TMI Tax Updates - e-Newsletter
August 18, 2012

Case Laws in this Newsletter:

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

Articles

1. Service tax liability for the Director's remuneration now on the companies.

   By: Meenu Garg

2. Works contract services provided by sub-contractor in exempt works contract services, exempt from service tax

   By: AMIT BAJAJ ADVOCATE

3. Functions of Governmental Authority

   By: Dr. Sanjiv Agarwal

4. JURISDICTIONAL FACT.

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Auction for Sale of Government Stocks.

2. Company Law Board.

3. Penalty Imposed for Violation of Companies Act.

4. Vanishing Companies.

5. Applicability of Service Tax on Commission Payable to Non-Whole Time Directors of a Company Under Section 309 (4) of the Companies Act, 1956- Approval of Central Government Under Section 309/310 of the Companies Act.

6. Training for Fresh Batch of Tax Return Preparers to begin Soon.

7. CBEC Issues Foreign Currency Conversion rate for Import and Export.

8. Finance Minister P. Chidambaram Expresses Satisfaction Over SEBI Measures.

9. Decisions to Improve Economic Climates within Next three Weeks, Says Anand Sharma Chairs fourth meeting of the Government-Industry task force.

Notifications

Customs

1. 46/2012 - dated 17-8-2012 - Cus

Amends in the Notification No. 12/2012- Customs.

2. 75/2012 - dated 16-8-2012 - Cus (NT)

Rate of exchange of conversion of each of the foreign currency with effect from 17th August, 2012.

3. 74/2012 - dated 14-8-2012 - Cus (NT)

Amends Notification No.36/2001-Customs(N.T) - Palm oil, Palmolein, Soyabean Oil (Crude) and Brass Scrap (all grades) - Traiff Values.

DGFT

4. 10 (RE – 2012)/2009-2014 - dated 14-8-2012 - FTP

Amendments Schedule-I (Imports) of the ITC(HS) Classifications of Export and Import Items, 2009-14.

Circulars / Instructions / Orders

VAT - Delhi

1. 13 - dated 16-8-2012

Waiving off the mandatory requirement of 'No Objection Certificate' from landlord for registration under the DVAT Act, 2004.

Highlights / Catch Notes

Income Tax

• Corporation gifting assets to another raises tax avoidance concerns; potential evasion under relevant Act scrutinized.

  Case-Laws - AAR : A gift by a corporation to another corporation is a strange transaction. To postulate that a corporation can give away its assets free to another even orally can only be aiding dubious attempts at avoidance of tax payable under the Act. - AAR
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• Embezzlement Loss Deduction Disallowed for 1990-91; Not Permitted Under Income Tax Act Sections 36, 37(1.

  Case-Laws - HC : Embezzlement of cash by employee in AY 84-85 - loss claimed in the year 1990-91 - dis-allowance - cannot be allowed as deduction u/s 36 or 37(1). - HC
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• Business's 2.81% Discount Partially Disallowed Due to Lack of Ad Hoc Discount Policy; Requires Careful Assessment.

  Case-Laws - HC : Business discount claimed at 2.81% of the total sales - partial dis-allowance - The companies do not offer discounts on adhoc basis. The amount was substantial and could not be given on adhoc treatment at the time of assessment. - HC
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• Tax Benefits Revoked u/s 11 Due to Funds Used for Government Equipment in Andhra Pradesh.

  Case-Laws - AT : Withdrawal of benefit u/s 11 on ground that main donor is the Government of Andhra Pradesh and application included expenses towards supply of equipment to Government Sector - AT
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• Court Evaluates if Employer-Paid Taxes on Salaries Are Non-Monetary Benefits u/s 10(10CC) for Tax Exemption.

  Case-Laws - HC : Exemption u/s 10(10CC) - Whether tax paid by the employer on the salaries of the employees would constitute non-monetary benefits exempt u/s 10(10CC) - HC
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• Income Estimation u/s 44AD Requires Depreciation Deduction; Authorities Must Follow Board's Circular.

  Case-Laws - HC : Estimation of income u/s 44AD of the Act - the depreciation allowance should be deducted therefrom - authorities should be guided by the binding circular of the Board - HC
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• Tribunal's Jurisdiction: Rule 27 and Section 253(4) Ensure Clear Boundaries in Income Tax Cases.

  Case-Laws - AT : Scope of the term 'thereon' - Jurisdiction of the Tribunal - favorable decision - adverse findings - provisions of Rule 27 and the provisions of Sec. 253(4) do not over-lap each other; rather operate in two different situations. - AT
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• Lack of Recorded Reasons in Decisions Undermines Justice and Fairness, Especially in Income Tax Cases.

  Case-Laws - AT : Validity of a decision where reasons are not recorded - Failure to give reasons amounts to denial of justice. - AT
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• Upfront Fee Classified as "Rent" Under Explanation to Section 194-I of the Income Tax Act.

  Case-Laws - AT : Whether upfront fee paid will fall within the definition of “rent“ as given under Explanation to Section 194-I of the Act - held yes - AT
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• Income Tax Act: Sections 80 and 139(3) Cover Business Losses, Not Unabsorbed Depreciation; See Section 32(2) for Details.

  Case-Laws - AT : Carry forward of unabsorbed depreciation – The provisions of sections 80 and 139(3) of the Act are applicable to business losses and not to unabsorbed depreciation governed by section 32(2) of the Act. - AT
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• High Court Rules on Search and Seizure Impact on Tax Liabilities in Hawala and Unreported Sales Cases.

  Case-Laws - HC : Search and seizure – suppression of sale and variation in G.P. rate - Addition made in respect of alleged Hawala transactions - HC
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• Packing Credit Interest Not Eligible for Weighted Deduction u/s 35B; Doesn't Cover Services Outside India.

  Case-Laws - HC : Weighted deduction u/s 35(B) - The interest on packing credit is not paid in respect of any services rendered outside India and consequently would not stand covered within the ambit of Section 35B(1) (b)(viii). - HC
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• Revenue Authorities Label Share Transaction as Sham Due to Broker Misconduct Involvement.

  Case-Laws - HC : Sale of shares - share broker - Revenue condemned the share transaction of the assessee and held them to sham merely because some share brokers were found to be indulged in some wrong - HC
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• Income from Share Transactions Classified as Business Income; STT Deduction Allowed for Accurate Tax Calculation.

  Case-Laws - AT : Capital gain vs Business income - The income from share transactions has been rightly assessed as business income, however, Security Transaction tax (STT) has to be allowed as a deduction - AT
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• Section 50C "Assessable" Term Not Retroactive; Inapplicable for Assessment Year 2007-08 per Finance Act 2009.

  Case-Laws - AT : Addition u/s 50C - reference to DVO - Word “assessable” has been incorporated only w.e.f. 1.10.2009 (Finance Act 2009 w.e.f. 1.10.2009). The same cannot be made operative for earlier Assessment Years i.e. AY 2007-08 in hand. - AT
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• VSAT Charges Exempt from Tax Deduction at Source as They Contain No Income Element.

  Case-Laws - AT : TDS on VSAT charges - Since the VSAT charges paid do not have any element of income, deducting tax while making such payments do not arise - AT
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• CIT's Revisionary Order u/s 263 Reclassifies LTCG as STCG, Reviews Excessive Deductions u/s 80C Validity.

  Case-Laws - AT : Validity of revisionary order passed u/s 263 on the issue of LTCG held to be STCG by CIT and excess allowance of deduction u/s 80C - AT
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• Violating agricultural income laws may lead to penalties, but income remains classified as agricultural.

  Case-Laws - AT : Agricultural income – infraction of the statutory provisions may expose the assessee to the risks of being penalized or punished under the relevant statutes, but the same do not change nature of the agricultural income - AT
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• Court Rejects Reassessment Order: Transparency in Initial Tax Disclosures Crucial for Avoiding Unnecessary Reassessments.

  Case-Laws - HC : Reopening of assessment – Even if the materials/evidence was not enclosed with the return, full and true details/material was disclosed during the course of the original proceedings - re-assessment order quashed - HC
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Customs

• High Court Holds Nominee Directors Liable for Failing Export Obligations Under DEPB Licenses, Highlights Compliance Importance.

  Case-Laws - HC : Fiscal Penalty on nominee directors - failure to fulfill the export obligation under DEPB licenses - HC
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• Amendments to Notification No. 12/2012-Customs: Changes to Duties, Exemptions, or Procedures for Improved Compliance and Efficiency.

  Notifications : Amends in the Notification No. 12/2012- Customs. - Notification
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• New Exchange Rates for Foreign Currency Conversions Effective August 17, 2012, per Customs Notification.

  Notifications : Rate of exchange of conversion of each of the foreign currency with effect from 17th August, 2012. - Notification
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• Misdeclared Quality in Imports Requires Rejection of Declared Value Under Customs Regulations for Accurate Tax Compliance.

  Case-Laws - AT : Import of goods - when the quality of the goods itself has been misdeclared, the declared value requires to be rejected. - AT
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• The appellant's exported automobile parts are not eligible for the all industry rate of drawback.

  Case-Laws - AT : Whether the goods, namely, automobile parts exported by the appellant is eligible for all industry rate of drawback - held no - AT
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DGFT

• DGFT Updates Import Classifications in ITC(HS) Schedule-I for 2009-14 to Streamline and Clarify Import Processes.

  Notifications : Amendments Schedule-I (Imports) of the ITC(HS) Classifications of Export and Import Items, 2009-14. - Notification
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Corporate Law

• Court Orders Govt to Revoke DINs of Directors Involved in Fraud; Banks to Freeze Their Accounts.

  Case-Laws - HC : Fraud on investors - Directors - Direction given to the Central government to revoke DIN in order to prevent them creation of new company. - Directions given to all banks to stop operation of their accounts. - HC
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Wealth-tax

• High Court Rejects Application for Plant and Machinery Valuer Registration u/s 34AB of Wealth Tax Act.

  Case-Laws - HC : Rejection of application for registration as a valuer of plant and machinery u/s 34AB of the Wealth Tax Act - HC
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Service Tax

• Air Cargo Service Tax Dispute: Extended Limitation Period Challenged, Penalties Under Relevant Section Set Aside.

  Case-Laws - AT : Transportation of cargo by air - default in payment of service tax - assessee contested against invoking the extended period of limitation - penalties set aside u/s 80 - AT
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• Refund Claim Rejected Due to Missing Documents; Authority of Commissioner (Appeal) to Remand Case Questioned Under Notification No.41/2007-ST.

  Case-Laws - AT : Rejection of refund claim in terms of Notification No.41/2007-ST dated 6.10.2007 - appellants did not submit the requisite documents before the sanctioning authority for examination - power of the commissioner (appeal) to remand - AT
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• Refund Denied: Appellants Failed to Submit Required Documents Under Notification No.41/2007-ST, Authority to Remand Questioned.

  Case-Laws - AT : Rejection of refund claim in terms of Notification No.41/2007-ST dated 6.10.2007 - appellants did not submit the requisite documents before the sanctioning authority for examination - power of the commissioner (appeal) to remand - AT
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• Commissioner (Appeals) Can Remand EOU Cases on IT Software Export Refunds Under Notification No. 5/2006.

  Case-Laws - AT : Power of the Commissioner (Appeals) to remand – 100% EOU - export of IT software - refund claim under Notification No. 5/2006 dated 14.3.2006 in respect of the unutilised credit accumulated due to export of services - AT
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• Subcontractor Challenges Double Taxation on Service Tax Already Paid by Main Courier Company.

  Case-Laws - AT : Double taxation of service tax - subcontractor - the appellant stated that when the appellant provided courier service to the main courier namely professional couriers and service tax having been paid by the latter, there shall not be levy on the appellant. - AT
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Central Excise

• Exemption for Captive Consumption Applies: Sponge Iron Used in Billet Production Across Units Qualifies.

  Case-Laws - AT : Captive Consumption - the benefit of exemption Notification No.67/95-CE cannot be denied to the sponge iron manufactured in one unit and consumed in the manufacture of billets in another unit. - AT
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• Remission of Duty Approved as Losses Within Board Limits: Breakage and Losses Claim Reviewed Successfully.

  Case-Laws - AT : Claim for remission of duty for the breakage and losses - it is not the case of the department that the loss due to breakage etc. was over and above the limit prescribed by the Board. - remission allowed - AT
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• Cenvat credit denied due to Head Office's non-registration as Input Service Distributor u/r 9(1)(g).

  Case-Laws - AT : Cenvat credit on input services - invoices issued in favour of the Head Office - denial under Rule 9(1)(g) of Cenvat Credit Rules, 2004 on ground that Head Office of the assessee was not registered during relevant time as Input Service Distributor in terms of Rule 3(1) of Service Tax Rules, 2005 - AT
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• Rule 6: Demand for Duty on Press Mud and Sludge as Non-Excisable By-Products Not Sustainable.

  Case-Laws - AT : Cenvat credit – common input used - rule 6 - demand of 10% / 5% on press mud and sludge, which are in the nature of by-product and waste and also non-excisable cannot be sustained - AT
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• Duty Payment Error: Paid u/r 3A Instead of Section 3; Incorrect Return Filed Under Compounded Levy Scheme.

  Case-Laws - AT : Central excise retrun - Duty payment has been made under Rule 3A of the Act and not under Section 3 - Under compounded levy scheme, this is the statutory return which is required to be filed and not the return under Rule 12 of the Central Excise Rules, 2002 - AT
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VAT

• Sunglasses Classified as "Medical Devices" Under Entry C-107(8); Sales Tax Commissioner Must Comply with Legislative Decision.

  Case-Laws - HC : If the Legislature in its wisdom has included the sunglasses within the category of “Medical Devices and Implants” covered under entry C-107(8) by issuing a notification on 23rd November, 2005, it would not be open to the Commissioner of Sales Tax to hold that non prescriptive sunglasses are not medical devices - HC
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• Landlord 'No Objection Certificate' requirement waived for DVAT Act registration, simplifying the process for applicants.

  Circulars : Waiving off the mandatory requirement of 'No Objection Certificate' from landlord for registration under the DVAT Act, 2004. - Circular
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• Dispute Over HDPE Pipe Contract Classification: Indivisible Interstate Works vs. Separate Supply and Laying Contracts.

  Case-Laws - HC : VAT / CST - Contract for performance of work of laying HDPE pipe for transportation of natural gas – determination of nature of the contract namely whether the said contract was an indivisible interstate works contract or a contract to supply pipes and a contract to lay down the pipes - HC
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Case Laws:

• Income Tax

• 2012 (8) TMI 434
  Gift by foreign company incorporated in Singapore of shares held in Indian company to its Indian subsidiary without consideration - transfer effected before the coming into force of section 56(2)(viia) – applicant contending non-taxability u/s 45 r.w.s. 48 since the transfer was one without consideration whereas Revenue questioning genuineness of the transaction and contending the same to be with purpose of avoiding tax – Held that:- The shares dealt with are shares of a public limited company governed by the Companies Act, 1956. It is claimed that, what can be called an oral gift, was made by one corporation to another corporation. Such a form of transfer appears to be strange, unless it be one which has been set up for some purpose. It is necessary for the applicant to demonstrate before this authority that the transfer was authorized by the Articles of Association and was effected in the mode prescribed by the Articles of Association and meeting the requirements of section 82 of the Companies Act. Hence, proper enquiry by AO into the question of the genuineness and validity of the transaction is necessary. Hence forth, ruling declined Further, Section 47(i) and (iii), applies to gift by individual or a HUF or a Human Agency. A gift by a corporation to another corporation (though a subsidiary or an associate enterprise, which is always claimed to be independent for tax purposes) is a strange transaction. To postulate that a corporation can give away its assets free to another even orally can only be aiding dubious attempts at avoidance of tax payable under the Act.

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• 2012 (8) TMI 433
  India-Mauritius DTAA – chargeability to tax of the proposed transaction of sale of shares of GSKPL, the Indian company, to GSK Pte. Singapore by applicant company being Mauritius resident and part of GSK group – Held that:- It is observed that shares were held by the applicant from the year 1993 in one and from the year 1996 in the other and had no intention to trade in those shares and they were held as investments. Hence, it is ruled that the shares held would be considered as ‘capital asset’ Taxability of capital gains arising from transfer of shares in India – Held that:- Once the asset is held to be a capital asset, its proposed sale will generate a gain that would qualify to be capital gains under the Act and under the India-Mauritius DTAC. However, capital gains that would arise would not be chargeable to tax in India in view of paragraph 4 of Article 13 of the DTAC between India and Mauritius. Applicability of transfer pricing provisions from Section 92 to Section 92F – Held that:- Even if section 92 to section 92F are machinery provisions, without resort to them, the capital gains from an international transaction cannot be determined. Only on determining whether capital gains have arisen, would the question arise whether the gain is chargeable to tax or not under the Act. The application of Section 92 cannot be kept at bay by jumping to the second stage straight away. Therefore, whether ultimately the gain or income is taxable in the country or not, Sections 92 to 92F would apply if the transaction is one coming within those provisions. Liability to withhold taxes u/s 195 – Held that:- In cases where there is no chargeability to tax, there will be no obligation to withhold. Requirement to file return of income u/s 139 – Held that:- Since the income is not taxable in this country, under the Act, there is no obligation on the applicant to file a return of income u/s 139 Applicability of Section 112 when the proposed transfer or sale of shares is not through a recognized stock exchange – Held that:- Section 112(1) would be attracted when the income of an assessee includes income chargeable under the head capital gains under the Act. In the present case, the income of the applicant would be capital gains. Once it is, Section 112 of the Act is attracted. Applicability of provisions of Section115JB – Held that:- Section 115JB overrides section 34 to 48 of the Act. So by reading section 115JB as confined in its operation to domestic companies alone, one may be doing violence to the special scheme of taxation adopted for taxing certain companies. There is no compelling reason to jettison the scheme of taxation adopted by the Act by reading down section 115JB as confined in its application to domestic companies alone. Therefore, Section 115JB(1) would equally apply to a foreign company Theory of precedents may not have strict application in proceedings before this Authority. This Authority is bound only by the decisions of the Supreme Court. The decisions of High Courts have only persuasive value. This Authority is not subordinate to any High Court for even Article 227 of the Constitution to apply. While the AAR should be slow in disagreeing with propositions of law laid down in earlier rulings, it should not be deterred from taking a contrary view if it is convinced that the earlier view is not correct.

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• 2012 (8) TMI 432
  Validity of revisionary order passed u/s 263 dis-allowing deduction u/s 10A, invoking sub section 9 of Section 10A on ground of change in ownership - I.T. enabled services and BPO - Tribunal in AY 03-04, upheld the order passed u/s 263 on same ground - assessee contending retrospective omission of Section 10A(9) - Held that:- Purpose of Section 10A(9) was to curb the trading in incentives by shell companies, and to discourage unscrupulous shopping of EOUs and STPs. In the present case, in the year 2002, there was a change in the holding pattern by way of global re– orginasation of the business and nothing has been brought on record that such a re–orginazation was non–genuine or was solely for the purpose of shopping of STP for claiming the exemption. Also, sub–section 9 to section 10A, which has been omitted from the statute w.e.f. 1st April 2004, has to be read to be obliterated from the statute book or at least it will not have any effect from the year in which it was omitted. Thus, even if there was any change in the ownership through acquisition of shares in earlier year 2003–04, exemption u/s 10A, cannot be denied on this ground in the AY 2004–05. Further, in the present AY, no such provision was appearing in the statute and the AO was obliged to follow the law which was in force as on the first day of AY i.e., 1st April 2004; we hold that there was no error of law by the AO while allowing exemption u/s 10A in AY 2004–05 and the impugned order passed u/s 263 setting aside the assessment on the ground that deduction allowed u/s 10A is neither a correct finding nor correct in law. Order of Commissioner set aside - Decided in favor of assessee.

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• 2012 (8) TMI 431
  Embezzlement of cash by employee in AY 84-85 - loss claimed in the year 1990-91 - dis-allowance - Held that:- Tribunal on the findings that appellant is not in the business of handling of cash; if there was any embezzlement by any employee, apart from lodging of FIR, steps could be taken to recover the amount, which is not done. Further, letter of termination of the employee, or ; any notice or ; suit to recover the amount from him was not produced. Also, there was no relationship of debtor or creditor nor the amount was lost in the course of business. Hence, Tribunal has rightly held that same cannot be allowed as deduction u/s 10(1), 36 or 37(1). Interest paid on loan taken for the purpose of business - assessee contending allowance u/s 57 - Held that:- Each item of expenditure had been discussed by CIT(A). In the absence of verification of details, such expenses could not be allowed at the appellate stage. Further, expenses were not shown in the P/L A/c and was thus not allowable - Decided against the assessee.

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• 2012 (8) TMI 430
  Business discount claimed at 2.81% of the total sales - partial dis-allowance - revenue contended that following the past history the discount @ 2% of the sale was made admissible for deductions - Tribunal deleted the dis-allowance - Held that:- In order to claim discounts, which had increased for AY in question from 2% to 2.8% and which turned down to Rs 63,59,106/-, the insistence of the AO to verify such discounts by making an independent enquiry was justified. The discounts are offered after the scheme is prepared in accordance with the policy of the company, which may vary from year-to-year and may also depend upon the business strategy adopted to meet the market conditions. The companies do not offer discounts on adhoc basis. The amount was substantial and could not be given on adhoc treatment at the time of assessment. Matter restored to the file of AO to conduct enquiry - Decided in favour of Revenue.

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• 2012 (8) TMI 429
  Setting aside of order of CIT passed u/s 263 making addition u/s 68 - alleged concealment of income detected during raid conducted - assessee explained the surrender of the income which he has subsequently retracted - Held that:- Tribunal has considered the relevant principles of law in interfering with the order of CIT. The Tribunal found that the assessee-respondent had sufficiently explained the retraction of his statement given on 12.12.1994. It also found that the CIT could not point out as to whether the AO had failed to work out the amount of concealed income correctly. The AO had made additions on estimate basis for all the assessment years. There was no material indicating suppression of receipts. Hence, Tribunal has not committed any error of law in setting aside the order of CIT passed u/s 263 - Decided against Revenue

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• 2012 (8) TMI 428
  Charitable institution - withdrawal of benefit u/s 11 on ground that main donor is the Government of Andhra Pradesh and application included expenses worth of 488,49,585/- towards supply of equipment to Government Sector - Revenue contended application of income or property of the trust for the benefit of any person mentioned in Section 13(3) - Held that:- Definition of "person" u/s 2(31) includes legal authority but not Government itself. See CIT v. Dredging Corporation of India (1988 (3) TMI 29 - ANDHRA PRADESH HIGH COURT). Contention of the Revenue that by giving the machines to the Government Hospitals sec. 13(1)(c) has been violated is not correct not only because State Government is not a person, but also government cannot be said to have benefited by the machines out of the grant given by the government and given to the government Hospitals. The benefit accrues to the General Public. Non-registration under A.P. Charitable & Hindu Religious Institutions and Endowments Act, 1987 - Held that:- Once an institution is approved and granted registration u/s 12A, the department cannot refuse the registration except for violation of sec 11, 12 or 13. Therefore, eligibility for exemption u/s 11 has to be independently considered based on the provisions of the Income tax Act and not anything else. Hence, exemption u/s 11 cannot be denied merely because it is not registered under said Act Validity of reopening of assessment on suspicion based on report of C& AG (Civil) for the Govt. of AP - Held that:- AO cannot reopen the assessment merely on the basis of roving enquiry and since there is no addition with respect to the purchase of equipments the initial reason given for reopening cannot survive and the AO cannot go beyond the reasons given by him for reopening - Decided in favor of assessee

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• 2012 (8) TMI 427
  Dividend income earned by investment company from the shares held as stock in trade - Business income or Income from other sources - set off of business loss against dividend Income - Held that:- In Investment Ltd vs CIT (1970 (4) TMI 15 - SUPREME COURT), it has been held that method of accounting regularly employed by the assessee can be discarded only if the taxing authority is of the opinion that the income earned cannot be properly deduced therefrom. The method employed by the company in valuing stock at cost and describing such stock in the balance-sheet as "investments", were held to be not decisive of the fact that the stock valued was not stock-in-trade. The finding of the first appellate authority as well as the Tribunal that the shares held by the assessee, which earned dividend income, constituted stock-in-trade; does not necessarily give rise to a question of law. The appellate authorities having concurred on facts that the dividend income earned by the assessee was eligible to be brought forward as loss of the previous years, in our opinion, cannot be interfered with in this appeal - Decided in favor of assessee.

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• 2012 (8) TMI 426
  Exemption u/s 10(10CC) - Whether tax paid by the employer on the salaries of the employees would constitute non-monetary benefits exempt u/s 10(10CC) - Held that:- Despite prohibition contemplated in the Section 200 of Companies Act for payment of tax free remuneration to an employee, Section 10(10CC) of the Income Tax Act provides for exemption of amount which is not a monetary payment to employee and is also provided as perquisite u/s 17(2) and thereby has acknowledged that remuneration plus tax payable thereon is permissible. Therefore, the payment of tax on account of salaries of the employees not by way of monetary payment to the employees concerned, but for or on their account to the Department and the same being one of the perquisites included in Section 17(2), such payment was to be excluded from the income of the employees - Decided in favor of assessee.

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• 2012 (8) TMI 425
  Disallowance of deduction claimed u/s 80IA - AO considered the sale price of the wind power sold by the Assessee to the TNEB at the rate of Rs.2.70 per unit through an agreement for calculating the deduction as against Rs.3.50 per unit as taken by assessee - Held that:- The rate at which the State Electricity Board supplies power to its consumers is to be considered to be the market value for transfer of power by the assessee’s electricity generating undertaking for captive consumption for the purposes of section 80IA(8) and not the price at which power is supplied by the assessee to the Board as decided in Additional Commissioner of Income-tax, Hisar Range, Hisar Versus Jindal Steel & Power Ltd. [2007 (6) TMI 308 - ITAT DELHI] - Thus the value of the power generated and consumed by the assessee will be that value that should have been paid by the assessee if the power was bought from open market. As Tamil Nadu Electricity Board sells power to the assessee in the usual course of its business and the assessee buys the power like any other consumer in the market the question of market price arises & in such a scenario the price collected by the Tamil Nadu Electricity Board is Rs.3.50 per unit and it is obvious that the market price of the power generated by the assessee is Rs.3.50 per unit as opted by assessee - in favour of assessee.

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• 2012 (8) TMI 424
  Reopening of assessment u/s 147 - capital gains had arisen because of a sale deed executed on 13.3.1994 belongs to the AY 19994-95 & not in AY 1997-98 - Held that:- As no valid notice u/s 143(2) was issued within one year of filing of the return of income and AO without even dealing with the factual aspect of the plea has declined it by citing ‘ principle of estoppel' the same is not sustainable because the plea challenging the validity of the assessment goes to the root of the case and if the assessment itself is held to be bad in the eyes of law nothing further survives - in favour of the Assessee

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• 2012 (8) TMI 423
  Interest income – netting of interest payment against income of fixed deposits - assessee clarified that the assessee earned interest income which also includes interest earned on fixed deposits – Held that:- CIT rejected the assessee’s claim of not only it being a business receipt/expenditure and in the alternative, he granted relief as per the provisions of S.56 of the Act - decision of the CIT is fair and it does not call for any interference Prior period expenditure - whether the said prior period expenses should be adjusted to the net profit for the purposes of S.115JA of the Act, considering the contents of parts II and III of Schedule VI of the Companies Act, 1956 – Held that:- Assessing officer directed to examine the items mentioned in said Part II and III of Schedule VI of the Companies Act, 1956 and decide afresh as to the correct treatment to be given to the impugned prior period expenses for the purposes of computing the book profit, and its adjustment for the purposes under S.115JA of the Act - Revenue’s appeal is partly allowed for statistical purposes

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• 2012 (8) TMI 422
  Denial exemption u/s 11 of the Act – whether because of these violations as mentioned by the Assessing Officer (a) whether the appellant forfeits the entire exemption available to it or (b) whether the denial of exemption should only be proportionate to the diversion of the funds made by the appellant. - held that:- the assessee is not eligible for exemption u/ss 11 and 12 of the Act.

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• 2012 (8) TMI 421
  Income deemed to accrue or arise in India - TDS u/s.195 of the Act – DTAA agreement - expenditure on advertisements - assessee remitted the amount towards expenses to the advertising agencies of Russia through its parent company NPS which is a resident of Switzerland – Held that:- Entire advertisement activity had been carried out outside India. There are no facts brought on record that NPS has a PE in India. Considering above facts and also the fact that there is a DTAA agreement between India and Switzerland and also between India and Russia, the said amount remitted by the assessee towards advertisements even if assessable could be assessed as business profits as per section 9 of the Act but having regard to the fact that these non-resident companies i.e. recipients and/or advertising companies have no PE in India - amount could not be taxed in India under section 5(2) of the Act - assessee has not committed any default in not deducting TDS u/s.195 on the amount remitted by it to NPS in respect of advertisement campaign launched in Russia. Whether the expenditure incurred on TV films and commercial and other promotional films is capital in nature or not – Held that:- Onus lies on the assessee to prove that the expenditure has been incurred wholly and exclusively for the purposes of its business. It is observed that said expenditure has been incurred by NPS and paid by assessee on the basis of invoices raised - no document has been brought on record that the said expenditure was incurred by NPS at the instance of the assessee wholly and exclusively for the purposes of assessee's business - expenditure cannot be allowed to have been incurred by the assessee for the purposes of its business unless assessee proves that expenditure was incurred in connection with assessee's business with some documentary evidences – matter restored to the file of the AO to decide afresh with the liberty to assessee to place such document Disallowance on account of repairs to buildings - renovation of R&D Centre - Assessing Officer did not accept the contention of assessee that expenditure represents expenses of revenue nature such as civil modifications, ceiling repairs, electrical modification, partitions, etc – Held that:- If the advantage consists merely in facilitating the assessee's trading operations or enabling the management and conduct of the assessee's business to be carried on more efficiently or more profitability while leaving the fixed capital untouched, the expenditure would be on revenue account, even though the advantage may endure for an indefinite future - expenditure incurred by assessee under the head "repairs" is on the existing assets by renovating the buildings and is revenue in nature – disallowance deleted Disallowance of deduction under section 80 HHC of the Act - assessee has not brought in sales proceeds of an amount of Rs. 1,19,06,264 within the extended period which was granted to the assessee and same is to be reduced from export turnover as per clause (b) of Explanation to Section (4C) of Section 80HHC of the Act., while computing the deduction to be allowed under section 80HHC of the Act - direct cost in respect of which goods which have been exported but the sales proceeds have not been brought in India in specified period, should be reduced while computing the deduction u/s.80HHC of the Act – addition confirmed – In favor of revenue

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• 2012 (8) TMI 420
  Principles underlying section 44AD of the Act - Civil contractor - contract work from Government departments - Assessing Officer applied the proviso to section 145(3) and calculated the net profit at the rate of 8 per cent. of the gross contract receipt after consideration of expenses debited in the trading and the profit and loss account, depreciation and interest salary paid to the partners - as per the circular of the Board dated August 31, 1965, the gross profit should be estimated and the deductions and allowance including the depreciation allowance should be separately deducted from the gross profit. If the net profit is required to be estimated, it should be estimated subject to the allowance for depreciation and the depreciation allowance should be deducted therefrom - authorities should not apply the principles emanating section 44AD of the Act but should be guided by the binding circular of the Board - matter is remitted back to the Assessing Officer for passing a fresh order of assessment

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• 2012 (8) TMI 419
  Scope of the term 'thereon' - Jurisdiction of the Tribunal - favorable decision - adverse findings - held that:- Hon'ble Courts have removed this confusion by explicitly mentioning that the judgment being favourable but could have an adverse finding or reasoning and that ground though against the respondent can be defended in Rule 27, nevertheless by supporting the final verdict. The interpretation of the word "grounds" is in wider sense because the same is not at par with the "ground" of appeal. The word "thereon" restricts the jurisdiction of the Tribunal to the subject matter of appeal. If this word "thereon" is to be read in conjunction with Rule 27, then the respondent is to support the order appealed against but required to confine to the subject matter of the appeal. Interestingly, in the present case though the first appellate authority has decided the issue of the applicability of the provisions of section 153C of IT Act, which was one of the ground of appeal raised by the assessee before ld. CIT(A), but even after an adverse decision of the CIT(A) on the said legal ground, no appeal was preferred by the assessee. Because of this reason, the Tribunal is not empowered to pass an order "thereon" on the subject matter which is not in appeal as per the appeal memo to be adjudicated upon. In any case, provisions of Rule 27 and the provisions of Sec. 253(4) do not over-lap each other; rather operate in two different situations.

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• 2012 (8) TMI 418
  Validity of a decision where reasons are not recorded - held that:- Recording of reasons is a part of fair procedure. Reasons are the harbinger between the mind of the maker of the decision in the controversy and the decision or conclusion arrived at. They substitute subjectivity with objectivity. Failure to give reasons amounts to denial of justice. - Decision of Apex court in Mangalore Ganesh Beedi Works Vs. CIT and another [2005 (1) TMI 15 - SUPREME COURT] followed. Unaccounted scrap sales - alleged unaccounted scrap sales was found in the course of survey and the assessee could not produce any evidence for the argument that the same is included in the scrap sales already shown in the books of accounts – Held that:- One of the reasons for making the addition was that the assessee did not furnish any evidence to substantiate its claim that the income had already been offered to tax in the earlier years - it is not clear as to whether the earlier record which was available with the AO had been considered while taking a view that no evidence was produced by the assessee - issue back to the file of the Assessing Officer for fresh adjudication Disallowance of the travelling expenses incurred by the wife of Managing Director - AO made the disallowance by observing that the directors and their spouses travelled abroad and that travel was personal in nature - claim of the assessee is that the director of the company travelled for business purposes and his wife accompanied him – Held that:- Facts are not clear as to whether the director traveled for the business purposes - issue is remanded back to the Assessing Officer for fresh adjudication in accordance with the law, after providing due and reasonable opportunity of being heard to the assessee. Capital gains on the transfer of immovable property - possession of the land is not given as per the terms of agreement and will be handed over to the developer only after completion of the work – Held that:- claim of the assessee was that amount was received as an advance, would be offered for taxation when the sale deed gets executed - nothing is brought on record to suggest that M/s. IDEB had taken possession of the property either physically or constructively - matter remanded back to the file of the Assessing Officer for fresh adjudication

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• 2012 (8) TMI 417
  Denial of benefit of sec. 80IB(10) – Held that:- Assessee made the contribution of his capital in the shape of land and incurred the initial expenses for development and building of housing project like sanction of plan, getting the electricity and water connection by making the payments to BWSSB and KEB etc. Therefore, merely on this basis that the assessee did not construct himself was not a ground to deny the deduction u/s 80IB(10), particularly when the assessee had undertaken the other work like making the land useful by getting it converted into non agricultural purpose and getting plan sanctioned - assessee contributed the land, undertook the developmental activities in the said land and thus complied with all other conditions which have to be fulfilled before claiming the benefit u/s 80IB(10) of the Act - assessee entitled for the benefit of deduction u/s 80IB(10) of the Act

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• 2012 (8) TMI 416
  Whether upfront fee paid will fall within the definition of "rent" as given under Explanation to Section 194-I of the Act - upfront charges paid by the assessee for allotment of land as rent advance – Held that:- Definition of "rent" given under Explanation to Section 194-I of the Act will squarely cover the payment made by the assessee to M/s SIPCOT Ltd. and render such payment as something on which assessee was obliged to deduct tax at source. Interest under Section 201(1A) of the Act – Held that:- A.O. directed to calculate interest under Section 201(1A) of the Act, after considering the advance tax payment effected by M/s SIPCOT Ltd. and the time period involved in effecting such payment when compared to dates on which assessee was to deduct tax at source in accordance with Section 194-I of the Act - appeal filed by the assessee is dismissed

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• 2012 (8) TMI 415
  Carry forward of unabsorbed depreciation – Held that:- The assessee having claimed the set off and carry forward of allowance of depreciation unadjusted against the profits of the current previous year cannot be denied such set off or carry forward of the unabsorbed depreciation allowance as the provisions of section 139(3) of the Act are not applicable. The assessee having filed return of income, though belatedly but within the extended period allowed under the Statute is entitled to the benefit of carry forward and set off of unabsorbed depreciation allowance as part of depreciation of the succeeding year in view of the provisions of section 32(2) of the Act and section 72(2) of the Act. The provisions of sections 80 and 139(3) of the Act are applicable to business losses and not to unabsorbed depreciation governed by section 32(2) of the Act.

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• 2012 (8) TMI 402
  Search and seizure – suppression of sale and variation in G.P. rate - Tribunal upheld deletion made by CIT(A) on ground that no incriminating material was found during the search on the assessee so as to suggest under-invoicing of sales - documents upon which the AO placed reliance were seized from a different person and not from the assessee - Held that:- Factual findings recorded by CIT(A) and Tribunal have not been sought to be disturbed or impeached by reference to any material or evidence to the contrary. AO has not referred to any material to show that the quality of the hing sold by the assessee was the same as that sold by the members of the group from whom the sale bills were seized during the search carried out simultaneously. In such circumstances, we are unable to hold that the Tribunal was not right in deleting the additions made to the gross profit declared by the assessee – Decided in favour of the assessee. Addition made in respect of alleged Hawala transactions – opinion formed on the basis of some papers found in the course of the search in one of the family members premises – Tribunal while upholding deletion also noted that such a course adopted by the CIT(Appeals) in another case, namely, ACIT vs. Om Prakash Bhatia has been upheld by the Tribunal - Held that:- CIT(Appeals) in the impugned proceedings has no doubt deleted the addition made in respect of Hawala business, but that is only because the Appellate Tribunal for Foreign Exchange had set aside the order passed by the Adjudicating Officer, Enforcement Directorate. These directions of the CIT(Appeals) have been confirmed by the Tribunal in the impugned order and in our opinion rightly so – Decided in favor of assessee.

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• 2012 (8) TMI 401
  Capital grant - taxability - assessee charged with duty of implementing a scheme of industries in Delhi which had been formulated by the Delhi Government and as a developing agency and not as the owner of this scheme and had been given the grant only for implementing the scheme - Held that:- It is amply clear that the amount in this regard is a capital grant received in order to carry out the policies of the Government in the manner it is sought to be utilized by the assessee and no administrative expenditure has been incurred out of it. CIT(A) rightly deleted the addition - Decided in favor of assessee Depreciation - non-entitlement of depreciation of the building constructed with the aid of the grant in view of the provisions of Section 43(1) - Held that:- It is clarified that it would be dealt with in the appropriate manner at the relevant stage. Maintenance receipts credited to Maintenance Fund - addition - Held that:- There is no trust under which the assessee can be said to hold the receipts. The assessee is collecting the maintenance charges for maintaining the properties of the housing scheme, and obviously for defraying the expenses. The receipts are its own and merely because some expenditure is required to be incurred on maintenance, the funds collected do not become funds kept or held in trust. Addition confirmed - Decided in favor of Revenue.

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• 2012 (8) TMI 400
  Interest on packing credit paid to bank for export orders secured - allowability of weighted deduction u/s 35(B) - Held that:- This interest on packing credit is not paid in respect of any services rendered outside India and consequently would not stand covered within the ambit of Section 35B(1) (b)(viii). See KEC International Ltd. Vs. CIT (2009 (1) TMI 5 - BOMBAY HIGH COURT) - Decided in favor of Revenue.

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• 2012 (8) TMI 399
  Validity of reopening of assessment of the order framed u/s 143(3) - alleged diversion of interest bearing fund for non-business purpose - assessee contending change of opinion - Held that:- From the submissions made by the petitioner during the course of the assessment proceedings as well as the findings recorded by the AO, it is apparent that the petitioner had furnished necessary evidence in support of its case that in exchange of the loan at a lower rate to M/s. Nachmo Textiles, it had given trade discounts so as to meet with the deficiency caused by giving loan at a lower rate. Thus, AO on the basis of the material produced and having been satisfied that the utilisation of funds advanced was for the purpose of regular business of the petitioner, the reopening of assessment on the very same ground without there being any additional material, is clearly based upon a mere change of opinion. Assumption of jurisdiction u/s 147 is invalid - Decided in favor of assessee

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• 2012 (8) TMI 398
  Long term Capital Gain - sale of shares - share broker - Revenue condemned the share transaction of the assessee and held them to sham merely because some share brokers were found to be indulged in some wrong as per report of inquiry held to detect violation of SEBI ( Prohibition of Fraudulent and Unfair Trade Practices Relating to Security Market) Regulation, 2003 - Held that:- It is clear that after getting that enquiry report, the SEBI prima facie found involvement of some of the share brokers in unfair trade practices. Fact of tinted broker may be relevant for suspicion but it alone necessarily does lead to conclusion of all transaction of that broker as tinted. In such circumstances, further enquiry is needed and that is for individual case. Such further enquiry was not conducted in that case. Just on the mere ground of share transaction with such broker does not lead to the belief that bonafide transactions are sham even if their genuineness and bonafides are established. it is also undisputed that purchase of the shares were shown by the assessees in their Balance Sheet of the last five years and genuineness of the Books of Accounts was never questioned - Decided in favor of assessee.

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• 2012 (8) TMI 397
  Interest from Head Office credited to the P&L Account - addition - Non-resident banking company - assessee contended the same to be non-taxable on ground that one cannot earn income from its own self - Held that:- Issue is covered in favor of assessee by decision of Special Bench in the case of Sumitomo Mitsul Banking Corpn. Vs. DDIT(IT)(2012 (4) TMI 80 - ITAT MUMBAI). Addition cannot be sustained - Decided in favor of assessee Bad debt - opening balance of the provision for bad debt was adjusted against the written off amount and remaining amount of bad debts was claimed - revenue was of the view that the assessee is entitled to a provision for bad debt u/s 36(1)(vii)(a) which is equal to 5% of the total income before deduction allowable under Chapter-VI - Held that:- Issue has been decided in favor of assessee in preceding years wherein it was held that if bad debts are written off in the books of account during the course of the previous year, such bad debts be deducted as admissible u/s 36(1)(vii) before quantifying the assessee’s total income for the purpose of clause (viia) - Decided in favor of assessee Head Office expenses viz traveling expenses claimed by assessee as deduction u/s 37 - Revenue contending application of Section 44C - Held that:- As the travelling expenses have been incurred by the head office on travel of its own staff and directly related to the business of the Indian Branch, hence we hold that section 44C is not applicable and these are allowable u/s 37(1) - Decided in favor of assessee Prior-period interest expenses - certain term deposit interest wrongly accrued on simple interest basis rather than on compound interest - additional interest claim during assessment proceedings - Revenue contending that deduction not made in the return cannot be entertained by AO otherwise than by filing a revised return - Held that:- Impugned amount claimed by the assessee is not a deduction but it is an expenditure. It is not the case of the revenue that these expenditures are not allowable in the regular course of business of the assessee. The claim is supported by the audit report. Therefore, we are of the opinion, that CIT(A) has rightly granted relief to the assessee - Decided in favor of assessee

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• 2012 (8) TMI 396
  Capital gain vs Business income - dispute regarding nature of income from sale and purchase of shares - assessee alleged of involved in scam of getting allotment of shares reserved for small investors by making multiple applications in ficticious /benami names - Held that:- It is found that assessee was financing such activities. Shares allotted were transferred by Smt. Roopal N. Panchal and M/s. Sugandh Estate and Investments P. Ltd.(in whose case search was conducted revealing involvement of assessee in scam) to the assessee and other financiers who sold shares in the market on the day of listing or immediately thereafter for making profits. It is therefore clear that the assessee had acquired shares in public issues from borrowed funds through an organized effort almost at allotment price, through irregular and illegal manner and selling them on profit soon after shares were listed on stock exchange. The income from share transactions has, therefore, been rightly assessed as business income, however, Security Transaction tax (STT) has to be allowed as a deduction - Decided against assessee.

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• 2012 (8) TMI 395
  Penalty u/s 158 BFA (2) - application u/s 154 submitting mistake in the computation in the total income - Held that:- It is not in dispute that after giving effect to the order of the CIT(A) passed against the appeal filed by the assessee u/s 154 the final undisclosed income of the assessee has been determined at Rs. 55 lacs as disclosed by the assessee in the return. Even otherwise, the difference between the income returned and assessed by the A.O. is due to difference of opinion, and, hence not a case of concealment - in absence of any contrary material placed on record by the Revenue there is no concealment on the part of the assessee and deleting the penalty is thus warranted - in favour of assessee.

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• 2012 (8) TMI 394
  Addition u/s 50C - reference to DVO - dispute regarding value of the property in hand regarding which unregistered agreement has been executed in September 2006 - Held that:- Word “assessable” has been incorporated only w.e.f. 1.10.2009 (Finance Act 2009 w.e.f. 1.10.2009). The same cannot be made operative for earlier Assessment Years i.e. AY 2007-08 in hand. The assessment proceedings before the said point of time have to governed by the words “adopted or assessed”. Even otherwise also, the Coordinate Bench in cases of Carlton Hotel had rightly held that sec. 50C is not applicable in cases of unregistered agreements. Once sec. 50C itself is not applicable qua the facts of the instant case, there is no other provision in the Act which could govern the peculiar circumstances in hand. Therefore, we hold that the CIT (A) has not committed any irregularity in deleting the addition, made by the AO - Decided against the Revenue

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• 2012 (8) TMI 393
  TDS on VSAT charges - Held that:- It stands settled that ‘VSAT charges’ are not payment for technical services and same being paid by the assessee to Stock Exchange are merely reimbursement of the charges paid/payable by the Stock Exchange to the Department of Telecommunication. Since the VSAT charges paid do not have any element of income, deducting tax while making such payments do not arise - Decided against Revenue TDS on Transaction charges paid by the assessee to the stock exchanges - Held that:- Though section 194J was inserted w.e.f.July 1, 1995, till the AY in question that is the AY 2005-06 both the Revenue and the assessee proceeded on the footing that section 194J was not applicable to the payment of transaction charges. In these circumstances, if both the parties for nearly a decade proceeded on the footing that section 194J is not attracted, then in the AY in question, no fault can be found with the assessee in not deducting the tax at source u/s 194J and consequently, no action could be taken u/s 40(a)(ia). Therefore, to ascertain whether such bona fide was entertained in the earlier assessment, we remit issue back to file of AO with a direction to decide ‘bona fides of contention’ in this regard and to decide the issue afresh in the spirit of law in case of Kotak Securities (2011 (10) TMI 24 - BOMBAY HIGH COURT) - Decided in favor of Revenue for statistical purposes.

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• 2012 (8) TMI 392
  Validity of reassessment proceedings framed u/s 143(3) r.w.s. 147 - assessment reopened to dis-allow interest expenses holding that said interest paid on the borrowed funds, utilized for the purpose of obtaining capital assets must be capitalized - CIT(A) deleted dis-allowance on ground that requirement is that of utilization of fund for the purpose of business - Held that:- Entire reassessment is bad in law being based on mere change of opinion as there was no failure on part of assessee in disclosing all material particulars. The AO has not come in position of any new material so as to form an opinion that any income has escaped assessment attributable to failure on part of the assessee in disclosing material facts. As regards merits, it is found that borrowed amount is for the purpose of business within the meaning of sec. 36(i)(iii). There is no dispute that borrowed funds were used in business. Hence, we see no reason to interfere - Decided in favor of assessee.

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• 2012 (8) TMI 391
  Penalty u/s 271(1)(c) - dis-allowance during reassessment of the claim already allowed u/s 80-IB on ground that project in question was residential cum commercial which did not qualify for deduction u/s 80-IB(10) - dis-allowance in question was however deleted by Coordinate Bench of Mumbai ITAT, upheld by jurisdictional High Court - Held that:- Since dis-allowance has already been deleted by Tribunal and upheld by jurisdictional High Court, hence there exists no basis to levy penalty u/s 271(1)(c). We, therefore, do not find any infirmity in CIT(A)’s order deleting penalty - Decided in favor of assessee.

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• 2012 (8) TMI 390
  Renewal of certificate u/s 80G - refusal on ground that applicant trust had not carried out any charitable activities in the last three years and had not incurred any expenditure - trust came into existence vide Trust Deed dated 17-11-1997 - this was the case of fourth renewal - no change in facts and circumstances of the case and also in the objects of the assessee trust - Held that:- Until and unless, the conditions mentioned in Section 80G(5) are not violated, refusal for grant/recognition u/s 80G cannot be made. Also, there is also no material on record to show that, what are the change in the facts and circumstances from the earlier years when the approval and recognition u/s 80G was granted and certificate has been issued. thus, matter should be restored back to the file of the DIT(E), who will not only consider the submissions of the assessee but also examine the conditions as laid down u/s 80G(5) - Decided in favor of assessee for statistical purposes.

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• 2012 (8) TMI 389
  Validity of revisionary order passed u/s 263 on the issue of LTCG held to be STCG by CIT and excess allowance of deduction u/s 80C - assessee purchased three flats vide agreement dated 14.03.2001 rectified vide deed dated 09-10-2002 as the flats numbers were wrongly mentioned in the original agreement - Revenue submitted that through the rectification, the assessee had actually taken different flats, thus holding period was within the three years period - Held that:- It is observed that during the regular assessment proceedings the AO had already made the enquiry, as he thought fit. In these circumstances, it can never be held that there was a lack of enquiry by the authority under the Act. It can also not be held that the enquiry was inadequate because complete details were provided to the AO, therefore, we have to hold that this was a clear case of change of opinion, that too, on a proposal sent by the AO, meaning whereby it was not the case of suo moto action of the CIT, which means, that the CIT himself did not apply his mind. Hence, action to invoke revision proceedings u/s 263 is bad in law and cannot be sustained. Second part of revision proceedings with regard to excess allowance of deduction u/s 80C - rectification proceedings already initiated by AO - Held that:- Since, this was an erroneous view taken by the AO, which, in any case is unsustainable in law. We, therefore, uphold the revision proceedings initiated by the CIT on the issue of excess allowance of deduction u/s 80C - Decided partly in favor of assessee.

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• 2012 (8) TMI 388
  Admission of additional evidence - requirements of Rule 46A – Held that:- new evidence filed by the assessee from the government agency and the same are essential for disposal of the appeal - CIThas considered the new evidence and the facts and circumstances of the case in entirety and validly, after recording reasons, admitted the new evidences Addition on account of unexplained addition to capital account – Held that:- copy of the capital account is available wherein amount on account of remittance from LIC of India and amount on account of constituency allowance received by the assessee is mentioned - addition has been deleted on the basis of corroborative evidence – against revenue Unexplained cash credit –Held that:- Assessee establish the identity & creditworthiness of the investor and genuineness of the transaction - Shri Gurdip Singh is assessed to income tax and he has confirmed the loan granted to the assessee and further quoted his PAN number – addition deleted

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• 2012 (8) TMI 387
  Unexplained cash credit – assessee obtained loans from parties by means of cheques - AO had accepted part of the loans - AO not only accepted the identity and genuineness of the creditors but also the creditworthiness of the creditors - he chose to disallow a part of the loan without bringing on record any material to show that the assessee had any other source of income which could have been routed in the from of loan given by a third party – Held that:- Creditors have explained the source of their deposits which in effect means that the sources were explained by the creditors. The AO has not pointed out how the explanation is not convincing and merely proceeded to invoke provisions of section 68 of the Act, that too for a part of the loan - initial onus placed upon the assessee stood discharged - appeal of the assessee is allowed

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• 2012 (8) TMI 386
  Exemption under S.10(1) of the Act in respect of agricultural income – Held that:- Once it is established that such agricultural activities are carried out by the assessee, assessee is entitled for exemption in respect of such agricultural income under S.10(1) of the Act, irrespective of any violation of the statutory provisions - infraction of the statutory provisions may expose the assessee to the risks of being penalized or punished under the relevant statutes, but the same do not change nature of the agricultural income, and as such, cannot be fatal to the assessee's claim for exemption under S.10(1) of the Act. Charitable or religious trust - Non-registration of the assessee under S.43(1) of the A.P. Charitable and Hindu Religious Institutions and Endowments Act, 1987 – Held that:- Mere fact that the assessee-trust is not registered under the provisions of the A.P. Charitable and Hindu Religious Institutions and Endowments Act, 1987, shall not render the assessee trust as a non-charitable one, and registration under S.12A of the Income-tax Act alone is enough for an assessee to claim exemption in respect of its income under S.11 of the Act - Revenue's appeal is dismissed.

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• 2012 (8) TMI 385
  Penalty under section 271(l)(c) of the Act – Held that:- during pendency of penalty proceedings assessee died and, thereupon Assessing Officer without issuing a fresh notice to legal heir of deceased-assessee passed a penalty order, order so passed was not sustainable being violative of principles of natural justice - Action of the Assessing Officer on the ground that assessee has concealed income is contradictory in terms for the simple reason that the Investigation Wing appears to have passed on the information - assessee voluntarily declared return of income of Rs. 1 lakh it is intriguing to note that the revenue could not lay their hands on any evidence, for about two years, to prove that the gift received by the assessee was bogus and presumably because of non-availability of material no action was taken by the Assessing Officer - it is for the Assessing Officer to prove, either by obtaining the statement from the donor or otherwise, that the gift is not genuine. No such effort was made by the Assessing Officer. Assessee having declared a sum of Rs. 1 lakh as his income it is not a case of furnishing inaccurate particulars of income - penalty proceedings are bad in law

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• 2012 (8) TMI 384
  Undisclosed cash credit - Assessee received unsecured loans from three parties through account payee cheques – Held that:- Assessee has discharged the initial burden of proving identity, genuineness of transactions and also creditworthiness of the three creditors by producing their respective bank accounts. Entry in the pass book of a third party can be taken as a primary evidence in proof of the fact that loan was advanced by third party - initial onus shifts onto the Revenue to prove that the creditors lack creditworthiness and to come to such conclusion, the assessee cannot be asked to produce any evidence which is within the personal knowledge of the third party - AO did not examine the parties and proceeded on the assumption that creditors would not have saved any money to advance the loan - it is not a fit case to make addition u/s 68 of the Act

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• 2012 (8) TMI 383
  Reopening of assessment – income escaped assessment - Assessee, a non-resident, was operating in India through its liaison office and project office - it was found that assessee did not include sales to DMRC effected through project office which amount represented milestone payments received abroad in foreign currency and same was not offered to tax in India as income of project office – Held that:- Even if the materials/evidence was not enclosed with the return, full and true details/material was disclosed during the course of the original proceedings - project office was a permanent establishment - conclusion drawn by the Assessing Officer cannot be attributed to the failure of the petitioner to disclose fully and truly all the material facts. No new material fact or particulars have come to the notice/knowledge of the Assessing Officer - re-assessment order quashed

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• Customs

• 2012 (8) TMI 414
  Fiscal Penalty imposed for alleged violation of provisions of Section 11(2) of the Foreign Trade (Development & Regulation) Act, 1992 on nominee directors - failure to fulfill the export obligation under DEPB licenses - Held that:- It is relevant to note that neither in the showcause notice it is alleged nor in the orders impugned in the petition any finding is recorded to the effect that the petitioner, a nominee director had aided or abeted in contravening the provisions of the Act. In the absence of any such finding recorded, imposition of penalty on the petitioner nominee director on the ground that the petitioner has violated Section 11(2) of the 1992 Act cannot be sustained - Decided in favor of petitioner

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• 2012 (8) TMI 413
  Claim of refund on the differential amount of duty paid - Commissioner (Appeals) re-remanded the matter - Held that:- The power of remand by the Commissioner (Appeals) has been taken away by amendment to Section 128 of Customs Act, 1962 w.e.f. 11-5-2001, thus Commissioner (Appeals) have to decide the issue himself instead of remanding the matter the lower authority.

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• 2012 (8) TMI 382
  Enhancement of import value of goods on the basis of contemporaneous imports - difference between the description of the goods - assessee contended the same to be of reject quality whereas test report held the impugned goods to be of Grade-I quality - Held that:- The discrepancy has not been explained by the appellants. Further, a claim has been made by the appellants that they only ordered for the reject quality goods. This submission appears to have no substance as they have taken delivery of the impugned goods without returning the same to the suppliers, which was required to be done, if the suppliers were at fault in supplying a different quality of goods. Hence, enhancement confirmed. Further, when the quality of the goods itself has been misdeclared, the declared value requires to be rejected. The appeal is otherwise rejected except for reducing the redemption fine and penalty.

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• 2012 (8) TMI 381
  Whether the goods, namely, automobile parts exported by the appellant is eligible for all industry rate of drawback – Held that:- Item steering knuckle falls under chapter 87 of the Customs Tariff and hence the all industry rate of drawback for the said item can not be claimed against goods for which rate has been prescribed under chapter 73 - if a product falls under chapter 87, benefit of drawback is not available merely because the product description matches with those given for goods falling under chapter 73 - appellant is not eligible for duty drawback at all industry rates on the impugned goods under serial nos. 73.29 and 73.30 of the drawback schedule as it stood at the relevant time Whether the goods already exported are liable to confiscation and if so, whether penalty is imposable - appellant did not furnish the correct description of the goods under export either in the shipping bill or in the export invoice - appellant sought ineligible drawback by mis-declaring the goods - appellant has submitted that in the instant case the goods have not been seized at all the hence they cannot be confiscated – Held that:- Section 113 deals with liability to confiscation and not actual confiscation - section nowhere states the goods should be seized to determine the liability to confiscation - merely because the goods have been examined by the central excise authorities does not absolve the appellants of their responsibility of making the correct declarations in the export documents - This can at best a factor for determination of quantum of penalty and not for imposition of penalty per se – Penalty reduced

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• Corporate Laws

• 2012 (8) TMI 412
  Winding up – application for cancelation of sale of the property which is mortgaged to the applicant-Corporation - applicant financed the 1st respondent company - Similarly the 2nd respondent K.S.I.I.D.C, had also financed the 1st respondent – Held that:- Proceedings, the 2nd respondent K.S.I.I.D.C. had filed an application to stand outside the winding up and recover the amounts due to it - K.S.I.I.D.C., initiated steps for sale of the properties belonging to the company in liquidation - applicant cannot make out any grievance in the instant application inasmuch as they have concerned to the entire process of sale by K.S.I.I.D.C. - It is in the presence of the 2nd respondent, this Court disposed of the said application on 15-6-2006 conforming the sale of the property – application dismissed

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• 2012 (8) TMI 380
  Winding up – alleged that company was unable to pay its debts – respondent company was taken over by another company but no payment was made by either company – Held that:- Petitioner is an admitted creditor and the respondent is unable to pay its debts, present petition is admitted and respondent company is directed to be wound up. Fraud on investors - held that:- Mr. Vijay Kumar Sharma and his family members are targeting small and middle class investors as they know that they are unorganized and do not have resources to defend themselves. Even the statutory authorities like the Official Liquidator's office who are entrusted with the duty to bring the culprits to book are not able to keep pace with the scams perpetrated by Mr. Vijay Kumar Sharma and his family members. In fact, the Official Liquidator's office is ill-equipped, under-staffed, untrained and manned by non-professionals. Had it not been for the SFIO and police inquiry, Official Liquidator would never even have come to know about the real diversion of funds even in JVG Finance Company, despite lapse of more than ten years. Direction given to the Central government to revoke DIN in order to prevent them creation of new company. Directions given to all banks to stop operation of their accounts.

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• Service Tax

• 2012 (8) TMI 437
  Transportation of cargo by air - default in payment of service tax - assessee contested against invoking the extended period of limitation - Held that:- The appellants were liable to pay service tax for the reason that they were not eligible for the benefit of the Export of Service Rules, 2005 based on the reasoning that the service was performed in India & that during the period from 15.3.2005 to 15.7.2005 the period during which the exemption as was available in Notf.No. 28/2004-ST dated 17.9.2004 was rescinded but not re-stored - Thus the appellants could not get waiver from service tax on such services during the period 16.6.2005 (Date on which Notf 28/2005-ST took effect) to 23.6.2005 (Appellant started paying service tax from 24-06-2005). As during the period 15-06-2005 to 23-06-2005, the appellant was not able to collect taxes from the customers cannot a reason to waive the liability or to consider that the appellant had bonafide belief that tax was not payable for the said period, thus the extended period of time can be invoked in this case. Invocation of Section 80 - Held that:- Considering the legislative history of notifications like notification 28/2004-ST dated 17-09-2004, 9/2005-ST dated 03-03-2005 and 28/2005-ST dated 07-06-2005 and Notification 29/2005-ST dated 15-07-2005 would justify invoking section 80 - all the penalties imposed on the appellant is set aside

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• 2012 (8) TMI 436
  Non-registration with the Service Tax Department and failure to pay service tax - Held that:- As Commissioner (Appeals) set aside the order passed by the adjudicating authority confirming the demand & penalty and remanded the matter for denovo adjudication is not correct as that by an amendment to Section 35A of Central Excise Act, 1944 w.e.f. 11.5.2011, the power of remand has been specifically withdrawn by the legislature - the embargo on the power of remand in Section 35A is squarely applicable to the provisions of Section 85 of the Finance Act, 1994.

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• 2012 (8) TMI 435
  Rejection of refund claim in terms of Notification No.41/2007-ST dated 6.10.2007 - appellants did not submit the requisite documents before the sanctioning authority for examination - on challenge Commissioner (Appeals remanded the matter to the lower authority - Held that:- Considering the amended Section 35A w.e.f. 11-5-2001 under the Finance Act, 1994 Commissioner (Appeals) is not empowered to remand the matter and he has to decide the matter by himself, therefore the order of Commissioner (Appeals) remanding the case to the lower authority, is not sustainable. Thus the Commissioner (Appeals) is certainly entitled to set aside order passed by the Adjudicating Authority and thereupon pass an appropriate order on merits by himself but not to remand the matter. Being so, Commissioner (Appeals) dealing with the appeals in relation to the service tax also is not empowered to remand the matter but he has to decide the matter by himself - remand the matter to the lower adjudicating authority making such further inquiry as may be necessary.

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• 2012 (8) TMI 406
  Power of the Commissioner (Appeals) to remand – 100% EOU - export of IT software - refund claim under Notification No. 5/2006 dated 14.3.2006 in respect of the unutilised credit accumulated due to export of services – Commissioner (Appeals) allowed the refund of Cleaning activity, Security Agency, Courier charges, Repair & Maintenance, Cargo Handling, Commercial Training or coaching, Courier, Internet Telephone, Manpower Recruitment, Pager, Rent a cab operator, Telephone, Chartered Accountants, Clearing & Forwarding Agents, Outdoor catering except Air Travel Agent service - Held that:- Order of the Commissioner (Appeals) is not a remand order and he has clearly held that the refund was available in respect of all services except Air Travel Agent service . Therefore, I do not find any merit in the submission that the Commissioner s (Appeals) order is a remand order. Appeal rejected.

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• 2012 (8) TMI 405
  Liability of Service tax on the import of service for the period from 1.1.2005 to 18.4.2006 - Held that:- Liability under Finance Act 1994 for availing service of foreign agents arise after 18.04.2006 following Apex Court decision in case of Indian National Shipowners Association v. Union of India (2010 (12) TMI 12 - SUPREME COURT OF INDIA ) - Decided in favor of assessee

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• 2012 (8) TMI 404
  Demand of service tax - under the category of "Business Auxiliary" service provider – benefit of Notification No.l4/2004/ST, and Notification No. 6/2005-Customs – Held that:- According to appellant individuals are totally exempt from the purview of the service tax when they provided services on behalf of their client - Authorities below have not dealt with exemption notification - matter remanded to Adjudicating Authority-

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• 2012 (8) TMI 403
  Double taxation of service tax - subcontractor - the appellant stated that when the appellant provided courier service to the main courier namely professional couriers and service tax having been paid by the latter, there shall not be levy on the appellant. - held that:- No doubt, larger bench decided [in Vijay Sharma & Co. & 2 Others Vs CCE Chandigarh - 2010 (4) TMI 570 - CESTAT, NEW DELHI]the case of stock brokers and sub-brokers where the matter in controversy was about taxability as was the question framed in para-1 of the reported decision cited by ld. Counsel. We do appreciate that larger bench decision emerged subsequent to adjudication. Therefore, ld. Adjudicating authority had no advantage of reading that decision. But entire plea of appellant was without proof and nothing was proved to show that the appellant was a mere agent of the principal courier. It is therefore not possible to hold that the appellant acted as a courier without being a provider of business support service. Stay granted - matter remanded back to pass a reasoned and speaking order dealing with pleadings and evidence..

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• Central Excise

• 2012 (8) TMI 411
  Cenvat credit on input services - manufacture of both taxable and exempted products - non-maintenance of separate accounts - period involved April 2008 to December 2008 - assesee contended application of retrospective amendment in CENVAT Credit Rule (6) done by Section 73 of Finance Act, 2010 to the period involved and reversal of credit attributable to the inputs used in the manufacture of the exempted products as sufficient discharge of their liability - Held that:- Matter has to be re-examined by the adjudicating authority in the light of retrospective amendment in Rules along with the application filed by the Appellants under Section 73 of Finance Act, 2010. Appeal allowed by way of remand

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• 2012 (8) TMI 410
  Captive Consumption - benefit of Notification No.67/95-CE dated 16.03.1995 - denial - assessee engaged in the manufacture of sponge iron and steel billets out of the sponge iron, had taken separate registration for these commodities, though manufactured in the same factory premises but located at different parts in the said factory premises - issue decided against appellant in remand proceedings - Held that:- Even though both these units are having separate Central Excise registration, but being situated in the same factory premises, the benefit of exemption Notification No.67/95-CE cannot be denied to the sponge iron manufactured in one unit and consumed in the manufacture of billets in another unit. Consequently, the order of the Commissioner is set aside and the appeal of appellant is allowed

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• 2012 (8) TMI 409
  Claim for remission of duty for the breakage and losses - rejection - appellants engaged in the manufacture of aerated water under chapter 22 of C.E.T.A., 1985 contended that breakage is ranging from 0.06% to 0.01% which is much less than the limit of 0.5% prescribed by the Board vide Circular No.1D/3/70-CX.8 dated 08.09.1971 - Held that:- It is found that department has not challenged the aspect that the appellants are regularly showing the quantum of loss due to breakage etc. in their periodical return filed by them. Nothing prevented the department to carry out the physical verification and it is not the case of the department that the loss due to breakage etc. was over and above the limit prescribed by the Board. We also find that this Tribunal for the earlier period has already allowed the appeal of the appellant, therefore, the decision of Commissioner is not sustainable and the same is set aside and appeal is allowed.

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• 2012 (8) TMI 408
  GTA Services - dis-allowance of cenvat credit of the service tax paid on GTA Services under reverse charge mechanism - period March 2007 - Held that:- Issue is no more res-integra. It is found that prior to 01.03.08 any service tax paid by the assessee under reverse charge mechanism on GTA services, was eligible for availment of cenvat credit. See Nahar Industrial Enterprises (2010 (5) TMI 608 - PUNJAB AND HARYANA HIGH COURT ) - Decided in favor of assessee.

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• 2012 (8) TMI 379
  Cenvat credit on input services - invoices issued in favour of the Head Office - denial under Rule 9(1)(g) of Cenvat Credit Rules, 2004 on ground that Head Office of the assessee was not registered during relevant time as Input Service Distributor in terms of Rule 3(1) of Service Tax Rules, 2005 - Held that:- It is found that neither the adjudicating authority nor the Appellate authority have undertaken the exercise to scrutinize the invoices relating to Input services availed in order to find out as to whether or not the Input service corresponding to the invoices were availed by the appellant unit or the Head Office or any other unit. We remand the matter back to the adjudicating authority for de novo decision

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• 2012 (8) TMI 378
  Plea for condonation of delay of 29 days - delay occurred due to accident of accountant dealing with the matter who got bed-ridden for almost 3 months - Held that:- Explanation given by the appellant for delay in filing of the appeal is satisfactory and Commissioner (Appeals) should have accepted the same, more so because of the fact the medical certificate of Accountant was also produced. It is well settled that while dealing with the application for condonation of delay, the Courts/Tribunal should take liberal view and ordinarily the doors of justice should not be shut to a party on technical ground of limitation. Delay condoned - Decided in favor of assessee.

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• 2012 (8) TMI 377
  Cenvat credit – common input used - appellants are manufacturers of sugar, molasses, rectified spirit and carbon-di-oxide - manufacture, press mud and sludge are produced which have been sold by the appellants for some value – demand of 10% or 5% as applicable during the relevant period from April 2008 to September 2010 in terms of CENVAT Credit Rule 6(3)(i) – Held that:- CENVAT credit is also admissible in respect of amounts of inputs contained in any of the waste, residue or by-product. It further states that the basic idea is that CENVAT credit is admissible so long as the inputs are used in or in relation to the manufacture of final products - demand of 10% / 5% on press mud and sludge, which are in the nature of by-product and waste and also non-excisable cannot be sustained - appeals are allowed.

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• 2012 (8) TMI 376
  Penalty under Rule 27 of the Central Excise Rules, 2002, for contravention of Rule 12 (1) of the Central Excise Rules, 2002 on the ground that the appellant did not file the monthly ER-1 returns – Held that:- discharge of duty liability under compounded levy scheme - Duty payment has been made under Rule 3A of the Act and not under Section 3 - Under compounded levy scheme, this is the statutory return which is required to be filed and not the return under Rule 12 of the Central Excise Rules, 2002 - appellant has complied with the said procedure - appellant has not violated the provisions of Rule 12 of the Central Excise Rule, 2002 and accordingly, the imposition of penalty on the appellant under Rule 27 for violation of Rule 12 is not correct in law - appeal is allowed

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• CST, VAT & Sales Tax

• 2012 (8) TMI 438
  Taxability of non-prescription sunglasses - at 4% as under the schedule entry C-107(8) read with Notification dated 23rd November, 2005 or at 12.5% under residuary entry E-1 of the schedule to the 2002 Act - Held that:- As per item 5 of the notification dated 23rd November, 2005 corrective spectacles as also protective spectacles are liable to be considered as medical device - If the Legislature in its wisdom has included the sunglasses within the category of “Medical Devices and Implants” covered under entry C-107(8) by issuing a notification on 23rd November, 2005, it would not be open to the Commissioner of Sales Tax to hold that non prescriptive sunglasses are not medical devices and hence not covered under the notification dated 23rd November, 2005 The decision of the Tribunal that the items in question viz. protective sunglasses covered under notification dated 23rd November, 2005 are liable to be treated as medical device up to the date of its amendment on 27th April, 2011, cannot be faulted as with effect from 1st May, 2011 by notification dated 27th April, 2011 by substituting the words 'corrective spectacles' in place of the words 'spectacles', correctives, protective or other' - in favour of assessee.

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• 2012 (8) TMI 407
  Contract for performance of work of laying HDPE pipe for transportation of natural gas – determination of nature of the contract namely whether the said contract was an indivisible interstate works contract or a contract to supply pipes and a contract to lay down the pipes - Revenue considered the transaction as a divisible transaction – Held that:- The use of HDPE pipes was an integral part of the performance of the contractual obligation by the applicants in as much as the applicants were required to lay down the tranches and lay down the pipes which would be reaching at site. The payment terms also clearly indicates that the applicants were entitled to get money from Assam Gas depending upon the performance of various acts required to be done for the successful fulfillment of terms of the contract. Further, Clause 9 and clause 21 refers to the term 'contract value' and ‘turnkey basis’ respectively which clearly indicates that the consideration payable was to be calculated as a whole and not in parts. If at all the contract was intended to be divided into two parts, the said payment terms would have indicated that the applicants would be entitled to get cost of the pipes on delivery of required quantity of pipes to be used for the purposes of laying the pipes In view of aforesaid it is held transaction to supply and laying down the pipe being inseparable, it would constitute works contract and to such a works contract, the liability to pay Central Sales Tax would arise only after 11.05.2002 and since the transaction in the present case pertains to the period prior to 11.05.2002, the applicant would not be liable for Central Sales Tax.

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• Wealth tax

• 2012 (8) TMI 439
  Rejection of application for registration as a valuer of plant and machinery u/s 34AB of the Wealth Tax Act - Held that:- The degree in production engineering as possessed by the assessee has been recognized as a qualification equivalent to a degree in mechanical or electrical engineering for appointment to superior services and posts of Central Government as prescribed under Rule 8A (8)(i) of the Wealth Tax Rules, 1957 - The application dated 26th June, 2011 being rejected only on the ground that the previous application had been rejected - being a fresh application, the Chief Commissioner of Income Tax is obliged to consider the same on its merits - in favour of assessee.

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