TMI Tax Updates - e-Newsletter
August 23, 2013

Case Laws in this Newsletter:

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

Articles

1. What is the relevant date for determining the rate of service tax applicable

   By: Bimal jain

2. ‘SEBI’ IS HAVING NO POWER TO GRANT COMPENSATION

   By: DR.MARIAPPAN GOVINDARAJAN

3. VOLUNTARY COMPLIANCE SCHEME IN SERVICE TAX CLARIFIED

   By: Dr. Sanjiv Agarwal

News

1. Penetration of Life Insurance Coverage Goes Up

2. RBI penalises six banks

3. Interest Subvention Scheme Extended to the Private Sector Banks from 2013-14; Additional Interest Subvention Scheme of 3% for Farmers also Extended to 2013-14

4. Complaints Against CIBIL

5. Guidelines for Education Loans

6. Auction for Sale (Re-Issue) of 1.44% Inflation Indexed Government Stock 2023

7. RBI Reference Rate for US $ and Euro

8. RBI releases its Annual Report for 2012-13

9. Exchange Rate of Foreign Currency Relating to Imported and Export Goods Notified

10. No Cause for Panic due to Currency Market Volatility; Government has No Intention to Introduce Any Capital Controls: FM

Notifications

Income Tax

1. 53/2013/500/138/2002-FTD-II - dated 5-7-2013 - IT

Double Taxation Agreement - Agreement for Avoidance of Double Taxation and Prevention of Fiscal Evasion with Oriental Republic of Uruguay

Circulars / Instructions / Orders

Income Tax

1. F. No. 500/138/2002-FTD-II - dated 16-8-2013

Circulation of the published notifications of the Agreement between the Government of the Republic of India and the Government of the Oriental Republic of Uruguay for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to taxes on income and on capital in the Gazette of India (extraordinary)- reg.

2. 1/FT&TR/2013 - dated 13-8-2013

Dispute Resolution Panel at the areas of jurisdiction

Customs

3. 33/2013 - dated 23-8-2013

Customs Duty Exemption for Import of Ash Handling Systems, Water Treatment Plant and Coal Transportation Facilities etc. Required for Ultra-Mega/ Mega Power Projects under Heading 9801(Project Imports)-Clarification -Reg.

4. 29/2013 - dated 5-8-2013

Procedure to avail Chapter 3 (FTP 2009-14) Reward Schemes for exports from Foreign Post Office, New Delhi Launch of Pilot regarding

Highlights / Catch Notes

Income Tax

• High Court Dismisses Writ Petitions as Petitioner Fails to Cooperate in Assessment for 1998-2003, Misses Deadline.

  Case-Laws - HC : Period of Limitation in passing the assessment order dated 31.12.2004 for the assessment years 1998-99 to 2002-03 - Petitioner was fully aware that the limitation for assessment was going to expire on 8.12.2004 - They refused to cooperate with the Assessing Officer - They deliberately absented from the proceedings - All writ petitions dismissed - HC
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• Exemption Denied for Royalty and Consultancy Charges u/s 80HH and 80-I of Income Tax Act.

  Case-Laws - HC : Exemption of the amount received as royalty/consultancy charges under Section 80HH and Section 80-I of the Act - the consultancy has no nexus with the objects as mentioned in Section 80HH & 80-I of the Act. - Exemption denied - HC
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• High Court Rules No Addition for Undisclosed Investment Based on Diary u/s 69 in Block Assessment Case.

  Case-Laws - HC : Block assessment - Block period - Addition on account undisclosed investment based on diary of the assessee - The money so advanced will tantamount to be the investment made by the assessee which can be added only under section 69 in the year in which the advance has been made if it is undisclosed income of the assessee as defined u/s 158B(b). - No addition - HC
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• Concrete Evidence Needed for Legal Income Tax Searches: Mere Possession of Valuables Insufficient for Justifying Seizures.

  Case-Laws - HC : Legality of search & seizure operations – mere possession of money, bullion, jewellery or such valuable article or thing per-se would not be sufficient to enable the competent officer to form a belief that the same had not been or would not be disclosed for the purpose of the Act. - What is required is some concrete material to enable a reasonable person to form such a belief. - HC
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• Eligibility for Deduction u/s 80IB Hinges on Initial Year of Operation and Assessee's Evidence.

  Case-Laws - AT : The issue as to whether the said unit is eligible for deduction u/s 80IB of the Act or not is required to be established with reference to the initial year and the onus on this regard is on the assessee to establish by producing the relevant documentary evidence to establish that the eligibility conditions stipulated for claiming the deduction u/s 80IB of the Act were duly satisfied in the initial year - AT
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• Sale Agreements Before April 1, 2003, Not Affected by Section 50-C if Delays are Justified and No Concealment Claims Exist.

  Case-Laws - AT : Section 50-C of the Act cannot be applied to the sale agreements entered into before the introduction of the said provisions i.e before 1-4-2003 especially when delay in execution and registration of conveyance is sufficiently explained and there is no allegation of suppression of actual consideration - AT
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• Taxpayer Allowed to Write Off Bad Debts Due to Subsidiaries' Losses and Liquidation Proceedings.

  Case-Laws - AT : Bad debts - It is understandable that assessee was constrained to write off the advances as the same were not recoverable on account of losses suffered by the subsidiaries and in some of the cases on account of liquidation proceedings - claim allowed - AT
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• Employee Stock Option Discounts Deductible for Business Income Calculations under Profits and Gains Section.

  Case-Laws - AT : Whether discount on issue of Employee Stock Options is allowable as deduction in computing the income under the head profits and gains of business? - Held Yes - AT
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• Depreciation Claim on Assets Leased to Western Railways Approved After Proving Assessee's Lack of Asset Interest.

  Case-Laws - AT : Disallowance of depreciation - Assets leased to Western Railways -It is not proved that assessee is only a financer and is not interested in the assets and therefore, it cannot be said as full payout lease - depreciation allowed - AT
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• Consultancy Fees for Film Production Deductible for Tax, Even If Work Didn't Start This Year.

  Case-Laws - AT : Deduction of consultancy fees - film production - payment of consultancy fees allowable as deduction even though the execution of the contract work for film production was not commenced during the year under consideration - AT
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• Section 271(1)(c) Penalties Not Applicable When Income is Estimated; No Inference of Concealment or Inaccuracy Possible.

  Case-Laws - AT : Penalty u/s 271(1)(c) - It is well settled principles of law that when profit is estimated there cannot be any inference that the assessee has concealed the income or furnished inaccurate particulars of income so as to attract the provisions of section 271(1)(c) of the Act - AT
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• Assessing Officer Rejects Government-Approved Property Valuation u/s 50C; Importance of Qualified Valuer's Assessment Highlighted.

  Case-Laws - AT : Valuation u/s 50C - A.O. rejected valuation done by Govt. valuer - valuation done by the government approved valuer cannot be brushed aside, as it has been done by a qualified person - AT
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• No Penalty Imposed: Assessee Not Asked to Explain Income Source u/s 271AAA.

  Case-Laws - AT : Penalty u/s 271AAA - assessee was asked to explain the entries in the 'work-in-progress sheet' - assessee was not asked about the manner in which such income was earned and also to substantiate the manner in which undisclosed income was derived - No penalty - AT
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• Plot Valuation Upheld u/s 50C; D.V.O. Considers Potential for Nursing Home or Multi-Story Flats.

  Case-Laws - AT : Valuation - Section 50C - D.V.O. is correct in estimating the value of the plot as per the building byelaws of Agra Development Authority because that plot is having potentiality for constructing of many floors suitable for Nursing Home, Multi storey flat etc. Certainly, these are part and parcel of valuation of the plot - AT
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Customs

• High Court Rules Authority Liable for Missing Goods Under Its Care; Importer Wins Case Against Authority.

  Case-Laws - HC : Liability of AAI for goods misplaced or stolen - the goods belonging to the plaintiff (importer) went missing while they were in the care and custody of the defendant Authority. - AAI can not deny its liability - HC
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• Assesse Accused of Mislabeling 166 Metric Tons of Muriate of Potash as Industrial Salt; Prima Facie Case Not Established.

  Case-Laws - AT : Disguised Attempt to Export - Department was of the view that assesse had attempted to export 166 MTs of Muriate of Potash in the guise of industrial salt - Assesse was unable to prove prima facie case - AT
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• Court Rules No Leniency for Mis-declaring Non-Basmati Rice as Basmati; Redemption Fine Stands Firm.

  Case-Laws - AT : Mis-declaration of description of goods – export of non-basmati rice as basmati rice - no leniency can be made to reduce redemption fine - AT
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• CHA Granted Stay: No Evidence of Forged Documents in Customs Clearing Case, Revenue Authorities' Claims Unsubstantiated.

  Case-Laws - AT : Stay application – Revenue contended that the CHA had facilitated in clearing the consignments on the basis of forged/tampered licences. - forged/tampered documents not available - prima facie case in favor of CHA - stay granted - AT
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• Company Misses Deadline for Export Documents Due to Sick Unit Status; Benefit Still Granted Under BIFR Oversight.

  Case-Laws - AT : Export obligation - failure to produce the evidence of fulfillment of export obligation within 30 days - only fault at the end of the party was that they had failed in submitting any original documents but that had happened due to the company had been declared as sick unit and now under BIFR - Benefit not denied - AT
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Wealth-tax

• Taxpayer Penalized for Not Listing Asset in Return; Section 18(1)(c) Wealth Tax Act Applies.

  Case-Laws - AT : Penalty u/s 18(1)(c) - wealth tax - For claiming an exemption assesse had to include the asset in the return - Without including the same in the return filed it cannot claim exemption - Claims of exemption/deduction/rebate were not to be decided by the assesses - it was the job of the AO to entertain or rejects such claim as per the provisions of the Act - penalty confirmed - AT
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Service Tax

• Applicant Chooses 4% Service Tax Rate Under Works Contract Rules, Must Notify Department of Decision.

  Case-Laws - AT : Works Contract Services - Prima facie the Applicant was required to intimate the Department stating that they would be paying service tax @4% instead of 12%/10% by exercising their option under Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007 - AT
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• Assessee in maintenance and repair must pre-deposit 50% of tax under Service Tax Act Section 65(105)(zzg).

  Case-Laws - AT : Management, Maintenance and Repair Service’ u/s 65 (105) (zzg) - The assesse was doing maintenance and repair activity for such common facilities - pplicant to make a pre-deposit of 50% of the tax amounts demanded - AT
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• Service Tax Stay Granted on Incidental Crude Oil Storage Due to Transportation Constraints and Weather Conditions.

  Case-Laws - AT : Storage and warehousing services - Storage of crude oil is only incidental to the main activity of transportation and the vessels are hired only when pumping of crude cannot be made through pipelines laid under the sea bed or in specific weather conditions. - stay granted - AT
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• Stay Granted in Service Tax Case on Rent-a-Cab and Export Services; Prima Facie Favors Assessee.

  Case-Laws - AT : Service tax demand – rent a cab services – export of services - secondary service which are used by the primary service provider - Prima facie case in favor of assessee - stay granted - AT
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• Project Office Not a Permanent Establishment u/s 66A(2); Services Deemed Self-Provided, Stay Granted.

  Case-Laws - AT : Import of service - Section 66A(2) - project office is not doing any work other than the work relating to the project and would get wound up once the project is completed - no a permanent establishment - prima facie services are provided to self - stay granted - AT
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Central Excise

• Court Orders Show Cause Notice Issuance and Partial Deposit in CENVAT Credit Case u/r 8 Central Excise Rules.

  Case-Laws - HC : Belated payment of duty - Restriction on utilizing CENVAT credit - Rule 8 of central excise rules - Department directed the appellant to pay an amount without issuing show cause notice - Department directed to issue a show cause notice to the assesse - assessee also directed to deposit part amount - HC
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• Refund Claim Denied for EOU Due to Non-Compliance with Export Procedures and Documentation under Notification No. 19/2004.

  Case-Laws - CGOVT : Refund Claim – Notification No.19/2004 - 100% EOU - Export of goods after clearance to DTA - Non-preparation of statutory document and not following the basic procedure of export goods as discussed above, cannot be treated as just a minor/technical procedural lapse for the purpose of granting rebate of duty on the materials used in the manufacture of impugned exported goods - CGOVT
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• Court Dismisses Petition: Assessee Must Prove Export Claims for Excise Duty Exemption u/r 19.

  Case-Laws - HC : Proof of Export - incompatibility in description - Challenge to show cause notice - it was open for the assesse to produce relevant records, documents and other evidence to substantiate its plea of export of goods manufactured by it, making those worthy of the exemption from payment of central excise duty as envisioned by Rule 19 of the Rules - writ petition dismissed - HC
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• Circular on Duty Recovery Deemed Incomplete, Lacks Mechanism for Timely Hearing of Stay Petitions, Infringing Assessee Rights.

  Case-Laws - HC : Recovery of duty - circular dated 1.1.2013 - Circular was incomplete in the sense that unless there was complete mechanism for hearing the stay petitions before period of 30 days, how the Circular can be given effect to which will tantamount to denial of the legal right to the assesses for, obtaining stay - HC
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• Assessee Faces Prima Facie Case for Evasion of Duty on Misclassified Railway Wagon Components.

  Case-Laws - AT : Evasion of Duty - Revenue was of the view that the assesse manufactured and supplied the components/parts of Railway wagon without payment of duty to different units of Indian Railways showing the said goods as trading item - prima facie case is against the assessee - AT
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• Packing Machine for Khaini Not Notified Under Notification No. 10/2010; Exempt from Compounded Levy Rules.

  Case-Laws - AT : Compounded levy - Notification No. 10/2010 - The packing machine used for packing of filter khaini pouches/pillows/sachets can not be considered to be notified item and the goods manufactured with the aid of packing machine would not be covered under the compounded levy Rules. - AT
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VAT

• High Court Rules Goods Detention Under UPVAT Based on Assumptions, Not Evidence, Is Legally Unsustainable.

  Case-Laws - HC : Detention of Goods - UPVAT - transport of the goods from Delhi to Orissa - Transit Declaration Form - The inference that the goods may likely to be unloaded inside the State of U.P. And may not be taken to other State, while the goods were in transit and vehicle was on declared route was merely based on presumption, suspicion and doubts, which was not sustainable in law. - HC
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Case Laws:

• Income Tax

• 2013 (8) TMI 637
  Period of Limitation in passing the assessment order - Petitioner has prayed for setting aside the assessment order dated 31.12.2004 for the assessment years 1998-99 to 2002-03 - Contention of the petitioner before the High Court that the original accounts books were seized by the office of the Assessing Officer under Section 131 (3) – Held that:- The contention of the Petitioner that original books of accounts is with Assessing officer is not factually correct - Petitioner was fully aware that the limitation for assessment was going to expire on 8.12.2004. Taking advantage of the letter of the Assessing Officer dated 24.12.2003, which was more than a year old and did not give any details of the books of accounts, which were seized from the previous director of the company, filed the earlier writ petition and obtained an order without disclosing the contents and nature of the documents, which were retained by the department and whether they were relevant for assessment. The petitioners were aware of the date fixed by the Assessing Officer in his last notice dated 17.12.2004, which was served on the petitioner on 20.12.2004. Inspite of appearing before the Assessing Officer and participating in the assessment proceedings the petitioner left a letter on the dak counter of the department on 29.12.2004, requesting to provide them documents. The petitioner-company refused to cooperate with the Assessing Officer in the assessment proceedings. They deliberately absented from the proceedings as they could not have faced the Assessing Officer, who was aware of the facts and from whom they had taken time to produce the books of accounts – No merit found in the writ petitions – Writ Petitions dismissed – Decided against the Assessee.

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• 2013 (8) TMI 636
  Exemption of the amount received as royalty/consultancy charges under Section 80HH and Section 80-I of the Act - Assessee company is engaged in the manufacturing of wide range of products like industrial perfumes, chewing tobacco, synthetic essential oil etc. The assessee has entered into an agreement with Hindustan Lever Ltd. (for short, 'HLL') whereby assessee as the licensor had licensed the formula developed through its research and gave exclusive right to HLL to use the said formula in their products specially in liril soap - It is the claim of the assessee that along with its manufacturing activity, the assessee carried out the research and development activity side by side making use of the entire paraphernalia of the industrial undertaking – Held that:- In the instant case, the consultancy has no nexus with the objects as mentioned in Section 80HH & 80-I of the Act. The case laws relied by the assessee are in the context of old Section of 80E/80I, in which the words were "profit attributable to" as distinct from the word "profit derived from" in the present Section of 80HH and 80-I of the Act. Reliance is placed upon the judgment in the case of Honda SIEL Power Products Ltd. vs. Commissioner of Income-tax [2007 (10) TMI 298 - DELHI HIGH COURT], wherein observation made is "Both sections 80HH and 80-I of the Income-tax Act, 1961, use the expression "profit and gains derived from an industrial undertaking". The Supreme Court has drawn a distinction between the expression "derived from" and "attributable to" in Combay Electric Supply Industrial Co. Ltd., vs. CIT, [1978] 113 ITR 84. Only such business profits that have a direct nexus to the essential business activity of the assessee can qualify for deduction under Section 80HH of the Act. Inasmuch as both Sections 80HH and 80-I use the expression "profits and gains derived from an industrial undertaking", the burden is on the assessee to show that the income earned from an activity, the profits from which are claimed to qualify for deduction, has an immediate and direct nexus to the essential activity of the industrial undertaking." In the instant case, the consultancy charges received from the HLL is a receipt. So, it is subject to tax and cannot be allowed for deduction under Section 80HH & 80-I of the Act. For the purpose of this section, the profit and gains of the new undertaking is not commercial profit but only such profit as are computed in the manner land down under the Act in pursuance of Section 80AB, as if each undertaking was a separate assessee - By considering the totality of the facts and circumstances of the case, the consultancy charges are not exempted under Section 80HH & 80-I of the Act – Decided in favor of Revenue.

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• 2013 (8) TMI 635
  Search u/s 132 of the Income Tax Act - Block assessment - Addition on account undisclosed investment based on diary of the assessee - Held that:- The Assessing Officer has made the addition in this case on the basis of the diary as if the assessee has advanced money to the farmers. The money so advanced will tantamount to be the investment made by the assessee which can be added only under section 69 in the year in which the advance has been made if it is undisclosed income of the assessee as defined u/s 158B(b). Therefore, we do not agree with the finding of the CIT(A) that computation of the income of a particular Assessment Year within the block period is not relevant. In our opinion, the income has to be first computed in a particular assessment year. If the income will not fall in a particular Assessment Year, it cannot form part of the undisclosed income. Assessee was asked to verify from the DR whether entries in Annexure A-10 were duly recorded in books of account. The D.R. after several sitting with the assessee filed written submissions and reiterated the findings of the Assessing Officer, at the outset, that the assessee has not maintained the regular books of accounts for the assessment year 1998-99, ignoring the fact that the assessment for the assessment year 1998-99 was completed under Section 143 (3). The A.R., however, could not explain the amount of Rs.10,000/-, Rs.15,000/-, Rs.7100/- and Rs.5000/- totalling Rs.1,27,100/-, which was not entered in the regular books of accounts and which was treated as undisclosed income. The assessee had maintained account on computers and that notice in Register A-10 sufficiently explained the entries except an amount of Rs.1,27,100/-, which was treated to be undisclosed income found during the course of search – Decided against the Revenue.

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• 2013 (8) TMI 634
  Legality of search & seizure operations – Held that:- As per judgment in the case of Ajit Jain v. Union of India [2000 (1) TMI 41 - DELHI High Court], wherein it was held that even assuming that the amount found from the person was not reflected in the books of account of the Company, mere possession of such amount by the petitioner could hardly be said to constitute information which could be treated as sufficient by a reasonable person. Further, in the case of Dr. Mrs. Anita Sahai v. Director of Income Tax, [2004 (2) TMI 55 - ALLAHABAD High Court ], search and seizure operations were quashed observing that search and seizure can not be fishing expedition. Before search is authorized, the Director must on the relevant material have reason to believe that the assessee has not and would not have disclosed his income. On the basis of the above decisions, it has been held that mere possession of money, bullion, jewellery or such valuable article or thing per-se would not be sufficient to enable the competent officer to form a belief that the same had not been or would not be disclosed for the purpose of the Act. What is required is some concrete material to enable a reasonable person to form such a belief. It is, of course, true that such belief is a matter of subjective satisfaction of the competent authority. Such subjective satisfaction, however, must be formed on the basis of the material on record and objective assessment of such material and cannot be on the basis of a mere suspicion or apprehension that the income had not been or would not be disclosed for the purpose of the Act - In the result, the petition is allowed. Search and seizure operation is declared illegal and it is hereby quashed. Consequently, seizure of the gold ornaments under panchnama dated 26th July, 2012 is also quashed – Decided in favor of Assessee.

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• 2013 (8) TMI 633
  Deduction claim u/s 80IB of the Income Tax Act - Karaikal Unit in respect of which the impugned deduction u/s 80IB of the Act is claimed by the assessee for the year under consideration was set up in the year 1996 by EID Parry (India) Ltd. and the same was taken over by the assessee - No deduction u/s 80IB of the Act was claimed by EID Parry (India) Ltd. in respect of the said unit in the initial years and even by the assessee up to the immediately preceding year - Due to the continuing losses suffered by the said unit in the earlier years, no deduction u/s 80IB of the Act was claimed as stated by the assessee and the year under consideration was the first year where there was an occasion to claim such deduction – Held that:- The issue as to whether the said unit is eligible for deduction u/s 80IB of the Act or not is required to be established with reference to the initial year and the onus on this regard is on the assessee to establish by producing the relevant documentary evidence to establish that the eligibility conditions stipulated for claiming the deduction u/s 80IB of the Act were duly satisfied in the initial year - It is also required for the A.O. to point out to the assessee as to what exactly is the documentary evidence required to establish its case if the documentary evidence produced by the assessee is found to be not satisfactory by him – Matter remitted to the file of the A.O. with a direction to decide the same afresh after giving the assessee proper opportunity of being heard. Disallowance made u/s 36(1)(va) on account of deposit of employees contribution to PF/ESTC made beyond the due date – Held that:- Relying upon the decision of Hon'ble Kerala High Court in the case of Commissioner of Income-tax v. South India Corporation Ltd. [1999 (10) TMI 44 - KERALA High Court] and that of Hon'ble Madras High Court in the case of Commissioner of Income-tax v. Shri Ganapathy Mills Company Ltd. [1999 (2) TMI 26 - MADRAS High Court], it was held that due date of payment under the relevant Act is inclusive of the grace period allowed under the said Act – Decided against the Revenue. Explanation to Section 43(1) of the Income Tax Act - Disallowance on account of interest attributable to the borrowed funds utilized for acquiring the office premises – Assessee made payment of Rs. 13.56 crores for the purchase of office premises. The said amount was paid by the assessee from the loan taken from UTI Bank Ltd – Held that:- The interest paid on the borrowed funds utilized for acquiring such capital asset is allowable as revenue expenditure as per the main provisions contained in section 36(1)(iii) of the Act - Assessee acquired the capital asset of office premises for the purpose of its existing business and not for any extension of its existing business – Decided against the Revenue.

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• 2013 (8) TMI 632
  Applicability of provisions of section 50-C of the Act - Date of agreement versus date of excution of agreement (i.e. conveyance deed) – Held that:- Relying upon the decision in the case of M. Siva Parvathi & Ors[2009 (10) TMI 618 - ITAT VISAKHAPATNAM], it is held that section 50-C of the Act cannot be applied to the sale agreements entered into before the introduction of the said provisions i.e before 1-4-2003 especially when delay in execution and registration of conveyance is sufficiently explained and there is no allegation of suppression of actual consideration – Decided in favor of Assessee.

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• 2013 (8) TMI 631
  Allowance of depreciation when no business was carried out – There was withdrawal of permission by RBI to carry on the business activity, therefore, the business of the assessee was not at all in existence – the assessee has filed a copy of letter dated 23-02-2006 issued by RBI reviving the permission to carry on the business activity - Assessee has urged that this additional evidence may be admitted as it was written to carry on the business activity as it was again granted by the RBI on 23-2-2006 i.e. in the year under consideration itself -Assessee therefore was entitled to depreciation as the relevant assets were ready to use for its business which was in existence in the year under consideration - Held that:- ld. D.R. has not raised any objection for admission of the said additional evidence - Additional evidence requires verification and the matter may be sent back to the A.O. for such verification - Assessee also has no objection in this regard – Matter restored to the file of the A.O. with a direction to verify the stand of the assessee of having received the required permission from RBI to revive its business activity in the light of additional evidence filed by the assessee and decide the issue relating to the assessee's claim for depreciation in accordance with law. Disallowance of Rs. 29,65,122/- on account of prior period expenses - Said expenditure was mainly comprising of Customs and Excise Duty pertaining to the earlier period which was paid during the year under consideration and claimed as deduction on payment basis – Held that:- The assessee has filed a copy of letter filed before the ld. CIT(A) along with the documents annexed thereto - The assessee was registered as 100% export oriented unit under STPI and accordingly it was allowed to import and buy indigenous machinery without payment of customs and excise duty respectively. The assessee was required to be used the said machinery for export turnover only and it had to fulfill certain export obligation. As further submitted in the said letter, the assessee, however, could not fulfill the export obligation and hence intended to de-bond the same for utilization of the same for local turnover purpose. For this purpose, the assessee was required to pay customs and excise duty for the machinery and although the assessee initiated the process of de-bonding in the earlier year, the first demand for custom and excise duty was raised by the excise authorities only on 19-4-2006. As per the said demand, the custom and excise duty aggregating to Rs. 29,65,122/- was paid by the assessee under two challans dtd. 28-4-2006. A perusal of the impugned order of the ld. CIT(A), shows that this important submission made by the assessee as well as the relevant documentary evidence produced in support thereof has not been considered by the ld. CIT(A) as there is no discussion specifically on this point of prior period expenditure in his impugned order - Stand taken by the assessee relying on the relevant documentary evidence requires verification – Ordered to restore this issue to the file of the A.O. with a direction to decide the same after verifying the stand of the assessee from the relevant documentary evidence.

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• 2013 (8) TMI 630
  Cost of acquisition of land for computation of Capital Gains – Determination of FMV as on 1.4.1981 - CIT (Appeals) directed the Assessing Officer to adopt the value of land at Ambattur Industrial Estate at Rs. 50 per sq.ft. as on 1.4.1981 for the purpose of computing capital gains - Issue in appeal has been decided by the coordinate Bench of this Tribunal in favour of the assessee for the immediately preceding assessment year i.e. 2008-09 in ITA No.803/Mds/2012 dated 9.8.2012 - Assessee had claimed fair market value of the land situated at Ambattur Industrial Estate at Rs.108/- sq.ft. as on 1.4.1981 but the Assessing Officer adopted the value at Rs.5/- per sq.ft. The Commissioner of Income Tax (Appeals) directed the Assessing Officer to adopt the value at Rs. 50/- per sq.ft. and this valuation of Rs. 50/- per sq.ft was held to be reasonable by the co-ordinate Bench of this Tribunal in the assessee’s own case for the earlier assessment year – Held that:- Value adopted by the assessee company is supported by the reports furnished by two independent valuers. Moreover, the value adopted by the Assessing Officer is too low, when compared to the guideline value of the land at Rs. 536/- per sq. ft. as on 1.4.2007. It is after considering all these aspects that the Commissioner of Income-tax(Appeals) has adopted the fair market value at Rs. 50/- per sq. ft - Value adopted by the Commissioner of Income-tax (Appeals) is reasonable. Exclusion of interest on bank loan and term loans for the purpose of determining disallowance under Rule 8D(2)(ii) read with section 14A of the Act – Held that:- Commissioner of Income Tax (Appeals) excluded the interest on bank loan and term loans from the calculation of disallowance under Rule 8D(2)(ii) as the assessee has utilized the bank loan and term loan for the purpose of purchase of machineries and for expansion of projects and these loans were specifically sanctioned for specific project and such loans were also used for the purpose for which they were sanctioned. In the circumstances, Commissioner of Income Tax (Appeals) has rightly excluded such interest from the purview of computation of disallowance under Rule 8D(2)(ii) – Decided against the Revenue. Writing off of advances to its subsidiary companies on the ground that the assessee failed to substantiate that the advances have been made in the course of normal business – Held that:- The facts and circumstances of the case show that the assessee has extended loans and advances to its subsidiaries to support the business and on account of commercial expediency. The subsidiaries could not repay the loans or advances for the reason that they have incurred huge financial losses and have gone sick. The Assessing Officer has not disputed the fact that subsidiary companies are under liquidation proceedings and therefore loans are not recoverable. It is understandable that assessee was constrained to write off the advances as the same were not recoverable on account of losses suffered by the subsidiaries and in some of the cases on account of liquidation proceedings – Also, in the instant case, it is an admitted fact that the loans advanced to the subsidiary companies were utilized by them for their business requirements and have not been utilized for the personal benefits of the individuals/directors – Decided against the Revenue.

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• 2013 (8) TMI 629
  Whether discount on issue of Employee Stock Options is allowable as deduction in computing the income under the head profits and gains of business? - Vesting period and quantum of entitlement of shares – Held that:- The period from grant of option to the vesting of option is the `vesting period' - It is during such period that an employee is supposed to render service to the company so as to earn an entitlement to the shares at a discounted premium. The vesting period may vary from a case to case. If the vesting period is, say, four years with equal vesting at the end of each year, then it is at the end of the vesting period or during the exercise period, which in turn immediately succeeds the vesting period, that the employee becomes entitled to exercise 100 options or qualify for receipt of 100 shares at discount - Though the shares are allotted at the end of the vesting period, but it is during such vesting period that the entitlement is earned. It means that 25 options vest with the employee at the end of each year on his rendering service for the respective year. If during the interregnum, he leaves the service, say after one year, he will still remain entitled to exercise option for 25 shares at the discounted premium at the time of exercise of option. In that case, the benefit which would have accrued to him at the end of the second, third and fourth years would stand forfeited. Thus it becomes abundantly clear that an employee becomes entitled to the shares at a discounted premium over the vesting period depending upon the length of service provided by him to the company. In all such schemes, it is at the end of the vesting period that option is exercisable albeit the proportionate right to option is acquired by rendering service at the end of each year. Quantification of ESOP discount – Subsequent adjustment at the time of exercise of options – Held that:- Company incurs a definite liability during the vesting period, but its proper quantification is not possible at that stage as the actual amount of employees cost to the company, can be finally determined at the time of the exercise of option or when the options remain unvested or lapse at the end of the exercise period. It is at this later stage that the provisional amount of discount on ESOP, initially quantified on the basis of market price at the time of grant of options, needs to be suitably adjusted with the actual amount of discount. ESOP discount – Held that:- Discount under ESOP is in the nature of employees cost and is hence deductible during the vesting period w.r.t. the market price of shares at the time of grant of options to the employees - The amount of discount claimed as deduction during the vesting period is required to be reversed in relation to the unvesting/lapsing options at the appropriate time. However, an adjustment to the income is called for at the time of exercise of option by the amount of difference in the amount of discount calculated with reference the market price at the time of grant of option and the market price at the time of exercise of option. No accounting principle can be determinative in the matter of computation of total income under the Act. The question before the special bench is thus answered in affirmative by holding that discount on issue of Employee Stock Options is allowable as deduction in computing the income under the head `Profits and gains of business or profession'. Deduction for discount – Discount amounting to Rs. 3.38 crore for the A.Y. 2003-04 - On being called upon to furnish bifurcation of such claim, the assessee filed a chart showing its detail comprising of four amounts. First amount of Rs. 1.62 crore has been shown as the first tranche of 25% option. Second amount of Rs. 81.25 lakh as the second tranche of 25% option; third amount of Rs. 54.16 lakh as the third tranche of 25% option and the last amount of Rs. 40.62 lakh as the fourth tranche of 25% option – Held that:- Last three amounts can’t qualify for deduction at the end of the first year itself - Assessee claimed deduction for the proportionate part of discount for the second, third and fourth year at the end of the first year itself because 25% of options vested in the employees at the end of the first to fourth year each. This defies all logics and rationalities - When the options vest equally over a period of four years, it is but natural that the company would incur equal liability for the discounted premium @ 25% of total discount on receipt of services of the employees at the end of each year. The way in which the assessee has claimed deduction runs contrary even to the SEBI Guidelines, which also provide for deduction on straight line basis. The manner of the assessee's claiming deduction has resulted in needlessly increasing the amount of deduction for the first year at the cost of deduction for the subsequent three years. It needs to be set right by apportioning the total amount of the discounted premium evenly over the vesting period of four years.

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• 2013 (8) TMI 628
  Disallowance of depreciation - Assets leased to Western Railways - CIT allowed depreciation - Held that:- it is not a case, as is appearing from different clauses of the lease deed that the equipments leased will be returned back to the lessor after the expiry of the lease. Nothing has been brought to disapprove the said clauses of the lease deed by any of the authorities below - It is not proved that assessee is only a financer and is not interested in the assets and therefore, it cannot be said as full payout lease - such claim did not arise for consideration for the first time, but, is spread over to the entire period between A.Y. 1996-97 to 1999-2000. Such claim was made by the Assessee and duly granted by the Assessing Officer - Following decision of DEPUTY COMMISSIONER OF INCOME TAX BHARUCH CIRCLE. VERSUS GUJARAT NARMADA VALLEY FERTILIZERS CO LTD [2013 (8) TMI 300 - GUJARAT HIGH COURT] - Decided in favour of assessee.

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• 2013 (8) TMI 627
  Deduction of consultancy fees - contract work for film production - A.O. made disallowance - CIT deleted disallowance - Held that:- although the assessee was engaged in the business of trading in investment and securities and the contracts for film production were executed by it for the first time during the year under consideration, there was complete unity of control and management - if there is common management and common control of the business, the new line of business constitutes expansion of the existing business - business relating to film production was set up in the year under consideration and the expenditure in question on payment of consultancy fees having incurred by the assessee in connection with the said business, the same was allowable as deduction even though the execution of the contract work for film production was not commenced during the year under consideration - Following decision of B.R. Ltd. vs. CIT [1978 (5) TMI 3 - SUPREME Court] - Decided against Revenue. Applicability of Rule 9-A - Expenditure on production of feature films - Whether the assessee is in the business of production of feature films as contemplated in Rule 9A - Held that:- It is manifest from the relevant portion of the agreement between the assessee company and M/s Sahara India TV Network that the role of the assessee company as "production house" was limited to produce the films at the instance of the producer Sahara India TV Network strictly in accordance with the concept, theme, script, production value and production schedule etc. approved by the producer. Even any alteration in the approved details was to be done with the prior written consent of the producer - The activity of production of film was to be monitored and supervised by M/s Sahara India TV Network as producer and the instructions and advice given by M/s Sahara India TV Network to the assessee, be it commercial and otherwise, was binding on the assessee as the production house. M/s Sahara India TV Network as the producer was entitled to use , exhibit, market, sell, distribute, re-produce, assign and exploit etc. the films and parts thereof as may be decided by it being perpetual and global territory holders of the films and the assessee production house was not entitled to any rights, interests and claims whatsoever except the gross consideration expressly provided in the agreement - all these terms and conditions of the agreement are sufficient to show that M/s Sahara India TV Network was the producer of the film as envisaged in Rule 9A and not the assessee and the said Rule therefore was not applicable in computing the business income of the assessee - Decided against Revenue.

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• 2013 (8) TMI 626
  Penalty u/s 271(1)(c) - CIT estimated profit rate @ 5% - Held that:- Tribunal in a large number of cases of assesses, carrying liquor trade has directed estimation of profit at the rate of 5% on the sales turnover of the assessee - Following decisions of Badri Prasad Bhagavandas & Co. Vs. CIT [1994 (10) TMI 268 - MADRAS HIGH COURT] - Decided against Revenue. Penalty u/s 271(1)(c) - Rejection of books of accounts - CIT deleted penalty - Held that:- Merely because the profit has been estimated and certain additions are made in the assessment would not automatically lead to imposition of penalty u/s 271(1)(c) of the Act. The additions made in assessment proceedings ipso facto does not lead to a conclusion that the assessee has concealed particulars of income or furnished inaccurate particulars of income. There must be material brought on record on the basis of which a conclusion can be formed that there is a conscious attempt on the part of the assessee to conceal its income or furnish inaccurate particulars of its income. It is not disputed that the major addition in case of the assessee is on account of estimation of profit - It is well settled principles of law that when profit is estimated there cannot be any inference that the assessee has concealed the income or furnished inaccurate particulars of income so as to attract the provisions of section 271(1)(c) of the Act - Following decisions of CIT vs. Iqbal Singh & Co. [2009 (3) TMI 568 - HIGH COURT OF PUNJAB AND HARYANA] and Eagle Synthetics (P) Ltd. Vs. Income-tax Officer [2010 (2) TMI 719 - ITAT, Ahmedabad] - Decided against Revenue.

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• 2013 (8) TMI 625
  Valuation u/s 50C - A.O. rejected valuation done by Govt. valuer - Held that:- valuation is done by the government approved valuer - valuation done by the government approved valuer cannot be brushed aside, as it has been done by a qualified person - Following decisions of ITO vs United Marine Academy [2011 (4) TMI 15 - ITAT MUMBAI], Mrs. Sosamma Paulose vs JCIT [2003 (2) TMI 161 - ITAT COCHIN] and CIT vs Raman Kumar Suri [2012 (12) TMI 421 - BOMBAY HIGH COURT] - Decided in favour of assessee. Disallowance u/s 14A - Expenditure to earn the exempt incomes - Held that:- assessee was holding on to old investment in shares in which hardly one dividend is received in a year on which no expenditure was incurred - It is quite incomprehensible income claimed to be exempt is huge amount in dividends, and receiving the same in one dividend warrant is improbable - Assessee's grievance not clear - Decided against assessee.

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• 2013 (8) TMI 624
  Penalty u/s 271AAA - Penalty where search has been initiated - Held that:- assessee was asked to explain the entries in the 'work-in-progress sheet' and assessee in the course of statement offered the income with a plea not to initiate penalty proceedings. The assessee was not asked about the manner in which such income was earned and also to substantiate the manner in which undisclosed income was derived - Following decision of CIT vs. Radha Kishan Goel [2005 (4) TMI 47 - ALLAHABAD High Court] and CIT vs. Mahendra C. Shah [2008 (2) TMI 32 - GUJARAT HIGH COURT] - No Penalty - Decided against Revenue.

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• 2013 (8) TMI 623
  Valuation - Sale value being stamp value of the property by invoking section 50C of the Income Tax Act - Jurisdiction of DVO under section 50C for passing the order and others – Held that:- This action of reference to the D.V.O. has been taken by the A.O. on the direction of the I.T.A.T. Action taken by the A.O. on the direction of the I.T.A.T. is not incorrect rather it is in accordance with law. Correctness of valuation done by D.V.O. - The A.O. taken circle rate in calculation of capital gain on the ground that the D.V.O. inspite of valuing the plot has valued it as a constructed area on the plot - Held that:- Value of the plot depends upon a number of factors including location, size, road on which the plot is situated, area and others. The Stamp Valuation Authorities have also certain criteria and basis for determining the circle rate - The ld. Authorised Representative is not correct in submitting that the D.V.O. estimated the value of the plot as it is a constructed area - The D.V.O. is correct in estimating the value of the plot as per the building byelaws of Agra Development Authority, Agra because that plot is having potentiality for constructing of many floors suitable for Nursing Home, Multi storey flat etc. Certainly, these are part and parcel of valuation of the plot – No infirmity in the valuation made by D.V.O – Decided against the Assessee.

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• 2013 (8) TMI 622
  Disallowance u/s. 14A - A.O. computed the disallowance by applying Rule 8D - CIT(A)held that applicability of Rule 8D is prospective - Held that:- Following decision of Godrej & Boyce Mfg. Co. Ltd. Vs DCIT [2010 (8) TMI 77 - BOMBAY HIGH COURT] - Decided against Revenue.

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• Customs

• 2013 (8) TMI 621
  Recovery of Imported Goods - Liability of AAI for goods misplaced or stolen - Plaintiff (importer) had made payments to the foreign supplier for the consignment and even paid Customs Duty in respect of one consignment. The plaintiff had claimed not only the value of goods, including the Customs Duty and Interest for certain period but also damages on account of loss of reputation. The suit had impleaded AAI and the Customs authorities.. Held that:- the fact that the plaintiff did not pay duty, or approached the Customs authorities late, does not in any manner implicate or detract from the appellant’s duty of exercising diligent and proper care of the goods, till they were claimed and cleared. May be, if the plaintiff had neglected to clear the goods, after assessment, the Airport Authority would have, after issuing notice in terms of Sections 45, 46 and 48 of the Customs Act, entitled it to dispose of the goods, and apply the proceeds to realize customs duty dues (statutorily chargeable) and its detention or demurrage charges. However, those facts are not pleaded or proved before the Court. This court is also unpersuaded by the appellant’s submission that the principle of res ipsa loquitur did not apply. Even if it were inapplicable, arguendo, the plaintiff proved all the foundational facts in the case, such as their entry into India, on the dates alleged, the payment made to their suppliers, evidence of due filing of Bills of Entry, assessment of two of those, and payment towards one of them. It had also alleged that the non-availability certificate in respect of the consignments was not forthcoming, due to which it could not claim any insurance amount towards the lost or stolen consignment. The judgment cannot be faulted with in holding that the goods belonging to the plaintiff (importer) went missing while they were in the care and custody of the defendant Authority. Bar of Limitation – Held that:- The plea of the Assesse that the suit was time-barred, as it was filed beyond the period of one year, under Article 72 of the Limitation Act, was meritless - As regards the factual findings in the judgment the Court had already noticed that they do not call for interference, and are unexceptionable Article 72 had limited application and applied to protect bona fide exercise of power, or bona fide omission to do something, under belief that such act or omission was covered by statutory authority - It was not only a limitation, but also restriction of ordinary rights and had to be strictly construed. Only if the AAI had urged that it lost the goods from its custody, as a result of some omission (or act) which it bona fide thought was part of its duties, (traceable to some provision of law) would it be entitled to successfully say that the shorter period of limitation applied - Therefore, neglect of duty, whether statutory or otherwise, does not afford the State or state agency shelter of the shorter period of limitation - Decided against assesse.

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• 2013 (8) TMI 620
  Disguised Attempt to Export - Department was of the view that assesse had attempted to export 166 MTs of Muriate of Potash in the guise of industrial salt - Held that:- It was quite clear that Agriculture Department, Government of Karnataka treated it as only Muriate of Potash and buyers purchased the item in auction believing that it was Muriate of Potash and there was no evidence that they subsequently complained that it was not Muriate of Potash and the buyers also got the samples tested and even then they have not complained - It cannot be said that the Agriculture Department, Government of Karnataka officers did not know what is Muriate of Potash. Waiver of pre-deposit – Assesse was unable to prove prima facie case - Assesse had not been able to make out justification for reducing the requirement of deposit of 50% of penalty in his case by making an exception - 7.5 Lakhs were ordered to be submitted as pre deposit - rest of the duty to be waived till the disposal - stay granted.

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• 2013 (8) TMI 619
  Condonation of delay – application was filed to condone the delay of 9 days on the ground of illness of the consultant – Held that:- The first appellate authority should have condoned the delay of 9 days - delay has been explained properly as to there being serious illness of Consultant appearing before him as indicated in the medical certificate been given by Doctor - They should have considered this medical certificate sympathetically and in proper perspective and should have condoned the delay – orders in appeals were set aside and the appeals were remanded back to first appellate authority to reconsider the issue afresh.

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• 2013 (8) TMI 618
  Mis-declaration of description of goods – export of non-basmati rice as basmati rice - redemption fine imposed - Various pleas raised in adjudication were demolished finding no basis nor backed by basic evidence for which the appellant failed to succeed in adjudication - Held that:- no leniency can be made to reduce redemption fine as redemption fine imposed by learned adjudicating authority - there was no rebuttal to the test report which proved that non-basmati rice were attempted to be exported. Penalty - attempt to export was perpetuated as is apparent from record because appellant lost its plea of no presence at the time of loading of rice being baseless - Held that:- not inclined to reduce penalty to 10% of the imposed amount but recuded it to some extent - Penal proceedings are quasi-criminal in nature and quantum of penalty depends on gravity of offence, modus operandi, and the offence perpetrated. To ban perpetration or commitment of offence appropriate penalty is considered on the facts and circumstances of each case – penalty reduced - appeal decided partly in favour of assessee.

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• 2013 (8) TMI 617
  Stay application – Revenue contended that the CHA had facilitated in clearing the consignments on the basis of forged/tampered licences. - waiver of pre deposit of penalties u/s 112(a) – Held that:- the entire case starts on the basis of clearance of consignments based on forged/tampered licence. If the same is not available for defence of the assessee or the person, the appellant had made out a case for waiver of pre-deposit of the amounts involved - he had to defend himself against the charges of being involved in the import of goods which were cleared by producing forged/tampered invoices – stay granted. Condonation of delay - applications was filed for condonation of delay of ten days in filing the appeal – Held that:- The delay was marginal - delay condoned.

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• 2013 (8) TMI 616
  Export obligation - assessee did not produce the evidence of fulfillment of export obligation from the licensing authority within 30 days of expiry of period allowed for fulfillment of export obligation - Held that:- The appellant has fulfilled the export obligation - It was noticed from the order of Jt. DGFT that he had accepted the documents produced by the assessee and concluded that stipulated export obligation had been fulfilled by the applicant within the prescribed time and the license has been utilized properly issued duty free - the stipulated export obligation had been fulfilled within the prescribed time and the license was utilized properly for which it was issued duty free - only fault at the end of the party was that they had failed in submitting any original documents but that had happened due to the company had been declared as sick unit and now under BIFR – decided in favour of assessee.

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• Corporate Laws

• 2013 (8) TMI 615
  Winding up Petition u/s 439 r.w. 433(e) and 434 of the Companies Act, 1956 - The Court had to examine if the debt is bona fide disputed and whether the company had the ability to and was willing to pay the debt – Held that:- The Directors were directed to strictly comply with the requirements of Section 454 of the Act and Rule 130 of the Rules and furnish to the OL a statement of affairs in the prescribed form verified by an affidavit - After considering the history of the litigation, and the fact that they claimed that it was a profit making company that had the capacity to pay the admitted liability – the Court considers it appropriate to grant - one more opportunity to pay the admitted liability was granted. In Madhusudan Gordhandas & Co. v. Madhu Woollen Industries (P.) Ltd. 1971 (10) TMI 49 - SUPREME COURT OF INDIA - The principles on which the court acts are first that the defence of the company was in good faith and one of substance, secondly, the defence was likely to succeed in point of law and thirdly the company adduces prima facie proof of the facts on which the defence depends - No bona fide defence in the winding up petition and was unwilling and therefore unable to pay the admitted liability - the defence as to why it will not pay the admitted debt was neither one of substance nor in good faith – they had also not been able to satisfy the Court that it was willing to make payment of the admitted debt – prima facie case had been made out for admitting the petition and appointing a provisional liquidator - the order to be kept in abeyance for a period of six weeks - If such payment was not made then the order will become immediately operational.

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• Service Tax

• 2013 (8) TMI 642
  Commercial or Industrial Construction Service - Works Contract Services - Assesse were engaged in providing ‘Commercial or Industrial Construction Service’ in respect of construction of residential complex and ‘Works Contract Services’ during the relevant period - Revenue was of the view that any payment @4% of the service tax under the Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007, during the relevant period, an assessee had to exercise their option in writing to the concerned authority – Held that:- Prima facie the Applicant was required to intimate the Department stating that they would be paying service tax @4% instead of 12%/10% by exercising their option under Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007. Waiver of Pre-deposit - Taking into consideration the interest of the revenue as well as the financial condition of the Applicant and also the principle of law laid down relating to disposal of stay applications by the Hon’ble Apex Court and High Courts - the Applicant could not able to make out a prima facie case for total waiver of pre-deposit of the dues - 25% of the duty to be deposited - rest of the duty to be waived till the disposal – Conditional Stay granted.

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• 2013 (8) TMI 641
  Management, Maintenance and Repair Service’ u/s 65 (105) (zzg) - The assesse was doing maintenance and repair activity for such common facilities - Assesse had not been paying any service tax on amounts recovered from the clients for maintenance or repair of common facilities - Revenue was of the view that such service was classifiable under ‘Management, Maintenance and Repair Service’ - Held that:- In the case some agencies which were doing the maintenance work might had paid service tax on some part of the value for which tax was demanded in the absence of clear proof - the earlier order was and direct the applicant to make a pre-deposit of 50% of the tax amounts demanded in each of the appeals within eight weeks of the order - Subject to such pre-deposit, pre-deposit of the balance dues arising from the impugned orders shall stand waived and collection thereof stayed during the pendency of the appeals - the Bench had already called for pre-deposit of 50% of the tax amount on the same issue for the previous period – Decided partly in favor of assesse.

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• 2013 (8) TMI 640
  Supply of tangible goods for use - Storage and warehousing services - appellant provided shipping vessels on hire basis - during monsoon period used for storage and transportation of crude oil from Bombay High – Whether the activity would liable to be taxed – Held that:- The primary object of charter of hiring the vessel is for transportation of crude from the place of production to the refineries in India and not for "storage and warehousing" - Storage of crude oil is only incidental to the main activity of transportation and the vessels are hired only when pumping of crude cannot be made through pipelines laid under the sea bed or in specific weather conditions. As decided in Indian National Ship Owners Association v/s Union of India (2008 (12) TMI 41 - HIGH COURT OF BOMBAY) – the said activity would come under supply of tangible goods for use – the same was brought under the service tax net with effect from 16/05/2008. Stay application –stay granted as the appellant being govt. undertaking there is no risk to revenue.

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• 2013 (8) TMI 639
  Service tax demand – rent a cab services – export of services - secondary service which are used by the primary service provider - Held that:- The appellant not to be liable to pay service tax on rent-a-cab services provided by them to various IT companies – they have exported their services - in view of the clarification issued by the Board vide Circular dated 25/04/2003, the service provided by the primary service provider are exported. Stay application - unconditional waiver from pre-deposit granted and stay granted to recovery to the appellant.

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• 2013 (8) TMI 638
  Import of service - permanent establishment - Section 66A(2) - appellant was provided design and consultancy service - head office is at Canada and in India they have set up only a project office - Held that:- The appellant have provided the service to itself - project office of the appellant in India set up for implementation of the project in terms of agreement between the Government of Uttranchal and the Canada cannot be called the permanent establishment - project office is not doing any work other than the work relating to the project and would get wound up once the project is completed - the same covered branch or agency of a foreign based company set up in India to carry out its business on long term basis – does not cover the project office temporarily set up in India only for implementation of a particular project. Stay application – prima-facie case in the favour of assessee – waived the pre deposit of service tax- stay granted.

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• Central Excise

• 2013 (8) TMI 614
  Belated payment of duty - Restriction on utilizing CENVAT credit - Rule 8 of central excise rules - appellant submitted that the Department directed the appellant to pay the sum of Rs. 53,62,822/-, without affording any opportunity to the appellant as no show cause notice was issued and straight away a demand was served on the appellant. - Principles of Natural Justice - Assesse cited financial crises and did not remit the Central Excise Duty. Held that:- The revenue shall issue a show cause notice to the assesse clearly indicating the defaulted amount together with interest and the appellant shall be entitled to submit their reply to the show cause notice and thereafter the respondents shall pass orders on merits and in accordance with law - Assesse should be put on some terms before the Department was directed to issue a show cause notice to the assesse - before the quantifying the total amount the department ought to have issued a show notice to the appellant clearly setting out the period of default, the amount payable, the interest payable on the said amount and afford an opportunity to the appellant.

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• 2013 (8) TMI 613
  Refund Claim – Notification No.19/2004 - 100% EOU - Export of goods after clearance to DTA - The assesse had filed the application for refund on the ground that the product Sesame seeds were exempted in DTA and subsequently claim the refund on the ground that the goods cleared in DTA were ultimately exported - Held that:- The goods exported cannot be correlated with goods cleared in DTA - the duty paid on goods exported was not proved - the fundamental requirement of export of duty paid goods was not satisfied the rebate claim was not admissible to the assesse under Rule 18 of Central Excise Rules, 2002 read with Notification No. 19/2004 - J. Yashoda v. Shobha Rani [2007 (4) TMI 11 - SUPREME COURT OF INDIA ] - Non-preparation of statutory document and not following the basic procedure of export goods as discussed above, cannot be treated as just a minor/technical procedural lapse for the purpose of granting rebate of duty on the materials used in the manufacture of impugned exported goods – Order set aside.

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• 2013 (8) TMI 612
  Proof of Export - incompatibility in description - Challenge to show cause notice though reply was filed - Bar of Limitation - Admission of writ petition - Held that:- The provisions of the Central Excise Act suggest that the time limit prescribed thereunder was absolute and unextendable by a court under Section 5 of the Limitation Act - it was the duty of the court to respect the legislative intent and that liberal interpretation contrary thereto ought not be granted – Following Commissioner of Customs & Central Excise Versus M/s Hongo India (P) Ltd. & Anr. [2009 (3) TMI 31 - SUPREME COURT] - by the time the revision petition under Section 35EE was filed not only the period of limitation prescribed therefor had expired but also the term of relaxation grantable had lapsed. We are left unpersuaded by the petitioner’s plea for condonation of delay on the ground of its bona fide litigating before a wrong forum. The assertion of the respondents to the effect that in the other accompanying instances, the petitioner had rightly identified the forum, in the overall factual backdrop cannot also be lightly discarded. However, the above rejection of the petitioner’s revision application under Section 35EE being only on the ground of limitation and not on merits, the arguments against merger thereof with the order of the Commissioner (Appeals), Jaipur has substance. Proof of Export - Duty Demand u/s 11A - Interest u/s 11AB and Penalty - Assesse submitted the proof of export before the authority for acceptance under the provision of the Rules and the authority had accepted the same - authority withdrew the acceptance of the proof of export covering the consignments - Held that:- The action of the authorities on the ground of misdescription of the goods by the petitioner, on a cumulative consideration cannot be construed to be untenable - The relief claimed by the petitioner was statutory in nature and would be logically available to it on strict compliance of the prescriptions in connection therewith - The mere contingency that at some earlier point of time, the acceptance of the proof of export had been issued by the concerned excise authorities would not entitle it to the benefit of Rule 19. The present determination had been based on the materials laid before - As the show cause notice(s) would demonstrate, it was open for the assesse to produce relevant records, documents and other evidence to substantiate its plea of export of goods manufactured by it, making those worthy of the exemption from payment of central excise duty as envisioned by Rule 19 of the Rules - it was worth-mentioning that the observations made and the conclusions reached were in the context of the debate addressed in the petitions and it would be open for the petitioner to participate in the proceedings arising out of the show cause notice(s) in spite of this adjudication - In such an eventuality, needless to say, the Department would take an appropriate decision in accordance with law in the said proceedings without being influenced by the above observation after affording due opportunity of participation to the assesse - Stay application Also rejected.

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• 2013 (8) TMI 611
  Recovery of duty - circular dated 1.1.2013 - Revisional Power – Interim Relief - Held that:- Circular was incomplete in the sense that unless there was complete mechanism for hearing the stay petitions before period of 30 days, how the Circular can be given effect to which will tantamount to denial of the legal right to the assesses for, obtaining stay because of the fault in the machinery and mechanism for consideration of the appeals and the stay petitions resulting into attachment of bank accounts etc. of running business concerns, affecting it to the extent of financial crisis. The order will be effective till the petitioners applications for interim relief - court directed the Ministry of Finance, Department of Revenue, New Delhi to clear its stand with respect to improvement of system of hearing of the appeals/stay petitions by the appellate authority or the Tribunal within a reasonable time, in the light of the Circular dated 1-1-2013 for consideration of the prayer for interim relief before 30 days from the filing of the appeal. The mechanism for deciding the cases of the Revenue require priority in the interest of the nation and since we are coming across several matters where the prayer is only for interim relief in the writ jurisdiction, when the original appeal is pending before the appellate authority or before the Tribunal, and virtually making the High Courts the courts of hearing the application for interim relief when the main matter will be decided by the appellate authority or the Tribunal, the High Courts in the entire India appear to have heavily been burdened because of the lack of infrastructure in appellate or Tribunal level.

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• 2013 (8) TMI 610
  Evasion of Duty - Revenue was of the view that the assesse manufactured and supplied the components/parts of Railway wagon without payment of duty to different units of Indian Railways showing the said goods as trading items in their books of accounts and thereby indulged in evading the Central Excise duty involved thereon - Held that:- The applicant company could not make out a prima facie case in their favor - The Adjudicating authority had discussed in details the evidences to hold the Assesse as manufacturer - wherever the claim of procurement of goods from traders and job workers had been made by the Assesse a fact contrary to the tenders/purchase orders, it was their duty to satisfy by adducing sufficient evidences before the Authorities in support of their claims. They did not discharge any duty before clearing the said goods to Railways - all tenders/purchase orders of different units of Railways have been accepted and executed by the assesse company representing themselves as manufacturer - before the goods were finally cleared to Railways, the assesse company used to inscribe ‘AEW’ which is their trade name along with manufacturing date - the necessary testing which is the pre-requisite for supply of the goods to Railway was done at the factory premises of the assesse - the job workers admitted that goods supplied to the assesse were in semi-finished goods and the same were processed and inspected for quality control at the premises of the assesse. Waiver of Pre-deposit and Penalty - Assesse failed to make out a prima- facie case for total waiver of pre-deposit of duty and penalty – the principles of law governing the exercise of discretion in disposing of the applications filed under Section 35(F) and also the interest of Revenue in line and the justice - 70 Lakhs were ordered to be submitted as pre-deposit – upon such submission rest of the deposit to be stayed till the disposal – stay granted.

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• 2013 (8) TMI 609
  CENVAT credit - cenvat credit was denied on the basis of enquiry conducted with the transporters - Held that:- Prima-facie the ground for denying the cenvat credit was doubtful - the denial of cenvat credit was on the basis that on the date of supply as mentioned in the invoices - the transport of the goods covered by the invoices was not mentioned in the diaries maintained by the drivers - The ground for denial of cenvat credit also appeared to be without any basis when on this point, no inquiry had been made with the driver and the vehicle owners confirm having transported the goods covered under the invoices - The major demand is on the basis that the weight of the goods mentioned in the impugned invoices is much more than the weight which the vehicles can legally carrying and hence the goods covered under these invoices have not been transported. Stay Application - The amount already deposited by the appellant was sufficient for hearing the appeal - the requirement of pre-deposit of balance amount of cenvat credit demand, interest thereon and penalty was waived for hearing of his appeal and recovery and was stayed - Stay granted.

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• 2013 (8) TMI 608
  Demand of CENVAT credit – Bogus invoices - Interest and Penalty u/s 11AC - Held that:- Prima-facie the evidence in support of both the grounds for alleging that there was no supply of goods by the registered dealers was doubtful - the vehicle of the transport company were not involved - in the present group of appeals there were two transporters, the owners of vehicles had stated that they had not transported the goods - in view of the findings of the Commissioner (Appeals) it appeared that assesse may issued bogus invoices showing transportation of the goods in the vehicle - the department’s case was that notwithstanding the truck owners statement confirming transport of the goods, their claim cannot be accepted as the quantity mentioned in the invoices was much more the load which the vehicle can legally carry. Stay Application - Prima-facie the assesse cannot make out the case for total waiver – 1.5lakhs were ordered to be submitted as pre-deposit – upon such submission rest of the duty to be stayed till the disposal of the case - Stay granted.

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• 2013 (8) TMI 607
  Compounded levy - Production capacity based duty - Chewing tobacco and Filter Khaini - Notified Goods as per Notification No. 10/2010 - The assesse was engaged in the manufacture of Chewing tobacco and Filter Khaini falling under tariff item No.24039910 of the First Schedule of the Central Excise Tariff Act, 1985 - Whether the Filter Khaini Pouches manufactured by the Respondents with the help of packing machines were required to be considered as notified goods in terms of notification No.10/2010-CE(NT) and whether the same were required to be taken into consideration while determining the annual capacity of production and collection of duty. Held that:- The packing machine used for packing of filter khaini pouches/pillows/sachets cannot be considered to be notified item and the goods manufactured with the aid of packing machine would not be covered under the compounded levy Rules - They were required to discharge duty not in terms under the said Rule, but in terms of the normal provisions of law - in the pillow packing machine for the manufacture of the said sachets would not be taken into consideration for determining the annual capacity of production and collection of duty - Section 3 A covers only pouches packed with the aid of packing machine and not the pouches that were packed manually - Inasmuch as the plastic pouches were pre-sealed and zipped from one side and the sachets were put in manually and the pouch was sealed with the help of hot iron/band sealer. The filter khaini, pillows/sachets packed with the aid of packing machine do not bear any brand name, MRP, warnings as to health hazards and manufacturer's particulars, as required under the capacity Rules, it cannot be held that the same were notified goods in terms of the compounded levy rules - The same were more or less like the Tea bags, which were without any brand, name or carrying any other requisite information and which were ultimately packed in the final containers carrying various requisite information. It was only the final container, which can be held to be as the final product -The Tea bags cannot be held to be the product which was marketable in that condition inasmuch as not even the manufacturer's name was described - even if the Tea packs were manufactured with the aid of power, they cannot be considered to be notified goods in terms of the Capacity Determination Rule. The packing machine used for packing of filter khaini pouches/pillows/sachets can not be considered to be notified item and the goods manufactured with the aid of packing machine would not be covered under the compounded levy Rules. They are required to discharge duty not in terms under the said Rule, but in terms of the normal provisions of law. – Decided against Revenue.

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• CST, VAT & Sales Tax

• 2013 (8) TMI 643
  Detention of Goods - UP VAT - transport of the goods from Delhi to Orissa - Transit Declaration Form - Held that:- Goods had not been taken outside the State of U.P - The declaration form under the Orissa VAT Act, which was necessary for the import of the goods was not produced - The discrepancy in the bill number and date of issue of certain bills from the bill book had been alleged - The goods have been detained illegally, arbitrarily and without any basis and merely on surmises and conjectures and whims of the authorities concerned despite the settled principle of law - Each and every transaction had to be examined independently on its own merit and past conduct is wholly irrelevant - the driver of the vehicle possessed the documents relating to the goods and the Transit Declaration Form and the same were produced before the Commercial Tax Officer at the time of checking. Neither such Transit Declaration Form was found non-genuine or improper nor were any details relating to the goods furnished in the Transit Declaration Form found incorrect - No such finding had been recorded by any authority in this regard. No case had been made out that Section 52 of the Act or Rule 58 or circular of the Commissioner had been violated - No case had been made out that the goods were not traceable to bonafide dealer and were not recorded in the books of accounts, document or register - The inference that the goods may likely to be unloaded inside the State of U.P. And may not be taken to other State, while the goods were in transit and vehicle was on declared route was merely based on presumption, suspicion and doubts, which was not sustainable in law. 28-B. Transit of goods by road through the State and issue of authorization for transit of goods - When a vehicle coming from any place outside the State and bound for any other place outside the State, and carrying goods referred to in sub-section (1) of Section 28-A, passes through the state, the driver or other person-in-charge of such vehicle shall obtain in the prescribed manner an authorization for transit of goods from the officer-in-charge of the first check-post or barrier after his entry into the State and deliver it to the officer-in-charge of the last check-post or barrier before his exit from the State, failing which it shall be presumed that the goods carried thereby have been sold within the State by the owner or person-in-charge of the vehicle. The Principal Secretary, Financial Institutions was directed to look into the matter and review the mechanism provided under the Act and take steps to provide such mechanism to check evasion and corrupt practices - The Commercial Tax Officer was directed to release the goods forthwith without any security and also pay the exemplary cost imposed.

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• Wealth tax

• 2013 (8) TMI 644
  Penalty u/s 18(1)(c) - Claiming exemption from wealth tax - concealment of wealth or inaccurate furnishing of particulars of such wealth. - Held that:- It can easily be said that the assesse had not only filed inaccurate particulars of wealth but the verification of return was also not based on true facts - The assessment and penalty proceedings were different - It had not furnished any explanation that could rebut the stand taken by the AO - he was justified in invoking provisions of explanation 2 to section 18(1)(c) - assesse had not included the value of the assets in its return without any basis and thus deprived the Sovereign of its due share of tax - It deserves to be treated differently from other tax-payers where they show the value of the assets in their returns and question the taxability of such assets. A return was not an ordinary piece of paper - it was a document that had to be verified by authorized persons only - In the verification column assesses were supposed to make a declaration about correctness of the details mentioned in the return - If the assesse chooses to ignore these important factors while filing return of wealth, he cannot escape from the ensuing results. Non-inclusion of taxable asset was a prima facie proof of furnishing of inaccurate particulars resulting in concealing the particulars of wealth - Assesse was at liberty to rebut said presumption - Explanation filed by the assesse was the deciding factor to arrive at final conclusion - During penal proceedings assesse was issued a notice asking him why penalty should not be levied - After considering the explanation filed by the assesse, AO reached at the conclusion that assesse had not included the taxable wealth in the return - As per the established principles of taxation jurisprudence non- inclusion of taxable wealth resulting in loss to Revenue had to be dealt with as per the provisions of the section 18(1)(c)of the Act. Assesse had claimed that it was under the impression that the assets in question were exempt as per the provisions of the Act. For claiming an exemption assesse had to include the asset in the return - Without including the same in the return filed it cannot claim exemption - Claims of exemption/deduction/rebate were not to be decided by the assesses - it was the job of the AO to entertain or rejects such claim as per the provisions of the Act - Twin factors essential for levying penalty u/s.18(1)(c) of the Act very much exists in the case – Appeal Rejected.

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