TMI Tax Updates - e-Newsletter
August 6, 2012

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws Service Tax Central Excise

Articles

1. No Service Tax on Foreign Remittances

   By: Meenu Garg

2. Service Tax credit eligibility for clearance of final products upto place of removal

   By: JAMES PG

3. NOTHING IN THE COMPANIES ACT PROHIBITS THE SWAPPING OR INTERCHANGE OF NAME OF COPMANY IN AN ARRANGEMENT.

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Anand Sharma Meets President Mahinda Rajapaksa in Colombo Sick Sri Lankan Textiles units to be Revived There will be more Clarity on IKEA in Guidelines Three More NMIZs to be Announced in August

2. India Sri Lanka to Double trade to USD 10 billion by 2015 Anand Sharma Inaugurates India show in Colombo Assures Sri Lanka of Preferential Access to Indian Market

3. Anand Sharma Urges AWDC and Indian Diamond Facilities to Strengthen Linkages India-Belgium Bilaterla trade Touches USD 17.75 billion

4. First India - Sri Lanka CEOs Forum Meeting to be held in Colombo on August 4

5. India Signs Tax Information Exchange Agreement with Monaco

Notifications

DGFT

1. 09 (RE – 2012)/2009-2014 - dated 1-8-2012 - FTP

Ban on export of edible oil in branded consumer packs.

Circulars / Instructions / Orders

Income Tax

1. 06/2012 - dated 3-8-2012

Relaxation from compulsory e-filing of return of income for assessment year 2012-13 - for representative assessees of non-residents and in the case of private discretionary trusts –regarding.

2. 05/2012 - dated 1-8-2012

Inadmissibility of expenses incurred in providing freebees to Medical Practitioner by pharmaceutical and allied health sector Industry

FEMA

3. Press Note No.3 (2012 Series) - dated 1-8-2012

Review of the Foreign Direct Investment policy - permitting investments from Pakistan.

Companies Law

4. 22/2012 - dated 3-8-2012

Imposing fees on certain e-forms filed with ROC, RD or MCA(HQ) under MCA-21 where at present no fee in prescribed.

5. 21/2012 - dated 2-8-2012

Filling of Balance Sheet and Profit and Loss Account by Companies in Non-XBRL for Accounting year commencing on or after 01.04.2011.

6. 20/2012 - dated 1-8-2012

Investor Education and protection Fund(uploading of information regarding unpaid and unclaimed amount lying with companies) Rules 2012

Highlights / Catch Notes

Income Tax

• Advance Rulings Challenged Under Articles 136, 226, 227 for Broader Judicial Review in Supreme and High Courts.

  Case-Laws - SC : It cannot be hold that an advance ruling of the Authority can only be challenged under Article 136 of the Constitution before this Court and not under Articles 226 and/or 227 of the Constitution before the High Court - SC
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• Income from Other Sources Must Be Included in Profit Calculation for Partner Remuneration under Book-Profit Rules.

  Case-Laws - HC : Even if the income from other sources is included in the profit and loss accounts to ascertain the net profit qua book-profit for computation of the remuneration of the partners the same cannot be discarded. - Tri
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• Court Rules on Consistent Accounting for Partners' Remuneration Deductions u/s 40(b)(v) of Income Tax Act.

  Case-Laws - HC : Excessive claim of deduction of partners’ remuneration - for the purpose of Section 40(b)(v) read with Explanation there cannot be separate method of accounting for ascertaining net profit and/or book-profit - Tri
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• Pharmaceutical Freebies to Doctors Not Tax Deductible, Reinforces Ethical Standards in Healthcare Industry per Circular.

  Circulars : Inadmissibility of expenses incurred in providing freebees to Medical Practitioner by pharmaceutical and allied health sector Industry - Circular
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• Separate Tax Assessments Allowed for Each Individual Named in Warrants u/ss 132 and 132A.

  Case-Laws - HC : Warrant issued in joint name - if an authorization has been issued under Section 132 or requisition under Section 132A in the name of more than one person, the assessment or reassessment can be made separately in the name of each of the persons mentioned in the authorization/requisition - HC
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• Gold Chains for Sales Promotion: Deductible Expense Approved Under Income Tax Rules.

  Case-Laws - AT : Sales promotion expenses - expenditure with respect to the gold chains being distributed - expenditure allowed - AT
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• Section 68: Unjustified Gift/Loan Additions if Assessing Officer Skips Summons or Verification; Appeal Confirmation Unwarranted.

  Case-Laws - AT : Addition of gift & loan u/s 68 - if A.O. has not issued summons to the donors/cash creditors or commission to ITO, Bhiwani, for further verification of the fact the addition confirmed by the CIT(A) is not justified - AT
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• Internal Responsibility Division Doesn't Affect AOP Formation; Legal Status Remains Unchanged.

  Case-Laws - AAR : Formation of Association of persons (AOP) - The internal division of responsibility by the consortium members and the recognition thereof cannot dislodge the legal position of formation of an association of persons - AAR
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• Software Usage Payments Classified as 'Royalty' Under Income Tax Act Section 9(1), Subject to Royalty Taxation.

  Case-Laws - HC : Mischief of 'royalty' u/s 9(1) - payment made for transfer of the right to use the software/computer programme in respect of the copyrights falls within the mischief of 'royalty' - HC
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• Inherited Land's 1981 Fair Market Value Accepted for Capital Gains Tax Calculation.

  Case-Laws - AT : Capital gains - The portion of land had come to appellant’s share due to inheritance. - fair market value of immovable property as on 01.04.1981 accepted - AT
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• Welfare Fund Contribution for Export Permits Not a Business Expenditure u/s 37(1), Lacks Business Expediency.

  Case-Laws - AT : Donation versus business expenditure u/s 37(1) - Contribution to the welfare fund as a precondition for the grant of export permits - business expediency - assessee’s claim as not sustainable - AT
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• Classifying Expenditure: Focus on Payer's Perspective, Not Payee's Loss, Affects Tax Treatment in Income Tax Context.

  Case-Laws - AT : Revenue or Capital expenditure - Nature of loss in the hands of the payee would be of little consequence in determining the nature of the expenditure in the hands of the payer/person incurring the expenditure - AT
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• Developers Can Claim Tax Deductions for Housing Projects Without Owning Land u/s 80IB(10) of Income Tax Act.

  Case-Laws - AT : Deduction u/s 80IB(10) - housing project - whether ownership of land is necessary - computation of eligible land - AT
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• TPO Not Required to Disclose Notice Process or Full Information to Taxpayer in Transfer Pricing Case Under Sec 133(6).

  Case-Laws - AT : Transfer pricing - Computation of arm's length price – TPO need not inform the assessee about the process used by him for issuing the notices u/s 133(6) of the Act nor is he under any obligation to furnish the entire information to the assessee - AT
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• E-filing exemption granted for 2012-13 income tax returns for representative assessees of non-residents and private trusts.

  Circulars : Relaxation from compulsory e-filing of return of income for assessment year 2012-13 - for representative assessees of non-residents and in the case of private discretionary trusts –regarding. - Circular
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• Taxpayer's Derivative Trading Loss Can Offset Short-Term Capital Gains in Same Year per Section Rules.

  Case-Laws - AT : Transactions in derivatives - loss suffered by the assessee during derivative trading should be allowed as short term capital loss and the same can be set off against the short term capital gain during the year - AT
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• Court Rules Sales Acceptance Confirms Validity of Purchases; Profit Suppression Claims on Bogus Purchases Rejected.

  Case-Laws - AT : Suppression of profit of bogus purchases - held that:- when the sales have been accepted, there is no question of disputing the purchases because no sales could be made without purchases. - AT
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• Compounding Fee Deduction u/s 37(1) of Income Tax Act Questioned; Penal Nature Debated and Remanded for Review.

  Case-Laws - AT : Deduction u/s 37(1) - Payment of compounding fee in lieu of an offence - whether or not penal in nature - After analyzing and referring various case laws matter remanded back to CIT(A) with the directions - AT
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• AO Rightly Initiates Reassessment with Notice u/s 148, No Scrutiny Assessment Possible.

  Case-Laws - AT : When no scrutiny assessment could have been completed in this case, AO is perfectly justified to invoke reassessment proceeding by issuance of notice under section 148 of the Act. - AT
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Customs

• High Court Updates: Importing Explosives, Licensing Procedures, and Compliance Under Customs Authority Guidelines.

  Case-Laws - HC : Import of explosive - Inspection and Certification agency - General Procedure for Licensing of Restricted Goods - HC
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DGFT

• DGFT bans export of edible oil in branded consumer packs to stabilize domestic supply and prices.

  Notifications : Ban on export of edible oil in branded consumer packs. - Notification
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FEMA

• India Revises FDI Policy to Allow Investments from Pakistan; Changes Notified Under FEMA Guidelines.

  Circulars : Review of the Foreign Direct Investment policy - permitting investments from Pakistan. - FDI GUIDELINES
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Corporate Law

• Companies Must File Balance Sheets and Profit and Loss Accounts in Non-XBRL Format for Years Starting April 1, 2011.

  Circulars : Filling of Balance Sheet and Profit and Loss Account by Companies in Non-XBRL for Accounting year commencing on or after 01.04.2011. - Circular
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• New Fees Imposed on Electronic Form Submissions to ROC, RD, and MCA HQ via MCA-21 System.

  Circulars : Imposing fees on certain e-forms filed with ROC, RD or MCA(HQ) under MCA-21 where at present no fee in prescribed. - Circular
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• Companies Must Disclose Unpaid Claims Under Investor Education and Protection Fund Rules, 2012 to Boost Transparency and Trust.

  Circulars : Investor Education and protection Fund(uploading of information regarding unpaid and unclaimed amount lying with companies) Rules 2012 - Circular
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• Court Can Dissolve Company if Official Liquidator Can't Continue Winding-Up Due to Lack of Funds or Other Reasons.

  Case-Laws - HC : When the Official Liquidator cannot proceed with the winding up of the Company for want of funds or for any other reason, the Court can make an order dissolving the Company - HC
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Service Tax

• Customs House Agent Service: CMC Charges Must Be Included in Taxable Value, Says Court Decision.

  Case-Laws - AT : Inclusion of CMC charges to the assessable value of the CHA service – CMC charges are to be included in the assessable value of the taxable service provided by the appellants. - AT
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• Tribunal Cannot Modify Stay Order; Only High Court Can Address Application for Changes Post-Merger.

  Case-Laws - AT : Application for modification of the stay order - As the order passed by the Tribunal is merged with the order passed by the Hon'ble High Court, hence the Tribunal has no power to modify the stay order - AT
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Central Excise

• Transportation Charges Excluded from Assessable Value if Separately Shown u/r 5 of Central Excise Valuation Rules 2000.

  Case-Laws - AT : Assessable value – As per Rule 5 of the Central Excise (Valuation) Rules, 2000, the transportation charges shown separately in the invoice or charge separately are not includable in the assessable value - AT
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• Applicant's Delay in Filing Appeal Due to Advocate's Illness Lacks Specific Dates and Evidence, Seeks Condonation.

  Case-Laws - AT : Condonation of delay in filing appeal – Applicant could not tell the date when their Advocate fell sick, nor any documentary evidence has been produced in support of their contention - AT
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Case Laws:

• Income Tax

• 2012 (8) TMI 105
  Income accrues or arises in India - liaison office in India of company incorporated in USA - special leave petitions filed against the advance rulings of the Authority - Held that:- As Section 245S expressly makes the Advance Ruling binding on the applicant, in respect of the transaction and on the Commissioner and the income tax authorities subordinate to him, the Authority is a body acting in judicial capacity and the transaction would not affect the jurisdiction of either this Court under Article 136 of the Constitution or of the High Courts under Articles 226 and 227 of the Constitution to entertain a challenge to the advance ruling pronounced by the Authority. It cannot be hold that an advance ruling of the Authority can only be challenged under Article 136 of the Constitution before this Court and not under Articles 226 and/or 227 of the Constitution before the High Court - the power vested in the High Courts to exercise judicial superintendence over the decisions of all courts and tribunals within their respective jurisdictions is part of the basic structure of the Constitution. Therefore, to hold that an advance ruling of the authority should not be permitted to be challenged before the High Court under Articles 226 and/or 227 of the Constitution would be to negate a part of the basic structure of the Constitution - no substantial question of general importance arises in SLP - dispose of this SLP granting liberty to the petitioner to move the appropriate High Court under Article 226 and/or 227 of the Constitution.

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• 2012 (8) TMI 104
  Excessive claim of deduction of partners’ remuneration - notice issued u/s 154 - Held that:- It appears from the orders of the AO when notice u/s 154 was issued replies in writing were given explaining how the computation of remuneration of partners were determined and the same were shown in the audited accounts, the said explanation was not accepted and AO was of the view that the entire profit of the business of the assessee cannot be a book profit for the purpose of explanation 3 of Section 40(b)(v) - that income from other sources could be taken into consideration for ascertaining book profit for the purpose of computation of allowable remuneration to partners not the income from business alone, thus undoubtedly this is a debatable issue and such debatable issue cannot be a ground for rectification u/s 154 - the point which was not examined on fact or in law cannot be dealt with as a mistake apparent on the record this dispute raised a mixed question of fact and law. Thus for the purpose of Section 40(b)(v) read with Explanation there cannot be separate method of accounting for ascertaining net profit and/or book-profit as it nowhere provides that the net profit as shown in the profit and loss account not the profit computed under the head profit and gains of business or profession - Sub-section (1A) of section 115J does not empower the Assessing Officer to embark upon a fresh inquiry in regard to the entries made in the books of account of the company Even if the income from other sources is included in the profit and loss accounts to ascertain the net profit qua book-profit for computation of the remuneration of the partners the same cannot be discarded.

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• 2012 (8) TMI 98
  Warrant issued in joint name - assessee contested the assessment could not have taken place in the name of an individual - Held that:- As the warrant of authorization u/s 132 has been issued on 10th November, 2006 in the joint name of three persons, therefore in view of the provisions of Section 292CC, as inserted by Finance Act, 2012 in the Income-tax Act, 1961 with retrospective effect from 1st April, 1976 ) if an authorization has been issued under Section 132 or requisition under Section 132A in the name of more than one person, the assessment or reassessment can be made separately in the name of each of the persons mentioned in the authorization/requisition As the assessments made in the individual capacity of each persons named in he warrant of authorisation was perfectly within the jurisdiction of the AO and the CIT(A) - the Tribunal were not justified in annulling the assessment that if the warrant of authorisation was issued jointly in the name of more than one person, the assessment could not have been made in the capacity of an individual - remand the matter to the CIT (A to decide the appeals on merits - in favour of revenue.

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• 2012 (8) TMI 97
  Rejecting the claim of the appellant to be assessed in the status of Joint Venture - assessee contested against assessing returned income on the protective basis in the hands of AOP and the same income to be assessed separately in their respective hands on substantive basis - Held that:- When income returned by a person is not accepted by the revenue as his income and the income is assessed only on protective basis then the assessee’s right over the income is not recognized by the revenue and the assessee has valid reasons to be aggrieved by such an order - the order of CIT(A) was set aside and matter was restored back to his file - in favour of assessee for statistical purpose. Disallowance of depreciation - Held that:- As no material was brought on record before the tribunal to controvert this finding of CIT(A) that the assessee joint venture is not the owner of the assets - as this argument was not raised by the assessee before the authorities below that the assets in question on which the depreciation is claimed by the assessee were used by the assessee and on account of user of those assets only, the income was assessed in the hands of the assessee, and therefore, the assessee is at least beneficial owner of those assets and hence, eligible for depreciation - this matter should go back to the file of Ld. CIT(A) for fresh decision - in favour of assessee for statistical purpose.

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• 2012 (8) TMI 96
  Deduction of TDS without surcharge - revision u/s.263 - assessment order u/s 143(3) should be treated as erroneous and prejudicial to the interest of the revenue - Held that:- No finding has been given by CIT to come to the conclusion that the as to which payments the assessee was required to deduct TDS along with surcharge but has not done so and therefore cannot be allowed as deduction. CIT has not been able to establish and show the error or the mistake made by the AO which makes the order unsustainable in law. As it is seen that the assessee has deducted TDS at appropriate rate including education cess and the surcharge was not required to be added at all as aggregate of the payments to none of the payees exceeded the limit of Rs.10 lacs or Rs.1 crore, as the case may be - AO having exercised his mind over the issue, the order of the AO passed under Section 143(3) cannot be termed as erroneous and prejudicial to the interest of the Revenue - in favour of assessee.

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• 2012 (8) TMI 95
  Addition made on account of disallowance of Sales promotion expenses - expenditure with respect to the gold chains being distributed - CIT(A) deleted the addition - Held that:- The assessee has given full details of expenses of the gold chain incurred to get the more business and attract the customers - appellant had completed successful seven years of business and on such occasion, he had distributed the gold chain for their operation in business in past and future - A.O. had allowed similar expenses in case of 65 dealers therefore, this expense is for business expediency as sale promotion expenses - confirm the order of the CIT(A) and dismiss the Revenue’s appeal - in favour of assessee. Disallowance of interest - CIT(A) deleted the it - Held that:- The assessee had interest free fund in form of capital of Rs.26,31,523 and the opening balance of assessee's sister concern was 38,91,635 in which appellant was working on commission basis concern - The concern has paid commission to the appellant and at the same time the sum was reduced from the advances account. The actual amount would be much lower. There was no direct nexus has been established by A.O. between interest bearing fund to interest free advances - as there is no leakage of Revenue thus confirmation of the order of the CIT(A) and dismiss the appeal of revenue - in favour of assessee.

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• 2012 (8) TMI 94
  Treatment of closing stock found at the time of survey - CIT(A) invoked provisions of s. 263 against AO's order u/s 143(3) - Held that:- From the perusal of the Order u/s 143 it is clear that the AO while framing the assessment order had considered the submissions of the assessee and carried out cross verification of certain sales and purchases particularly in respect of the period after the date of survey, thus appears that the AO had examined the aspect of valuation of closing stock and had applied his mind and after being satisfied passed the assessment order. If the closing stock as worked out in the show cause notice is considered, the Gross profit of the assessee would be on a higher side i.e approximately 27.2% as compared to the GP of 22% taken by the survey party and as estimated by the AO. This also indicates that the AO has verified the details of closing stock - CIT has not been able to establish and pin point unequivocally the error or the mistake made by the AO which makes the order unsustainable in law as the finding of the CIT must be clear, unambiguous and not debatable - in favour of assessee.

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• 2012 (8) TMI 93
  Addition of gift & loan u/s 68 - Held that:- All the donors are same which were shown in 04-05 and has filed addresses of the donors, copy of acknowledgement of return file, copy of capital account, copy of bank account, PAN No. and copy of the cash flow statement but was not able to produce the donors/cash creditors for cross examination as required by the A.O. because they are all belong to Bhiwani (Haryana) and had difficulty in coming to Surat. The assessee requested to issue summons to the donors/cash creditors or commission to ITO, Bhiwani, for cross examination - as the assessee has discharged his onus to prove the identity of the cash creditors, genuineness of the transaction and if A.O. has not issued summons to the donors/cash creditors or commission to ITO, Bhiwani, for further verification of the fact the addition confirmed by the CIT(A) is not justified - addition made need to be deleted - in favour of assessee.

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• 2012 (8) TMI 92
  Addition on account of low GP - CIT(A) deleted the addition - Held that:- It is undisputed fact that the AO has simply made comparison of GP ratio of the assessee with another firm and drawn adverse inference - has not brought any evidence on records to indicate that the assessee has suppressed any production or made any sales outside the books of accounts. The observation of the AO is that there is minimum suppression of production of 50,000 kg. of yarn is based on presumption and not on the basis of any cogent evidence or supporting documents - the nature of business of two firms are different and cannot be compared as assessee manufactures grey cloth which is used for dress material whereas the grey cloth manufactured by other firm used for comparison is used for sarees - against revenue. Disallowance of telephone & vehicle expenses - Held that:- CIT(A) considered the disallowance of 20% to be on higher side and therefore restricted the disallowance to 10% - no interference is called for in the order of the CIT(A) - against revenue.

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• 2012 (8) TMI 91
  Addition on unexplained investment - Disallowance of bogus purchases expenses - Held that:- With regard to the business undertaken by the assessee, it was canvassed by the assessee, during the course of assessment, that in addition to actual trading of grains, he was also issuing accommodation bill and for which purchases were also made through book entries. Accordingly, separate trading account with respect to the actual business vis-a-vis accommodation business was filed by the assessee which was not examined by AO did and made the addition on the basis of withdrawals shown in respect of the cheques issued for purchases in respect of accommodation business - remit the matter back to AO to examine both the separate trading accounts furnished by the assessee so as to find out the actual income earned in real trading vis-a-vis accommodation business - in favor of assessee for statistical purposes.

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• 2012 (8) TMI 90
  Disallowance of contribution made to superannuation fund - the provision made towards pension fund was held to be liable for fringe benefit tax - Held that:- As per the amended provisions with effect from the assessment year 2007-08, the amount of contribution, referred in clause (c) of sub-section (1) of section 115WC, which exceeds Rs. 1 lac in respect of each employee, is to be taken into consideration for the purpose of valuing the fringe benefit tax - that the contribution to superannuation fund in present case being less than Rs. 1.00 lac per employee is not liable for fringe benefit tax - the matter is restored back to the file of AO to verify the actual payment of contribution which exceeds Rs. 1 lac in respect of each employee - in favour of assessee for statistical purposes

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• 2012 (8) TMI 89
  Addition on account of suppression in valuation of closing stock - Held that:- As Tax Audit Report clearly demonstrate that the assessee was valuing the closing stock by FIFO method which was accepted in assessment order for assessment year 2007-08 by the AO no merit in the action of AO for valuing closing stock as per average rate of purchases - restore this ground to the file of AO for detailed calculation of stock as per FIFO method. Disallowance of warehouse charges - invoking provisions of Section 80IB(13)and Section 40A(2) - Held that:- No merit in the action of the AO for making disallowance on the plea that sister concern of the assessee is availing exemption u/s 80IB - that neither AO has brought any material on record to say that fair market value of warehousing charges paid was lower nor the assessee has placed on record the operative rate of cotton charges prevailing in the market - restore this ground to the file of AO for reconsider the issue with reference to the provisions of Section 40A(2B) Disallowance u/s 40A(2)(b) - Held that:- AO has given detailed calculation of payment made to the sister concern on account of purchases made with reference to the market rate prevailing on the date of purchase and nothing was brought on record to dislodge the finding of AO - confirm the disallowance made on account of purchase made from sister concern under provisions of Section 40(a)(ii)(b) - against assessee. Reworking of assessee’s claim of depreciation - Held that:- As this ground was not before the AO therefore in the interest of justice this ground is restored back to the file of AO to recalculate depreciation allowable.

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• 2012 (8) TMI 88
  Formation of Association of persons (AOP) - held that:- The fact that the two consortium members entered into an memorandum of understanding first and then into an agreement between them separating their area of operations, cannot alter the picture. Nor can the fact that payments were agreed to be made to them separately for the work they had divided between them affect the status they acquired when they came together to bid for the work and their bid was accepted in terms of the tender for the whole work. - The internal division of responsibility by the consortium members and the recognition thereof by "X" or the making of separate payments by "X" to the two members, cannot dislodge the legal position of formation of an association of persons by the applicant and 'E'. - Formation of AOP is there. In the face of an indivisible contract and the existence of an association of persons, the claim that the amount payable in respect of design and engineering cannot be taxed in India, cannot be accepted. They are liable to be taxed in India.

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• 2012 (8) TMI 87
  Mischief of 'royalty' - Held that:- Consideration paid by the Indian customers or end users to the assessee - a foreign supplier, for transfer of the right to use the software/computer programme in respect of the copyrights falls within the mischief of 'royalty' as defined under sub-clause [v] to Explanation 2 to Clause [vi] of section 9[1] of the Income-tax Act, 1961 - in favour of the revenue and against the assessee.

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• 2012 (8) TMI 86
  Capital gains - fair market value of immovable property as on 01.04.1981 - cost of indexation - Exemption u/s 54 of the Act - purchased of a new house or deposit an amount in the capital gain scheme before the due date of filing of return – Held that:- property was acquired by the material grand father of appellant being a society member in 1951. Though there was dispute between Govt. of Delhi and society, and finally wife of late Bipin Chandra got the land registered by the society in her name in 1984 (06.02.1984). The portion of land had come to appellant’s share due to inheritance. - Fair market Value as on 1.4.1981 to be accepted. Assessee in his revised computation of capital gain enclosed as annexure to this order before the completion of assessment proceedings before Assessing Officer - assessee had invested in the new property within the time allowed u/s 139 (4) of the Act, the assessee will be entitled for exemption u/s 54 of the Act to the extent the amount invested in the new property – In favor of assessee

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• 2012 (8) TMI 85
  Whether compensation paid to the land owners for using their land for extraction of Gypsum; mining being part of the assessee’s trade, as revenue expenditure – Held that:- Nature of loss in the hands of the payee would be of little consequence in determining the nature of the expenditure in the hands of the payer/person incurring the expenditure - expenditure is revenue in nature - in favour of the assessee Disallowance - contribution to a Fund established at the instance of the State Government with the object of providing a safety net for the workers - disallowance by the Assessing Officer on the basis that the same is only an application of income and not a case of diversion of income by overriding title – Held that:- Fund had been set up solely for the purpose of welfare and benefit of the employees - disallowance deleted - in favour of the assessee Donation versus business expenditure - Contribution to the welfare fund as a precondition for the grant of export permits - business expediency – Held that:- Most business payments arising only out of conscious business decisions on the part of the Management, whose function and responsibility and, thus, prerogative, it is to decide as to how to conduct the same; the only requirement of law being a clear exhibition of the same being motivated by considerations only of business - assessee’s claim as not sustainable

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• 2012 (8) TMI 84
  Deduction u/s 80IB(10) - housing project - whether ownership of land is necessary - computation of eligible land - held that:- assessee was not required to be owner of land on record. - housing project constitute development plan, roads and grant of other facilities, therefore, those areas should exist within the prescribed limits and to be considered as a part and parcel of the project. There is no dispute in the case before us that after addition of 5 Are of land purchased by the assessee vide agreement dt. 20th March 2004, for the purpose of approach road, to the area given in the lay out plan, it fulfills the 1 Acre prescribed area for eligibility of claiming deduction u/s. 80IB(10) of the Act. Revisionary provision u/s. 263 of the Act - revisional order passed u/s. 263 of the Act for which, the foremost requirement is that the assessment order is erroneous and prejudicial to the interest of revenue – alleged that row house having area more than 1500 Sq.ft. – Held that:- Each flat was within the prescribed limit of 1500 Sq.ft. area and if after purchasing of 2 flats owner(s) of flats merges it into a larger flat, the claimed deduction to the assessee cannot be denied on this basis - A.O has fully applied his mind before allowing the deduction - assessment order in question can not be held as erroneous and prejudicial to the interest of the revenue - grounds questioning the validity of the revisional order in question are thus allowed in favour of the assessee Disallowance of deduction claimed u/s. 80IB(10) – alleged that area of the project is less than 1 acre - explanation of the assessee that another 5 Are of land was purchased subsequently from the same owners which could be included in the calculation of area of the plot - A.O has denied the deduction is the alleged merger of 4 flats deviating from approved plans – Held that:- Merger of flats after purchase by the owners thereof to make it into a larger flat for their own convenience will not be a cause for denial of claimed deduction especially when an undisputed fact that each of those flats does not exceed the prescribed area limit 1500 Sq.ft. – deduction is allowed - appeal is allowed Disallowance of deduction - authorities below have denied the claimed deduction u/s. 80IB(10) of the Act to the assessee on similar basis that the area of the land is below 1 Acre and the area of row house No. 11C in building ”D” is more than 1500 Sq.ft. – Held that:- Addition of further area of 5 ‘Are’ land purchased by the assessee subsequently for providing road to the Society is fulfilling the 1 Acre area requirement and the area of the row house No. 11C in building ‘D’ is within the prescribed maximum area limit of 1500 Sq.ft. - A.O directed to allow the claimed deduction u/s. 80 IB(10) to the assessee - in favour of the assessee.

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• 2012 (8) TMI 83
  Transfer pricing - Computation of arm's length price – Held that:- The ALP has to be determined by the TPO in accordance with law and the Act provides that the TPO shall take into consideration the contemporaneous data. The assessee was only required to maintain the information and documents as may be necessary relating to the international transactions so that it can be made available to the TPO or the AO or any other authority in any proceedings under the Act. By providing a specified date in the Act, the obligation is cast upon the assessee to keep and maintain the documents for that period. But, it does not restrict the TPO from making enquiries thereafter for determining the correct ALP. TPO need not inform the assessee about the process used by him for issuing the notices u/s 133(6) of the Act nor is he under any obligation to furnish the entire information to the assessee - when TPO is making search for a relevant comparable, he can issue notices to parties whom he considers as relevant to gather requisite information and on being satisfied with regard to relevancy of material which can be used against assessee, assessee has to be given an opportunity of presenting its objections, if any. TPO Directed to recompute with following directions:- i) the operating revenue and the operating cost of the transactions relating to associated enterprises only shall be considered; (ii) the comparables having the turnover of more than Rs. 1 crore, but, less than Rs. 200 crores only shall be taken into consideration; (iii) all the information relating to comparables which were sought to be used against the appellant shall be furnished to the appellant; (iv) to consider the objections of the appellant that relate to additional comparables sought to be adopted by the TPO and to pass a detailed order; and (v) to give the standard deduction of 5% under the proviso to s.92C(2) of the Act. Free trade zone – Held that:- while computing deduction under section 10A communication expenses should be reduced not only from export turnover but also from total turnover

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• 2012 (8) TMI 82
  Allowability of deduction in respect of write off of advances - assessee had participated in promotion of EECL, in order to safeguard its business of explosives and detonators in West Bengal – Held that:- Advances made by the assessee to EECL is incidental to carrying on the business by the assessee itself and consequently, the borrowed money should be considered as having been utilized for the purpose of business of the assessee - advances, thus, having been made in the normal course of business of the assessee, when written off, have to be held as falling in the revenue field, and consequently, such amounts of advances written off, are allowable as deduction either as bad debt or as business loss, incidental to carrying on the business by the assessee – In favor of assessee Deduction in respect of amount advanced to a sick company – Held that:- There is only the order of BIFR to wind up the EECL, but the EECL has not been actually would up by that date - Loss on account of investment in the shares of EECL cannot be considered in the year under appeal, and the same can be considered only in the year in which the EECL has actually been wound up or the rights of the shareholders are extinguished Expenditure in R&D - assessee had an approved R&D Unit, approved by the Government, even though the approval for the current year was not produced – Held that:- question whether any part of the expenditure claimed, constituted the expenditure on scientific research or not, has to be referred to the prescribed authority, in terms of Explanation below the provisions of S.35(1) of the Act - issue is remitted back to the file of the assessing officer - assessee’s appeal is partly allowed.

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• 2012 (8) TMI 70
  Claim of expenditure incurred for foreign education of company's ex director's son - Held that:- Considering material placed on record that Shri Siddharth Chhajlani was an employee of the assessee Company not only before going but even during the period he was undertaking studies in printing technology at London and also on his return from London which was directly related with the business of the assessee Company. Interest on unsecured loan in view of Section 14A and 36(1) (iii) - Held that:- As the assessee had properly utilized the amount of interest bearing funds for the purpose of its business only and there was no diversion of such interest bearing funds for non-business purposes while allowing the interest expenditure - appeals do not involve any question of law.

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• 2012 (8) TMI 69
  Transactions in derivatives - Short term capital loss in respect of speculation business - Held that:- As that speculation loss from derivatives can be set off against the income earned from derivatives after amendment in the Act with effect from 1.4.2006 thus assessee is entitled to the relief and the loss suffered by the assessee during derivative trading should be allowed as short term capital loss and the same can be set off against the short term capital gain during the year - in favour of assessee. Disallowance of commission paid to foreign agents - Held that:- As decided in Bharat Earth Movers Versus Commissioner of Income-Tax [2000 (8) TMI 4 - SUPREME COURT ] 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 - As the liability to pay commission has arisen by virtue of sales in the financial year 2004-05 relevant to the assessment year 2005-06. The realization of sale amount in the next financial year will not make much difference as the liability to pay commission had crystallized in the financial year 2004-05 itself after sale - in favour of assessee.

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• 2012 (8) TMI 68
  Addition as unaccounted cash credits - Held that:- Once the assessee has paid the tax on the amount which was alleged to be introduced as cash credit in the books of account, therefore the Revenue should have examined this aspect on those lines as per the provisions of law - the cash credit amount was subject to tax by invoking section 68 but those figures were ultimately recorded as sales and paid tax thereon by the assessee himself in the subsequent financial year and if the addition is hereby sustained, then in consequence thereupon the said amount shall get reduced from the sales amount of the subsequent year - the AO was not justified in adding the impugned amount as the taxable income of the assessee for the year under consideration. Penalty levied u/s.271(1)(c) - Held that:- Penalty was imposed in respect of the impugned addition made u/s.68 and since in quantum appeal the said addition has already deleted there was no basis for levy of penalty, hence we hereby direct to delete the same - in favour of assessee.

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• 2012 (8) TMI 67
  Confirming he assessment order u/s.144 by CIT(A) - Decline in Gross Profit rate in comparison to the ratio of profit disclosed in the past - Held that:- As the assessee is not a habitual defaulter because the admitted factual position is that the accounts have been duly audited and thereupon a return has also been filed within the prescribed period - the AO has admitted that the notices were complied with and representative of the assessee as well as one of the Director of the assessee attended the assessment proceedings - inability of AO to allow assessee to present his case on many occasions informed of the assessment having been finalized ex-parte u/s.144 - the assessee deserves reasonable opportunity of being heard - case is remitted back to AO - in favour of assessee for statistical purposes.

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• 2012 (8) TMI 66
  Allowing the deduction u/s.80IB(10) - not granted approval by the local authority to carry on the business of an undertaking developing and building housing projects - Held that:- The issue is restored back to his file to look into the agreement entered into by assessees with the landowner and decide whether the assessee has in fact purchased the land for a fixed consideration from the landowner and has developed the housing project at its own cost and risks involved in the project - in case the AO finds that the Developer has acted on behalf of the landowner and has got the fixed consideration from the landowner for the development of the housing projects, the assessee should not be allowed deduction u/s.80IB(10) - it has to be ascertained whether it was a “work contract” or a “Development Contract - in favour of revenue for statistical purposes.

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• 2012 (8) TMI 65
  Addition u/s.69C being unaccounted expenditure & unaccounted investment - Held that:- As opening cash balance was Rs.6.93 lakhs and Books of account were not written up-to-date because the partner could not explain the cash balance and cash utilized. The admission made by the partner appears to be in fear and without any evidence. The assessee has retracted the disclosure by the affidavit which A.O. has not considered the affidavit in framing of the assessment. The case is audited. The assessee had claimed that some of the expenses were paid through demand draft prior to date of survey. The Books of account has not been rejected by the A.O. at the time of assessment - CIT(A) was correct in deleting the addition - in favour of assessee. Addition being unaccounted expenses on machinery - not supported by the vouchers - Held that:- CIT(A) was correct in scaling down the addition of Rs.25,000/- to Rs.15,000/- goning through the reply of the assessee and order of the authority below that payments were made in cash and bills are not verifiable, therefore, we confirm the order of the CIT(A).

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• 2012 (8) TMI 64
  Addition on account of profit earned from unaccounted sales – Held that:- Central Excise Department conducted enquiry at business premises of assessee and the partner admitted before them, that the assessee had made sales and which remained unrecorded in the books of accounts - On the basis of information received from Excise, the A.O. estimated unrecorded sales and estimated net profit by applying the net profit rate of the recorded sales - CIT (A) has erred in deleting the addition

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• 2012 (8) TMI 63
  Taxability of Income - income of deceased husband was taxed in the hands of his wife - Held that:- The date of death of “KKP” late husband of the assessee ” is 8.3.1999 and the receipts of the monies were by “KKP” during his lifetime and there is no evidence or material brought on record to suggest that the assessee (the widow) has ever received these amounts of monies - The assessee as well as her late husband are clearly separate legal entities, assessable to tax separately. If any action was called for, the department should have initiated the same in the hands of the late “KKP” through his legal heirs and not in the personal assessment case of the widow of the deceased - the balance addition of Rs.5,98,568/- is also not maintainable since there is no material brought on record by the Revenue to suggest that the amount relates to the assessee and was in the nature of the income in the hands of the assessee - decided in favour of assessee. Addition of Rs.65,000/- made only on the basis of two receipts in the name of the assessee found from the premises of the third party - Held that:- AO has wrongly mixed up Shreeji Corporation and Shivshakti Consultancy which are distinct and separate entity and the assessee has no connection with them as she was neither a shareholder nor director of the above entities - AO has not examined the office bearers of the said two entities - in the absence of any evidence brought on record to show that the amount belongs to the assessee, no addition on this count could be made - in favour of assessee. Addition of Ras.3,31,215/- in the hands of the assessee as the scheme Kana Apartment - Held that:- From a perusal of the details of the amounts alleged to have been received from “kana” scheme launched by late husband of the assessee, “KKP”, all the payments totaling to Rs.3,31,215/- related to the period prior to 8.3.1999, the date of death of husband of the assessee, no action for the payments during the life time of the husband of the assessee could be made in the individual assessment of the assessee - in favour of assessee. Addition of Rs.4,76,000/- various amounts deposited in bank account - Held that:- Assessee has tried to explain the source by giving a general explanation that it is out of agricultural income earned by the assessee but has not shown any evidence of having agricultural income and nexus between the income and the deposits made in the bank account, thus sustain the addition of Rs.3,54,500/- on account of entries in the bank accounts with the SBI out of total addition of Rs.4,76,000/- for which assessee has given satisfactory explanation - Partly in favour of assessee. Addition of Rs.1,24,000/- deposited in various accounts consist of small amounts of deposits made in the names of sons and daughters of the assessee, for which no adverse view could be taken in the hands of the assessee. There is no material brought on record to suggest that the amounts belonged to the assessee, and accordingly addition made is deleted - in favour of assessee. Addition of Rs.15,85,000/- made on the basis of a small telephone diary which was not books of accounts nor a document before confirming such amounts the identity of the said persons was not established in this case - pre-dominance of probability was in favour of the assessee as there is no corroborative evidence placed on record to suggest that the figures mentioned in the column found was in fact the income of the assessee - favour of assessee. CIT(A)deleted the addition of Rs.2,00,000/- made on account of unaccounted receipts - Held that:- Assessee has claimed that the cheques in question found at the time of search were seized by the department is still lying with them and could not be encashed till date and since money was never transferred to the account of the assessee, no addition could be made in the hands of the assessee - in favour of assessee. Addition of Rs.91,400/- made on account of undisclosed rental income - CIT(A) deleted the addition - Held that:- Revenue could not controvert to the submissions of the assessee that the amount in question has already taxed in the hands of the firm and therefore, the same could not be taxed in the hands of the assessee even on protective basis - in favour of assessee. Deletion of the surcharge levied u/s.113 as directed by CIT(A) - Held that:- Issue is covered in favour of the Revenue by the decision of Hon’ble Supreme Court in the case of CIT Vs. Suresh N. Gupta [2008 (1) TMI 396 - SUPREME COURT]

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• 2012 (8) TMI 62
  Disallowance u/s 14A - CIT(A)restored the issue back to the file of the AO for recalculation - Held that:- Neither the assessee submitted any computation for disallowance in terms of section 14A nor the AO pinpointed any specific item of expenditure incurred for earning the dividend income. The CIT(A) merely followed the aforesaid decision in Godrej Boyce Mfg. Co. Ltd. (2010 (8) TMI 77 - BOMBAY HIGH COURT ) and restored the matter to the file of the AO. However, the extent provisions of section 251 do not bestow any power on the CIT(A) for setting aside the issue in an assessment - the order passed by the CIT(A) is cryptic and grossly violative of one of the facets of the rules of natural justice that every judicial/quasi- judicial body/authority must pass reasoned order - Section 14A remained an empty shell until the introduction of Rule 8D on 24.03.2008 - the impugned order suffers from lack of reasoning and is not a speaking order on the issue restore the mater to CIT(A) file for deciding the issue, afresh - in favour of revenue. Claim of depreciation on UPS @60% by assessee - @15% as allowed by the AO - Held that:- As decided in ITO vs.v.Omni Globe Information Technologies India (P.) Ltd.[2010 (4) TMI 769 - ITAT, DELHI ] that if peripherals such as printers, scanners and servers etc. form integral part of the computer system, UPS will also be an integral part of the computer system and cannot be used without the computer, entitled for deduction of depreciation at the rate of 60 per cent - against revenue. Disallowance of legal and professional charges - AO treated the amount capital in nature while the ld. CIT(A) reduced the disallowance by 50% - Held that:- CIT(A) without analyzing the basis of allocation of each of the job undertaken by M/s Wadia Gandy & Co. vis-à-vis assessee and other entities, attributed 50% of the amount in relation to merger of the company as capital in nature. The CIT(A) nowhere adduced the basis of such allocation nor the DR could throw any light on this aspect - CIT(A) did not make elaborate discussion on the scope of study undertaken by the consultants nor the ld. DR submitted a copy of the agreement with consultants, if any - complete facts in relation to scope of study are not available restore the matter to his file for deciding the issue. Dis allowance of prior period expenditure - CIT(A)accepted the submissions of the assessee placed before through certain additional documents - Held that:- Once the assessee invokes Rule 46A and prays for admission of additional evidence before the CIT (A), then the procedure prescribed in the said rule has to be scrupulously followed - as in the instant case, there is nothing in the impugned order of the CIT (A) to suggest as to whether or not any opportunity was allowed to the AO before concluding on the issue nor the CIT(A) refers to any additional evidence in terms of rule 46A of the IT Rules,1962 it is necessary to vacate the findings of the CIT(A) and restore the issue back with the directions to follow the mandate in terms of Rule 46A - in favour of revenue.

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• 2012 (8) TMI 61
  Penalty u/s 271(1)(c) - the assessee showed gain of sale of 23,90,000 shares of HQR as STCG. This stand was changed in the course of assessment proceedings and it was claimed that the shares were long – term capital asset, therefore, the gain was LTCG. Such a claim , if accepted by the AO, would permit the assessee to set off other LTCG loss against this gain. - On the basis of this date of acquisition, the gain has to be qualified as STCG, which cannot be set off against other loss in the form of LTCG. The question is whether the assessee is liable to be penalised u/s 271(1)(c) on these facts ? Held that:- It is a case of false claim rather than a wrong claim. In such a situation, the decision of jurisdictional High Court in the case of Zoom Communication Pvt. Ltd. (2010 (5) TMI 34 - DELHI HIGH COURT) clearly applicable. Further since particulars furnished for ascertaining the nature of capital gain are inaccurate, the decision in the case of Reliance Petro Products (2010 (3) TMI 80 - SUPREME COURT) is not applicable. In the light of this finding, it is clear that the explanation is not bonafide. Accordingly, the levy of penalty on this amount is upheld.

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• 2012 (8) TMI 60
  Penalty - Suppression of profit of bogus purchases - held that:- when the sales have been accepted, there is no question of disputing the purchases because no sales could be made without purchases. - Since the party has confirmed the purchases and the purchases have been supported by bills and vouchers, therefore, the explanation of the assessee has been rightly accepted by the ld. CIT(A) for the purpose of deleting the addition. Penalty u/s 271 on surrender of income to buy peace - retraction of statement - held that:- Such a retraction is, therefore, not valid and the assessee cannot be permitted to deny the statement made in the course of survey. Further, the assessee has already made surrender of amount and paid taxes voluntarily and the assessee cannot be allowed to withdraw the amount, on which taxes have already been paid voluntarily. Considering the totality of the facts and circumstances, we do not find any justification to interfere with the order of the ld. CIT(A) in confirming the addition of Rs.28,20,240/-. Reassessment u/s 147 - non issurance of notice u/s 143(2) - held that:- AO rightly computed the income of the assessee as per original return in which notice u/s. 143(2) has been validly issued and as such, there was no need to issue any further notice u/s. 143(2) on the invalid revised return filed on 29.12.2008 which was also not taken into consideration by the AO while framing the assessment in the matter. Considering the totality of facts and circumstances, we are of the view that the notice u/s. 143(2) has been correctly issued in this case on the original return of income, on the basis of which the assessment order has been framed by the AO. May be, the AO has wrongly mentioned section 147 in the body of order would not make the assessment order u/s. 143(3) as invalid. - Decided against the assessee.

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• 2012 (8) TMI 59
  Reassessment - There is no dispute to the fact that the return filed on 12-09-2001 was processed u/s. 143(1) and no order u/s.143(3) was passed as mentioned by the AO as well as the CIT(A). Therefore, there was no application of mind by the AO. We find the notice u/s.148 was issued on 03-02-2004 which is within a period of four years from the end of the relevant assessment year. Therefore, in view of the decision of the Hon’ble Supreme Court in the case of CIT Vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd. (2007 (5) TMI 197 - SUPREME COURT) the re-assessment proceedings initiated by the AO is legally valid. Unexplained credit - addition u/s 68 - held that:- Once the assessee discharges the initial burden cast on him by giving the details and the other party having confirmed the outstanding balance, the assessee in our opinion cannot be held responsible for lapse or omission on the part of the other assessee. Addition u/s 41(1) - old liabilities - CIT(A) deleted the addition on account of 5 parties and sustained the addition made by the AO on account of other parties - following the decisionin the case of T.V. Sundaram Iyengar and Sons Ltd., (1996 (9) TMI 1 - SUPREME COURT), order of CIT(A) sustained - decided against the assessee.

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• 2012 (8) TMI 58
  Deduction u/s 37(1) -Payment of compounding fee in lieu of an offence - whether or not penal in nature - legal principles, namely, “ratio decidendi” and the doctrine of stare decisis “Stare decisis et non quieta movere” - held that:- After analyzing and referring various case laws matter remanded back to CIT(A) with the directions to decide the same in accordance with law requiring him to call for and examine the provisions of the Specific Scheme which empowered the GDA to collect the compounding fee.

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• 2012 (8) TMI 57
  Reassessment - jurisdiction u/s 147 - whether the income derived from letting out of the property be treated as ‘income from business’ as against ‘income from house property’ - held that:- As the expenses claimed being not allowable and the AO had reasons to believe that the income escaped assessment because the assessment of such income had to be under the head ‘income from house property’. Accordingly, as rightly pointed out by the learned CIT (A), while concluding the assessment, the AO had not travelled beyond the reasons recorded and, therefore, there was no merit in the allegation of the assessee that the assessment was bad in law. When no scrutiny assessment could have been completed in this case, and when the Assessing Officer realizes that the income has escaped assessment, he is perfectly justified to invoke reassessment proceeding by issuance of notice under section 148 of the Act. AO, vide his orders u/s 143 (3) r.w.s. 260A of the Act dated 25.11.2010 had held the status of the assessee as AOP and also the income derived by the assessee from the subject property was assessed under the head ‘income from house property.’ - the assessee has not come up with any documentary evidence to rebut the Revenue’s stand convincingly. - Decided against the assessee.

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• Customs

• 2012 (8) TMI 81
  Import of explosive - Inspection and Certification agency - General Procedure for Licensing of Restricted Goods - petitioner had issued certificate/form of declaration/undertaking in respect of consignment - Declaration/undertaking that consignment does not contain any type of arms, ammunition, mines shells cartridges, or any other explosive material in any form, either used or otherwise – Held that:- Examination of the imported goods by the customs officers revealed that the same contained Eight Cylindrical shaped, military green colour objects having markings as "Rocket 2.75 war-head with motor MK-66 MOD 4 Ammunition, incendiary UM" - Conditions stipulated in paragraph 2.32.1 read with the aforesaid clause relating to certification were not satisfied - writ petition dismissed

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• 2012 (8) TMI 80
  Refund claims of SAD paid by them under Notification No. 102/2007-Cus. – Held that:- Commissioner (Appeals) considered the contentions of the respondents and sanctioned the refund claim but remanded the matter subject to verification of the documents in support of the claim for refund by the adjudicating authority i.e., CA. certificate, balance sheet and other relevant documents - matter remanded to the adjudicating authority to verify the documents in support of the claim of refund and pass appropriate order

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• 2012 (8) TMI 56
  Import - misdeclaration – goods have been declared as copper dross and the copper content declared is 85% approx. - On actual testing, it is seen that in respect of goods declared as copper dross, the copper content varies between 96 and 97% - Held that:- Mis-declaration on the part of the importer appellant with respect to the copper content under importation - appellant has not placed any purchase orders for the products, especially when the copper content in the product is the main criteria for valuation of the product and the same is much higher than those declared in the import documents - misdeclaration is clearly evident from the records - appellant directed to make a pre-deposit

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• 2012 (8) TMI 55
  Import of vessel - vessel was sent out of the territorial waters for the purpose of repairs – seizure of vessel – provisional release of vessel – petitioner liable to pay duty in respect of the modification/upgradation that has taken place which amount is computed on a provisional basis – Held that:- Petitioners would be required to pay duty assessed provisionally in the amount of Rs. 12.77 crores and for that purpose, they would be at liberty to avail of the credit – Bank guarantee reduced from 20% to 10%

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• Corporate Laws

• 2012 (8) TMI 79
  Scheme of De merger - spinning business was to be demerged as a going concern and transferred to respondent-IRSL - applicant contested agianst scheme stating the transferred undertaking could not be regarded as a going concern apart from the fact that such incomplete transfer would not satisfy the requirement of sub-Section (i) of Section 2(19AA) - Held that:- Upon reading the Scheme of Arrangement in its entirety no hesitation in concluding that the Housing colony as well as common utilities were specifically agreed to be retained and owned by respondent-IRSL - Even the Applicant before entering into the share purchase agreement was aware of the Memorandum of Understanding which specifically stated that housing colony was being offered by respondent-IRSL as a resource to IRTL for five years upon payment of actual cost, thus if respondent-IRSL was not the owner of the common resources and infrastructure, there was no question of it offering the common assets for use to IRTL on payment of cost. This Court is not in agreement with the Applicant's submissions that in a Scheme of Demerger by virtue of Section 2(19AA) of the Act, 1961, all the properties of the undertaking become the property of the resulting company. This Court is of the view that non-transfer of some of the pervious common assets being used by the transferee undertaking will not affect IRTL status as a going concern - infact it is settled legal position that there is no requirement under the provisions of the Act, 1961 or Act, 1956 for transfer of all common assets and/or liabilities relatable to the Undertaking being demerged. Applicant's submission that all common assets that cannot be divided must be transferred to the transferee namely, IRTL overlooks the explicit language of Section 2(19AA)(i) of the Act, 1961, which states that ''all the properties of the undertaking being transferred by the demerged company, immediately before the demerger becomes the property of resulting company by virtue of the demerger." Whether or not Section 2(19AA) of the Act, 1961 has been complied with, is not to be determined pre-merger, but post merger and that too by the tax authorities. Thus if the Scheme of Arrangement is not tax complaint, then the tax authorities will levy capital gains tax, if any, on the transferor, namely, respondent-IRSL - Consequently, the contention urged by the Applicant that in view of Section 2(19AA) of the Act, 1961, the Scheme of Demerger must necessarily comply with Section 2(19AA) which is meant for availing tax concession cannot be read as a mandatory requirement for all schemes of amalgamation/arrangement/de-merger under Sections 391/392/394 of the Act, 1956, thus, the Applicant is in error in contending that the common infrastructure is liable to be made over to them by virtue of reasoning of Section 2(19AA) It is apparent that in the proceedings under Section 392(1)(b) of the Act, 1956, the Court cannot rewrite the scheme approved in the meeting called under Section 391(2) of the Act, 1956; but, it can only make such modification as it may consider necessary for proper working of the compromise or arrangement - when the scheme was sanctioned in the year 2003, both the Transferor and Transferee Companies were owned and managed by O.P. Lohia group but now as both the entities are owned and managed by different business groups. Consequently, to ensure that the scheme sanctioned by this Court is properly implemented, this Court modifies only the dispute redressal mechanism in Clause 36 of the Scheme by directing that in the event of any dispute, doubt or issue arising between the parties, the same shall be referred to a sole arbitrator to be appointed with the consent of the parties - application aginst the Scheme stands disposed of.

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• 2012 (8) TMI 54
  Application for dissolution of company by the Official Liquidator - Held that:- When the affairs of the Company had been completely wound up or the Court finds that the Official Liquidator cannot proceed with the winding up of the Company for want of funds or for any other reason, the Court can make an order dissolving the Company from the date of that order. This puts an end to the winding-up process - considering the facts and circumstances of this case, the liquidation proceedings deserve to be brought to an end - permitting the Official Liquidator to make payments to valuer out of the funds of the Company and to transfer the balance fund available in the Company’s account to the Reserve Bank of India after creating provision or making payment towards the government fee, audit fee and liquidation expenses.

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• Service Tax

• 2012 (8) TMI 103
  Inclusion of CMC charges to the assessable value of the CHA service – Held that:- As per the provisions of rule 5(1) of the said Rules "any expenditure or cost that are incurred by the service provider in the course of providing taxable service are to be included in the value of the taxable service for the purpose of charging service tax - expenditure in respect of CMC charges is incurred by the appellants in discharging their primary responsibility as a CHA - CMC charges are to be included in the assessable value of the taxable service provided by the appellants. Limitation of Time bar - appellants never disclosed the fact that CMC charges are recovered from their customers in the ST-3 returns in which the statutory returns are filed by the assessee, wherein there is a separate column in which the assessees have to show the reimbursable expenses - no merit in the contention of the appellants in respect of time bar also - appeals are dismissed.

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• 2012 (8) TMI 102
  Waiver of pre-deposit – alleged that appellants provided Design Service which is taxable under the Finance Act and had not paid the service tax – Held that:- Appellants made a request before the adjudicating authority for an opportunity to produce evidence to show that the cost of design and drawing are included in the assessable value of patterns/castings and appropriate duty is paid - matter is remanded to the adjudicating authority - appellants volunteered to deposit a sum of Rs.50 lakhs remaining dues shall remain waived

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• 2012 (8) TMI 101
  Application for modification of the stay order - waiver of pre-deposit – Held that:- Appellants have filed a writ petition against the stay order passed by the Tribunal and High Court had dismissed the writ petition - As the order passed by the Tribunal is merged with the order passed by the Hon'ble High Court, hence the Tribunal has no power to modify the stay order - order has granted time to make deposit as per the stay order passed by the Tribunal and the appellants had not complied with the directions of High Court - appeal is dismissed for non-compliance with the provisions of section 35 of the Central Excise Act - appeal are dismissed.

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• 2012 (8) TMI 100
  Royalty payment to Foreign Service provider - service tax paid on being objected by Department - recovery of interest and imposition of penalty for delay in filing - Held that:- As there was no liability to pay Service Tax u/s 66A as it was was enacted w.e.f. 18.4.2006 even if the Service Tax is paid, the question of recovery of interest and imposition of penalty does not arise.

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• 2012 (8) TMI 99
  Penalty under sections 76 and 78 of Finance Act, 1994 – assessee submited that they were under the bona fide impression that they need to pay service tax only on the commission amount retained by the appellants and not on the value including the salary of personnel employed for providing services – Held that:- Appellants' impression that they had to pay service tax on their commission only cannot be considered to be mala fide. Considering that the appellants are a small firm, and the levy was in the early stage and their realisation from the activity was only that of commission. Provisions of section 80 of Finance Act, 1994 invoked and penalty waived.

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• 2012 (8) TMI 74
  Penalty - payment of entire amount of service tax liability and interest thereof before the issuance of show cause notice – Held that:- Provisions of the section 73(1A) of the Finance Act, 1994 will apply in full force in this case, as there is payment of entire amount of service tax liability and interest thereof before the issuance of show cause notice - penalties under Sections 76 and 78 in excess of the 25% of the amount of penalty paid by the appellant set aside

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• 2012 (8) TMI 73
  Waiver of pre-deposit - telecommunication service - applicant provides SIM cards to their customers through their dealers – Held that:- Amount paid as sales tax cannot be considered as sufficient compliance of Section 35F of the Central Excise Act, read with Section 83 of the Finance Act - Tribunal have no power to adjust such payments as the same is created under the Special Act i.e., Customs Act, Finance Act and Central Excise Act - applicant directed to make pre-deposit - penalties under the Finance Act shall remain stayed during the pendency of the appeal.

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• 2012 (8) TMI 72
  Business Auxiliary Service - activity of providing goods transport agency services to their customers - application for waiver of pre-deposit of demand - Held that:- As the service tax has been paid on the whole activity by the service recipient, no service tax is required to be paid by the applicant - a complete case for 100% waiver of demands adjudged against them - in favour of assessee.

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• 2012 (8) TMI 71
  Waiver of pre-deposit duty – denial of benefit of Cenvat Credit on Service Tax paid on the various services utilized by assessee on the ground that the invoices do not reflect the correct name and address of the appellant – Held that:- appellant cannot take shelter under the provisions of the said Rule 9(2) in as much as in terms of Rule 4(a), the basic and primary requirement is that the documents on the basis of which credit is being availed should be in the name of service receiver. Other of units assessee were working from the same premises, is required to be taken into consideration and the fact that appellants have admitted that credit of Rs.9,30,920/- so availed by them was in respect of common services utilized by all the units located in the same premises is indicative of the fact that wrong credit was being availed. appellants are directed to further deposit of Rs.10 lakhs balance amount of duty and entire amount of penalty imposed upon them shall stands waived

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• Central Excise

• 2012 (8) TMI 78
  Refund - import of Industrial Nylon Yarn - Revenue denied the benefit of Notification and respondent paid the higher rate of customs duty under protest - Tribunal set aside the demand and allowed the benefit of Notification - respondent filed refund claim – Held that:- Refund claim was filed as consequential relief in pursuance of the order passed by the Tribunal and the differential duty was paid under protest - no infirmity in the impugned order passed by the Commissioner (Appeals) whereby the refund is sanctioned - appellant failed to show that the burden of duty has not been passed on, the Commissioner (Appeals) ordered the amount of refund to be credited in the Consumer Welfare Fund - no merit in the appeal filed by the Revenue and the same is dismissed.

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• 2012 (8) TMI 77
  Assessable value – transportation charges – Held that:- As per Rule 5 of the Central Excise (Valuation) Rules, 2000, the transportation charges shown separately in the invoice or charge separately are not includable in the assessable value - while calculating the expenses incurred by the appellant on transportation charges, the maintenance of vehicles was also not considered

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• 2012 (8) TMI 76
  Duty demand - on the basis of annual production capacity under Hot Air Stenter Independent Textile Processors Annual Capacity Determination Rules, 1998 – Held that:- Their annual production capacity was first assessed provisionally, which was finalized by order dated 01/07/99 under Section 3A (2) of the Central Excise Act, 1944. Against that they have made a representation to the Commissioner of Central Excise for re-determination of their annual production capacity, as the annual capacity of production was fixed is not proper as there were one Stenter was permanently closed under Section 3A (3) of the Central Excise Act - no re-determination of annual capacity of production was done, therefore, impugned orders are not sustainable - Annual capacity of production has not been determined, following the provisions of Section 3A (4) of the Central Excise Act, 1994 - matter remanded to the adjudicating authority to re-determine the annual capacity of production

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• 2012 (8) TMI 75
  Condonation of delay in filing appeal – appellant submitted that Advocate was suffering from cough and cold and got serious fever, for which he was under bed rest. Therefore, they could not file the appeal in time and there was a delay of 29 days in filing the appeal – Held that:- Applicant could not tell the date when their Advocate fell sick, nor any documentary evidence has been produced in support of their contention - Applicant could not show any sufficient cause for the delay in filing the appeal - application for condonation of delay is dismissed

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• 2012 (8) TMI 53
  Direction to 15% of the duty demanded is unreasonable - Held that:- The petitioner has in no way claimed that the direction to pay 15% of the duty demanded which works out to Rs.one crore is unreasonable that results in substantial hardship so as to cause prejudice its right to be heard - no ground to interfere.

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• 2012 (8) TMI 52
  Unconditional waiver of pre-deposit of interest and penalty - Held that:- As the appellant submits that the appellant was in bona fide belief that they have paid the entire amount of Service Tax on the basis of certificate issued by Chartered Accountant has admitted that the appellant has paid only a sum of Rs.6,24,21,219/- out of Rs.18,08,18,228 - direction to make a pre-deposit of balance amount of along with 25% of penalty within a period of eight weeks.

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• 2012 (8) TMI 51
  Cenvat credit - Job worker of the appellant manufactured certain moulds for the former the ultimate use thereof in manufacture of intermediate goods for the appellant – alleged that mould was not received in the premises of the appellant there was no mould further send by the appellant to the job worker – Held that:- Tools retained by it are property of the appellant and used to make components for the appellant - It was to reduce the exercise of movement of goods and no malafide was attributed or attached to the conduct of the appellant - cenvat credit does not appear to have been claimed malafide - appeal is allowed.

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• 2012 (8) TMI 50
  Cenvat Credit - job worker the goods manufactured by it being dutiable in the hands of the ultimate manufacturer - Only because the goods are exempted, cenvat credit was disallowed – Held that:- When the goods was not exempted goods since that was dutiable the intermittent stage the appellant cannot be denied the benefit claimed – In favor of assessee

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