TMI Tax Updates - e-Newsletter
August 22, 2013

Case Laws in this Newsletter:

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

TMI SMS

• Refund Claim of Duty - Duty paid under Protest - finalization of provisional assessment - the issue of unjust enrichment was not required to be considered - HC

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• Failure to obtain and Quote PAN - TDS - Penalty u/s 272B - no revenue loss - mere technical breach - clearly satisfies the test of reasonable cause u/s 273B -HC

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Articles

1. A MOVE TOWARDS GST

2. INPUT TAX CREDIT UNDER TAMIL NADU VALUE ADDED TAX ACT, 2006

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Draft National Competition Policy

2. Factors Leading to Corporate Frauds and the Measures Taken by the Government to Check them

3. Fast Track Exit Mode for Defunct Companies

4. Reserve Bank of India penalizes Nagrik Sahakari Bank Ltd., Indore (Madhya Pradesh)

5. RBI Reference Rate for US $ and Euro

6. Exchange Rate of Foreign Currency (Pound Sterling) Relating to Imported and Export Goods Notified

7. RBI releases Minutes of the July 24, 2013 Meeting of the Technical Advisory Committee on Monetary Policy

Notifications

Customs

1. 87/2013 - dated 22-8-2013 - Cus (NT)

Rate of exchange of conversion of each of the foreign currency with effect from August 23, 2013

Circulars / Instructions / Orders

VAT - Delhi

1. VAT AUDIT/HQ/2013-14/3210-3218 - dated 16-8-2013

REGARDING AUDIT OF DEALERS

2. F. III/7/T&T/Misc./2000/Estt./Pt.-I/4591-97 - dated 8-8-2013

Allocation of work

FEMA

3. Press Note No. 4 (2013 Series) - dated 22-8-2013

Amendment of the existing policy on Foreign Direct Investment - definition of the term “control”, for calculation of total foreign investment i.e. direct and indirect foreign investment, in Indian companies

4. Press Note No. 5 (2013 Series) - dated 22-8-2013

Review of the policy on foreign direct investment in the Multi-Brand Retail Trading Sector-amendment of paragraph 6.2.16.5 (iii), (iv) and (vi) of Circular 1 of 2013-Consolidated FDI Policy

Highlights / Catch Notes

Income Tax

• Court Finds No Penalty for Technical Breach in TDS Returns Due to Reasonable Cause u/s 273B.

  Case-Laws - HC : Failure to obtain PAN and Quote PAN of deductees as provided u/s 139-A(5B) - TDS returns / certificates - Penalty u/s 272B - Relied u/s 273B - There is no revenue loss and mere technical breach, clearly satisfies the test of reasonable cause under section 273B of the Act - HC
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• Lease Premium Not Subject to TDS u/s 194I; Capitalized as Capital Expenditure by Assessee.

  Case-Laws - AT : TDS u/s 194I of the Income Tax Act - Lease premium - lumpsum payment - assessee has capitalized the lease premium in its books of accounts and treated the same as capital expenditure for tax purposes - Provisions of section 194-I of the Act to deduct TDS on the lease premium paid by the assessee is not attracted - AT
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• Section 80IB allows tax deductions for projects with multiple approvals if stipulated conditions are met, not defined as housing.

  Case-Laws - AT : Deduction u/s 80IB - Two approvals one as commercial and one as housing - There is no definition of housing project in the provisions and there can be more than one approval for the project and even if there is common approval, assessee is entitled for deduction on the project undertaken by it, provided the project satisfies the other conditions - AT
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• Land Classification for Tax: Agricultural vs. Capital Asset u/s 2(14) of Income Tax Act.

  Case-Laws - AT : Land sold is agricultural land or it is to be treated as a capital asset in the terms of section 2(14) of the Act – Even if no agricultural production was done by the assessee on this land, this mere fact will not take out the land out of the nomenclature of 'agricultural land' - AT
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• TPO Challenges AMP Expenses, Claims They Boost Suzuki's Brand Value, Not Just Maruti's Since 1982.

  Case-Laws - AT : TPO has imputed a very large T.P. adjustment in respect of AMP expenses on the basis that the said expenses incurred by the assessee year after year since 1982 have resulted in a significant increase in Suzuki's brand value - Suzuki cannot be considered to be a weak brand which is only reinforcing on Maruti's brand and taking away value from it - AT
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• Section 271AAA: No Time Limit for Tax Payment Means No Unfair Penalties for Taxpayers After Search.

  Case-Laws - AT : Penalty u/s 271AAA - Immunity - Penalty where search has been initiated - Once a time limit for payment of tax and interest has not been set out by the statute, it cannot indeed be open to the Assessing Officer to read such a time limit into the scheme of the Section or to infer one. - AT
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• Court Confirms Income Addition Due to Unsubstantiated Brass Scrap Sales and Lack of Manpower Evidence.

  Case-Laws - AT : Addition on account of bogus sale - accommodation entries - Assessee has failed to produce any credible evidence to establish that cash sales were effected of brass scrap. The surrounding circumstances also show that there was no man-power available with the assessee to deal with the huge quantity of brass scrap. - additions confirmed - AT
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• AO's Letters Misaddressed: Taxpayer's Explanation Accepted, No Extra Tax Levied u/s 133(6) for Alleged Bogus Purchases.

  Case-Laws - AT : Bogus purchase - AO has not issued the letters u/s. 133(6) on the correct address supplied by the assessee. Therefore, no fault could be found with the explanation of the assessee. - No addition - AT
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• Charitable Institution's 12AA Registration Cancellation Contested; CIT Finds Activities Genuine, Case Sent for Further Review.

  Case-Laws - AT : Cancellation of registration provided u/s 12AA of the IT Act, as a charitable institution – CIT did not give any such finding that the assessee's activities are not genuine or are not being carried out in accordance with the objects of the trust - matter remanded back - AT
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• Filing fees for capital enhancement are not revenue expenditures, says court.

  Case-Laws - AT : Amount paid to the Registrar of Companies, as filing fee for enhancement of capital was not revenue expenditure - AT
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• Intangible assets from slump sale qualify for depreciation u/s 32(1)(ii) of the Income Tax Act. Goodwill not addressed.

  Case-Laws - AT : Specified intangible assets acquired under slump sale agreement were in the nature of “business or commercial rights of similar nature” specified in Section 32(1)(ii) and were accordingly eligible for depreciation. It is not necessary to decide the alternative submission made on behalf of the assessee that goodwill per se is eligible for depreciation u/s 32(1)(ii) - AT
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• Assessee Granted 25% Depreciation on "License to Collect Toll" as Intangible Asset under Income Tax Section 32(1)(ii.

  Case-Laws - AT : Depreciation on intangible asset - assessee has succeeded in its substantive claim of depreciation on 'License to collect Toll' @ 25% in terms of Section 32(1)(ii) - AT
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• Allegation of Misuse of Section 80IC: Assessee Accused of Shifting Invoicing to Dehradun for Tax Benefits.

  Case-Laws - AT : Deduction u/s 80IC - Manufacturing activity - assessee is invoicing majority of finished goods from Dehradun whereas that substantial production is carried out at Chennai - the assessee has adopted colourable devise to take undue advantage of benevolent provisions of the Act - AT
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• Credit Card Company Charges Not Subject to TDS u/s 194H, Treated as Normal Bank Charges Instead.

  Case-Laws - AT : TDS u/s 194H - The commission retained by the credit card company is therefore in the nature of normal bank charges and not in the nature of commission/brokerage for acting on behalf of the merchant establishment - No TDS - AT
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• India-UAE Tax Treaty: Are Time Charters and Slot Hires Covered Under Article 8? Clarifying 'Liable to Tax' Status.

  Case-Laws - AT : Benefit of DTAA between India and UAE - whether time charter and hiring of slots fell within the Article 8 of the Treaty or not. - Simply because there is no tax incidence in UAE, does not mean that the assessee ceases to be 'otherwise liable to tax', as per Article 4. - AT
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Customs

• Steamer Agent Faces Automatic Penalty for Short Landing of Goods u/ss 116 and 148 of the Act.

  Case-Laws - HC : Short Landing of Goods - The petitioner as a steamer agent files an Import General Manifest and represents before the customs authorities as an agent of the shipper and conducts all affairs in compliance with the provisions of the Act, then the provisions of Section 116 read with Section 148 of the Act get attracted automatically and as a result penalty becomes leviable - HC
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• Confiscation Order Challenged: Goods Deemed Eligible for Solar Project Benefits Under Notification No.1/2011-Cus. Benefits Cannot Be Denied.

  Case-Laws - AT : Validity of Confiscation order - Goods are prima facie eligible for benefit of Notification No.1/2011-Cus Extending the notification and acknowledges the fact that the goods are needed for solar power generation project or facility - the benefit of Notification No.1/2011-Cus, cannot be denied to such goods - AT
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• Imported Goods Valuation Excludes Unrelated Technical Know-How and Royalty Costs for Functioning Purposes.

  Case-Laws - AT : Valuation of imported goods - If the cost of technical know-how payment of royalty had no nexus with the working of the imported goods then such payment was not includable in the price of the imported goods - AT
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FEMA

• Cross-Examination Entitlement Must Be Flexible to Uphold Natural Justice and Fair Play in Legal Proceedings.

  Case-Laws - HC : Entitlement for Cross Examination – it was not possible to lay down any rigid rules as to when in compliance of principles of natural justice opportunity to cross-examine should be given - In the application of the concept of fair play there had to be flexibility. - HC
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Corporate Law

• Court Temporarily Suspends Winding-Up Order Under Companies Act to Allow Company to Settle Debt in Eight Weeks.

  Case-Laws - HC : Winding up u/s 433(e) r.w 434(1)(a) - Inability to pay Debts -The order of winding up of the company to be kept in abeyance for a period of eight weeks to give JIL one last opportunity to make payment to E&Y of the admitted liability to the satisfaction of E&Y - HC
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Service Tax

• Construction Service Tax Classification Excludes Extended Limitation Period Due to Non-Commercial Use by Youth and Women Vendors.

  Case-Laws - AT : Commercial or Industrial Construction Service u/s 65(105)(zzq) - assessee under a bona fide belief that ultimately the marketing complex would be used for the persons, namely, unemployed youth and women vendors and not for commercial purpose - prima facie extended period of limitation is not applicable - AT
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• Courier Delivery Not Valid for Show-Cause Notices u/s 37C of Central Excise Act, 1944.

  Case-Laws - AT : Manner of Service of Notice - Sending show-cause notice through courier was not an approved mode of service envisaged under Section 37C of the Central Excise Act, 1944 read with Section 83 of the Finance Act, 1994 - AT
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• Mandap Keeper Service Credit for Annual Day Function Deemed Integral to Business Activities; Credit Allowed.

  Case-Laws - AT : Input Service Credit – Mandap Keeper Service - the annual day function of the appellant company is an integral part of the business activity - credit allowed - AT
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• Multi-piece packaging of pre-packed soaps classified as 'manufacture' u/s 2(f)(iii); case remanded for tax verification.

  Case-Laws - AT : Manufacture or Business Auxiliary Service - multi piece packaging - The definition covers not only packing but also re-packing - multi-piece packaging is done on the soaps already packed - thus it would amount to repacking and accordingly the activity would be covered under the definition of ‘manufacture' u/s 2(f) (iii) - matter remanded back for verification - AT
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• Service Tax Not Applicable on Sponsorship for IPL Matches; Authority's Premises Deemed Misconceived and Unsustainable.

  Case-Laws - AT : Sponsorship whether liable for service tax or not - sponsorship of the IPL matches - Fundamental premises of the adjudication authority are misconceived and unsustainable - legislature has incorporated no restriction upon the exclusion by enacting that where a sports events has a commercial purpose, the exclusion was inapplicable - no service tax - AT
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Central Excise

• Provisional Assessment Refunds Exempt from Sections 11A and 11B; Unjust Enrichment Not Considered u/r 9B Sub-rule (5).

  Case-Laws - HC : Refund Claim of Duty - Unjust enrichment - finalization of provisional assessment - any recovery or refund consequent upon adjustment under Sub-rule (5) of Rule 9B is not to be governed by Section 11A & 11B of the Central Excise Act. - the issue of unjust enrichment was not required to be considered. - HC
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• Modvat/Cenvat Credit Extended to All Components, Spares, Accessories; Assessee Eligible for Relief Regardless of Classification.

  Case-Laws - HC : Modvat / Cenvat Credit - Classification of Goods - credit would be applicable to all components, spares and accessories of the specified goods, irrespective of their classification under any chapter heading – the assesse would also be eligible for relief - HC
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• Petitioner Denied Cash Refund for Excess Excise Duty; Refund Limited to Actual Credit Paid; Balance as Credit.

  Case-Laws - CGOVT : Petitioner paid lesser duty on domestic product and higher duty on export product which was not payable - Assessee not entitled for refund thereof in cash regardless of mode of payment of said higher excise duty - Petitioner was entitled to cash refund only of the portion deposited by it by actual credit and for remaining portion refund by way of credit is appropriate - Notification No. 40/2001 - CGOVT
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• Rule 6(3) Cenvat Credit Rules: No Set Percentage for Exclusively Producing Exempted Goods, Benefits Cannot Be Denied.

  Case-Laws - AT : Application of Rule 6(3) of the Cenvat Credit Rules, 2004 - There is no percentage fixed in the Cenvat Credit Rules to decide that if dutiable goods are much below that percentage, the manufacturer will be treated as exclusive manufacturer of exempted goods. In absence of any such limit mentioned in the rule Commissioner cannot deny the benefit of Rule 6(3)(1)/ Rule 6[3][b] - AT
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• No Credit for Pre-May 13, 2003, Packing Materials Outside Factory; Demand Barred by Limitation Period.

  Case-Laws - AT : Packing material used outside factory i.e. Depot - packing material (extra carton etc.) not used in the factory of production - Credit in respect of these cartons will not be available prior to 13.5.2003. - However demand set aside on the ground of period of limitation - AT
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• Mahape Unit Cleared Duty-Free Goods; Pawane Unit Deems Them Duty Paid, Demand Set Aside Under Notification 14/2002.

  Case-Laws - AT : As per Notification 14/2002 the Mahape unit has cleared the goods after satisfying the condition i.e in availing CENVAT credit on inputs/capital goods. Therefore, goods were cleared without payment of duty - These goods were received by their Pawane unit and the same were deemed to be duty paid as no credit on inputs/capital goods have been availed by their Mahape unit - Demand set aside - AT
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VAT

• Tamil Nadu VAT Amendment Upheld: High Court Dismisses Challenge to Section 19(20) on Input Tax Credit Reversal.

  Case-Laws - HC : Whether amendment by inserting Section 19(20) to Tamil Nadu Value Added Tax reversing the amount of the input tax credit over and above the output tax of those credit was not within the legislative competence of the State Legislature under Entry 54 of the State List and utravires the Constitution and the Statute - Petition dismissed - HC
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Case Laws:

• Income Tax

• 2013 (8) TMI 599
  Failure to obtain PAN and Qutore PAN of deductees as provided u/s 139-A(5B) - TDS returns / certificates - Penalty u/s 272B - Relied u/s 273B - reasonable cause - Respondent-assessee has not mentioned Permanent Account Number in Form-16-A issued to contractors – Held that:- A bare reading of Section 272B, 273-B and section 139A(5A) and 139A (5B) of the Act itself makes it clear that the penalty under section 272-B will not ordinarily be imposed unless the assessee has either acted deliberately in defiance of law or was guilty of conduct which is contumacious, dishonest or acted in conscious disregard to its obligation. The penalty under section 272B cannot be imposed merely because it is lawful to do so. It can be imposed for failure to perform statutory obligation. The imposition of penalty for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially, after considering the explanation of reasonable cause submitted by the assessee and on a consideration of all the relevant circumstances. Law laid down by the Hon'ble Supreme Court in the case of Hindustan Steels Ltd. Vs. State of Orissa [1969 (8) TMI 31 - SUPREME Court]. is applicable looking to the provisions of Section 272-B read with Section 273B of the Act – There is no revenue loss and mere technical breach, clearly satisfies the test of reasonable cause under section 273B of the Act – Decided against the Revenue.

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• 2013 (8) TMI 598
  TDS u/s 194I of the Income Tax Act - Lease premium - assessee has capitalized the lease premium in its books of accounts and treated the same as capital expenditure for tax purposes - Assessee in default u/s 201(1) and 201(1A) of the Act for not deducting tax u/s 194-I of the Act of lease premium paid by it - Lease premium paid by assessee to The City and Industrial Development Corporation of Maharashtra Ltd. (CIDCO) for acquiring development and lease-hold rights for a period of 60 years under the Lease Deed(s) is rent within the meaning of section 194-I of the Income Tax Act, 1961 (the Act) and hence liable for deduction of tax at source – Held that:- As per Hon'ble Apex Court in the case of Enterprising Enterprises V/s DCIT [2006 (12) TMI 138 - SUPREME Court], it was held that the assessee which had taken a quarry on lease, the lease rent paid was capital expenditure and the Hon'ble High Court also affirmed the decision of the Tribunal. The Hon'ble Apex Court while confirming the decision of the Hon'ble High Court held that premium for lease or any lumpsum payment for obtaining a lease for a long period is a payment for enduring advantage, so that it is a capital expenditure which is not deductible – In the present case it is held that lease premium paid by assessee to CIDCO is not in the nature of rent as contemplated u/s 194-I of the Act - Provisions of section 194-I of the Act to deduct TDS on the lease premium paid by the assessee is not attracted - Deleted the demand raised by the AO u/s 201(1) and 201(1A) of the Act by rejecting the grounds of appeal taken by the department – Decided against the Revenue.

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• 2013 (8) TMI 597
  Disallowance u/s 14 A of the Income Tax Act – Held that:- Initial onus to make a claim in respect of the expenditure incurred in relation to the income that does not form part of the total income, is on the assessee - Once the assessee makes such a claim with reference to its accounts, the A.O. is bound to examine the same for the purpose of satisfying himself with regard to its correctness or otherwise, and where not satisfied, determine the same in - Though there is no specific requirement of recording dissatisfaction, it is incumbent on A.O. to do so, as in its absence it cannot be ascertained if he had actually examined the assessee s claim or proceeded mechanically – In the present case, assessee s claim is without reference to the expenses incurred and claimed, much less as to which expenditure is included and to what extent - No indication of interest, if any, included therein, and which could be both in the form of direct and/or indirect expenditure. In the instant case, the said initial onus having been clearly not discharged by the assessee, which finding has been endorsed by revenue, the disallowance cannot be impugned for want of non-compliance of the procedure laid down u/s.14A(2). Again, however, none of the parties or their representatives have even as much as cared to look at the facts, which prima facie reflect an apparent case of bank borrowings having been availed for and utilized for specified purposes, so that the interest thereon could not be subject to apportionment on the basis of general pool of funds hypothesis, which would otherwise prevail. The matter, therefore, travelled back to the file of the A.O. Penalty u/s 271(1)(c) under Income Tax Act - The assessee, per its return, made an estimated disallowance at 10% of the dividend income received for the year, as accepted in the past, i.e., the two immediately preceding years. In fact, for the years prior thereto, a lower percentage by half, i.e., @ 5%, was found acceptable, with the matter having travelled upto the tribunal – Held that:- In this view of the matter, so that there was a suo motu disallowance u/s.14A as found acceptable for the preceding years, coupled with complete disclosure of facts, it would take the case away from the ambit of levy of penalty for concealment and/or furnishing inaccurate particulars of income – Reliance is place upon the decision in the case of CIT vs. Reliance Petroproducts (P.) Ltd.[2010 (3) TMI 80 - SUPREME COURT ].

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• 2013 (8) TMI 596
  Deduction u/s 80IB of the Income Tax Act - Assessee-firm had constructed buildings A, B, C and D on a plot admeasuring 2.36 acres - Plot was proportionately divided between five buildings, the land pertaining to building 'E' would be less than one acre' and that two flats on the ground floor of building 'E' were found to be merged into one flat and the area of the merged flat exceeded 1000 square feet – Assessee constructed only residential block 'Eden Garden' which was commenced on 30.2.2006 and completed on 16.10.2008 as per the date of commencement certificate and occupation certificate granted by the authority - The commercial project developed by M/s. Pyramid Developers, sanctioned by CIDCO has commenced on 18.10.2006 but completed after completion of this project, much later on 04.08.2010 - Held that:- There is no definition of housing project in the provisions and there can be more than one approval for the project and even if there is common approval, assessee is entitled for deduction on the project undertaken by it, provided the project satisfies the other conditions - The project is separate and not contiguous to the part of the building developed by assessee. The same is entirely separate block and in no way connected to the assessee project, except approved on the same plot of land. Moreover, the development rights were sold in March, 2009 and other party developed much later. Nothing was brought on record to indicate that assessee developed commercial project as well - Assessee has completed the residential project which satisfies the conditions, it is eligible for deduction u/s 80IB(10). The AO after satisfying the conditions has in fact allowed deduction in A.Y. 2007-08 and AY 2008-09 on the same project - Thus, the AO and ld.CIT(A) erred in disallowing the claim this year on the reason that commercial project is part of the same housing project and that portion exceeded the 5% or 2000 sq ft whichever is less - Commercial building is a separate project and assessee project satisfies the conditions prescribed – Deduction allowed – Decided in favor of Assessee.

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• 2013 (8) TMI 595
  Land sold is agricultural land or it is to be treated as a capital asset in the terms of section 2(14) of the Act – Held that:- If a land is situated within 8 kms of the municipal limits of a city even if it is recorded as agricultural land in the revenue records, it is to be treated as non-agricultural land and for that matter an Asset but in this case, the admitted fact is that this land falls beyond 8 kms from the notified limit. It is true that as per revenue records, the land has been recorded as agricultural land - Assessee has been showing agricultural income from this very land and the same has been accepted by the Revenue as such year after year – Assessee’s land has been agricultural land for the past many years and has been classified as such in the records of the revenue Department – Even if no agricultural production was done by the assessee on this land, this mere fact will not take out the land out of the nomenclature of 'agricultural land' – agricultural land to be held as agricultural land – Decided in favor of Assessee.

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• 2013 (8) TMI 594
  Transfer pricing adjustment on account of royalty for brand name Rs. 981,406,624/- - Assessee in this case is a license manufacturer of cars in India of its Associated Enterprise SMC - In terms of the license assessee has paid lumpsum royalty as well as running royalty SMC. TPO was of the opinion that the royalty paid should be split towards technical assistance and brand – TPO concluded Suzuki brand was weak/worthless – Held that:- TPO has imputed a very large T.P. adjustment in respect of AMP expenses on the basis that the said expenses incurred by the assessee year after year since 1982 have resulted in a significant increase in Suzuki's brand value - Suzuki cannot be considered to be a weak brand which is only reinforcing on Maruti's brand and taking away value from it - TPO was not justified in making adjustment of Rs. 98,13,53,745/- Payment of above sum as royalty to SMC was attributable to use of brand name is not sustainable - No disallowance is required in payment of royalty by MSIL to SMC – Decided in favor of assessee. Transfer Pricing Adjustment on account of AMP amounting to Rs. 1,54,12,00,000/- in relation to advertisement, marketing and sales promotion expenses (AMP expenses) incurred by the assessee – Held that:- Relying upon the decision in the case of M/s L.G. Electronics India (P) Ltd. Vs. ACIT [2013 (6) TMI 217 - ITAT DELHI], expenses in connection with the sales do not lead to brand promotion and thus cannot be brought within the ambit of advertisement, marketing and promotion expenses for determining the cost/value of the international transaction - Assessing officer to exclude the expenses incurred by the assessee in connection with the sales as the same do not fall within the ambit of AMP expenses and hence not to be considered for computing the cost/ value of international transaction - The TPO has to decide the rate of AMP expenses by applying the proper comparables after hearing the assessee, in view of the Special Bench directions in this behalf in the case of of M/s L.G. Electronics India (P) Ltd. (2013 (6) TMI 217 - ITAT DELHI) - Issue remitted with regard to the transfer pricing adjustment in respect of AMP expenses to the file of the TPO.

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• 2013 (8) TMI 593
  Penalty u/s 271AAA of the Income Tax Act - Immunity - Penalty where search has been initiated - Penalty has been imposed only because of alleged non compliance with the provisions of section 271AAA(2)(iii) which stipulates the payment of tax alongwith interest in respect of the undisclosed income. The only issue is that the assessee was levied interest u/s 234B for short payment of advance tax due on the income return which in turn was caused by inaction on the part of the A.O. to adjust the seized cash towards advance tax liability as requested by the assessee – Held that:- While payment of taxes, along with interest, by the assessee is one of the conditions precedent for availing the immunity under section 271AAA(2), there is no time limit set out for such payments by the assessee. Once a time limit for payment of tax and interest has not been set out by the statute, it cannot indeed be open to the Assessing Officer to read such a time limit into the scheme of the Section or to infer one. There is thus no legally sustainable basis for the stand of the Assessing Officer that in a situation in which due tax and interest has not been paid in full before filing of the relevant income tax return, the assessee will not be eligible for immunity under section 271 AAA(2). Relying on the judgment in the case of CIT Vs Mahendra C Shah [2008 (2) TMI 32 - GUJARAT HIGH COURT], wherein it was held that Penalty provisions under section 271(1)(c) wherein Assessing Officer has to record the satisfaction in the course of assessment proceedings itself – something which is not a condition precedent for imposition of penalty under section 271 AAA - Outer limit has to be the point of time when the assessment proceedings are undertaken by the Assessing Officer because the opening portion of section 271(1) of the Act requires the Assessing Officer to record satisfaction in the course of such proceedings - Section 271 AAA, as the statute unambiguously provides, does not require any subjective satisfaction of the Asessing Officer to be arrived at during the assessment roceedings, and, therefore, the outer limit of payment before the conclusion of assessment proceedings will not come into play - On the facts of the present case wherein entire tax and interest has been duly adjusted out of seized cash or otherwise paid in deference to notices of demand, well before the penalty proceedings were concluded, the assessee could not be denied the immunity under section 271AAA(2) only because entire tax, along with interest, was not paid before filing of income tax return or, for that purpose, before concluding the assessment proceedings – Reliance is placed on the case DCIT vs. Pioneer Online Ltd in [2012 (5) TMI 6 - ITAT KOLKATA] – Decided in favor of Assessee.

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• 2013 (8) TMI 592
  Addition on account of bogus sale of amount Rs.20,58,255/- - Assessee had made claim that the scrap of 18,970 kgs. was sold for Rs.20,58,245/- in cash - This scrap was stated to have been purchased from Times International on four different dates in October 2004 to December 2004. The payment for the same remained outstanding. The payment was shown as made in May 2005 - The Proprietor of Times International, Shri Mohd. Karim has also not produced details before Assessing Officer as evident from Note Sheet noting - The assessee has claimed that it has sold this brass scrap in cash on 23.12.2004 and 25.12.2004 and payment was shown as received in cash. These alleged sales are claimed to have been made to persons located at Delhi but no full name and address was given in these sale bills - Held that:- There was no sufficient storage facility available with the assessee to accommodate such huge quantity of brass scrap as the shop of assessee located in Manav Lane in Shanker Gali, Kali Masjid, Delhi. Assessee’s claim regarding purchase of scrap is not established - Assessee has failed to produce any credible evidence to establish that cash sales were effected of brass scrap. The surrounding circumstances with regard to not debiting cartage expenses and other expenditure like salary or wages also show that there was no man-power available with the assessee to deal with the huge quantity of brass scrap. The assessee’s claim that transportation charges made to the Thelawalas is not recorded in the books of account makes the claim of assessee of sale of brass scrap as more doubtful. Thus, the assessee has failed to produce any credible evidence to establish the cash sales of the brass scrap. There is mismatch of dates appearing on the sale bills. Bill nos. 67 and 68 are dated 27.12.2004 and 28.12.2004 respectively while bill nos. 69 an 70 are dated 23.12.2004 and 25.12.2004. These facts also show that sales transactions were a covered up action of the assessee and were not genuine. There is no scope to treat this mistake as clerical mistake. Considering all records and factual aspects, the addition of Rs.20,58,255/- is confirmed – Decided against the Assessee. Addition of Rs.7,51,946/- made on account of purchases shown from Shiva Sanitary, Jam Nagar – Held that:- Onus was on the assessee to prove the genuineness of the purchases debited in the books of account - The investigation made by the Assessing Officer shows that the party was bogus and non-existent. Further this fact has also been proved by the investigations made by the ADIT (Inv.), Rajkot. The assessee has simply expressed surprise but has not proved the purchases debited in the books of account. The investigation further proves that the assessee was indulging in providing accommodation entries – Decided against the Assessee. Only the peak amount in respect of the cash deposited with bank account in Indus ind Bank Rs.33,40,657/-and cheque amounting Rs.15,30,450/- be added ignoring the explanation of the assessee that only commission @ 1 % need to be added – Held that:- Assessee has claimed that these were the third party cheques and cashed for 1% commission. However, no details, even names and addresses of such parties, were provided to the income-tax authorities to substantiate the claim - Addition of the peak amount only of this concealed bank account held with Indus Ind Bank Ltd was completely justified - The source of the deposits as well as the destination of the withdrawals remains unknown and unexplained. The possibility of the same money being used for deposits as well as withdrawals cannot be ruled out – Decided against the Assessee.

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• 2013 (8) TMI 591
  Bogus purchase - AO letters u/s. 133(6) have been sent to various parties on the address made available with the assessee. Out of total such letters, 32 have been received back un-served. - Held that:- AO has not issued the letters u/s. 133(6) on the correct address supplied by the assessee. Therefore, no fault could be found with the explanation of the assessee. The assessee has given complete details of the parties from whom the purchases have been made. Purchase bills are supported by bank statements which have not been doubted by the AO. The account books of the assessee are audited. Sales are accepted by the AO which have been accepted by the Sales Tax Department also in their assessment. Profit rate of assessee is better is compared to the earlier years. Therefore, there is no question of holding that the assessee made bogus purchases. All the purchases are recorded in the books of account - The assessee has satisfactorily reconciled the discrepancies in the accounts of the parties except for amount upheld by CIT - Decided against Revenue.

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• 2013 (8) TMI 590
  Cancellation of registration provided u/s 12AA of the IT Act, as a charitable institution – Held that:- As per para 19 of the order of ITAT in the case of Agra Development Authority [2013 (8) TMI 549 - ITAT AGRA], wherein it was stated that for exercising power of cancellation of registration under section 12AA read with section 12AA(3) of the Act by the CIT only on the condition that the CIT subsequently found and satisfied that the activities of such trust or institution are not genuine, or are not being carried out in accordance with the objects of the trust or institution – In the instant case, CIT did not give any such finding that the assessee's activities are not genuine or are not being carried out in accordance with the objects of the trust as the assessee, Mathura Vrindavan Development Authority, carried out activities which were existing at the time of allowing registration under section 12AA of the Act - Set aside the order of CIT and restore the registration under section 12AA of the Act which has been cancelled – Appeal allowed – Decided in favor of Assessee.

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• 2013 (8) TMI 589
  Disallowance of fee paid to the Registrar of Companies - Amortization u/s. 35D - CIT upheld disallowance - Held that:- Fee paid to the Registrar for expansion of the capital base of the company - directly related to the capital expenditure incurred by the company - Amount paid to the Registrar of Companies, as filing fee for enhancement of capital was not revenue expenditure - Following decision of Punjab State Industrial Development Corporation Limited Versus Commissioner of Income-Tax [1996 (12) TMI 6 - SUPREME Court] - Decided against Assessee. Depreciation of goodwill - CIT disallowed goodwill - Held that:- figure of the goodwill in the assessee's case has arisen when the existing running unit was transferred by Minda Industries Ltd. to the assessee newly firm company i.e. the assessee for a consolidated consideration of Rs. 2.75 crores and the difference between the net value of assets, which assets were recorded at book value, was recognized as 'goodwill' in the books of accounts - transaction took place in the preceding assessment years and the figure of goodwill is coming from the previous balance sheet - Addition of the words “business or commercial rights of similar nature” after the specified intangible assets clearly demonstrates intention of Legislature to provide depreciation to other categories of intangible assets which are not exhaustively enumerated. It is observed that in case of the assessee, intangible assets being Business claims; business information; business records; contracts; skilled employees; knowhow were invaluable and resulted in carrying on the transmission and distribution business by the assessee, without any interruption - Therefore, specified intangible assets acquired under slump sale agreement were in the nature of “business or commercial rights of similar nature” specified in Section 32(1)(ii) and were accordingly eligible for depreciation. It is not necessary to decide the alternative submission made on behalf of the assessee that goodwill per se is eligible for depreciation u/s 32(1)(ii) – Following decision of AREVA T & D INDIA LTD. Versus THE DEPUTY COMMISSIONER OF INCOME-TAX [2012 (4) TMI 79 - DELHI HIGH COURT] - Decided in favor of assessee. Disallowance u/s 40A(2)(b) - Payment made to sister concern - Held that:- assessee has not supported the expenditure in this regard with proper details and supporting. Assessee has merely stated that certain list of services were being rendered for which payment is made @ 2% of the sales of the assessee company - assessee has not given any submission in this regard that the expenditure incurred by the assessee were commensurate with the market rates - matter in this regard needs to be remitted back to the file of the Assessing Officer - Decided against assessee.

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• 2013 (8) TMI 588
  Depreciation on intangible asset - CIT refused to grant depreciation - Held that:- The 'Right to collect the Toll' is emerging as a result of the costs incurred by the assessee on development, construction and maintenance of the infrastructure facility. Such a right has been adjudicated by the Tribunal in the aforesaid precedents to be in the nature of 'intangible asset' falling within the purview of section 32(1)(ii) of the Act and has been found eligible for claim of depreciation - section 32(1)(ii) permits allowance of depreciation on assets specified therein being 'intangible assets' which are wholly or partly owned by the assessee and used for the purposes of its business. The aforesaid condition is fully satisfied by the assessee - Decided in favour of assessee. Depreciation on the infrastructure facility - Held that:- Once the assessee was found not eligible for the claim for depreciation @ 25% on 'License to collect Toll' in terms of Section 32(1)(ii) of the Act, the CIT(A) proceeded to allow the depreciation on the road facility @ 10%, treating it to be in the nature of 'building' - It was a common point between the parties that the aforesaid issue is rendered infructuous as assessee has succeeded in its substantive claim of depreciation on 'License to collect Toll' @ 25% in terms of Section 32(1)(ii) - Decided in favour of assessee.

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• 2013 (8) TMI 587
  Deduction u/s 80IC - Manufacturing activity - CIT allowed deduction - Held that:- The assessee has detailed the procedure followed to bring into existence the final product. The process being carried out by the assessee in assembling of 'Torch Light' amounts to manufacturing activity. A new and distinct product comes into existence after integration of various small components into one product having distinct name, character and use - Therefore assessee is carrying a manufacturing activity - Decided against Revenue. Deduction u/s 80IC - Manufacturing activity in Dehradun - Held that:- The assessee in order to claim benefit u/s. 80IC of the Act, has either invoiced finished goods manufactured at Chennai from Dehradun or has debited the expenses relating to Dehradun unit to Chennai unit - Despite the fact that there are two units at Chennai, the volume of sales from Dehradun unit is seven times more than the combined sale of units at Chennai - assessee is misusing the benevolent provisions of law at the cost of Government exchequer. The deduction u/s. 80IC is being granted to the units set up in certain specified areas which are industrially backward - assessee is invoicing majority of finished goods from Dehradun whereas that substantial production is carried out at Chennai. The assessee has adopted colourable devise to take undue advantage of benevolent provisions of the Act - Decided in favour of Revenue.

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• 2013 (8) TMI 586
  TDS u/s 194H - Impugned retention by banks/credit card agencies - Held that:- banks make payments to the assessee after deducting certain fees as per the terms and conditions in the credit card and it is not a commission but a fee deducted by the banks - assessee only receives the payment form the bank/credit card companies concerned, after deduction of commission thereon, and thus, this is only in the nature of a post facto accounting and does not involve any payment or crediting of the account of the banks or any other account before such payment by the assessee - liability to make TDS under the said section arises only when a person acts on behalf of another person. In the case of commission retained by the credit card companies however, it cannot be said that the bank acts on behalf of the merchant establishment or that even the merchant establishment conducts the transaction for the bank. The sale made on the basis of a credit card is clearly a transaction of the merchants establishment only and the credit card company only facilitates the electronic payment, for a certain charge. The commission retained by the credit card company is therefore in the nature of normal bank charges and not in the nature of commission/brokerage for acting on behalf of the merchant establishment - payments made to the banks on account of utilization of credit card facilities would be in the nature of bank charges and not in the nature of commission within the meaning of section 194H of the Act and hence no TDS is required to be deducted u/s 194 H of the Act - Following decision of DCIT V/s M/s Vah Magna Retail (P) Ltd [2013 (8) TMI 299 - ITAT HYDERABAD] - Decided against Revenue. Withhold of tax u/s 195(3) - Held that:- assessee has also filed a copy of certificates issued by the AO u/s 195(3) of the Act dated 27.4.2006, 30.3.2007, 31.3.2008 and 31.3.2008 which are addressed to Citibank N.A. for Financial Years 2006-07 to 2008-09 respectively. On perusal of the said certificates it is specifically mentioned that the said bank is authorized to receive the payments, interests without deduction of income tax u/s 195(1) of the Act in the respective Financial Years. Similarly, the assessee has also placed on record the copy of certificates dated 27.4.2006 and 28.4.2007 which are addressed to American Express Bank Ltd authorizing the said bank to receive interalia any sum without deduction of income tax under sub-section (1) of Section 195 of the Act for Financial Years 2006-07 and 2007-08 respectively - certificates issued u/s 195(3) of the Act are applicable for the concerned Financial Years and will not be effected only from the date of issuance as stated by the AO - Decided against Revenue.

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• 2013 (8) TMI 585
  Benefit of DTAA between India and UAE - whether time charter and hiring of slots fell within the Article 8 of the Treaty or not. - CIT granted benefit - Held that:- a tax treaty not only prevents current' but also potential' double taxation. - assessee, who is tax resident of UAE, but has not paid taxes there - assessee is 'otherwise liable to tax' in UAE. Simply because there is no tax incidence in UAE, does not mean that the assessee ceases to be 'otherwise liable to tax', as per Article 4. Once the assessee, gets within the expression 'otherwise liable to tax' in UAE Treaty, DTAA becomes operative - Order of CIT set aside. The case of Balaji Shipping (2008 (8) TMI 389 - ITAT BOMBAY-L) cannot be relied upon, simply because Article 8 is differently worded. - the wordings used in Article 8 in UAE Treaty is pari materia to the language used in US Treaty - there is no detailed reasoning in the orders of the revenue authorities, giving the nature of the receipts from shipping business - matter remanded back.

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• Customs

• 2013 (8) TMI 583
  Short Landing of Goods - Interpretation of Provisions – Penalty u/s 116 - The issue involved was the interpretation of the relevant provisions of the Act as argued by the petitioner - In the case of short landing of the goods Section 116 of the Act provides for penalty for not accounting of goods - Held that:- The petitioner squarely satisfied the term agent or any person as he dealt with the goods at different stages of its shipment - A conjoint reading of Sections 116, 2(31) and 148 of the Act makes it clear that in a case of short landing of goods, if penalty was to be imposed on the person-in-charge of the conveyance, it can also be imposed on the agent so appointed by the person-in-charge of the vessel. It was very clear that the steamer agent had filed Import General Manifest for goods which had been shipped and they also dealt with the customs department for appropriate orders that had to be passed in terms of Section 42 of the Act - The petitioner was a agent duly appointed - It had to be noticed that the authorities below have on facts come to the conclusion that the steamer agent had affixed the seal on the containers after stuffing and the steamer agent took charge of the sealed containers - If thast was the fact, then the customs authorities were justified in taking appropriate action for levying of penalty for the short shipment or no shipment in 40 containers. SHAW WALLACE & CO. LTD. Versus ASSISTANT COLLECTOR OF CUSTOMS & OTHERS [1986 (7) TMI 106 - HIGH COURT OF JUDICATURE AT BOMBAY] - The petitioner as a steamer agent files an Import General Manifest and represents before the customs authorities as an agent of the shipper and conducts all affairs in compliance with the provisions of the Act, then the provisions of Section 116 read with Section 148 of the Act get attracted automatically and as a result penalty becomes leviable - The authorities below were justified in imposing penalty as contemplated under Section 116 of the Act - the writ petition filed for challenging the recovery notice failed – Decided against Petitioner.

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• 2013 (8) TMI 581
  Validity of Confiscation order - Benefit of Notification No.1/2011 - issue involved in the case was regarding the differential duty of Customs which had been confirmed by the adjudicating authority by denying the benefit of Notification No.1/2011 - Held that:- Goods are prima facie eligible for benefit of Notification No.1/2011-Cus Extending the notification and acknowledges the fact that the goods are needed for solar power generation project or facility - the benefit of Notification No.1/2011-Cus, cannot be denied to such goods - the appellant can be considered as a person who was holding himself out to be an importer – confiscation order of the Goods was erroneous. Stay application and waiver of pre deposit - assesseee has made out a strong prima facie case for pre-deposit of the amount of duty, interest and the penalty imposed – pre- deposit amount waived – decided in favour of assesse.

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• 2013 (8) TMI 580
  Valuation of imported goods - assessee made an import from their collaborator and associated companies the case was registered in GATT Valuation Cell for examination and valuation of goods imported by them - the department's case had been to load the royalty of technical know-how payable to the supplier - Held that:- The department could not show that the royalty which they wanted to add to the assessable value was a condition pre-requisite for sale and the assessable value was not a true transaction value in terms of Section 14(1)(a) - the royalty can be included in the assessable value in case there are conditions for sale of the goods being valued and in case such royalty and fees are not included in the price actually paid or payable. If the cost of technical know-how payment of royalty had no nexus with the working of the imported goods then such payment was not includable in the price of the imported goods – court relied upon Commissioner of Customs Vs. Ferodo India P. Ltd. (2008 (2) TMI 12 - Supreme Court ) and Collector vs. Essar Gujarat Ltd.(1996 (11) TMI 426 - SUPREME COURT OF INDIA) – decided against revenue

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• 2013 (8) TMI 579
  Confiscation of Goods – department contended that the goods were of foreign origin and assessee failed to produce any documentary evidence showing licit purchase/possession of the goods – Held that:- The Commissioner (Appeals) was right in setting aside the order of confiscation and directing the Revenue to return the goods to the assessee - the goods were not notified u/s 123 and the provisions of Chapter IVA relating to notified goods had been deleted from the Customs Act more than a decade back - the Customs cannot absolutely confiscate the goods at all - as the goods had already been disposed of the Revenue was directed to refund the sale proceeds of the goods to the assessee – decided against the revenue.

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• Corporate Laws

• 2013 (8) TMI 578
  Winding up u/s 433(e) r.w 434(1)(a) - Inability to pay Debts - Petition for winding up was made on the ground of Defendant’s inability to pay its debts – Held that :- The order of winding up of the company to be kept in abeyance for a period of eight weeks to give JIL one last opportunity to make payment to E&Y of the admitted liability to the satisfaction of E&Y – The present petition will be disposed of leaving it open to E&Y to institute other appropriate proceedings in accordance with law to recover the balance amount claimed by it - If such payment was not made by JIL to E&Y – Following order would become immediately operational - The OL was appointed as the Provisional Liquidator ('PL') of the JIL. The OL was directed to take over all the assets, books of accounts and records of the JIL immediately upon this order becoming effective - The OL shall in that event also prepare a complete inventory of all the assets of the JIL before sealing the premises in which they are kept - He may also seek the assistance of a valuer to value the assets - He was permitted to take the assistance of the local police authorities, if required – Decided in favor of Petitioner.

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• FEMA

• 2013 (8) TMI 584
  Entitlement for Cross Examination – In the complaint that had been filed, the statements of three witnesses had been extensively relied upon - the application was filed by the appellants for seeking permission to cross-examine - it was stated that there was a need to cross-examine the witnesses to controvert their statements and to establish their (appellants) innocence as the charges had been denied by the said appellant – Held that:- The present appeal should be allowed to the extent that the appellants should be entitled to cross-examine the three witnesses whose statements had been relied upon by the respondent in the complaint – The respondent had failed to place on record any fact to show that prejudice would be caused to it if the appellant was permitted to cross-examine the witness - The learned counsel could not specify any prejudice – following Ayaaubkhan Noorkhan Pathan vs. State of Maharashtra [2013 (8) TMI 563 - SUPREME COURT] - the appellant intended to cross -examine the said person to controvert the veracity of the complaint regarding contraventions of various provisions of FEMA and it was further stated that the statements made by the said complainant in the complaint were inherently false. Cross-examination of witnesses had been held to be an integral part and parcel of the principles of natural justice - Refusal to grant permission to cross-examine witnesses would normally be an exception - The legal position that would follow is that normally if the credibility of a person who has testified or given some information is in doubt or if the version or the statement of the person who has testified is in dispute normally right to cross-examination would be inevitable - If some real prejudice was caused to the complainant, the right to cross-examine witnesses may be denied - it was not possible to lay down any rigid rules as to when in compliance of principles of natural justice opportunity to cross-examine should be given - In the application of the concept of fair play there had to be flexibility.

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• Service Tax

• 2013 (8) TMI 605
  Goods Transport Agency services u/s 66A - Reverse charge mechanism - Waiver of pre deposit - Held that:- there is no evidence to show that M/s Shreeji Shipping/M/s Shreeji Roadways has raised invoices in the name of the appellant for transportation of coal/coke from Port to the factory premises. It is also seen from the record that the appellant has been taking a consistent stand that all the transportation of coal/coke has been done by the truck owners, and the freight is paid through M/s Shreeji Shipping to them and not to Goods Transport Agency - prima facie, appellant has made out a case for complete waiver of pre-deposit of the amounts involved - Following decision of LAKSHMINARAYANA MINING CO. Versus COMMR. OF S. T., BANGALORE [2009 (9) TMI 71 - CESTAT, BANGALORE] - Decided in favour of assessee.

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• 2013 (8) TMI 604
  Commercial or Industrial Construction Service u/s 65(105)(zzq) - Held that:- Prima facie there was force in the argument that they had only acted as an executor and not rendered service in the construction of the Marketing complex, hence, service tax was not payable by them under the category of commercial or industrial construction service - The assesse had constructed the marketing complex being entrusted which claimed to have been under a bona fide belief that ultimately the marketing complex would be used for the persons, namely, unemployed youth and women vendors and not for commercial purpose - In nutshell, the claim was that the construction was not for commercial purpose. The issue of limitation had been raised but the Ld. Commissioner had not recorded any finding on the same – Assesses claimed that the project had been sponsored by the Central Govt. and aimed at for removal of urban unemployment and poverty alleviation in the region - It was meant for unemployed youth and women vendors in the area. Waiver of Pre-deposit – 5 lakhs were ordered to be submitted as pre-deposit – Rest of the duty to be waived till the disposal – Stay granted partly.

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• 2013 (8) TMI 603
  Manner of Service of Notice - CENVAT credit - The assesse built a commercial complex and rented out to various customers - the adjudicating authority observed that the notice had been served on the assesse - Held that:- There was no proper service of the notice on the assesse in respect of show-cause notice was concerned - Therefore there was clear violation of the principles of natural justice - Sending show-cause notice through courier was not an approved mode of service envisaged under Section 37C of the Central Excise Act, 1944 read with Section 83 of the Finance Act, 1994 - The show-cause notice was sent to the assesse through courier - another copy of the said notice was sent which was returned undelivered. Navaratna S. G. Highway Prop. (P.) Ltd. Versus Commissioner of Service Tax, Ahmedabad [2012 (7) TMI 316 - CESTAT, AHMEDABAD] - Any summon or notice to the party had to be sent by registered post with acknowledgement due, to the person for whom it is intended or his authorized agent, or by affixing a copy of the same in the business premises of the person or by displaying the same in the notice board of the office which issued the notice - From the records it was seen that none of these modes had been followed by the Revenue - The matter had went back to the original adjudicating authority for service of the show-cause notice afresh to the assesse and assesse should be given opportunity to make their submissions against said show-cause notice and only thereafter, the order confirming any demand can be passed against the assesse – Appeal Allowed by way of Remand.

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• 2013 (8) TMI 602
  Condonation of delay - Held that:- delay is that due to an accidental fall from the motorbike, on account of which the appellant sustained injuries. Considering the reasons stated as satisfactory, we condone the delay in filing the appeal. Manpower Supply Agency or Security Agency - in terms of Notification No. 8/2005-ST they are exempted from payment of service tax - Held that:- Notification No. 08/2005-ST grants exemption on job work carried out by service provider on the materials supplied by the clients. Such job work envisages processing of material supplied by the clients. Shifting of raw material or cleaning factory premises, by no stretch of imagination, can be considered as job work, so as to be eligible for the benefit of Notification No. 08/2005-ST. Therefore, the appellant's submission in this regard lacks merit. The appellant has also not pleaded any financial hardship in the appeal memorandum. Waiver of pre deposit - Held that:- Appellant has not made out any case for grant of any stay - appellant to make a pre-deposit of entire amount of service tax confirmed - On such compliance, pre-deposit of balance of dues adjudged against the appellant shall stand waived and recovery, thereof stayed during the pendency of the appeal.

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• 2013 (8) TMI 601
  Input Service Credit – appellant was disallowed by the department to take input service credit – department’s reasoning was that the service does not have nexus with the manufacturing activity of the appellant - Held that:- Appellant is entitled to input service credit on Mandap Keeper Service - the annual day function of the appellant company is an integral part of the business activity - it is also found that the appellant is the manufacturer of excisable goods - relying on the decision of CCE Nagpur vs Ultratech Cement Ltd (2010 (10) TMI 13 - BOMBAY HIGH COURT) and Kirloskar Motor Pvt. Ltd. vs. CCE LTU, Bangalore (2011 (3) TMI 1373 - KARNATAKA HIGH COURT) - the order was set aside - appeal allowed in the favour of the appellant.

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• 2013 (8) TMI 600
  Manufacture or Business Auxiliary Service - multi piece packaging - Whether the activity undertook by the appellant amounts to manufacture or business auxiliary services - appellant undertakes multi-piece packaging which come under the category of ‘packing or re-packing of goods and would be an activity of ‘manufacture' - Department did not make any findings as to why the activity of multi piece packaging undertaken by the appellant would not come under the definition of ‘manufacture' – Notification NO. 8/2005-ST dated 01/03/2005 grants exemption from service tax if the goods, after undertaking the job-work, are returned to the supplier of the goods further manufacture – Held that:- The definition covers not only packing but also re-packing - multi-piece packaging is done on the soaps already packed - thus it would amount to repacking and accordingly the activity would be covered under the definition of ‘manufacture' under Section 2(f) (iii) – If the soap noodles are sold as such after mixing and packing/re-packing, then the activity undertaken by the appellant would amount to ‘manufacture' - for the activity of mixing of soap noodles and packing them in bags or re-packing from small packs to big packs also – matter remanded back – appeal allowed in the favour of assessee.

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• 2013 (8) TMI 582
  Sponsorship whether liable for service tax or not - whether sponsorship of the IPL matches by appellants falls within the exclusionary clause of Section 65 (105) (zzzn) – department levied service tax in relation to sponsorship of IPL League matches – Held that:- Fundamental premises of the adjudication authority are misconceived and unsustainable - legislature has incorporated no restriction upon the exclusion by enacting that where a sports events has a commercial purpose, the exclusion was inapplicable - sponsorship of a sports event, which had a commercial element (the IPL events) was disentitled to the benefits of immunity to service tax, notwithstanding the clear phraseology of section 105(65)(zzzn). The provision in issue excludes from liability to service tax, service in relation to sponsorship of sports event - the exclusionary clause admits of no ambiguity, grammatical, syntactical or contextual - legislature in its wisdom has considered it appropriate to extend the benefit of immunity to service tax, to the service of sponsorship in relation to sports events – In the absence of ambiguity, the golden rule of construction namely a construction whereby the literal meaning corresponds to the legal meaning, must be adopted – appeal allowed in favour of assessee.

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• Central Excise

• 2013 (8) TMI 577
  Refund Claim of Duty - Unjust enrichment - finalization of provisional assessment - Duty paid under Protest - refund claim was rejected by the original authority on the ground that the petitioner-company had passed on an excess amount being claimed as refund to the customers and the refund claim was hit by doctrine of unjust enrichment. - Held that:- The duty on differential assessable value on account of Modvat Credit on input was denied on the ground of doctrine of unjust enrichment - Non receipt of goods had not been contended - when excess duty payment was to be refunded without considering the provision of Section 11B of the Central Excise Act as under the provisional assessment, duty payment was made under protest & hence the very base of decline would not survive. The assessee had paid provisional duty which got reduced on finalizing assessment, entitling the petitioner to get the refund which is payable in terms of Rule 9B of Excise Rules, 1944. It is not disputed by either side that the assessee is entitled to refund on account of appellate order passed by Tribunal under sub-Rule (5) of Rule 9B of Excise Rules. Thus, any recovery or refund consequent upon adjustment under Sub-rule (5) of Rule 9B is not to be governed by Section 11A & 11B of the Central Excise Act. Neither the final decision under Rule 9B(5) was appealed against nor the issue was re-agitated once again after such claim was finalized. Therefore, the issue of unjust enrichment was not required to be considered. Once the Revenue does not dispute the receipt of paperboards used as input material under the cover of invoices for preparing shells by the assesse which contained duty paying particulars, the Modvat Credit cannot be denied to the assesse - Even if the assesse had agreed later on that M/s. ITC Ltd was the real manufacturer, that ipso facto would not take away its right to avail refund claim when duties were recovered from the assessee, treating it as the manufacturer at the time of recovery - the assesse had established due payment of such duties - Non-maintenance of procedure was since not the ground contested, further dwelling on that subject was unnecessary - Department was directed to refund the entire amount with interest - Decided in favor of assesse.

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• 2013 (8) TMI 576
  Modvat / Cenvat Credit - Classification of Goods - Whether the assesse would be entitled to credit in respect of goods falling under Heading 8474.90 on capital goods - Held that:- Items used in the fabrication of chimney would fall within the ambit of "capital goods" and that the assesse was entitled to avail modvat credit in respect of the disputed items under Rule 57Q - the goods were capital goods entitled to credit under Rule 57Q of Central Excise Rules - Capital goods itself were eligible for modvat credit under Rule 57Q - the amendment under Notification No.25/96 had to be read only as clarificatory and retrospective effect had to be given for availing modvat credit. The item in question were classifiable under Chapter Heading 84.31 and they were parts of materials conveying equipments falling under Chapter Heading 84.28 - Commissioner Of Central Excise, Jaipur Versus M/S Rajasthan Spinning & Weaving Mills Ltd. [2010 (7) TMI 12 - SUPREME COURT OF INDIA] - in the light of the decision of following the Apex court decision and in the background of the circular issued by the Government of India that the benefit of modvat credit under Rule 57Q would be applicable to all components, spares and accessories of the specified goods, irrespective of their classification under any chapter heading – the assesse would also be eligible for relief – order of the CESTAT set aside – Decided in favor of assesse.

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• 2013 (8) TMI 575
  Conditions of Notification No. 40/2001 and Notification No. 21/2004 – Classification of Goods under proper Heading - Rebate Claims - Assesse had filed applications for rebate claims of duty paid on said goods exported under Rule 18 of the Central Excise Rules, 2002 - Revenue was of the view that the assesse had not followed the conditions and the procedure as specified in the Notification No. 40/2001-C.E. (N.T.) & Notification No. 21/2004-C.E. (N.T.) - They had declared and exported the goods in the relevant Shipping Bills under Chapter Heading Nos. 2008 99 10 (RITC Code) whereas the chapter heading No. 2108.99 of Central Excise Tariff has been indicated in Central Excise Invoice issued by the manufacturer - Held that:- Rebate claim was rightly disallowed by lower authorities - Goods were being exempted no duty was required to be paid - the amount paid by assesse can be treated as payment of duty - Assesse deliberately choose not to export goods under bond - the rebate of duty under the provision of Rule 18 was eligible only if the duty of excise paid on excisable goods exported or the duty paid on the material used in manufacturing/processing of such goods - the amount paid by assesses was a voluntary deposit made by them on their own volition with the department and same was to be returned in the way it was initially paid - the amount paid by the assesses may be allowed to be re-credited in their Cenvat credit account. M/s. Nahar Industrial Enterprises Ltd. v. UOI [2008 (9) TMI 176 - PUNJAB AND HARYANA HIGH COURT] - Rebate/Refund - Mode of Payment - Petitioner paid lesser duty on domestic product and higher duty on export product which was not payable - Assessee not entitled for refund thereof in cash regardless of mode of payment of said higher excise duty - Petitioner was entitled to cash refund only of the portion deposited by it by actual credit and for remaining portion refund by way of credit is appropriate – Order modified

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• 2013 (8) TMI 574
  Application of Rule 6(3) of the Cenvat Credit Rules, 2004 - Chips/modules are common inputs for both dutiable and exempted finished goods but the other major input that is plastic card are exclusively user based inputs and they cannot be used interchangeable for exempted as well as dutiable final products - Plastic card on which name, design, logo of the customers are printed - those plastic cards cannot be treated as a common input for both dutiable as well as exempted goods, But in respect of other plastic cards on which no such personal information i.e. name, design and logo and customer recorded - To be treated as common inputs for the purpose of manufacture of both dutiable as well as exempted goods. There is no percentage fixed in the Cenvat Credit Rules to decide that if dutiable goods are much below that percentage, the manufacturer will be treated as exclusive manufacturer of exempted goods. In absence of any such limit mentioned in the rule Commissioner cannot deny the benefit of Rule 6(3)(1)/ Rule 6[3][b] to the appellants. Limitation - Extended period – Held that:- Module as well as plastic card in majority of the cases the plastic card are inputs for the manufacture of recorded as well as unrecorded smart cards. Therefore allegation of suppression or mis-declaration of inputs is not sustainable in respect of modules and majority of the plastic cards against the appellant - Also not be liable to any penalty under Section 11AC of the Central Excise Act. Plastic cards which are exclusively going to be used in the manufacture of recorded smart cards, on such quantity of the plastic cards no Cenvat credit is admissible to the appellants as these were not the common inputs for dutiable as well as exempted goods and on such inputs demand is required to be confirmed against the appellants along with interest and equal amount of penalty imposable under Section 11AC of the Act.

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• 2013 (8) TMI 573
  Packing material used outside factory i.e. Depot - packing material (extra carton etc.) not used in the factory of production - Cenvat Credit on extra (master or single) cartons would not be allowed as the same was not used in the factory of production, but are used in the depot of the appellant for packing of the cookers – Held that:- Apex Court has in the case of Vikram Cement [2006 (1) TMI 130 - SUPREME COURT OF INDIA] very clearly held that the credit cannot be denied merely on the ground that the inputs are not used within the factory of the production and clearly stated that the definition under Rule 57AA and other rule nowhere places any such restrictions. Depot has been defined as place of removal only with effect from 13.5.2003 and prior to that the place of removal was factory only. Since prior to 13.5.2003 the goods were packed in primary cartons and transported in that condition only, the master cartons cannot said to be used in or in relation to manufacture of the final product - Credit in respect of these cartons will not be available prior to 13.5.2003. Period of limitation – Held that:- Extended period of limitation is not invocable – As there is no case of any mischief, fraud or contumacious conduct made out on part of the appellant - and reliance was placed on the ruling of the Apex court in the case of Raj Bahadur Naryan Singh Sugar Mills Ltd. Vs. UOI –[1996 (7) TMI 146 - SUPREME COURT OF INDIA] and also on the ruling in the case of Centre of Development for Advanced Computing Vs. CCE, Pune -III – [2002 (2) TMI 105 - SUPREME COURT OF INDIA ] - Demand notice was issued only on 8.2.2005 relating to the period April, 2001 to 12.5.2003 and the same is barred by limitation in view of the fact that Return for May, 2003 submitted on 10.6.2003 - Limitation expired on 9.6.2204 much before the date of issue of show-cause notice. Decided in favor of Assessee.

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• 2013 (8) TMI 572
  Penalty u/s 11AC - Commissioner set aside penalty imposed by Department and imposed penalty under Rule 15(4) - Held that:- For imposing a penalty on any person under the above provision, the Department should clearly allege in the relevant show-cause notice that such person has wrongly taken or utilized CENVAT credit on input services by reason of fraud, collusion, wilful mis-statement, suppression of facts or contravention of any of the provisions of the Finance Act, 1994 or of the rules made thereunder with intention to evade payment of service tax. None of these ingredients was alleged in the subject show-cause notice for imposing penalty on the appellant under Rules 15(4) - Following decision of CCE, Pune-I vs. Thermax Ltd. [2010 (1) TMI 460 - CESTAT MUMBAI] - Decided against assessee.

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• 2013 (8) TMI 571
  Benefit of exemption under Notification 14/2002 - unprocessed cotton knitted fabrics - , the exemption under Notification 14/2002 at Sr.no.12 was denied to the appellant on the premise that the input (unprocessed knitted fabric) cleared from the Mahape unit have been received by Pawane unit without payment of duty as the appellant has availed exemption under Notification 14/2002 - Held that:- The Commissioner had misdirected to apply the higher rate of duty in the case of the assesses whereas the concessional rate under Notification No. 14/2002-C.E. had been allowed in respect of other units similarly situated - SIMPLEX MILLS CO. LTD. Versus COMMISSIONER OF CENTRAL EXCISE, MUMBAI [2005 (4) TMI 406 - CESTAT, MUMBAI]. Contention of the revenue that Notification 14/2002 the Mahape unit of the assesse had cleared the goods after satisfying the condition no. 1 i.e. in availing CENVAT credit on inputs/capital goods could not be accepted. As per Notification 14/2002 the Mahape unit of the appellant has cleared the goods after satisfying the condition no. 1 i.e. in availing CENVAT credit on inputs/capital goods. Therefore, goods were cleared without payment of duty at Sr.no.10 of Notification 14/2002. These goods were received by their Pawane unit and the same were deemed to be duty paid as no credit on inputs/capital goods have been availed by their Mahape unit. - order set aside. - Decided in favor of assessee.

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• CST, VAT & Sales Tax

• 2013 (8) TMI 606
  Legislative Competence to Amend Section 19(20) - Whether amendment by inserting Section 19(20) to Tamil Nadu Value Added Tax reversing the amount of the input tax credit over and above the output tax of those credit was not within the legislative competence of the State Legislature under Entry 54 of the State List and utravires the Constitution and the Statute - Held that:- There was no ambiguity in the provision, the provision does not go beyond the legislative power of the State legislature under Entry 54 of List II nor the provision was confiscatory as contended by the petitioner - The provision starts with non-obstante clause and would state that where any registered dealer has sold goods at a price lesser than the price of the goods purchased by him the amount of input tax credit over and above the output tax of those goods shall be reversed. Section 19(20) the only plausible meaning to the word 'price' used therein shall be the price /value as reflected in the tax invoice - Any other interpretation given would not be in consonance with the scheme of the VAT Act -Therefore, the correct manner in which sub-section (20) of Section 19 had to be read is that where any registered dealer had sold goods at a price lesser than the price of the goods purchased by him as reflected in the original tax invoice as defined under Section 2 (36) of the Act, then the amount of input tax credit over and above the output tax of those goods has to be reversed. Constitutional Validity of fiscal legislation - When there was a challenge to the constitutional validity of the provisions of a Statute, Court exercising power of judicial review must be conscious of the limitation of judicial intervention, particularly, in matters relating to the legitimacy of the economic or fiscal legislation - While enacting fiscal legislation, the Legislature was entitled to a great deal of latitude. Validity of Retrospective Amendment - Whether amendment to Section 19(20) of Tamil Nadu Value Added Tax Act by giving retrospective effect from 01.01.2007 was unreasonable and harsh and whether retrospective operation of the provision was liable to be struck down - There was no discrimination in the matter and the manner of giving effect to the legislation and it applies to all dealers covered under the VAT Act - Held that:- Section 19 (20) was inserted in order to safe guard the interest of the revenue - Section 19(20) as amended by Amendment Act 22 of 2010, was a valid piece of legislation and the amendment given retrospective effect with effect from 01.01.2007, by Amending Act 42 of 2010, cannot be struck down as being either unreasonable, discriminatory or causing any unforeseen or unforeseeable financial burden for the past period nor unduly oppressive or confiscatory - Accordingly Constitutional validity of the impugned enactment was upheld. The factors which are generally considered relevant for examining the reasonableness of retrospectivity - the context in which retrospectivity was contemplated, the period of such retrospectivity and the degree of any unforeseen or unforeseeable financial burden imposed for the past period - The taxing statute may arise in which retrospective operation of a taxing or other statute may introduce an element of unreasonableness and the same may be open to challenge as unconstitutional - But the test of length of time covered by the retrospective operation cannot by itself necessary be a decisive test. There was no intention on the part of the respondents to collect tax either from the vendor or from the consumers and it was aimed at recovery of tax available with the writ petitioner which was admitted by the petitioners to be retained by them, the amendment given effect to retrospectively does not cause any unforeseen or unforeseeable financial burden for the past period – Petition Dismissed.

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