TMI Tax Updates - e-Newsletter
August 27, 2012

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws Service Tax Central Excise Indian Laws

Articles

1. TAXABILITY OF DIRECTOR'S SERVICES

   By: Dr. Sanjiv Agarwal

2. China Acts Opportunist

   By: INDRANEEL SEN GUPTA

News

1. GST is More Effective and Efficient Substitute for Plethora of Indirect Taxes: FM

2. Recognising, rejecting and reporting tax avoidance schemes - ATO's Fact sheet for tax professionals

3. Chidambaram Appointed as Governor on the Board of Governors of African Development Bank and African Development Fund

4. Award of remaining Exploration Blocks under Ninth Bid Round of New Exploration Licensing Policy (NELP-IX) and cancellation of two blocks awarded earlier under NELP-IX

5. National Mission on Food Processing

6. Additional financing from external funding agencies and continuance of 75:25 sharing pattern under the Rashtriya Madhyamik Shiksha Abhiyan Scheme

7. Proposal of M/s. Shriram Financial Ventures (Chennai) Pvt. Ltd., (i) to allot shares to M/s. Sanlam Emerging Markets (Mauritius) Limited, and (ii) M/s. Sanlam Emerging Markets (Mauritius) Limited to hold, through M/s. Shriram Financial Ventures (Chennai), a stake, not exceeding 26 per cent, in M/s. Shriram Capital Limited

8. Conversion of Optionally Convertible Debentures of Rs.923 Crore held by Government in Equity in IFCI

9. Approval of change in the equity structure of the Delhi Mumbai Industrial Corridor Development Corporation (DMICDC)

Notifications

Customs

1. 47/2012 - dated 21-8-2012 - Cus

Regarding exemption of import duty on oil cakes thereby amending Notification 12/2012-Customs, dated 17-03-2012

2. F.No. 437/42/2012-Cus. IV - dated 24-8-2012 - Cus (NT)

Appointment of Common Adjudicating Authority

Circulars / Instructions / Orders

VAT - Delhi

1. 14 - dated 22-8-2012

Online submission of Tax Rate Wise Stock held on 31st day of March

Service Tax

2. 1/2012 - dated 21-8-2012

Dispute Resolution and Tax-Payer Services through Indirect Tax Ombudsman, Delhi.

FEMA

3. 17 - dated 23-8-2012

Anti-Money Laundering (AML) / Combating the Financing of Terrorism (CFT) Standards - Money changing activities

4. 18 - dated 23-8-2012

Anti-Money Laundering (AML)/Combating the Financing of Terrorism (CFT) Standards - Cross Border Inward Remittance under Money Transfer Service Scheme (MTSS)

DGFT

5. 03 (RE-2012)/2009-14 - dated 23-8-2012

Conditions and modalities for registration of contracts of sugar with DGFT- relaxation of (-) 5% by weight in export of sugar.

Companies Law

6. 26/2012 - dated 23-8-2012

Constitution of a Committee for Reforming the Regulatory Environment for doing Business in India.

Highlights / Catch Notes

Income Tax

• Indo-UAE DTAA: Fee to Emirates Advocates for Trademark Registration Not Qualified as Professional Services for Tax Purposes.

  Case-Laws - AT : Indo UAE DTAA - Fee paid to Emirates Advocates - merely stating that this was for the purpose of registration of trade-mark application and, therefore, it is in the nature of professional services, cannot be upheld. - AT
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• Court Rules Section 17(2)(i) Inapplicable for Rent-Free Housing; No Taxpayer Obligation for Repairs or Renovations.

  Case-Laws - HC : Perquisite value of rent free accommodation - reference to Section 17(2)(i) was unwarranted because the assessee was under no obligation to incur the expenses on repairs and renovation or modification of rent free accommodation - HC
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• Court Rules Non-Educational Income Exempt if Used for Educational Purposes by Institutions.

  Case-Laws - HC : Educational exemption - income from in non-educational activities like horticulture - utilized in the educational activities of the institutions - exemption allowed - HC
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• High Court Evaluates If Fees for Placement and Training Count as Educational Activity u/s 10(23C)(vi) for Tax Exemption.

  Case-Laws - HC : Exemption u/s 10(23C)(vi) - collection of fees for placement and training - whether constitute an educational activity - if in accordance with Act of 2007, exemption to be allowed - HC
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• Employee Rent-Free Housing and Tax: Can It Be Considered a Concession u/s 17(2)(ii) of Income Tax Act?

  Case-Laws - AT : Perquisite - rent free accommodation - in spite of the legal position that Rule 3 is intra vires, valid and is not inconsistent with the provisions of the parent Act under section 17(2)(ii), it is still open to the assessee to contend that there is no 'concession' in the matter of accommodation provided by the employer to the employee and hence the case did not fall within the mischief of section 17(2)(ii) of the Act - AT
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• Court Rules No TDS Needed on Airport Charges u/s 194-I of Income Tax Act.

  Case-Laws - HC : TDS on landing and parking charges collected by Airport Authority of India u/s 194 C OR u/s 194-I - no TDS u/s 194I - HC
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• Court Disallows Bad Debt Claims on Undisclosed Income; Reinforces Need for Transparency in Tax Declarations.

  Case-Laws - AT : Claim of bad debts against the undisclosed income found during search not allowed - AT
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• Court Allows Charitable Society to Claim Depreciation Alongside Income Application u/s 10(23C) of Income Tax Act.

  Case-Laws - AT : Charitable society claiming exemption u/s 10(23C) - depreciation allowed besides allowing claim on account of application of income - AT
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• Capital Loss from Share Sale to Relatives Not Automatically a Sham Transaction, Relationships Alone Insufficient Basis.

  Case-Laws - AT : Long term capital loss on sale of shares - Just because of assessee sold shares to daughter and sister concern, it cannot be considered that the transactions are sham transactions - AT
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• Interest on Sales Tax Under Amnesty Scheme Allowed as Business Deduction; Not Considered Penal in Nature.

  Case-Laws - AT : Whether the interest paid on sales tax under the amnesty scheme is an allowable deduction as business expenditure – not panel in nature - deduction allowed - AT
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• Notice Invalid: Section 148 Issued to Non-Existent Amalgamating Company Post-Merger.

  Case-Laws - AT : Notice u/s 148 – Notice was issued in the name of amalgamating company which has been merged - the amalgamating company ceased to exist - Notice invalid - AT
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• Section 12AA: Charitable Status Maintained Despite Commercial Property Investments If Income Supports Charitable Goals.

  Case-Laws - AT : Cancellation of registration u/s 12AA – investment even in commercial property assets remains charitable purposes so long as the income generated by it is applied to charitable objects. - AT
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• Section 80IA(4) Deduction: Developers of Government Infrastructure Projects Need Not Own Facilities to Qualify.

  Case-Laws - AT : Deduction under Sec 80IA(4) - there is no requirement that the assessee should have been the owner of the infrastructure facility. - Every contractor may not be a developer but every developer developing infrastructure facility on behalf of the Government is a contractor. - - AT
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• Merger with parent company not exempt from capital gains tax under Income Tax Act, section 47(via) interpretation.

  Case-Laws - AAR : Merger with the parent company - no capital gain chargeable to tax under the Act in terms of section 45 read with section 48 can be said to arise. - it cannot be postulated that section 47(via) takes the transaction out of the clutches of section 45 - The merger involved in this case, is not exempt from capital gains tax under section 47(via). - AAR
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• India-Mauritius DTAC exempts capital gains from share buybacks from Indian taxation under Article 13, Paragraph 4.

  Case-Laws - AAR : The capital gains arising out of the proposed buyback of shares is not taxable in India in view of paragraph 4 of Article 13 of the DTAC between India and Mauritius. - AAR
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• India-Germany DTAA: Key Distinctions Between "Copyright Right" and "Copyrighted Article" Affecting Taxation of Royalties and License Charges.

  Case-Laws - AT : India - Germany DTAA - Receipt of license charges / royalty - Distinction has to be made between the acquisition of a 'copyright right" and a "copyrighted article". - AT
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• Business losses cannot offset unexplained cash credits taxed u/s 68, which are treated as taxable income.

  Case-Laws - AT : Business loss assessed by the AO cannot be set off against the amount taxed u/s 68 as unexplained cash credits taxed under section 68 cannot be pegged to any head of income- - AT
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• High Court Rules Mistaken Advance Payment Not to Be Added to Assessee's Income for Tax Purposes.

  Case-Laws - HC : Income - receipt of advance payment - due to inadvertence the amount was credited to the accounts of the assessee in the balance-sheet - no addition - HC
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• Assessing Officer's 3-Year Composite Notice u/s 148 Faces Legal Scrutiny for Not Meeting Statutory Requirements.

  Case-Laws - HC : Reassessment proceedings – Notice for 3 years - AO has not issued separate notice under section 148 and instead had issued a composite notice which does not meet the requirement of section 148 of the Act - HC
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• High Court Rules Computer Data Processing and Stationery Sales Qualify as "Manufacture" u/s 80-I for Tax Benefits.

  Case-Laws - HC : Computer data processing services and sale of computer stationery held as industrial undertaking engaged in the business of "manufacture" within the meaning of section 80-I - HC
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• Revenue Department Missed Chance to Contest High Court Judgment; Section 263 of Income Tax Act Not Applicable.

  Case-Laws - HC : If the judgment passed by High Court is erroneous, the revenue should have challenged the said order. - At any rate that cannot be a ground for invoking Section 263 of the Act - HC
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Customs

• Confiscation of vessel overturned: Barge deemed a foreign-going vessel, not imported goods, under established law.

  Case-Laws - AT : Confiscation of vessel and penalty imposed - it is settled law for movements/voyages in or out of the country the Barge, in any event, becomes a foreign going vessel and cannot be said to be imported goods. - AT
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• Import Duty Exemption on Oil Cakes Announced to Support Agriculture and Livestock Sectors with Reduced Costs.

  Notifications : Regarding exemption of import duty on oil cakes thereby amending Notification 12/2012-Customs, dated 17-03-2012 - Notification
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• Gum Arabic Waste Exempt from Countervailing Duty per Board Clarification on June 28, 2007.

  Case-Laws - AT : Levy of CVD on Gum Arabic waste imported – the gum arabic waste/reject is only a natural gum and as per the Board s clarification dated 28/06/2007 CVD is not leviable on gum arabic in raw form. - AT
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FEMA

• New AML/CFT Standards for Money-Changing Activities under FEMA: Compliance Updates for Financial and Tax Stakeholders.

  Circulars : Anti-Money Laundering (AML) / Combating the Financing of Terrorism (CFT) Standards - Money changing activities - Circular
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• New AML/CFT Standards for Cross-Border Remittances: Financial Institutions Must Monitor and Report Suspicious Transactions Under MTSS.

  Circulars : Anti-Money Laundering (AML)/Combating the Financing of Terrorism (CFT) Standards - Cross Border Inward Remittance under Money Transfer Service Scheme (MTSS) - Circular
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Corporate Law

• High Court Upholds Arbitrator's Award u/s 34, Finds No Grounds for Interference with Decision.

  Case-Laws - HC : Petition against Award u/s 34 by Arbitrator - The view of the learned Arbitrator, in the circumstances was a plausible one - no ground having made out for interference with the impugned Award - HC
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• Tender Bidder Net Worth: Exclude Contingent Liabilities, Focus on Actual Financial Position for Accurate Evaluation.

  Case-Laws - HC : How to calculate / determine 'Net Worth' of the bidder for the purpose of tender - Contingent Liability on Revenue Account - HC
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Service Tax

• Non-Profit Education Group's Construction Activities Exempt from Commercial Service Tax Due to Non-Profit Status.

  Case-Laws - AT : Commercial or industrial construction service - organisation working on no-profit no-loss basis, engaged in imparting knowledge to poor students - construction activity would not be covered by the definition of commercial and industrial construction services - AT
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• Service Tax Demand Issued Despite Lost Payment Challan; Pre-deposit Requirement Stayed, Verification Possible via PAO.

  Case-Laws - AT : Demand of service tax – return was filed but tax paid challan was lost - It is possible to verify the details are available with the PAO. - predeposit stayed - AT
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• Service Tax Implications on Exported Services: Key Case Laws and Recent Updates on Taxation of Overseas Services.

  Case-Laws - AT : Export of services - various issues - provided outside India - Delivered Outside India - Services rendered in India - Used in India etc. - AT
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• Service Tax Waiver Approved for Exported Customized Software; Recognized as Tax-Exempt Export Activity Under Revenue Neutrality Principles.

  Case-Laws - AT : Demand of service tax - development of customized software which they are exporting - it is a case of revenue neutrality – waiver of pre-deposit allowed - AT
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Central Excise

• Assessees' Claim on "Micro" as First Name Rejected for SSI Exemption under Central Excise Rules.

  Case-Laws - AT : Brand name – SSI exemption – contention of the assessees that ‘Micro’ is not a brand name belonging to MPPL but stands for the first name of MCPPL, cannot be accepted- AT
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• High Court Rules Granite Cutting and Polishing as Manufacturing for Tax Purposes Since March 2006.

  Case-Laws - HC : Activity of cutting and polishing of granites amount to manufacture only from 1-3-2006 - HC
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• Cenvat Credit Approved for Cab Services Used to Transport Employees to Factory Premises Under Input Services Rules.

  Case-Laws - AT : Input services - Rent a cab services - for transportation of their employees from their residence to the factory premises - Cenvat Credit allowed - AT
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• CENVAT Credit Eligibility Extended to Cable Distribution Boards and Accessories for Poly Machines, Including MS Channels and Angles.

  Case-Laws - AT : Cable distribution boards are accessories for poly machines and that the MS channels and angles used are accessories to the said cable boards - eligible for CENVAT credit - AT
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VAT

• New Circular Requires Online Submission of Stock Details by Tax Rate for VAT and Sales Tax Compliance.

  Circulars : Online submission of Tax Rate Wise Stock held on 31st day of March - Circular
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Case Laws:

• Income Tax

• 2012 (8) TMI 649
  Dis-allowance u/s 40(a)(ia) on account of non-deduction of TDS u/s 194C - enhancement of income by Rs 289.65 lacs - assessee, being architect awarded entered into an agreement with NIBM for comprehensive refurbishment of hostel at NIBM Campus, which was sub-contracted by assessee to JR & Co. - received Rs 289.65 lacs towards the “work” done and Rs 18.10 lacs as architect fees - TDS of Rs 35.57 lacs on entire payment deducted - payment of Rs 289.65 lacs not taken as receipts in the P/L A/c, however TDS deducted has been claimed as credit - amount received however incorporated in books of account wherein receipts from NIBM and the payments made to JR & Company has been shown - AO treated the entire payment as his receipts and income and dis-allowed TDS credit of 6 lacs since the same has not been shown in the instant year on cash basis - on appeal CIT(A) concluded that assessee was liable to deduct TDS on the payment made to the sub- contractor and made addition on account of non-deduction of taxes - assessee contesting jurisdiction assumed by CIT(A) and other grounds Held that:- It is settled preposition of law that power of the first appellate authority is co-terminus with that of the AO and is required to look into the issue and examine the same which has not been properly dealt with by the AO. Here in this case, the CIT(A) has not discovered any new source of income which was not before the AO but has examined the issue which was before the AO and grounds before him. It is not a case where the AO has made an addition on X and Y account and the CIT(A) has discovered some new source of addition for taxing the income on Z account. This is more so when the assessee himself has taken contradicting stand, on one hand he is claiming the credit of entire TDS amount and on the other hand, contending that the entire payment received by him is not his receipts. Therefore, the CIT(A) was fully justified in law in acquiring the jurisdiction for making the enhancement of the income. Preview of Section 194C - assessee contended JR & Company to be main contractor and that only the payment routed through the assessee - Held that:- It is observed from agreement that assessee was assigned and was solely responsible for “carrying out the work” as mentioned in the agreement and the assessee has got this “work” done through the contractor namely, JR & Company under the assessee’s supervision and guidance, who in this case can be referred to as a ‘sub-contractor’. Risk and responsibility associated with contract lies with the assessee only. Nowhere in the agreement it has been agreed that the JR & Co. is directly responsible for the risk and responsibility for executing the work. Thus, there is a clear cut relationship of a ‘contractor’ and ‘sub-contractor’ between the assessee qua the JR & Company. Thus, assessee was responsible for deducting TDS u/s 194C for making the payment to JR &Co. Applicability of Section 40(a)(ia) - Held that:- Since TDS has not been deducted while making the payment to JR & Co., such an expenditure cannot be allowed in view of the provisions of Section 40(a)(ia) on the amount payable. Applicability of Section 40(a)(ia) for non-deduction of TDS u/s 194C on bought out items i.e on purchases of material - Held that:- Dis-allowance u/s 40(a)(ia) cannot be made on bought out/supply and purchases of materials as there was no liability to deduct TDS u/s 194C and, therefore, such a dis-allowance should be reduced. Issue is decided in favour of the assessee subject to verification by the Assessing Officer. Plea of reasonable cause for non-deduction of tax at source - Held that:- Assessee right from the stage of filing of return to the stage of AO and further upto filing of appeal before the CIT(A) was very sure that TDS amount deducted from NIBM is his income. Once it is income, the assessee was obliged to deduct TDS while making the payment to JR & Co. The payment received and payment made are part of one transaction only. Thus, on these facts, we hold that there was no ‘reasonable cause entertained by the assessee. Further, nowhere it has been held that on the grounds of reasonable cause, dis-allowance u/s 40(a)(ia) should not be made Applicability of Section 40(a)(ia) only to amount payable on the last day - Held that:- Issue stands covered in favor of assessee by decision in case of Merilyn Shipping and Transporters Vs. ACIT (2012 (4) TMI 290 - ITAT VISAKHAPATNAM ). Issue is therefore, decided in favour of the assessee, subject to verification by the Assessing Officer. On contention that there was diversion of income at source it is held that nowhere from the reading of the agreement it is borne out that there is any title in favour of JR & Co. by the NIBM. In absence of such clause, it cannot be held that there was a diversion of any income by overriding title. It was assessee’s obligation alone to get the work done. The payment received by the assessee was as per terms of agreement only. Issue is, thus, decided against the assessee. Telephone and vehicle expenses - ad hoc dis- allowance of Rs 50,000 assuming it to be personal in nature - Held that:- Since assessee has himself shown personal expenditure of Rs.4,02,902/- on account of usage of telephone and vehicle, which has not been claimed as business expenditure, there was no occasion to make any kind of ad hoc disallowance on account of personal usage - Decided in favor of assessee

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• 2012 (8) TMI 648
  Fringe Benefit Tax – whether the mere incurrence of the expenditure listed in Clauses (A) to (Q) of section 115WB(2) is enough to trigger the deeming prescription contained in the section or that it is further required to be established that specified expenditure has been incurred on account of consideration for employment so as to attract levy of FBT contemplated in section 115WA(1) – Revenue contending levy of FBT in respect of expenditure on travelling of non-employees i.e. customers/outsider placing reliance on Circular No. 8 of 2005 - Held that:- It is evident that the interpretation sought to be advanced by the Revenue is not borne out of the statutory provisions. Circular No. 8 of 2005 seeks to enlarge the scope of levy of FBT, which is not supported by the language of the statute. Circulars issued by CBDT cannot override the provisions of the Act. Therefore, expenses prescribed therein are liable to be considered as fringe benefits only to the extent the same are incurred in consideration for employment. Levy deleted FBT on insurance premium paid under Group Accident Policy – assessee contending non levy on ground of it being expenditure on employees welfare arising out of statutory obligation or to mitigate occupational hazards - Held that:- CIT(A) rightly observed that impugned expenditure is not on account of a statutory obligation and, therefore, the same does not fall within the exceptions provided in the Explanation to section 115WB(2)(E) – Levy confirmed. FBT on the reimbursement of medical expenses to the extent of Rs 15,000/-. – Held that:- Medical reimbursement is taxable as perquisite in the hands of individual employees and merely because grant of such exemptions, same cannot be said to be a fringe benefit for the purposes of Chapter XII-H. Levy deleted. FBT on part of the expenses under the head depreciation and expenses on Aircraft and Club expenses, disallowed in the assessment finalized u/s 143(3) for personal in nature – Held that:- We remand the matter back to the file of the Assessing Officer who shall rework the liability of FBT on such dis-allowable expenses in accordance with the clarification issued by the CBDT in its Circular No. 8 of 2005 – Decided partly in favor of assessee

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• 2012 (8) TMI 647
  Indo UAE DTAA - Non-deduction of tax from payments made towards fees for registration of trade-mark applications in UAE to Emirates Advocates - Revenue contended the same to be ‘fees for technical services’ and applicability of Section 195 - Held that:- Nowhere from the records it can be found as to what was the nature of services which were rendered by ‘Emirates Advocates’. Merely stating that this was for the purpose of registration of trade-mark application and, therefore, it is in the nature of professional services, cannot be upheld. The exact nature of services has to be seen from the document. Even if the benefit has to be taken under Article 4 of the Indo UAE Treaty, then it is essential that ‘tax residency certificate’ issued by the competent authority of Govt. of UAE is required and not any certificate from the payee itself. Such a ‘Tax Residency Certificate’ has not been filed before the authorities below. Thus, matter needs to be restored back to the file of the AO to examine the issue afresh and for de novo verification - appeal of assessee allowed for statistical purposes.

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• 2012 (8) TMI 646
  Perquisite value of rent free accommodation - Expenditure on repair of building - inclusion of amount spent by the employer under clauses (iii) & (iv) of Sub-Section 2 of Section 17 by AO - Held that:- A careful reading of the Lease Deed nowhere suggests that the assessee had agreed to an obligation to renovate the expenses. As that of the original sum of Rs. 50.51 lakhs, Rs. 10 lakhs was spent towards furniture, the AO took that into consideration while working out the value of furnished residence, for the purpose of calculating the tax liability - The perquisite value of rent free accommodation under Section 17(2)(i) had been declared by the appellant in return of his income which was assessed, thus the reference to Section 17(2)(i) was unwarranted because the assessee was under no obligation to incur the expenses on repairs and renovation or modification of rent free accommodation The express provision of Rule 3 of the Valuation Rules elaborates various contingencies in relation to the perquisite of rent free accommodation, rules out the intention of Parliament to treat expense in relation to improvement, repairs or renovations, as falling within the meaning of "perquisite" - thus, as regards Section 17 (2) (iv), the argument on behalf of the revenue that repairs and renovation expenses constituted an obligation of the employee/assessee, which was borne by his employer, is meritless - if the AO had returned a finding that the premises were to be valued at market value (of the rental), in case it increased as a result of the renovations, the only prescribed mode was to apply the method indicated by Rule 3 (a) (iii) of the Valuation Rules and not have included the entire expenses, and spread it over a period of five years, for the purpose of saying that the whole of such expense constituted a perquisite - in favour of assessee.

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• 2012 (8) TMI 645
  Denial of grant of approval for exemption u/s 10(23C)(vi) - assessee was engaged in non-educational activities like horticulture - whether the petitioner Trust is existing solely for educational purpose and not for the purpose of profit - Held that:- In Section 10(23C)(vi) emphasis has been given on the word "solely" for educational purposes. Solely means exclusively, thus the only the income of the institution established solely for educational purposes and not for commercial activities is entitled for exemption - as the said order is totally silent as to what is the nature and magnitude of horticultural activities carried on by the assessee and what is its annual income and how it is utilized by the assessee thus accepting the assessee's contention with regard to horticultural income,as that there were standing coconut and mango trees in the land acquired by the petitioner for establishment of the educational institution and order to maintain a salubrious and green environment the trees were not cut down but maintained. The petitioner has reflected the receipt in its income and expenditure account. Amount of Rs.15,000/- received has been utilized in the educational activities of the institutions and for infrastructural development. Therefore, it cannot be treated that the profit was earned for non-educational activities - in favour of assessee. Excess collection of fees for placement and training - Held that:- The Chief Commissioner has relied on the Government of India resolution providing for fee structure, 1997 and the Government of Orissa Industries Department Resolution dated 17.09.1998 to come to a conclusion that the fees collected towards "placement and training" is in excess of what was prescribed by the said resolutions which is no more holds the field in view of the Act, 2007 and the order of the Hon'ble Supreme Court P. A. Inamdar and others Versus State of Maharashtra and others [2005 (8) TMI 614 - SUPREME COURT ] constituted the policy planning body and so also the "Fee Structure Committee" and directed that other provisions of the Act shall continue to be in force and subsequent notification vide Annexure-4 issued by the Industries Department. That on the issue of deciding whether an institution is existing for profit or not, the mere excess of income over expenditure cannot be decisive - The institutions are obliged to see the placements of their students as per the AICTE Guidelines and train them accordingly. The fee for the same has been permitted to be collected which is for educational purpose - the matter is remitted back to the Chief Commissioner to re-examine the case of the petitioner whether the fees collected under head "placement and training" is in consonance with the Act, 2007 - in favour of assessee by way of remand.

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• 2012 (8) TMI 644
  Non deduction of TDS on the value of perquisite of the rent free accommodation - accommodation provided to its employees for which it charges license fees - Held that:- Section 17 defines salary to include "perquisite" to include the value of any concession in the matter of rent respecting any accommodation provided to the assessee by his employer & Rule 3 provide for valuation of perquisites - The rules prior to 2001 were based on fair rental value of the accommodation and, therefore, AO was required to determine the fair market value of accommodation before arriving at a conclusion that the employer has given any perquisite to the employees. The submission of assessee is well founded and deserves to be accepted that "concession" under clause (ii) of subsection (2) of section 17 is a 'jurisdictional fact'. It is only when there is a 'concession' in the matter of rent respecting any accommodation provided by an employer to his employee that the mode, method or manner as to how such concession can be computed arises - If the assessee contends that there is no 'concession', the authority has to decide the said question and record a finding as to whether there is 'concession' and the case is covered by section 17(2)(ii). Only thereafter the authority may proceed to calculate the liability of the assessee under the Rules, therefore, in spite of the legal position that Rule 3 is intra vires, valid and is not inconsistent with the provisions of the parent Act under section 17(2)(ii), it is still open to the assessee to contend that there is no 'concession' in the matter of accommodation provided by the employer to the employee and hence the case did not fall within the mischief of section 17(2)(ii) of the Act As AO has nowhere held in the impugned order that any concession was given by the employer to its employees and they have provided the accommodation on a concessional rates and AO straightway applied Rule 3 without first establishing the case that the appellants have provided any concession in the shape of accommodation to its employees - no default under sec. 201(1) and 201(1A)- in favour of assessee.

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• 2012 (8) TMI 643
  Treatment for landing and parking charges - payment of contractors u/s 194 C OR payment of rent u/s 194-I - Held that:- The definition u/s 194-I begins with a phrase "rent to mean" as being an exhaustive definition, by whatever name called, payment made for the use of any land or building and the land appurtenant thereto under a lease or sub-lease or tenancy or under any agreement or arrangement with reference to the use of the land, would be "rent" and unless agreement or arrangement fall under the same clause or genus preceding the words "agreement or arrangement", that payment would not qualify as rent for the purpose of Section 194-I. The payment contemplated under the Explanation is for the use of the land under a lease, sub-lease or tenancy. This means, what is contemplated under the said definition is a systematic use of land specified for a consideration under an arrangement which carries the characteristics of lease or tenancy. Going by the logic of the said provisions, that a mere use of the land for landing and payment charged, which is not for the use of the land, but for maintenance of the various services, including the technical services involving navigation, would not automatically bring the transaction and the charges within the meaning of either lease or sub-lease or tenancy or any other agreement or arrangement of a nature of lease or tenancy and rent - for the purpose of treating the payment as rent, such use would fall under the expression "use of land". Thus, going by the nature of services offered by the Airport Authority of India for landing and parking charges thus collected from the assessee herein, no ground to accept that the payment would fit in with the definition of 'rent' as given under Section 194-I - in favour of assessee.

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• 2012 (8) TMI 642
  Disallowance on account of bad debts - undisclosed income - Held that:- Assessee not writing off of any bad debt in the accounts for any previous year and on the basis of the seized material and records quantum of undisclosed income was determined and according to the reply of assessee, the assessee made a claim of bad debt as per the accounts prepared on the basis of the seized material. Therefore, the same could not be treated that the assessee has written off the bad debt as irrecoverable in the accounts maintained for - plea of the assessee was not accepted because the seized documents found during the course of search could not be treated as regular books of account and on the basis of the seized material, cash book and ledger was prepared to find out the quantum of undisclosed income, thus whatever books of account maintained by the assessee in the regular course of business did not have mention of any loan and advance - against assessee.

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• 2012 (8) TMI 641
  Disallowance of employees' contributions to Provident Fund paid after the due date - non eligible for deduction u/s. 10A - Held that:- As decided in CIT Versus M/s. Alom Extrusions Limited [2009 (11) TMI 27 - SUPREME COURT] if the assessee has deposited the contribution before due date of filing of return under the I.T. Act, and the date of payment was after the due date under the Employees Provident Fund Act would not be denied deduction - as the assessee contended that the employees' contribution to PF was made before the due date of filing of the return but no details regarding the date of payment were furnished by assessee the matter is remitted back to the file of the Assessing Officer to examine this issue afresh. Direction to the Assessing Officer to grant exemption under section 10A on the assessed income, which was enhanced due to disallowance of the employer's as well as employees' contribution towards PF/ESIC. Exclusion of expenditure on 'Internet Service Provider' from export turnover - Held that:- As the assessee received consideration against software i.e., goods & the agreement, invoices and the turnover clearly show that the assessee did not recover any such expenditure. Therefore, there is no scope for any exclusion from export turnover on account at such expenses. If at all on presumption, it is to be excluded for the purpose of 'export turnover' then on the some assumption, reason and analogy it should be excluded from 'total turnover' also as elimination should be from both the denominator and the numerator to give a schematic interpretation to the formula - in favour of assessee.

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• 2012 (8) TMI 640
  Disallowance of depreciation - assessee society claimed exemption u/s 10(23C) - Held that:- Tribunal decided the issue in assessee's own case of allowability of depreciation on the capital asset in favour of the assessee and observed that the judgment of the Hon’ble Supreme Court in the case of Escorts India Ltd. reported in [1992 (10) TMI 1 - SUPREME Court ] is applicable to the facts of the present case though it is true that claiming depreciation, besides claiming the full cost of assets as application of income does prima facie look like a double claim of deduction and is unthinkable while computing the business income of any other person but such claim is allowable in the case of trusts/societies in order to make their working viable. - Decided in favor of assessee. Deduction claimed u/s 35(2)(iv) while computing the business income is not applicable to trusts/societies, as their income is not required to be computed in terms of section 28 to 44 of the Act, but is required to be computed in accordance with section 11 to 13 - Decided in favour of assessee.

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• 2012 (8) TMI 639
  Accrued interest on bad debts written off - Held that:- No dispute that the transactions of debts had actually taken place and interest thereon had been offered to tax over the years and assessed as business income in the hands of the assessee, and as such, write off of such debts after initiation of legal proceedings could not be considered as lacking bona fides - The interest in question relates to the written off debts and when the debts are validly written off, the accrued interest on such debts does not arise - in favour of assessee. Disallowance by invoking sec 14A - exemption claimed on dividend from mutual fund u/s 10(33) - Held that:- For failure to file the details of expenditure incurred by the assessee for earning the said income, AO made disallowance of Rs.6.55 lakhs reveals that it lacks reasoning and the basis for coming to the quantification of disallowance at Rs.6.55 lakhs - as it is not evident as to how this figure of Rs.6.55 lakhs has been arrived at the order of CIT(A) is set aside and restore the matter to the file of AO with a direction to recompute the disallowance warranted in terms of S.14A keeping in mind the provisions of Rule 8D as laid down in GODREJ AND BOYCE MFG. CO. LTD. [2010 (8) TMI 77 - BOMBAY HIGH COURT] - assessee’s appeal is partly allowed for statistical purposes.

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• 2012 (8) TMI 638
  Disallowance of interest - Held that:- No disallowance can be made u/s 14A of the Act out of the interest claim – Assessee has received interest free dividend income which was claimed exempt u/s 10(33) - amount of Rs. 5000/- can be considered as expenditure for earning of such dividend, therefore, an amount of Rs. 5000/- is appropriate for disallowance u/s 14A - A.O. directed to make addition of Rs.5000/- only. The ground raised by assessee is partly allowed. Long term capital loss on sale of shares - A.O. was of the opinion that the transactions of sale of shares in all these related companies/persons on which loss was claimed are malafide and sham transactions – Held that:- Just because of assessee sold shares to daughter and sister concern, it cannot be considered that the transactions are sham transactions - A.O. has not disputed the valuation of share or sale price. There is also no dispute to the fact that these are investments and gain or loss are long term in nature - AO accepted Long term capital gain offered by assessee without any question - transactions cannot be treated as sham transactions as assessee is well within his rights to set off loss incurred on sale of shares

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• 2012 (8) TMI 637
  Whether the interest paid on sales tax under the amnesty scheme is an allowable deduction as business expenditure – Held that:- Interest paid on sales tax is not of penal in nature and is therefore allowable as business expenditure - interest paid on sales tax under the amnesty scheme is not for infringement of any law Allowance of sales tax in earlier years – Held that:- Nothing has been placed to prove that in earlier years the sales tax that remained unpaid was added to the income - aspect needs to be verified - issue remitted back to the file of A.O. for limited purpose to verify as to whether in the earlier years the unpaid amount of sales tax at the year-end was added to the income. If the same was added then the same should be allowed as deduction in the current assessment year u/s. 43B - claim of the assesse is accordingly allowed for statistical purposes Deemed dividend taxed u/s. 2(22)(a) – Held that:- Deemed dividend did not form the part of book profit computed as per Part-II addition III of Schedule VI to Companies Act, 1956 - addition for computing the book profits is uncalled for Provision for gratuity - book profit u/s. 115JA – Held that:- Provision for gratuity not as unascertained liability for the purpose of calculation of book profits u/s 115JB and therefore considering the same for computing the book profits is uncalled for – addition deleted Computation of book profit u/s. 115JB – alleged that assessee had not added provision for fixed assets held for disposal amounting to Rs.7,00,000/- for computing book profit u/s. 115JB – Held that:- There has been retrospective amendment to Sec. 115JB as a result of which provision for diminution in the value of assets needs to be added to arrive at the book profits - matter remanded to the file of the A.O. for limited purpose to verify as to whether the provision of Rs.7 lacs includes any provision made in the current assessment year. Addition is to be made of only the incremental amount of provision made during the year. Therefore, this ground is allowed for statistical purpose - appeal of the assessee is allowed

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• 2012 (8) TMI 636
  Applicability of section 44BB(1) - fee for technical services. - held that:- Tribunal in the case of CGG Veritas Services SA (2012 (4) TMI 280 - ITAT DELHI) has propounded four categories which will govern the fee for technical services. The assessee has not given up its right rather in order to save time it has agreed that issue is covered against it which is to be challenged. He pointed out a that 44DA is not applicable in the present year. All other categories do not apply upon the assessee Therefore assessee's income is to be assessed u/s 44BB(1) as per the order of the Tribunal. On the other hand case of the revenue is that conclusively neither the Ld. DRP nor the Ld. AO has held that assessee has a permanent establishment in India. Impliedly AO has propounded that income of the assessee is to be assessed u/s 115A. No categorical finding has been recorded either by Ld. DRP or by the Ld. AO. Taking into consideration the case of the assessee that it has set up various project offices in India which constitute permanent establishment we deem it appropriate to remit this issue to the file of AO for adjudication afresh.

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• 2012 (8) TMI 635
  Validity of notice issued under section 148 – Held that:- Notice was issued in the name of amalgamating company i.e. M/s.TI Diamond Chain Ltd. Since the said company has merged with M/s.Tube Investments of India Ltd. on 1.4.2004, the amalgamating company ceased to exist from the date of the exist - notice served in the name of a wrong person is no notice in the eye of law and subsequent proceedings arising out of the said notice are void, illegal and totally without jurisdiction and it is a case of no notice to the assessee Reopening proceedings – Held that:- Assessing Officer has failed to give valid reason for reopening of the assessment as the same has been settled in favour of the assessee in its own case by the Tribunal - issue of notice issued under section 148 is identical to the issue already settled/adjudicated by the Tribunal in the earlier assessment years mentioned - matter has already been decided by the Tribunal and ought to have followed the decision of the Tribunal. Therefore, this ground raised by the assessee is also allowed. Interest under section 234D – Held that:- Section 234D was inserted by the Finance Act, 2003 with effect from 1.6.2003. Thus the same would be applicable with effect from the assessment year 2004-05 - CIT(A) rightly deleted the interest under section 234D imposed by the Assessing Officer - ground raised by the Revenue is dismissed

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• 2012 (8) TMI 634
  Cancellation of registration u/s 12AA – alleged that activity of the society relating to investment in purchase of commercial property does not fall within the meaning of Charitable activity – Held that:- Assessee's charitable objects include spreading education and opening of schools; investment even in commercial property assets remains charitable purposes so long as the income generated by it is applied to charitable objects. It has not been demonstrated that the assessee applied rent received from these properties to any non-charitable purposes. Besides, it has not been demonstrated that the assessee's intention was to enter in business of purchase and sale of commercial property inasmuch as we are in year 2012, the property was purchased in FY 2004-05 and the Trust still retains this property - assessee's investment charitable in nature - assessee's registration u/s 12A should not have been cancelled, the same is restored - assessee's appeal is allowed

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• 2012 (8) TMI 633
  Deduction under Sec 80IA(4) - AO denied the claim of the assessee on the ground that assessee was not developer rather a work contractor – Held that:- there is no requirement that the assessee should have been the owner of the infrastructure facility. - the contractor and the developer cannot be viewed differently. Every contractor may not be a developer but every developer developing infrastructure facility on behalf of the Government is a contractor. The term ‘contractor’ is not necessarily contradictory to the term ‘developer’. On the other hand, rather section 80IA(4) itself provides that assessee should develop the infrastructure facility as per the agreement with the Central Government, State Government or a Local Authority. So, entering into a lawful agreement and thereby becoming a contractor should in no way be a bar to the one being a ‘developer’. The assessee has developed infrastructure facility as per the agreement with Maharashtra Government/APSEB, therefore, merely because in the agreement for development of infrastructure facility the assessee is referred to as a contractor or because some basic specifications are laid down, it does not detract the assessee from the position of being a ‘developer’; nor will it debar the assessee from claiming deduction u/s 80IA(4). Disallowance of interest - assessee has made an investment in subsidiaries – Held that:- Assessee is not able to explain what were the business advantages assessee derived from these interest free advances to sister concerns and also not able to explain whether the amount advanced to sister concern was actually used for the business purposes or not - assessee has not shown the commercial expediency – In favor of revenue Applicability of provisions of section 40A(3) of the IT Act - assessee made a cash payment in excess of Rs. 20,000 – Held that:- Assessee could not show any reasonable cause for making the cash payment exceeding Rs. 20,000. The assessee also not brought on record any exceptions to make cash payments as provided in Rule 6DD of IT Rules, 1962 – In favor of revenue Disallowance of property tax - property tax paid on the property which was provided as a collateral security to the State Bank of India for obtaining the loan and it was necessary for the assessee to incur such expenditure so as to retain the security provided – Held that:- Property on which the property tax was paid was not owned by the assessee. The liability of payment of property tax on the property is on the owner of the property and not on any other person – Disallowance justified Disallowance of expenditure incurred on increasing the share capital - assessee claimed to allow this expenditure as a deduction u/s. 35D of the IT Act – Held that:- Expenditure incurred by a company in connection with the issue of shares with a view to increase its share capital, is directly related to the expansion of the capital base of the company, and is capital expenditure, even though it may incidentally help in the business of the company and in the profit making – in favor of revenue

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• 2012 (8) TMI 632
  Rectification of mistake - mistake in the rectification allowed based on the wrong claim by the assessee - assessee conceded his mistake but raised certain other claims – Held that:- Assessing Officer rectified the assessment on an agreed basis but simultaneously rejected additional loans claimed by the assessee from 3 other persons for want of convincing evidence - assessee's appeal against the second rectification order was allowed by the CIT (Appeals), which was reversed by the Tribunal on Departmental appeal - claims were rejected because the assessee could not substantiate his claim of debt due to the 3 parties, which is a new claim made in second rectification after completion of the assessment, which itself is not maintainable

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• 2012 (8) TMI 623
  Merger with the parent company - Article 8 of the Swiss Merger Act - the applicant had set up a wholly owned subsidiary in India of Switzerland company - Held that:- As the merger and consequent transfer of all assets and liabilities did not generate any gain & on a merger, the transferor is effaced. The transaction undertaken is apparently one sanctioned by Swiss law. The gain if any in this case is not determinable within the scope of section 45 and section 48 of the Act as postulated in the Ruling in Dana Corporation (2009 (11) TMI 32 - AUTHORITY FOR ADVANCE RULINGS ) - no capital gain chargeable to tax under the Act in terms of section 45 read with section 48 can be said to arise. As condition no. (iii), to satisfy that definition what has taken place is amalgamation as defined in section 2(1B), is not satisfied as the shareholders of the applicant merging with ‘company C’ do not or cannot become shareholders of company ‘C’ as company ‘C’ is the only shareholder of the applicant,relaxation of section 47 (via) will be granted but that may be in respect of the shareholders proportion, reduced from 75% to 25%, but the condition itself is not dispensed with. Therefore, in this case, it cannot be postulated that section 47(via) takes the transaction out of the clutches of section 45 - The merger involved in this case, is not exempt from capital gains tax under section 47(via). No obligation on ‘Company C’, parent company to withhold taxes under section 195.

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• 2012 (8) TMI 622
  India Mauritius DTAC - buy back of shares from Indian subsidiary/applicant by AWIL United Kingdom - taxability - Held that:- No adequate material has been disclosed to justify a finding that the applicant or its principal has resorted to the devising of a scheme for avoidance of tax. It may be true that the applicant was incorporated in Mauritius and the investment made through it for acquiring shares of the Indian company to take advantage of the Indian Mauritius DTAC but that by itself is no ground to discard the claim of the applicant for benefit under the India Mauritius DTAC - . Once it is held that the applicant is entitled to invoke the India Mauritius DTAC, then it is clear that Article 13 of the said DTAC is attracted - the capital gains arising out of the proposed buyback of shares is not taxable in India in view of paragraph 4 of Article 13 of the DTAC between India and Mauritius. Applicability of Section 47 - Held that:- Section 47 (iv) has to be read as conferring benefit in three situations, one, when the parent company holds the whole of the share capital of the subsidiary, two, when the nominees of the principal hold the whole of the share capital of the subsidiary and three, when the principal and the nominee together hold the whole of the share capital of the subsidiary - There appears to be no justification in reading “or” as “and” to hold that when a principal and its nominee hold the whole of the share capital, that case will also come within the ambit of the provision thus the proposed transaction is not exempt by virtue of section 47 (iv) Whether sections 92 to 92F will apply to the transaction ? - Held that:- As the present is an international transaction between related parties, and income arises out of it. Hence, sections 92 to 92F of the Act are attracted.

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• 2012 (8) TMI 621
  Reduction of Arm's Length Price by TPO - CIT(A) allowed the appeal of assessee - ITAT set aside the order of the CIT (A) and remanded the matter to the AO for fresh adjudication - Held that:- The Tribunal does not state that the material, including the comparables, furnished by the appellant was inadequate & the department/respondent also do not contend that the comparables were inadequate. They have analyzed the same in a particular manner whereas the CIT(A) has analyzed the same in a different manner. Although the order very fairly permits the appellant an opportunity of filing fresh comparables the appellant is willing to proceed before the Tribunal on the basis of the existing material including the comparables already furnished no purpose would be served by remanding the matter to the AO or for that matter, even before the CIT(A) for a fresh decision on the existing material - as the Tribunal has not held that it is not possible to arrive at the ALP on the basis of the existing material it must therefore now decide the matter - in favour of assessee.

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• 2012 (8) TMI 620
  Receipt of Gift as remission of liability and hence taxable u/s. 41(1) - Held that:- The gift is given by a person to another person who is personally related to him, the remission of trading liability takes place in business relationships taking place only due to adverse business situation faced by a business concern. In the instant case, nothing was brought on record by the department to show that the assessee's business was in critical condition, which would warrant remission of liability for its survival - assessee has declared an income of Rs. 16,13,228/- during the year under consideration, which fact shows that the business of the assessee was in healthy condition - in favour of assessee.

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• 2012 (8) TMI 619
  Denial of deduction u/s 80-IB(10) - the first plan was approved on 23.6.2003 and the project has not been completed before 31.3.2008 as per sub-clause (i) section 80-IB(10) - Held that:- The assessee firm acquired further land of 20 R on the same date and revised the building lay-out, which were originally prepared by the erstwhile holder of rights and the plan so revised (inclusive of the additional land of 20R) got sanctioned by the PCMC on 31.7.2004 only. It is only after that date, the assessee thus commenced the development and construction of the housing project in question. Quite clearly, the project in question is quite distinct and separate from the project reflected by the PCMC sanction dated 23.6.2003, in view of the above features AO has been unduly influenced by the remark ‘revised sanction’ contained in 11 PCMC approval dated 31.7.2004. In fact, the Explanation to section 80- IB(10)(a) pressed into service by the Revenue refers to the approval granted to the same housing project more than once and the said Explanation is not relevant in a case where the approval is granted to different housing projects. As project in question reflected by the sanction of PCMC dated 31.7.2004 is different than the project intended under PCMC approval dated 23.6.2003, the Explanation to section 80-IB(10) cannot be invoked so as to reckon the period of completion of construction as contained in clause (i) or (ii) clause (a) to section 80-IB(10) and the appellant is justified in asserting that it commenced development and construction of housing project on 31.7.2004 and not on 23.6.2003 and accordingly, the last date for completion of construction has to be calculated as per sub-clause (ii) of clause (a) to section 80-IB(10) in terms of which the assessee is required to complete the construction within four years from the end of the financial year in which the project was approved by PCMC, i.e. upto 31.3.2009 - in favour of assessee.

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• 2012 (8) TMI 618
  India - Germany DTAA - Receipt of license charges from Indian Joint venture entities - right to use Opus software was treated as Royalty income by Revenue - Held that:- In order to qualify as royalty payment, within the meaning of Section 9(1) (vi) and particularly clause (v) of Explanation-II thereto, it is necessary to establish that there is transfer of all or any rights (including the granting of any license) in respect of copy right of a literary, aliistic or scientific work. Section 2 (0) of the Copyright Act makes it clear that a computer programme is to be regarded as a 'literary work' - Thus, in order to treat the consideration paid by the cellular operator as royalty, it is to be established that the cellular operator, by making such payment, obtains all or any of the copyright rights of such literary work. In the presence case, this has not been established. It is not even the case of the Revenue that any right contemplated under Section 14 of the Copyright Act,1957 stood vested in this cellular operator as a consequence of Article 20 of the Supply contract. Distinction has to be made between the acquisition of a 'copyright right" and a "copyrighted article". Even assuming the payment made by the cellular operator is regarded as a payment by way of royalty as defined in Explanation 2 below Section 9(1) (vi), nevertheless, it can never be regarded as royalty within the meaning of the said term in article 13 para 3 of the DTAA - the consideration received by the assessee in that case allowing the use of the software was not considered as a royalty and instead, it was held as business receipts in the hands of the assessee - in favour of assessee.

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• 2012 (8) TMI 617
  Penalty under section 158BFA(2) of the Act for concealing the income – Held that:- alleged items was examined, thoroughly and in detail, by the Commissioner of Income-tax (Appeals) as well as the Income-tax Appellate Tribunal and by a reasoned order, both came to a conclusion that additions are based on estimation only – A fact or allegation based on estimation, cannot be said to be correct only, it can be incorrect also - penalty was wrongly imposed by the Assessing Officer – addition deleted

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• 2012 (8) TMI 616
  Unexplained Cash credit – Held that:- Amounts are taxed under the provisions of Chapter VI for the reason that their nature and source are not known - what is taxed under the specific provisions of Chapter VI cannot be pegged to any of the sources/heads of income as specified in Chapter IV - unexplained cash credits have to be brought to tax under section 68 and not under section 56 Set off of loss from business against the income being unexplained cash credits u/s 68 – Held that:- Income assessable u/s 68 cannot be assessed under any particular head of income including income from other sources u/s 56 - business loss assessed by the AO cannot be set off against the amount taxed u/s 68 as unexplained cash credits taxed under section 68 cannot be pegged to any head of income - appeal filed by the department is allowed.

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• 2012 (8) TMI 615
  Income - advance payment remitted by M/s. India Gems and Beads, USA, for supply of goods, but due to inadvertence the amount was credited to the accounts of the assessee in the balance-sheet – Held that:- Nature of any payment received cannot be decided with the accounting treatment given - even if due to mistake or mis understanding if the accountant has credited the said money into the capital account of the appellant it cannot become the part of capital and then obviously it shall be in the nature of advance payment which certainly cannot be part of revenue receipts because looking to the nature of business the revenue receipt shall be the export proceeds only and not the advance amount received - addition made by the Assessing Officer was not in accordance with the accounting principles

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• 2012 (8) TMI 614
  Reopening the assessment - assessment is sought to be opened beyond a period of four years of the end of the relevant assessment year – Held that:- Assessing Officer did not hear the objections of the assessee nor did he pass a separate order on those objections - Assessing Officer has acted arbitrarily and in a manner clearly contrary to law in passing an order without disposing of the objections of the assessee - order of reassessment quashed and set aside

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• 2012 (8) TMI 613
  Reassessment proceedings – Held that:- Each assessment year is taken to be an independent unit of assessment and the provisions of the Act applies separately, even where there has been escapement of income, the Assessing Officer is obliged to issue separate notice for each assessment year - Assessing Officer in the present case admittedly has not issued separate notice under section 148 of the Act and instead had issued a composite notice which does not meet the requirement of section 148 of the Act - entire reassessment proceedings are wholly without jurisdiction

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• 2012 (8) TMI 612
  Reopening the assessment - assessment is sought to be opened beyond a period of four years of the end of the relevant assessment year – Held that:- Assessing Officer did not hear the objections of the assessee nor did he pass a separate order on those objections - Assessing Officer has acted arbitrarily and in a manner clearly contrary to law in passing an order without disposing of the objections of the assessee - order of reassessment quashed and set aside

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• 2012 (8) TMI 611
  Charitable purpose within the meaning of section 2(15) of the Income-tax Act – Held that:- Assessee is providing sports facilities as a part of its activities consisting of badminton, table tennis, billiards, cricket and skating among others - assessee provides service to its members does not detract from the position that it advances a general public utility. The advancement of any object of benefit to the public or a section of the public as distinguished from a benefit to an individual or a group of individuals would be a charitable purpose - Assessing Officer did not determine whether the requirements of section 11 were fulfilled - matter remanded back to the Assessing Officer

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• 2012 (8) TMI 610
  Disallowance of loss - Tribunal allowed the appeal and granted the benefit to the assessee – Held that:- Once the Tribunal accepted the explanation of assessee and accordingly, deleted the additions in question made by the Assessing Officer and the Commissioner of Income-tax (Appeals), then it would not involve any substantial issue of law as such - court in its appellate jurisdiction under section 260A ibid, would not again de novo hold yet another factual inquiry with a view to find out as to whether the explanation offered by assessee and which found acceptance to the Tribunal is good or bad, or whether it was rightly accepted, or not – appeal dismissed

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• 2012 (8) TMI 609
  Deduction under section 80-I of the Act - computer data processing services and sale of computer stationery – Held that:- Activity undertaken by the assessee can be termed as industrial undertaking engaged in the business of "manufacture" within the meaning of section 80-I of the Act

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• 2012 (8) TMI 608
  Power under Section 263 of the Act - assessee has income from capital gains and has claimed exemption under Section 54F of the IT Act for the investment made in a new asset - Assessing Officer accepted the return filed by the assessee - revisional Authority issued a notice under Section 263 of the Act and after hearing the assessee passed an order taking away the benefit on the ground that investment made beyond the time period – Held that:- Tribunal accepted that Investment made by the assessee being within the time specified under sub-section (4) of Section 139 of the I.T.Act, the assessee is eligible for exemption under Section 54F of the I.T.Act - If the judgment passed by this Court is erroneous, the revenue should have challenged the said order. At any rate that cannot be a ground for invoking Section 263 of the Act

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• Customs

• 2012 (8) TMI 631
  Confiscation of vessel and penalty imposed - alleged violation of Section 111 of Customs Act - Tug Century Star-1 which had towed the vessel Pandav-4(seized) had also towed a Barge (impugned vessel) during the month of November, 2008 - Held that:- It is found that appellants have claimed that the Dumb Barge was imported into India in the year, 2006 pursuant to permission of DG-Shipping's order dated 09.10.2006. Thereafter, the Barge was converted for coastal run by virtue of the permission granted by the Deputy Commissioner of Customs, Paradip dated 20.10.2006, upon payment of duty on entry of the vessels and the permission for carrying cargo to Chittagong was also granted to the Tug and the Barge by the Jurisdictional Customs Authorities. In such circumstances, it is settled law for movements/voyages in or out of the country the Barge, in any event, becomes a foreign going vessel and cannot be said to be imported goods. It is a settled principle that in case the duty has already been suffered, it cannot be demanded again. The penalty is linked with the demand of duty, which will depend on the outcome of the reconsideration. In these circumstances, the case is remanded to the Original Authority to re-examine the above aspects

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• 2012 (8) TMI 630
  Classification - Injection Moulding Machine for manufacture of footwear soles – Held that:- Heading 8477.1000 of the Customs Tariff” specifically covers Injection Moulding Machines therefore, is rightly classifiable under Heading 8477.1000 of the Customs Tariff. Anti-Dumping Duty – Held that:- Notification No. 39/2010-Cus excludes only Injection Moulding Machine classified under Heading 8453 of the Customs Tariff - machine in question is not classifiable under Heading 8453 of the Customs Tariff and the same is classifiable under Chapter Sub Heading 8477.1000 of the Customs Tariff. Therefore, the same is liable to Anti-Dumping Duty.

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• 2012 (8) TMI 604
  Levy of CVD on Gum Arabic waste imported – Held that:- Gum arabic is a natural gum and not liable for CVD as it is extracted from the tree itself by making hole on the tree and some part of the gum which drops on the soil, that becomes gum arabic waste/rejects and this is the only product they have imported which does not have purity as natural gum arabic is having purity. Therefore, the gum arabic waste/reject is only a natural gum and as per the Board s clarification dated 28/06/2007 CVD is not leviable on gum arabic in raw form. Therefore, they are not liable to pay CVD on the imported goods – appeal allowed

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• Corporate Laws

• 2012 (8) TMI 629
  Petition against Award u/s 34 by Arbitrator - Arbitrator erred in not dealing with the issue of the shareholding pattern of the Respondent No. 1 company - Held that:- The order referring the disputes between the parties to arbitration no doubt begins by stating that "all the disputes between the parties regarding the share holding of the said company" are being referred. However, it also notes that the Petitioners' Group had agreed to surrender and transfer their shares in the Respondent No. 1 company to Respondent Nos. 2 to 5 or their nominees for a consideration which will be decided by the learned Arbitrator. The learned Arbitrator was also to decide "the mode and method of payment of the said consideration". Consequently, it was unnecessary for the learned Arbitrator to decide about the shareholding pattern since in any event the Petitioners agreed to transfer all their shares to Respondent Nos. 2 to 5 for a consideration, therefore no error having been committed by the learned Arbitrator in this regard. Valuation of the Petitioners' shares - Held that:- In the Award the Arbitrator in method adopted by him for valuation has not only considered the value of the assets of the Respondent No. 1 company i.e. the plot of land and the value of the construction thereon, but also the outstanding liabilities , this, in fact, was the correct approach. A perusal of the report of M/s. G.C. Mallick & Associates, Chartered Accountants also reflects this approach. While the report of M/s. Kumar Narang & Co., Chartered Accountants accounts for the current liabilities and unsecured loans, it fails to provide for the contingent property tax liability. The land and building value according to the said report is no doubt higher than that suggested by M/s. G.C. Mallick & Associates, however the report fails to explain the basis for such higher value. In any event it was for the learned Arbitrator to take a decision as to which of the two reports was more reliable & It cannot be said that the learned Arbitrator erred in not going by the report of M/s. Kumar Narang & Co. It is not possible to agree with the submission of the Petitioners that by fixing the value per share of the Respondent No. 1 company at Rs. 450, the learned Arbitrator committed a patent illegality. The view of the learned Arbitrator, in the circumstances was a plausible one - no ground having made out for interference with the impugned Award - against petitioner.

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• 2012 (8) TMI 603
  How to calculate / determine 'Net Worth' of the bidder for the purpose of tender - Contingent Liability on Revenue Account - writ petition on Contingent Liability to a Revenue Account would only be such sums as would be recorded in the balance-sheet - Held that: - If a business liability has definitely arisen in the accounting year, the deduction should be allowed although the liability may have to be quantified and discharged at a future date. What should be certain is the incurring of the liability. It should also be capable of being estimated with reasonable certainty though the actual quantification may not be possible. If these requirements are satisfied the liability is not a contingent one. Except contingent liability on account of “Capital Commitments” disclosed by the bidders in their Annual Reports, all other items of contingent liability reported by the bidders in their Annual Reports as per Accounting Standard (AS-29) issued by ICAI were considered for the purpose of net worth sufficiency - Empowered Committee of Secretaries was apprised that there has been no definition in any ICAI standards that contingent liability on revenue account means on account of any amount of demand created by revenue authority such as Income Tax, Sales Tax, etc.- as on calculation of net worth has been supported by audit firm who have concluded that the evaluation of net worth is in accordance with the NIO. Any deviation from the said provisions would result in denial of level playing field to all bidders and could result in litigation, thus it is apparent that the minutes of Notice Inviting Tender meetings have recorded a stand which is against the one projected by the writ petitioner. As these are mere opinions and the final decision has to be taken by the Cabinet Committee on Economic Affairs - Since the Cabinet Committee on Economic Affairs is yet to take a decision we hold the writ petition to be premature.

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• Service Tax

• 2012 (8) TMI 654
  Commercial or industrial construction service - construction service by organisation working on no-profit no-loss basis, engaged in imparting knowledge to poor students, to other organisation engaged on same principle and in same field - assessee contended that the definition of commercial and industrial construction is meant for construction of those buildings which are used for commercial purpose - said two organisations working as NPO should not be considered as commercial organisations - reliance placed on Board's Circular No. 80/10/2004-ST - Held that:- It is evident from MOA of organisations, that same are working on no profit basis. Hence, construction activity would not be covered by the definition of commercial and industrial construction services - Decided in favor of assessee

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• 2012 (8) TMI 653
  Waiver of pre-deposit - Demand of service tax – before the show-cause notice was issued for initiating proceedings, appellant paid amount of with interest – Dispute has arisen because of the appellant does not have the record to show that they had actually made the payment - Held that:- Even if the assessee does not have an evidence of payment of service tax, if the returns have been filed for the period involved, the department could have verify from the copies of the returns that any payment has been made or not. A copy of the challan also goes to PAO of the department who maintain accounts of payment by various assessees. It is possible to verify the details are available with the PAO. This effort could have been made before issue of show-cause notice and initiating proceedings when the assessee is making a claim that they have paid the amounts.

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• 2012 (8) TMI 652
  Valuation under service tax - reimbursement of expenses - clearing and forwarding service – Held that:- Service becomes complete and delivery thereof becomes possible only by incurring such expenses and therefore, such expenses form part of taxable value of service - order passed by appellate authority lacks in appreciating material facts - appeal is remanded for passing a speaking and reasoned order

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• 2012 (8) TMI 607
  Export of services - Demand of Service Tax on Business Auxiliary Services - denial of benefit of exemption Notification No.13/2003 dated 20/06/2003 and under the Export of Service Rules,2005 - assessee contested against invoking extended period of limitation - period in question is from 01/07/2003 to 19/11/2003 and from 18/03/2005 to 05/12/2007 - Held that:- Notification No.6/99-ST dated 28/02/1999 exempted services provided to any person in respect of which payment is received in Indian in convertible foreign exchange was rescinded and subsequently re-issued vide Notification No. 21/2003-ST dated 20/11/2003 which remained in force till 14/03/2005. During the intervening period i.e. from 01/03/2003 to 19/11/2003, the Board clarified vide Circular dated 25/04/2003 that " Service tax is a destination based consumption tax and it is not applicable on export of services. Export of services would continue to remain tax free even after withdrawal of Notification No.6/99, dated 09/04/1999." In the light of this clarification issued by the Board, the assessee has a prima facie, case for waiver of pre-deposit of dues adjudged for the period 01/07/2003 to 19/11/2003. From the period from 15/03/2005 onwards as per Export of Service Rules, 2005 that a taxable service shall be treated as ‘export of service' only if such service so ordered is delivered outside India and used in business outside India & in the instant case, the service of promotion of marketing of goods manufactured by the supplier has taken place in India and the said service is for the purpose promoting the business of the foreign manufacturer in India, thus the activity does not come within the scope of export of service during the period from 15/03/2005 to 18/04/2006. From the period from 19/04/2006 to 28/03/2007 though the condition of receipt of payment in convertible foreign exchange is satisfied, the conditions relating to delivery of service outside India and the use of the service outside India are not satisfied because the promotional activity undertaken by the service provider is in India and it can be used only in promoting the business in India. Therefore, the use of service is not outside India. The same position will prevail during the period up to 30/05/2007. Even for the period from 01/06/2007 onwards, the condition relating to service be provided from India and used outside India is not satisfied. Therefore, the demand of service tax for the period 18/03/2005 to 05/12/2007 appears to be prima facie correct in law - as activities are rendered in India and their effective use and enjoyment are in India and therefore, the benefit of the services rendered also accrue in India and hence leviable to service tax. The appellant failed to obtain service tax registration under business auxiliary service, failed to pay service tax and also failed to file statutory returns for the said services. They did not disclose to the department about the existence of the agreement with VIASYS and receipt of consideration towards the service rendered. These acts of the appellant clearly constitute suppression of facts on their part, thereby attracting the invocation of extended period of time for demand of service tax - not made out a case for complete waiver of the pre-deposit of the dues adjudged - direct the appellant to make a pre-deposit of Rs. 25 lakhs - partly in favour of assessee.

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• 2012 (8) TMI 606
  Demand of service tax - services charges for technical know-how and technical assistance – Held that:- Question falls squarely within the exception carved out in Section 35G, ‘an order relating, among other things, to the determination of any question having a relation to the rate of duty of excise or to the value of goods for purposes of assessment’, and the High Court has no jurisdiction to adjudicate the said issue - appeal is rejected as not maintainable

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• 2012 (8) TMI 605
  Whether the activities carried on by the assessee as Del Credere agents falls within the category of clearing and forwarding agent – Held that:- Question falls squarely within the exception carved out in Section 35G, ‘an order relating, among other things, to the determination of any question having a relation to the rate of duty of excise or to the value of goods for purposes of assessment’, and the High Court has no jurisdiction to adjudicate the said issue - appeal is rejected as not maintainable

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• 2012 (8) TMI 597
  Demand of service tax - applicant is an STP unit engaged in the development of customized software which they are exporting - new set of agreements between the applicant and their subsidiary – Held that:- Applicant is paying Service tax under the category IT services with effect from 16-5-2008 and in view of exporting the product/services, they are receiving refund in terms of Rule 5 of the CENVAT credit rules - period prior to 18-4-2006 no Service tax liability will be attracted in respect of services received by the applicant - it is a case of revenue neutrality – waiver of pre-deposit allowed

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• Central Excise

• 2012 (8) TMI 651
  Cenvat credit – Held that:- Service tax is paid on transportation charges fell within the phrase “clearance of final products from the place of removal” and therefore, the assessee was entitled to Cenvat credit - in favour of the assessee

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• 2012 (8) TMI 628
  Rejecting the claim of classification - manufacture of lubricating oil - Held that:- As adjudicating authority had decided the issue only on the ground that the proper procedure was not followed at the time of drawal of samples of the goods for testing and has ignored the certificate produced from the National Test House, an Affidavit filed by Mr. Sharma - case is remanded to the lower adjudicating authority to decide the issue afresh

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• 2012 (8) TMI 627
  Non eligibility for claim of Cenvat credit - the service of GTA availed for transportation of clinker from Sonadih plant to Nipania railway siding for onward transportation by rail to Jojobera plant of the appellant company - Held that:- The definition of 'place of removal' in Section 4 (3) (c) can be adopted for Cenvat Credit Rules only in those cases where the rate of duty is ad-vaiorem and the duty is charged on value determined under Section 4 - In this case, the duty on the goods - clinker is at specific rate and hence the definition of "place of removal" in Section 4 (3) (c) would be of no relevance. As the places on removal from where the duty is liable to be paid which in this case, is the factory gate of Sonadih factory, as the duty on clinker becomes payable at the time of removal from Sonadih factory therefore, the GTA service for transportation of clinker from Sonadih factory to Nipania depot, having been availed after the removal of the clinker from the factors, is 'prime facie' not covered by the definition of 'input service' - against assessee.

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• 2012 (8) TMI 626
  Extended period of limitation – SSI exemption – assessee using brand name of other – Held that:- Assessees, M/s. Micro Chem Products ‘MCPPL’ - Another family concern, namely, M/s. Micro Plates Pvt. Ltd. ‘MPPL’ - MCPPL have removed finished goods without payment of duty while using the brand name “Micro” of MPPL on containers - contention of the assessees that ‘Micro’ is not a brand name belonging to MPPL but stands for the first name of MCPPL, cannot be accepted - MCPPL is not entitied to the benefit of SSI exemption on the ground of use of brand name of another person - assessees are liable to pay the duty as demanded in the show-cause notice together with appropriate interest and also pay amount of penalty equal to duty, as the demand has been upheld by invoking the extended period of limitation – in favor of revenue

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• 2012 (8) TMI 625
  Demand of excise duty – Held that:- Activity of cutting and polishing of granites amount to manufacture only from 1-3-2006 in view of the budgetary changes in 2006 - alleged clandestine removal of granite slabs for the period from 1996-2000 does not amount to manufacture and hence no excise duty is payable

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• 2012 (8) TMI 624
  Clandestine removal – Held that:- Conclusion reached by the Commissioner that the appellant has indulged in suppression of production and clandestine removal appears legal and proper - When the appellant has chosen to deal in clandestine activity, the department is left with no alternative but to rely on the private records for working out the suppressed production and clandestine removal Regarding extended period of limitation – Held that:- If the finding of fact regarding clandestine removal of goods is not disturbed, the show cause notice cannot be held to be beyond limitation in terms of proviso to Section 11A of the Act

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• 2012 (8) TMI 602
  Non eligibility of cenvat credit - rent a cab services - Held that:- As decided in Stanzen Toyotetsu India (P) Ltd. [2011 (4) TMI 201 - KARNATAKA HIGH COURT] Rent-a-Cab service is provided by the assessee to these workers to reach the factory premises in time which has a direct bearing on the manufacturing activity & by no stretch of imagination can it be construed as a welfare measure. It is a basic necessity so as to ensure that the work force comes on time at the work place, the employers have taken this measure which has a direct bearing on the manufacturing activity. As undisputed fact of the case that the services of rent a cab services were received by the respondent for transportation of their employees from their residence to the factory premises and back to the residence and the service provider is registered and respondent is discharging the service tax liability billed on on such services rendered - no ground to deny the claim - in favour of assessee.

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• 2012 (8) TMI 601
  Clandestine clearance of goods - non inclusion of the value of engine/motor in the value of Concrete Mixer Machine - Held that:- As the appellant neither rebutted the allegation nor contended anything in support of their defence the lower authority has rightly held that 112 nos. of CMMs have been clandestinely removed without payment of duty and appropriate duty - remand the matter to the lower adjudicating authority with a direction to redetermine the duty liability on the 112 CMMs.

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• 2012 (8) TMI 600
  Waiver of pre-deposit - software licence key - contention of the applicant is that prior to 1.3.2006 the software was exempted from payment of central excise duty. It is only with effect from 1.3.2006 the software is liable to central excise duty – Held that:- Board vide circular dated 18.3.2011 in respect of the Customs Tariff has clarified that such keys which only permit the right to use the software are classifiable under Chapter Heading 49 of the Customs Tariff - matter is remanded to the adjudicating authority for de novo adjudication

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• 2012 (8) TMI 599
  Manufacture of sugar - by-product bio-compost came into existence which is being cleared by the respondents without payment of duty – Held that:- Demand of amount of 8% in respect of Bio-compost is set aside - pre-deposit of whole of the amount of penalty is waived.

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• 2012 (8) TMI 598
  Waiver of pre-deposit - Cenvat Credit - applicant is using MS plates, angles and channels to manufacture power cable distribution boards which are used in Poly Machines which are used in the manufacture of paper/paper boards – Held that:- Cable distribution boards are accessories for poly machines and that the MS channels and angles used are accessories to the said cable boards - eligible for CENVAT credit

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• 2012 (8) TMI 596
  Input services - Cenvat Credit Scheme was amended by new Cenvat Credit Rules, 2004, effective from 10-9-2004 by which they were allowed to take Cenvat credit of Service tax paid on input services – Held that:-Asse ssee had taken insurance of their plant and machinery and paid service tax on such insurance against bills dated prior to 10-9-2004 - credit is taken contrary to provisions in Rule 9(1)(f) of Cenvat Credit Rules, 2004 - assessee has taken proportionate credit by adopting their own interpretation without intimation to department would justify to consider this as a case of mis-representation and suppression to invoke extended period for demanding the excess credit availed and utilized

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• Indian Laws

• 2012 (8) TMI 650
  RTI - penalty – Held that:- RTI application was filed on 13th August 2009 the complete information was provided only on 6th March 2010 - delay was over 100 days - non-exhaustion of the remedy of a first appeal by the Respondent would not have made any difference to the fact that the complete information was provided to the Respondent only on 6th March 2010 – penalty upheld

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