI - Held that:- As the profits and gains under section 10A were not to be included in the income of the assessee at all, the question of setting off the loss of the assessee from any business against such profits and gains of the undertaking would not arise - as per section 72(2), unabsorbed business loss is to be first set off and thereafter unabsorbed depreciation treated as current year’s depreciation under section 32(2) is to be set off. As the deduction under section 10A has to be excluded from the total income of the assessee, the question of unabsorbed business loss being set off against such profit and gains of the undertaking would not arise - In favor of assessee.

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• 2012 (8) TMI 260
  Whether AO was justified in withdrawing the interest already allowed u/s 244A in proceedings u/s 154 of the Income-tax Act – Held that:- Appellant had been allowed interest u/s 244A of the Act on certain amount which was ultimately recovered from the appellant. The appellant is not disputing that position. Therefore, withdrawing interest allowed u/s 244A on this amount is just recovering from the appellant what had been wrongly given to it earlier. This is no case could be termed as penalizing the appellant - CO of the assessee is dismissed.

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• 2012 (8) TMI 259
  Business of share trading - sale of units other than units under section 54EA - assessee has shown long term capital gains and short term capital gains from numerous sale and purchase transactions of units of mutual funds - assessee contended that there is redemption of units of mutual funds and units redeemed were held by them as investment and not as stock-in-trade – Held that:- Merely because the purpose of redemption, according to the ld. Counsel for the assessee, is different i.e. other than business and the average period of holding is 413 days do not mean that the assessee is not carrying on business in Shares/Units and Mutual Funds of the Companies and others - CIT(A) was fully justified in treating the income from purchase and sale of shares/mutual fund/unit except units of Birla Sun Life Plus as income from business - assessee appeal rejected

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• 2012 (8) TMI 258
  Penalty notice u/s 271(1)(c) - Deduction u/s 80G – since the return was loss return claim was made u/s 37(1)– Held that:- Since there was loss as per returned income, deduction under section 80G was not admissible - assessee did not explain to the Income-tax authorities or to the Tribunal circumstances in which the mistake took place - Assessing Officer was justified in disallowing deduction and also levying penalty under section 271(1)(c) for furnishing wrong particulars of income when it was not proved that claim was made by mistake and there was no mala fide intention - assessee is liable to penalty Penalty u/s 271(1)(c) - disallowance of commission – Held that:- Disallowance has been deleted in the assessment of the assessee for assessment year 2006-07. However, the assessee did not prefer appeal in this year - Failure to file appeal and to obtain legitimate relief cannot lead to inference of penalty - even though the payment of commission has been disallowed in this year, the fact of the matter is that the assessee could have got this relief by following up the matter in the higher appellate forums - no penalty is leviable in respect of the disallowance of commission - appeal is partly allowed.

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• 2012 (8) TMI 257
  Transfer Pricing Adjustment - AO/Transfer Pricing Officer made addition to the total income of the Appellant on account of adjustment in the arm's length price of the software development and related services and customer support services transactions entered by the Appellant with its associated enterprise - disregarding the economic analysis undertaken by the Appellant and conducting a fresh economic analysis for the determination of the arm's length price in connection with the impugned international transactions and holding that the Appellant's international transactions are not at arm's length – Held that:- TPO erred in rejecting certain comparables considered by the Appellant in the comparability analysis by applying different quantitative and qualitative filters - most of the issues raised by the assessee have since been dealt with in the assessee's own case in the immediately preceding assessment year wherein the earlier Bench had remitted back the issues to the TPO for fresh consideration - it is a diversified company and, therefore, cannot be considered as comparable functionally with that of the assessee. There has been no attempt made to identify and eliminate and make adjustment of the profit margins so that the difference in functional comparability can be eliminated – matter remanded to TPO - assessee is partly allowed

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• 2012 (8) TMI 256
  Transfer pricing - Arm's length price - assessee used adjusted profit computed in relation to sales affected as appropriate PLI - TPO found that profits of comparable companies was 8.47 per cent as against that of assessee at 12.18 per cent and accordingly, he proposed Transfer Price adjustment - Commissioner held that 30 per cent of travelling and conveyance, legal and professional charges and communication expenses were extraordinary expenses – Held that:- Commissioner of Income Tax (Appeals) thus failed to follow rules of natural justice, as there was apparent violation of Rule 46A in as much as no opportunity was provided to the TPO - order of the Ld. Commissioner of Income Tax (Appeals) is non-speaking order as it does not give reasons for making adjustment to the operating results of tested party i.e. assessee - not clear how she arrived at the conclusion that 30% of expenses were extraordinary and required adjustment - assessee company had not claimed any adjustment on account of specified expense in the Transfer Pricing Study or documentation prepared under Rule 10D read with section 92D of the Act - matter remitted to the file of the Ld. Commissioner of Income Tax - assessee's cross objection stand allowed for statistical purposes.

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• 2012 (8) TMI 255
  Telephone and mobile expenses are treated as deemed FBT – No where from the reading of sub section 1 or sub section 2 of section 115WB, it is found that postage, email and courier have been treated to the part of FBT or deemed FBT - Postage and courier charges cannot be in any manner be treated as benefit of any kind to any employee as it is purely a business expense of the assessee - email expenses are also part of the business expenses as it does not give any fringe benefit to any employee, unless the company is paying for personal email expenses of the employees - assessee has rightly excluded the amount of expenditure debited under the head postage, email, lease line and courier from the FBT – in favor of assessee Travelling expenses - Held that:- assessee has offered sum of Rs 10,92,547/- under Section 115WB(2)(Q) and others under different clauses, which aggregates to Rs. 12,20,72,623/-. If the Assessing Officer would have carefully perused the said statement filed before him, then definitely he would not have come to the conclusion that there is a difference - Rate of 5% should be applied, in view of the provision of section 115WB©(1)(e), wherein 5% of the tax has been prescribed for expenses referred to in clause Q of sub-section 2 of Section 115WB - Assessing Officer is directed to apply the rate of 5% on the fringe benefit value offered by the assessee under the head tour and travel expenses - appeal of the assessee is allowed.

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• 2012 (8) TMI 254
  Trust - Disallowance of depreciation for a reason that cost of acquisition of the capital asset on which the claim of depreciation was made, was earlier allowed to the assessee as a deduction, while computing its income under Section 11 of the Income-tax Act – Held that:- Depreciation on assets of a Trust is to be deducted for the purpose of calculating income of a Trust - depreciation should be allowed even on assets, the cost of which had been allowed as exempt under Section 11 in the preceding years - appeals filed by the assessee stand allowed. Decision of Supreme Court in the case of Escorts Ltd. (1992 (10) TMI 1 - SUPREME COURT) distinguished.

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• 2012 (8) TMI 241
  Expenditure on foreign travel and medical treatment of the Managing Director and his wife - Tribunal treated it deduction u/s 37(1) - Held that:- Managing Director of the assessee company who resigned on 3.11.96 and the above said expenditure was incurred only after this date and that expenditure incurred by M.D. was reimbursed only due to the fact that the said person was main person in the family controlling the business of the assessee company - His wife, who accompanied him was a Director in the company - in the absence of any obligation on the part of the company to meet the medical and traveling expenses, the payment made could not be treated as one of commercial expediency & was purely a personal one - against assessee.

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• 2012 (8) TMI 240
  Denial of claim of deduction u/s 43B - assessee deposited the bonus amounts payable to the workers into a separate bank account - Held that:- The deduction is available only on the sum actually paid by the assessee on or before the due date for furnishing the return of income under Section 139(1) - deemed payment could not be treated as actual payment to qualify for deduction u/s 43B disagreeing with the submission of the assessee that depositing the amount in a bank, even if it be in a separate account, would satisfy the provisions of Section 43 B as actual payment - u/s 43 B only actual payment and not any notional or deemed payment that would be relevant for considering the deduction - against assessee.

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• 2012 (8) TMI 239
  Addition to the income under the head “income from house property” - amount paid by the tenants to DSL was nothing but a part of the rent and the same should be added to the rental income received by the assessee - Held that:- No case has been made out to prove that the entire transaction was the result of a collusive arrangement to divert the income which was in truth and fact earned by the assessee. The assessee being the owner of the property, is assessable under Section 22 only in respect of the annual letting value of the same as the services for maintenance of the common areas and facilities were found to have been actually rendered by DLS and not by the assessee. DLS may be part of the same group, but it is a separate corporate entity carrying on business as service provider for maintenance of properties. The arrangement between the tenants and DLS is a part of the business transaction entered into in the regular course of the business of DLS - assessee firm has not been found to have actually enjoyed the service charges paid to DLS and had no domain over the recovery of the maintenance charges nor had any role to play in the business activities of DLS - in favour of assessee.

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• 2012 (8) TMI 238
  Treatment of unutilized balance available in "consumer deposit account" - AO added the unutilized balance of such account to the total income of the assessee - Held that:- Considering the sale agreement produced by the assessee shows that these amounts are not the part of the total sales consideration and also the balance sheet disclosing how the amounts were treated as liability in the books of accounts - the customer deposit accounts are with respect to various services in the apartments, like power connection, water connection, Cable TV connection etc which are necessarily to be taken out by the individual owners of the apartment after the respective apartments are certified fit for occupation by the local authority - pointing of assessee to the fact that after utilization what remains is refunded completely to the customers the issue requires a second look at the hands of the AO - issue is thus remanded back to the AO for fresh consideration

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• 2012 (8) TMI 237
  Application for rehabilitation scheme to BIFR - Department claimed that relief flowing from Section 72A should not be granted by the BIFR itself without considering by the department - Held that:- A reading of the Section 32 shows that in case of amalgamation of a sick industrial company with another company, the provisions of Section 72A would apply in relation to such amalgamation, with the modification that the power of Central Govt. under that section may be exercised by the Board, without any recommendation by the specified authority referred to in that section - As the amendment in Section 32 had not been made by the Parliament the provision continues to dictate that the power of the Central Government under Section 72A shall be exercised by the Board without the recommendation of the specified authority even though under the amended Section 72A, no role is prescribed to the Central Government with or without the recommendation of the specified authority - thus it cannot be said that the BIFR fell into an error by directing the concession to be granted itself, rather than requiring the Income Tax Officer to examine this aspect of the concession - in favour of assessee.

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• 2012 (8) TMI 236
  Legality of allowing the claim for deduction by way of filing revised statement of income during the assessment proceedings - revenue contended that since the assessee has not claimed the deduction in its original return, the assessee cannot claim any benefit which the assessee has forgotten to claim while filing the return - Held that:- It is found that TDS on the alleged payment was deposited on 19.05.2007 i.e. in the F.Y. 2007-08 relevant to the AY under consideration. Even by the pre amendment provision of section 40(a)(ia), the said payment was allowable in the year of payment of TDS i.e. the year under consideration. Even if no revised statement of income was filed , the claim was allowable as the deduction has been claimed on the payment of TDS . We do not find any reason to interfere with the findings of the CIT(A) - Appeal of revenue dismissed. Employees’ contribution to PF and ESIC - dis-allowance - belated payment - Held that:- If the employee’s share of contribution is paid before the due date of filing of the return u/s 139(1), then no dis-allowance can be made - Decided in favor of assessee. Following precedent year decision deduction is allowed in respect of interest paid to the parent company and depreciation on expenses under the head R & D treated as capital expenses is allowed - Decided in favor of assessee.

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• 2012 (8) TMI 235
  Deduction u/s 36(1)(viii) - banking company - CIT, invoking his jurisdiction u/s 263, denied deduction on ground that assessee did not satisfy this initial condition of being a financial corporation - validity of revisionary proceedings - Held that:- In case of Union Bank of India vs ACIT (2012 (6) TMI 500 - ITAT MUMBAI ) it has been held that “government company” are financial corporation within the meaning of proviso to section 36(1)(viii) and thus entitled the bank to deduction u/s 36(1)(viii) even in the years up to 2006-2007. Hence, when one of the possible views has been taken by the Assessing Officer, the CIT cannot exercise his jurisdiction u/s 263 on that aspect of the matter. However, revisionary order is upheld in respect of erroneous deduction provided by AO in case for provision for bad and doubtful debts. Matter is restored back to file of AO for the purpose of computation of deduction u/s 36(1)(viii) - Appeal partly allowed. since more than 51% shares of the assessee-bank were held by the Central Government, it was a “government company” as defined u/s 617 of the Companies Act and as such it became financial corporation within the meaning of proviso to section 36(1)(viii). On the contrary, the ratio in the case before the Cochin Bench of the Tribunal is not attracted because there the assessee was a foreign bank, namely, Federal Bank Limited, which obviously is not a Government company as per the Companies Act, 1956.

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• 2012 (8) TMI 234
  Search and seizure - no opportunity of cross examination of the persons provided to assessee, based on whose statements substantial addition had been made on account of disallowance of deduction u/s 80IB(10) and other dis-allowances - Held that:- The request for cross examination had been made only before CIT(A) which had not been acceded to by CIT(A). In our view, order of CIT(A) confirming various additions made by AO without allowing the assessee an opportunity of cross examination of the parties whose statements had been used against the assessee cannot be sustained. Order of CIT(A) set aside and matter restored back with a direction to allow the assessee opportunity of cross examination by remanding the matter back to AO.

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• 2012 (8) TMI 233
  Plea for condonation of delay in filing appeal - assessee contended that delay in filing the appeal is mainly attributed to medical reasons, death of parents, family disputes and ignorance of law - Held that:- Considering the entire gamut of facts, the available material on record and averments of the assessee, which is supported by an affidavit, photographs and medical reports, in the absence of any contrary materials brought to our notice we deem it fit and proper to hold that the assessee had bona fide and sufficient reasons for delay in filing the appeals. In the interest of substantial cause of justice, such delay is condoned - Decided in favor of assessee.

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• 2012 (8) TMI 232
  Deduction u/s 80IB - Housing project - denial of deduction on ground that since assessee has sold plot of land to the customers and no residential unit was sold and only after transferring the plot, the assessee has constructed the building as a contractor, hence deduction is available to builder and not contractor - Held that:- Merely because the assessee had entered into agreement for sale of plot so as to enable the customer to have a loan facility from bank and other financial institutions will not go to prove that the assessee has not undertaken any construction. Not only as per project approval letter but also as per the certificate issued by the Office of Sub Divisional Officer, the assessee has not only conceived the entire housing scheme but also executed the work as per approved plan. Further, assessee had entered into comprehensive sale agreement with the customers for the purpose of sale of complete residential units. As per the agreement, the possession of residential unit remained with the assessee till final instalment is paid. In view of these facts, we do not find any merit on the part of AO’s action for treating the assessee merely as a contractor rather than a Developer. However, since revenue alleged that said project allowed commercial complex, we restore this aspect to the file of the AO to physically verify the project and if he finds that no commercial unit is constructed, he should allow the claim of deduction u/s 80IB(10) - Decided in favor of assessee for statistical purposes.

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• 2012 (8) TMI 231
  Non applicability of TDS provisions u/s 194C & consequently the charging of interest u/s 201 & 201(1A) - the assessee is a CONSORTIUM - Held that:- Considering facts of the present cases where the contract amounts are received by the assessee-JVs, which were transferred to one of the respective constituents, who actually executed the contract and the income of the JV was treated as NIL - CIT(A) opined the assessee as the one regularly making TDS on the said contract amount and in fact, fact of the matter in these cases is that the assessees made TDS under protest subsequent to survey, which is completely ignored - CIT(A) merely dismissed the assessee’s grounds relying on the assessee’s compliance in effecting TDS but did not discuss the fact that made assessee to effect TDS, i.e. events that occurred during the survey operations. CIT(A) should have given attention to the grounds raised before him and gone to the root of the matter as to why the assessee is aggrieved on the issue of the requirement to deduct TDS and the liability on the assessee etc. The contract sums were taxed subsequently in the hands of one of the constituents of the assessee-Consortiums and to avoid double tax, the said amounts were never taxed in the hands of the assessee - consortium. This is a relevant fact that the CIT(A) should have considered, while deciding as to why one must make TDS, when the JV - assessee are created to procure a contract and never to execute the same by themselves with the intention to earn income - the objection raised by the Learned Departmental Representative about the requirement of fresh adjudication on the said issue relating to liability to make TDS under S.201(1) is required to be approved - matter is restored to the file of the first appellate authority for fresh adjudication - in favour of assessee for statistical purposes.

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• 2012 (8) TMI 230
  Addition on account of discount allowed by the State Government on early repayment of deferred sales tax, loan holding the same to be income of the assessee for the year and not a capital receipt as claimed by the assessee - difference between the payment made against the future liability on account of deferred sales-tax is a capital receipt and could not be treated as a remission of cessation of liability assessable under section 41(1)(1) of the Act - addition made by the Assessing Officer in the instant case by invoking the provisions of section 41(1) of the Act is untenable In favor of assessee Addition on account of debit balance written off on reconciliation Held that:- Claim is on account of small balances, which were outstanding from the various customers on account of rejections, counting shortage etc., Since the amounts were not recovered, the same have been written off as irrecoverable - lower authorities were not justified in rejecting the claim of the assessee - ground raised by the Revenue is accordingly dismissed. Guarantee commission paid to the Directors of the Company Held that:- What the company loses by way of guarantee commission, it would gain by saving of interest and avoidance of restrictive covenants. The payment of guarantee commission was, therefore, commercially justified - payment, therefore, could not be called in question as being influenced by any extra-commercial considerations and it must be taken that it passed all the test laid down in section 40(c) - whole of the guarantee commission shall be allowed - guarantee commission was not excessive and was an allowable deduction - ground raised by the Revenue is accordingly dismissed. Applicability of Clause (ii) of sub-rule(2) of Rule 8(D) of the I.T. Act - funds of the assessee are from a common pool and there was no exclusively pertaining to capital expenditure on purchase of equipment - assessee received Dividend income which it claimed as exempt - assessee has an outstanding loan - on which it has paid interest Held that:- Matter remanded to the file of the AO for making reasonable disallowance under section 14A r.w. Rule 8D in the light of the decision of the Hon ble Bombay High Court in the case of Godrej Boyce Manufacturing Company ltd. (2010 (8) TMI 77 - BOMBAY HIGH COURT ) - Assessee is Partly-allowed.

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• 2012 (8) TMI 229
  Rejection of books of accounts - assessee has not been submitting the daily report to the Market Committee which were required to be submitted as per agreement with the Market Committee - AO accordingly, rejected the books of account by invoking the provisions of section1 145(3) of the Act As regards the employment of 34 persons - no material in the possession of the AO to support the factum of employment of 34 alleged employees by the assessee - no work done by them. There was no question of any payment of any salary to them for any alleged work in the contract business. No collection of market fee or RDF has been brought on record by the AO – AO not justified in rejecting books of accounts of the assessee As regards the commission income - assessee was not required to maintain books of account in respect of collection of Market fee and RDF and since the payments are collected in the name of Market Committee, they are deposited with the Market Committee only. All the details for the collections which were tallied weekly were available with the AO – Held that:- Collections made from commission agents till the amount of the contract entered is not the income of the assessee and, therefore, the assessee is not required to maintain books of account with regard to income of other persons. Therefore, the books of account to that extent cannot be rejected by the A.O - no estimation of income can be made Assessment under section 144 of the Act – Held that:- AO is not justified in making any addition to the income of the assessee, even if the books of account are rejected u/s 145(3) of the Act, on the basis of the material on record, which was available before the AO as well as before the ld. CIT(A). The Ld. CIT(A) is not justified in sustaining the addition on this account. Penalty under section 271(1)(c) of the Act - on concealing the income and furnishing inaccurate particulars of income – Held that:- When no addition remains in pursuance of order mentioned hereinabove, no penalty u/s 271(1)(c) can be sustained - no infirmity in the order of the ld. CIT(A), who has rightly deleted the addition

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• 2012 (8) TMI 228
  Claim for deduction u/s 80HHC of the Income-tax Act - in relation to the DEPB amount – alleged that assessee not fulfilled the conditions stipulated in the said third proviso to sec. 80HHC(3) of the Act – Held that:- Assessee will be liable to tax and will be entitled to exemption from tax according to the strict language of the taxing statute and if as per the words used in explanation (baa) to Section 80HHC read with the words used in clauses (iiid) and (iiie) of Section 28 - Assessing Officer is directed to compute the deduction under Section 80HHC in the case of the appellants in accordance with the judgment in the case of Topman Exports (2009 (8) TMI 827 - ITAT MUMBAI ) - assessee are allowed for statistical purposes.

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• 2012 (8) TMI 227
  Capital gain or business income - Trading of shares – assessee holding shares as a investment – Held that:- Assessee had submitted the explanation that he is mainly doing the business of poultry farm but also doing business in trading of shares - AO has not appreciated the explanation of the assessee that he has made the investments also as available at PB-40 and such details were available with the AO as well as before the CIT(A) - if any shares after purchase are sold to pay off the loan then the intention of making the investment cannot be held to be as an intention to trade in shares to hold the same as stock-in-trade - AO is not justified in treating short-term capital gain declared by the assessee as business income - appeal of the assessee is allowed

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• 2012 (8) TMI 226
  Addition made u/s.40A(2)(b) - CIT(A) deleted the additions - Held that:- The A.O. made hypotheticated calculation in assessment order without any base and material. The addition was made on presumption. In both years, there is no nexus between the borrowed fund and interest free loan - The assessee did not take substantial interest in the business of the specified person or the specified person has a substantial interest in the business of the assessee - A.O. has not brought on record any evidence regarding the assessee has substantial interest in M/s. Yuletide Industries Private Ltd. and M/s Covenent Investment Co. Ltd. and vice versa. - as interest free loan given to alleged sister concern were part consideration of service rendered by both the companies. Therefore, in both the years, the order of ld. CIT(A) are confirmed and appeal of the revenue are dismissed. Adjustment of Excise Duty on purchase, sales and closing stock u/s 145A - Held that:- Considering amendment w.e.f. 01.04.1999 in Subclause b of Section 145A adjustment to include the amount to any tax, duty, cess or fee actually paid or incurred by the assessee to bring goods to the place of its location and condition as on date of valuation is required to adjust as per law by the A.O - A.O. is directed to make suitable adjustment as per law.

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• 2012 (8) TMI 225
  Dis allowance of Peripheral Development Expenses - CIT(A)allowed partial relief - Held that:- As suggested by the Committee being a Government Body, the ITAT, Cuttack Bench in assessee’s own case for AYs 1999-2000 and 2002-03 has held such expenditures allowable u/s.37 as revenue in nature by placing reliance on various judicial pronouncements on the issue. The learned CIT-DR could not bring any decision contrary to the above. Therefore, the facts and issue being the same in the present Assessment Year the expenditure claimed under the head “Peripheral Development Expenses” is allowable u/s.37 - in favour of assessee. Computation of deduction u/s.80HHC - Non inclusion of sales tax and Excise Duty while arriving at total turnover by assessee - Held that:- Direction to exclude Excise duty and Sales tax from the total turnover for the purpose of deduction of Section 80HHC as decided on in the case of CIT v. Lakshmi Machine Works [2007 (4) TMI 202 - SUPREME COURT]that excise duty and sales tax were includible in the "total turnover", which was the denominator in the formula contained in section 80HHC(3) as it stood in the material time - against revenue. Deduction of 90% of the entire incomes credited to the P 76 lakhs as Misc. Expenses when the AO sought to disallow part of the expenses not pertaining to the business which the learned CIT(A) reduced heavily - to put a bar on such practice, a token disallowance has been made by the CIT(A) - against assessee. Disallowance of the loss claimed on revaluation of non- moving stores & spares - CIT deleted it - Held that:- If an item is lying in the inventory either unsold or unutilised, if there is a change in the intrinsic value, an assessee can revalue such assets, and claim the loss on account of revaluation as a charge against profits as decided in vs. CIT [1953 (10) TMI 2 - SUPREME COURT]- in favour of assessee. Dis allowance of addition of payment under benevolent Scheme - CIT deleted it - Held that:- Deleted by ITAT, Cuttack Bench in assessee’s own case for the AYs 1993-94 to 1998-99 & 2000-01. thus follow the same - decided in favour of assessee. Addition being donation made to Sports Authority of India - Held that:- Following the CIT case decided of Cloth & General Mills Co. Ltd [1978 (4) TMI 75 - DELHI HIGH COURT] CIT(A) has deleted the impugned addition in concluding that the payment to Sports Authority of India is not in the nature of donation but in the nature of advertisement and publicity, which is an allowable expenditure - Whenever newspaper coverage or radio or TV coverage took place, the name of assessee would be mentioned as one of the sponsors, thus the expenditure is therefore clearly for the enhancement of the brand value and image of the company.

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• 2012 (8) TMI 224
  Capital gain – sale of land - whether the long-term capital gains on sale of land was to be assessed in the hands of the partnership firm or in the hands of partner of the assessee firm – Held that:- Late J.M. Sharma had carried on a business. On his death, eight persons consisting of four sons and three daughters and his wife became the legal heirs of his estate. The business was carried on by his four sons by constituting a firm - land property belonging to his estate was not specifically assigned to the partnership firm either by act, deed or conduct - shares of two partners were transferred to the remaining partners by stating specific consideration and finally one of the partners sold his share to the remaining partner and thereby ultimately the property came into the individual hands of Shri Jayant Kumar Jethalal partner of the firm - property belonged to Shri Jayanthkumar Jethalal as his individual property and, therefore, the capital gain is assessable to tax in his individual capacity. The long-term capital gain cannot be assessed in the hands of the firm - long term capital gain is assessable to tax in the hands of the partner - against Revenue

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• 2012 (8) TMI 223
  Penalty u/s 158BFA (2) - addition made is on account of various electronic goods found during search from the residence of the assessee – Held that:- Assessee is not entitled to complete immunity from payment of penalty on the undisclosed income returned by them under clause (a) of section 158BC - when the assessee consistently failed to prove his bona fides at every stage in quantum proceedings and even in penalty proceedings, apparently onus laid down upon the assessee is not discharged and consequently, the levy of penalty under section 158BFA(2) of the Act is justified with reference to the undisclosed income determined by the AO to be in excess of the returned income

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• 2012 (8) TMI 222
  Charitable trust - denial of exemption under section 11 of the Act – Held that:- In the absence of any such cancellation of registration under section 12A - there is no justification in denying the exemption allowable under section 11 to the assessee while completing the assessment - assessee is allowed for statistical purposes.

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• 2012 (8) TMI 221
  Deduction under section 80-IB - assessee has withdrawn its claim of deduction under Section 80IB, which was accompanied by revised return – assessee again claimed deduction - Held that:- Conditions required for claiming deduction under Section 80IB stands fully satisfied and all such evidences and enquiry as done by the AO will not render the claim of the assessee infructuous - Once these conditions are fulfilled, the assessee is entitled for statutory deduction or claim to which he is entitled to. Mere consent or acquiescence by the assessee cannot take away the otherwise a legitimate claim to which he is entitled to - assessee has been held to be carrying on manufacturing activities of pre-fabricated steel buildings in the subsequent years for which the claim under Section 80IB has been allowed by the Assessing Officer himself in the order passed under Section 143(3) read with Section 148 - direct the Assessing Officer to allow the claim for deduction under Section 80IB in the impugned year also as have been allowed in the subsequent years by the Department, as there is no change of facts and circumstances.

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• 2012 (8) TMI 220
  Penalty u/s. 271(1)(c) - addition/disallowance made by the Assessing Officer under the normal computation of the Act when the assessment has been finally made and tax has been paid u/s. 115JB – Held that:- Penalty u/s. 271(1)(c) in the case of the assessee cannot be imposed, because there was no tax sought to be evaded because the additions in respect of which penalty have been imposed, was made while computing the total income under the normal provisions of the Act and finally the income of the assessee was determined on the basis of the book profit u/s. 115JB Penalty u/s. 271(1)(c) - For concealment of income - Assessee claimed short-term capital gain on sale of shares - However, Assessing Officer rejected said claim and treated gain as speculative business income under section 73 – Held that:- Appellant company was having shares in the nature of 'investment' and accordingly they were shown under the head "investment" in the balance sheet and gain on sale of such shares was bonafidely shown under the head "capital gain" - mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee - appellant cannot be held to be guilty of either furnishing of inaccurate particulars of income or has concealed particulars of income – penalty cannot be levied – In favor of assessee

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• 2012 (8) TMI 219
  Allocation of common expenditure - shipping business and non-shipping business - assessee preferred to offer income under tonnage tax scheme under section 115VJ of the Act, under which the income is assessed on some fixed basis without referring to the book results - AO identified the common expenses and allocated it in the ratio of gross receipts between the two businesses - Commissioner (Appeals) confirmed order of Assessing Officer – since assessee, apart from offering oral submissions, had failed to substantiate its claim that it had allocated common expenses in a fair and reasonable manner, order of Commissioner (Appeals) confirming Assessing Officer's order was to be upheld Disallowance under section 40(a)(ia) of the Act – Held that:- assessee is entitled to claim deduction of expenses if the TDS deducted there on is remitted before the due date for filing the return of income - assessee paid the entire amount of expenditure subjected to disallowance under section 40(a)(ia) of the Act before the end of the financial year and hence the provisions of sec.40(a)(ia) cannot be invoked on them - claim is not borne out of the orders of tax authorities - matter remanded to the file of the Assessing Officer

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• 2012 (8) TMI 218
  Whether Brand Usage Rights is revenue expenses – Jurisdiction of DRP - disallowance of depreciation on "intangible assets, Transfer of Pricing Adjustment u/s 92CA(4) of the Act, disallowance of depreciation on goodwill u/s 32 (1)(ii), disallowance of share issue expenditure and disallowance of expenditure u/s 43B of the Act. - Held that:- On the similar facts and circumstances of the case Tribunal has set aside the matter to the authorities to pass fresh assessment order in conformity with the provisions of the Act - in view the rule of consistency - matter remanded back to the file of the DRP/AO - assessee's appeal stands partly allowed for statistical purposes.

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• 2012 (8) TMI 217
  Purchase of software product - Indo-Singapore Treaty - assisting in modification and implementation of software purchased treated as a royalty payment –Held that:- Taxability of amount u/s 9(1)(vi) of the Act has not decided - if taxability is not attracted as per section 9 of the Act, then notwithstanding any positive provision in the DTAA including such payment within the ambit of 'Royalty' or 'Fees for technical services', no tax can be charged on the total income of the non-resident - if the charge is not attracted, there can be no question of any deduction of tax at source or treating the assessee as in default - matter is restored to the file of the CIT for examining - appeals are allowed for statistical purposes

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• Customs

• 2012 (8) TMI 252
  Challenge the Show Cause Notice as issued without jurisdiction and authority - Held that:- The final impugned order has been passed without addressing the question of jurisdiction, is an order which is not sustainable, under the statute. The impugned order is set aside and all the appeals are allowed by way of remand to the adjudicating authority to reconsider the issue afresh.

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• 2012 (8) TMI 251
  Import of goods – related person - goods imported by them were referred to special valuation cell for valuation of the goods – Held that:- Therefore, the extra discount received by the appellant is not justifiable and the Commissioner (Appeals) has gone differently on other grounds and held that value has to be arrived as per Rule 7/8 of the Customs Valuation Rules, 2007 which is not justified as it is neither the issue nor prayed before him. – matter remanded back.

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• 2012 (8) TMI 215
  Valuation - import of old/used digital multifunction print and copying machines. - goods were not accompanied by the Chartered Engineer's certificate from the load port and hence the value has been re-determined by ascertaining the value from a local Chartered Engineer. The appellants have also, accepted the value determined by the customs authorities as per the assessment of the local Chartered Engineer - The valuation done by the adjudicating Commissioner is upheld. Penalty – confiscation – redemption fine - Import of Secondhand Multifunctional Photocopiers - import licensing restrictions - violation of the import restriction – Held that:- Repeated offences and that the respondents are repeatedly importing second-hand digital photocopiers without licences, undervaluing the same and in one case even the quantity was found to be mis-declared - fines and penalties imposed by the original authorities in these cases of repeated offences are not unreasonable - no justification for reducing the fine imposed

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• 2012 (8) TMI 214
  Project import - Inclusion of value of drawings and designs – Held that:- department wants to include the value of the drawings and designs in the value of the machinery which has been assessed to duty under Project Imports under Heading No. 9801; at the same time, they do not want to give the benefit of Project Imports for drawings and designs on the ground that, if that value is included it would exceed the value recommended for Project Imports by the sponsoring authority - Drawings and designs are rightly classifiable under Heading No. 49.06 and the benefit of duty-free import under this Heading has to be extended to the goods in question - entire demand is unsustainable in law

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• Corporate Laws

• 2012 (8) TMI 250
  Petition for sanction of a Scheme of Arrangement - Held that:- Transfer of authorised capital and consequent increase in the share capital of the Resultant Company has been undertaken under Section 391 to 394 of the Companies Act, which are a complete code. Thus, having duly complied with the provisions of Section 391 to 394 and obtained due consent from the shareholders and creditors, the Petitioner Companies viz., the Demerged Company and the Resulting Company have duly adhered to the provisions of the Act - the Transferor Company/Demerged Company has increased its authorised share capital after having duly complied with the provisions of the Act and the Bombay Stamp Act, 1958 and payment of registration charges and stamp duty. Reconstruction entails business-wise bifurcation, which is within the purview of the arrangements contemplated under Sections 391 to 394 of the Companies Act and the same is permissible - Once the Scheme of Arrangement falls squarely within the four corners of this section, it can be sanctioned, even if it involves doing acts for which the procedure is specified in other sections of the Companies Act - Having once duly paid the amounts on periodic increases in share capital, further duty and charges cannot be levied when part of the same share capital becomes the share capital of the Resulting Company by effect of law - that none of the objections raised by the Regional Director are sustainable - Scheme of arrangement / demerger is allowed.

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• 2012 (8) TMI 213
  Mr. Kishore Rajaram Chhabria as the Managing Director of SWC had misused his fiduciary relationship by causing the take over of BDA, which was always considered as a subsidiary of SWC - Held that:- There is only one person behind the corporate bodies constituting Mr. Kishore Rajaram Chhabria’s group of companies - The distillery of BDA at Aurangabad was divested from SWC and its network of subsidiaries and group companies. However, in the suit, the then plaintiffs were unable to obtain any interim order with regard to this distillery, even up to the stage of Supreme Court - that if Mr. Kishore Rajaram Chhabria and his group of companies thought that by the schemes of merger and demerger the original cause of action of SWC was being given up, they were sadly mistaken as settlement between two individuals cannot bind any body corporate. On examination of the schemes of merger and demerger it can be concluded they were schemes between body corporates and no clause suggests that the cause of action of the original plaintiffs was extinguished. If the shares of BDA or its distillery were to be transferred to another company or group of companies, that transfer was subject to the original cause of action which the original plaintiffs had against Mr. Kishore Rajaram Chhabria and BDA. That had to be expressly given up at the time of transfer of undertakings and other assets under the schemes - there is devolution of interest of the original plaintiffs upon the applicant, United Spirits Ltd granting them leave to prosecute the suit in place of the original plaintiffs.

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• FEMA

• 2012 (8) TMI 253
  Foreign exchange was acquired by the Company - bank-to-bank transaction under a Letter of Credit - contravention of the provisions of FERA, 1973 - Held that:- The Appellant Parag Dalmia stated that notice to the company is not notice to the Appellant especially when the company had been wound up - though the offence was allegedly committed on 28th April, 1987, Appellant Parag Dalmia was sent summons for the first time to appear on 16th July, 2001 & till that date no summons were ever issued to him. This belated issuance of summons after 14 years has caused serious prejudice to him as then nothing was available with him to show that he had no role to play in the alleged offence. He neither has the bills of entry nor the postal refer of 1987 - Since the Appellants Parag Dalmia was only an ex-employee, he had no access to the documents and thus he could not file any document in reply to the opportunity notice. Merely because a person is a Director, he cannot be held liable and the onus is cast on the prosecution to prove that the Appellant was responsible and in-charge for the day-to-day functioning of the Company. As per Section 68(1) the initial burden is on the prosecution which is not discharged here. That extensive efforts were made to trace out the address of the company and various letters were written to the bank, however, it may be noted that the least that was required from the Respondent was to find out from the record of the Registrar of Companies about the address of the company - As serious prejudice is caused to the Appellant after more than 14 years in leading his defence this is not a case of delay on account of the acts of the Appellants but because of a casual approach adopted by the Respondent - in favour of assessee.

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• 2012 (8) TMI 216
  Imposition of penalty - whether the appellant had violated Section 9(1)(b) of FERA - transaction to sell the flats to the two directors were non resident Indians - Held that:- Apart from the statement of the appellant recorded to the effect that the two directors in whose name the receipt was received were persons resident outside India there is no material on record to suggest that on the date of receiving the amount, the appellant was aware of this fact and even from the statement recorded also cannot be inferred that the appellant on the date of issuing the receipts was aware of this fact. The Appellate Tribunal has drawn adverse inference against the appellant solely on the ground that the appellant has not produced the agreement entered into by the appellant with the two directors as apart from issuing receipts, no agreement was entered into - it was adverse on the part of Tribunal to arrive at a conclusion that an agreement must have been entered into by and between the appellant and the two directors and impose penalty of Rs.34 lacs upon the appellant - the Prothonotary and Senior Master is directed to refund the amount of Rs.7.50 lacs with accrued interest to whom the assessee has deposited with the direction of Court - in favour of assessee.

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• Service Tax

• 2012 (8) TMI 288
  Denial of refund of service tax - notification No.41/07 - port services - Held that:- What is required to be seen whether service tax was paid for the service rendered under the admissible services category or not. If the service tax has been paid under business auxiliary service, appellant may not be eligible. Before sanctioning refund in respect of services provided, the category of service and for which service tax has been paid may be verified from the invoice or any other document that may be produced by the appellants before a decision is taken. GTA service - Refund claim cannot be rejected on technical grounds like invoices issued by transport agencies do not contain all the details. If the appellant is able to correlate the export goods with the documents supporting service tax payment, such a refund should be granted. GTA service received for transportation of empty container - it cannot be denied that the transport of empty container to the exporter's premises was necessary and was received in relation to exported goods - The matter is remanded to the original adjudicating authority for fresh consideration

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• 2012 (8) TMI 287
  Refund of unutilized CENVAT credit of service tax paid on certain taxable services which were claimed to be input services availed for export of output services. - whether the necessary nexus existed between the input services and the output service for the purpose of refund of the CENVAT credit taken on the input services. - power of remand by the Commissioner (Appeals) - held that:- The learned Commissioner (Appeals) did not have the power of remand when the order was passed. - At the same time, the reason found by the learned Commissioner (Appeals) for de novo adjudication of the refund claim has to be appreciated. - To enable the original authority to do so, we set aside the impugned order and allow this appeal by way of remand.

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• 2012 (8) TMI 286
  Taxability of incentives received by an advertising agency services - bad debt and cash discount - held that:- Incentive is a receipt for appreciation of performance of services provided. How such forms part of taxable service remained unexplained. - Decided in favor of assessee. So far as the bed debt is concerned, that was not a consideration received and non receipt of consideration when becomes bed debt, by its nature that do not enter into tax ambit. Therefore, that shall not be taxed. In so far as cash discount is concerned, no logic is shown to us as to how there was understatement of consideration when the discount amount was not received towards consideration. - Discounts not being received not taxable.

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• 2012 (8) TMI 285
  Non comply with condition No.1 (ii) of Notification No.42/2001 - claim the refund rejected - Application seeking waiver of pre-deposit and stay of recovery - Held that:- As the assessee was required to export the goods within six months from the date on which the goods were cleared from the factory for export, the appellant cleared the goods for export on 21.11.2008 and exported it on 14.12.2008 after obtaining the necessary “let export” order from the proper officer of customs,thus, the relevant condition of the Notification was complied with and hence the assessee could claim the refund - grant of waiver of pre-deposit and stay of recovery.

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• 2012 (8) TMI 245
  Demand of Service Tax – denial of benefit of exemption under Notification No. 6/2005-ST - demand on the ground that the appellant has availed CENVAT Credit on input services and capital goods – Held that:- Once the appellant avail CENVAT Credit on the capital goods received in the premises from where he provides taxable service, the benefit of exemption under Notification No. 6/2005-ST, would not be available - appellant is directed to deposit full amount of Service tax

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• 2012 (8) TMI 244
  Catering services - Denial of exemption for small service providers as per Notification No. 6/05-ST - appellant submits that for the purpose of calculation, Revenue is taking into account the entire receipts of the appellants whereas the taxable value should be taken after allowing abatement of 50% in terms of Notification No. 1/-90ST – Held that:- There is provision in the Notification to the effect that value of services exempted by other Notification should not be taken into account for calculating the aggregate value under Notification No. 4/07-ST - argument that they were providing only tea and snacks and such items were not substantial and satisfying mean also to be misplaced because the canteen was operated for providing meals to employees of AIL and tea and snacks were only items served at times intervening between that for substantial meals and that was not the main service provided – pre-deposit waived

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• 2012 (8) TMI 243
  Refund – Exemption of service tax paid by them under Notification No. 09/2009 as amended by Notification No. 15/2009 - Held that:- Adjudicating authority denied the refund claim on the ground they are not entitled to claim refund prior to the period, on which date they got the approval from the concerned authority - remanded the matter to the adjudicating authority to consider the claim filed by the respondent to examine whether the respondent has fulfilled the other conditions of the above said notifications or not

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• 2012 (8) TMI 242
  Installation, Erection and Commissioning Service – Held that:- Appellant are clearing the solar system through dealers also and the dealers further sell it to the customers and charge certain amount for installation - appellant are not charging installation charges separately, but for installation activity, they are liable to pay service tax - activity of installation of solar system falls under the category of Erection, Installation and Commissioning Service - matter remanded back to the original adjudicating authority to consider the records, documents for computation of service components in the activity of the appellant

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• Central Excise

• 2012 (8) TMI 249
  Duty demand on allegation of clandestine removal - Held that:- As the duty liability has been discharged after the issuance of show cause notice the benefits which are available to an assessee prior to issuance of show cause notice should also be extended after the issuance of show cause notice, if liability is discharged before the adjudication order. No merits in the grounds raised by the Revenue that assessee may seek refund of the amount as that the entire order in original is set-aside as the first appellate authority has considered the extension of benefits of Section 11A to the assessee only on the ground that he has paid the amount in full.

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• 2012 (8) TMI 248
  Reversal of cenvat credit during the period when assessee were DTA - two units - Merger with EOU unit - Held that:- It is the claim for reversal of credit and the transferability thereof, particularly after the merger of two Units no dispute to the issue that the credit if it is allowed to DTA unit will be the very same unit i.e. Kiri Dyes and Chemicals Ltd. The identity of the assessee did not change and is merely the clubbing the unit No.1 & 2 together and the assessee remains the same and function from the same premises as a unit - the provisions of Rule 10 of Cenvat Credit Rules, 2004 would not be applicable.

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• 2012 (8) TMI 247
  Rejecting of application for registration of Central Excise for warehousing - premises is already having Central Excise Registration certificate and Warehouse License in the name of other EOU who has defaulted - Held that:- A perusal of Section 6 & rules also states that it is the person who has to get registered. The notification in Clause (2) only sets out that if such registered person has more than one premises, then each of such separate premises would require registration certificate for each of such premises. It is open to a person who has ceased to carry on the business to apply for deregistration. Would that mean in the absence of the person who has closed or sold the business or premises, applying for deregistration, there is no jurisdiction to grant another person registration of the premises as in the case of a bona fide transferee for value or for that to the owner of the premises whose lessee has defaulted in payment of excise dues - Neither Section 6 nor Rule 9 and the Notification is a provision for enforcing the claim for dues of the department - An immovable property by itself cannot be sold unless the owner of the premises is defaulter and that too under a certificate as arrears of land revenue. That sale would be subject to the priority of claims - The Respondent No. 3 has therefore, clearly acted without jurisdiction in refusing to grant registration on the specious plea that EOU whose assets has been sold and purchased by the Petitioners has not applied for reregistration - in favour of assessee.

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• 2012 (8) TMI 246
  Penalty under Rule 25 of the Central Excise Rules, 2002 - short payment of Cenvat & Education Cess - there is an error of computation of cess - Respondent submitted that there was no mistake on the part of the Respondent for the said error – Held that:- Cess is required to be re-considered and re-computed. Therefore, the case is remanded to the ld.Commissioner (Appeals) for the limited purposes for computation of quantum of Cess.

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• 2012 (8) TMI 212
  Claim of refund under Rule 5 of Cenvat Credit Rules, 2004 against exportation of 100% Cotton Terry Towels under bond. - Revenue was of the view that since final product was exempted from excise duty they could not have exported the goods under bond and they could not have taken Cenvat credit on inputs used in the manufacture of such exempted goods. - held that:- this issue has been initially decided by the Bombay High Court in the case of Repro India (2007 (12) TMI 209 - BOMBAY HIGH COURT) and decision has been further affirmed by the Himachal Pradesh High Court in the case of CCE Vs. Drish Shoes Ltd. (2010 (5) TMI 334 - HIMACHAL PRADESH HIGH COURT) - Refund allowed.

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• 2012 (8) TMI 211
  Common modvatable / cenvatable inputs in the manufacture of dutiable as also exempted final products. - demand provisions of Rule 6(3)(b) of Cenvat Credit Rules - held that:- matter remanded back.

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• 2012 (8) TMI 210
  Excisability of sugar syrup, being manufactured by the appellant at the intermediate stage of manufacture of edible biscuits and used by them captively - appellants contention that sugar syrup manufactured by them is not marketed on account of various factors like short shelf life etc. and hence the same is not excisable Held that:- Matters were remanded for denovo decision with the direction to establish the marketability of the product and to decide the consequent excisability.

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• 2012 (8) TMI 209
  CENVAT credit on stockbroker's service - respondent used the services of a stockbroker for acquiring shares in another company - understanding was that the other company would supply electricity to the respondent subject to the condition that the latter would invest in the former – Held that:- Electricity was used by the respondent in the manufacture of their final products – there is clear nexus between the stockbroker's service and the manufacture of the goods - service clearly fell within the ambit of 'input service' as defined under Rule 2(l) of the CENVAT Credit Rules, 2004 – credit allowed

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• 2012 (8) TMI 208
  Reversal of Cenvt Credit - Rule 6(3) - generation of waste - fine was resulted while manufacture of Sponge Iron – Held that:- There is nothing on record to suggest that outcome of manufacture is controllable to eliminate fine which obviously generate - Revenue not brought out that the appellant knowingly generated fine and also knowingly arranged its situation to attract Rule 6(3) of Cenvat Credit Rules, 2004 - Proportionality aspect not being dealt by Rule 6(3) of Cenvat Credit Rules, 2004 and that Rule being subject to certain conditions the appellant shall succeed in absence of a case made from that angle - appeal is allowed

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