Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
September 1, 2012
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Penalty imposed u/s 271(1)(c) - additional income disclosed in response to the notice u/s 153C - There was absolutely no need to try and bring the cases under Explanation 5 of section 271(1)(c). - HC
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Expenditure for subdivision of shares of the company - Revenue OR Capital expenditure - held as revenue in nature - HC
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Deduction u/s 80IA - Given the fact that the dyes and the materials were given by the assessee to the job workers, who had merely bestowed their labours, no hesitation in accepting the case of the assessee that it qualify for relief under Section 80IA - HC
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The words "adopted" or "assessed" (as also "assessable") in s. 50C(1) qualify the word "value" preceding it, and not the word "transfer" - there being no assessment by it by the end of the relevant year, i.e., 31-03-2006 cannot be accepted - AT
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Capital Loss - As long as the Revenue could not doubt the sale price of the shares, it would not be open for the Revenue to contend that the assessee had shown loss which it did not really suffer - HC
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Deduction u/s 80IB - sister concern - Deduction cannot be disallowed only on the ground that the product by the assessee has been used as a raw material by the sister concern. - AT
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Notional interest on provision of interest free loan - notional income is not taxable under the Act - AT
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Dis-allowance u/s 40(ba) - interest paid to directors/trustees - The trustees of the assessee trust cannot be described as members of the AOP. - AT
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Merely because an income was offered by another person in its return of income will not exonerate the assessee from inclusion of such income in its return which was earned and received by it - AT
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Estimation of profit - rejection of books of accounts - keeping in view such glaring defects in the books of account and the statement of the appellant during the course of survey A.O. has rightly applied provisions of section 145(3). - AT
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Capital expenditure vs Revenue expenditure - development of components - payments resulted in creation of a commercial right - benefit was of an enduring nature. - capital in nature - AT
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Monuments in the memory of war heroes - preservation of monument would be charitable purpose entitling the assessee to fall within the amended definition enshrined in section 2(15) - AT
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Reopening of assessment – court is only required to see whether there was prima facie some material on the basis of which the assessment could be reopened. The sufficiency or the correctness of the material cannot be considered at this stage. - HC
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Payments to overseas subsidiary towards sub contracting charges will not be liable for deduction of tax at source u/s 195 as there is no income chargeable to tax in India - AAR
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Taxability on the Settlement Amount payable under the Stipulation pursuant to the judgment and Final approval of the US Court - applicant is required to deduct income-tax @ 30% when the settlement amount moves from the segregated account to the initial escrow account. - AAR
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Entitlement to the benefit of Section 80IA - the profit derived form realization of TV/Films rights given on lease - SC
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Assessee in default - non deduction of TDS u/s 194H - Instructions and Rules can only supplement but can never supplant or limit the width of the statutory powers - HC
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Statute does not prohibit or enjoin the Commissioner from registering Trust solely based on its objects, without any activity, in the case of a newly registered Trust u/s 12AA - HC
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Unless and until there is a definite enactment made one could not take advantage of the Minister's Speech to buttress the argument that the import was made consequent on the speech made by the Minister - HC
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Revaluation of stock - non moving stock - deterioration in quality of the ink resulting in erosion of its value - HC
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Set off of brought forward business loss and unabsorbed depreciation - denial - invocation of provisions of Section 79 - change in shareholding - AT
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Payment of Non-compete fees - revenue expenditure vs capital expenditure - Said payment was made for the purpose of running the business and not for the purpose of acquiring the business. - held as revenue in nature - AT
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Deemed dividend – amount advanced to assessee who holds 10% of voting rights – Even though the loan was repaid within a short period the factum of the loan being granted cannot be denied. - taxable u/s 2(22)(e) - AT
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Mere fact that the land in question was agricultural land cannot be a ground to claim for exemption u/s 2(14) as the land is situated within the local limits of Hyderabad Municipal Corporation, and consequently, tax leviable u/s 45 - AT
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Interest on borrowings in respect of house let out – Assessee has not produced any evidence to show that the loan has been taken for acquisition of property. - dis-allowance confirmed - AT
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Deduction u/s 54 - Purchase of the new flat by the assessee will be treated on the date when the assessee has received the possession after it is constructed and not on the date of agreement for purchase when the flat itself was not in existence. Claim u/s 54 allowed - AT
Customs
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Advance licence - when according to the licensing authorities a manufacturer exporter can get the raw materials converted through a jobworker / supporting manufacturer, it would not be open to the Revenue to contend that the manufacturer / exporter cannot take assistance of a supporting manufacturer - HC
FEMA
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Non-resident guarantee for non-fund based facilities entered between two resident entities . - Circular
Corporate Law
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Constitution of a Committee for Reforming the Regulatory Environment for doing Business in India. - Circular
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When there is a bona fide dispute with regard to debt as claimed by the petitioner and when the dispute is likely to succeed in a point of law, it would be highly inappropriate to wind up the respondent-company. - HC
Service Tax
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Delay in filing an appeal - As such the service of the photocopy of the adjudication order for the second time cannot be taken as relevant date of receipt of the order for the purposes of limitation - AT
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Club or association service provided by an association in relation to a common facility set up for treatment and recycling effluent or solid waste is exempted from the service tax. - AT
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Pre-deposit made by the appellants by way of debiting in Cenvat Credit Account is sufficient for the purposes of fulfilment of requirement of pre-deposit - AT
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Service tax - business of real estate development and construction residential houses - for the period prior to 1-7-2010, the appellant’s activity cannot be treated as service provided by them to their customers - AT
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Payment of service tax though not applicable - If that amount is to be voluntarily permitted to be utilized towards CENVAT Credit, it is apparent that for late payment of service tax, interest amount needed to be paid - HC
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Completion and finishing services – benefit of Notification No. 1/2006-S.T. as well as 12/2003 not allowed even if VAT has been paid on material involved - AT
Central Excise
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Valuation under central excise - since the assessing authority could not do the valuation with the help of the other rules, has resorted to best judgment method and while doing so, has taken the assistance of the report of the 'Cost Accountant' - in favour of revenue. - SC
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Online platform to facilitate the sale of goods by various merchants - not a manufacturing activity but liable to service tax - AAR
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Maintainability of appeal – opinion by the Committee of Commissioners - there should be a meaningful consideration which should be reflected on the note sheets - appeal dismissed - HC
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Whether no provision in the Act empowering the Board to issue directions to the Assessing Authorities or the Appellate Authorities in the matter of deciding disputes - SC
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Demand of interest – if the entry is reversed it amounts to not taking the credit at all and therefore when admittedly no duty is payable, the question of payment of interest on the delayed payment of duty would not arise - HC
VAT
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Claim of 100% set off for tax paid on the coal purchased - Merely because heat is generated in the process it cannot be a ground to hold that Noncooking coal so used was used as fuel. The above observations clearly shows that the coal used in the process of manufacturing of sponge iron is used as a raw material and not as a fuel - HC
Case Laws:
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Income Tax
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2012 (8) TMI 813
Addition on undisclosed income - Penalty u/s 271(i)(c) - ITAT deleted the addition - Held that:- On issuing summons to the share applicants only 9 could be served and on examining bank accounts of the share applicants from which the share application amounts were subscribed it was noticed a regularity, a pattern, in the methodology of infusing cash into the accounts, and within a short while afterwards, withdrawing sums to pay for the shares. The PAN/GIR numbers of the share applicants furnished by the assessee were not found to be correct, upon verification from the concerned Income Tax officers of the ward(s) in question. The assessee was given opportunity to produce the share applicants’ principal officers, but did not do so. The share applicants’ addresses too were incorrect - thus additions are warranted to be made on account of share application moneys not found to be genuine - against assessee.
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2012 (8) TMI 812
Penalty imposed u/s 271(1)(c) - additional income disclosed in response to the notice u/s 153 C - assessee contested that levy of penalty to be under Explanation 5 of Section 271(1)(c) - Held that:- It was totally unnecessary on the facts of these cases to invoke Explanation 5 to Section 271(1)(c) as income not disclosed in the return u/s 139 but detected subsequently and established to be assessee's income and assessed accordingly is concealed and fully covered by Section 271(1)(c). There was absolutely no need to try and bring the cases under Explanation 5 of section 271(1)(c). The proposition that assessee has an obligation to show correct income under Section139 and if it is not done, Revenue is entitled to invoke provision to Section 271(1)(c) notwithstanding that correct income is shown in response to notice under Section 148 of the IT Act or in some other proceedings is well established and is beyond doubt. For the purpose of present proceeding, there is no material difference whether the returns were filed in response to notice under Section 148 or under Section 153C of the IT Act. As in the present case the assessee did not disclose the income or the assets any time in the returns filed by them. Furthermore, the search conducted was not in their premises, as it was in the premises of someone else. Having regard to the restricted nature of the phrase “books of account” the particulars found in the premises of someone else could not be said to have been “in the course of search”, because the present assessee's premises were not searched. Nor did they make any disclosure or statement, or surrender their income, during the course of search. They filed a return, which for the first time, disclosed the hitherto concealed income. Their explanations were not of the kind which therefore, fell within the exception to Explanation 5 of Section 271 (1) (c) - against assessee.
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2012 (8) TMI 811
Deduction for expenses incurred to earn amounts which are exempted from tax - Held that:- As Kolkata High Court on the interpretation of Section 14A said that no substantial question of law arises in this case as there is no judgment of the Kolkata High Court on the interpretation, thus as Section 14A has been introduced in the Act to say that expenses incurred to earn the amount, which is exempted from tax, would not be entitled to a deduction he matter is remitted to the High Court for de-novo consideration in accordance with law.
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2012 (8) TMI 810
Expenditure for subdivision of shares of the company - Revenue OR Capital expenditure - Held that:- The expenditure admittedly was made for the purpose of sub-division of the shares. It is not even the case of the Department that by such arrangement, share capital of the assessee company in any manner increased. Such sub-division was made only for the purpose of easy trading of the shares in the market. Such arrangement, therefore, may result into some benefit for the shareholders of the company, nevertheless it is unable to see how the revenue can argue that such division of shares resulted into any enduring benefit for the company - as in case of sub-division of the shares also, there is no increase in the share capital of the company and , the company gains enduring benefit is without any support from the record - in favour of assessee.
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2012 (8) TMI 809
Ineligibility for deduction u/s 80IA - the assessee is not engaged in any industrial activity of its own except assembling on job work basis - ITAT allowed the claim - Held that:- The assessee procured raw materials and components and were handed over to the job contractors to make use of the same in the manufacture of grinder parts. The assessee exercised supervision and control in the manufacturing of the parts done by the job workers on the materials supplied in according to the specification in the dyes supplied by the assessee. They were subjected to quality control too. Thus even though the assessee had not employed its own employees, yet, the fact is that at every stage the assessee had extracted control over the job work as though they were employees of the assessee. Given the fact that the dyes and the materials were given by the assessee to the job workers, who had merely bestowed their labours, no hesitation in accepting the case of the assessee that it qualify for relief under Section 80IA - in favour of assessee.
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2012 (8) TMI 808
Acceptance of fresh evidence by CIT(A)- Revenue appeal on violation of Rule 46A of the I.T. Rules, 1962 - Held that:- The copy of the assessees's letter to the AO exhibits that one copy each of the two deeds dated 15-01-1998 and 26-05-2006, i.e., the two dates on which the entire bunch of 15 deeds were executed, were filed as specimen copies before the AO, the other deeds being identical in all other respects. Had the AO wanted, he averred, the assessee could have supplied the copies of all the other deeds as well which was confirmed by DR as forming part of the assessment record - could not demonstrate any wrong assumption of fact/s by the AO - against revenue. Addition in the sale value consideration for computing long term capital gain u/s 50C - difference in value as per the valuation of stamp duty authority and as declared by assessee - Held that:- Section 50C stands co-opted on the statute by Finance Act, 2002, with effect from 01-04-2003 and would apply in respect of capital gains arising on the transfer of any capital asset, being land or building or both, chargeable u/s. 45 of the Act for A.Y. 2003-04 or any subsequent year. As such, the impugned capital gains, being chargeable u/s. 45 for the current year, i.e., AY 2006-07, section 50C would be per se applicable - The words "adopted" or "assessed" (as also "assessable") in s. 50C(1) qualify the word "value" preceding it, and not the word "transfer", thus the assessee's case that the assessment of the fair market value of the property (land) by the SVA was done only on 27-11-2007 and, therefore, there being no assessment by it by the end of the relevant year, i.e., 31-03-2006 cannot be accepted - in favour of revenue.
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2012 (8) TMI 807
Disallowance of deferred revenue expenses written off - CIT(A) deleted the addition - assessee distributed the advertisement expenses towards brand building over a period of four years - Held that:- As decided in ACIT vs. Ashima Syntex Ltd. [2008 (10) TMI 298 - ITAT AHMEDABAD-B] the concept of deferred revenue expenditure is essentially an accounting concept and alien to the Act - deferred revenue expenditure denotes expenditure for which a payment has been made or a liability incurred, which is essentially revenue in nature but which for various reasons like quantum and period of expected future benefit etc., is written off over a period of time e.g., expenditure on advertisement, sales promotion etc. - thus advertisement expenses towards brand building are revenue in nature nor any material has been placed before us by the Revenue, suggesting that any tangible or intangible asset has been created by the assessee - in favour of assessee. Disallowance of bad debts written off - CIT(A) deleted the addition - Held that:- As decided in T.R.F. LTD. Versus COMMISSIONER OF INCOME-TAX [2010 (2) TMI 211 - SUPREME COURT] it is a well-settled law that after 1st April, 1989 it is not necessary for the assessee to establish that the debt, in fact, has become irrecoverable. It is enough if the bad debt is written off as irrecoverable in the accounts of the assessee - in favour of assessee.
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2012 (8) TMI 806
Re-opening of assessment - Held that:- As that power to reopen an assessment is not a power to review an assessment the power to reassess has to be exercised only on fulfilment of certain pre conditions such as tangible material to come to a conclusion that there has been escapement of income - As in the present notice, it is an admitted position that facts had been disclosed and the AO passed his order of assessment on 28/3/2003 for the assessment year 2000-01. Further, the issue on which the assessment is being sought to be reopened was considered by the AO and accepted by his order dated 28/3/2003 and the present proceedings emanating from the notice dated 28/12/2004 under Section 147/148 is bad in law as the same is based on mere change of opinion - in favour of assessee.
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2012 (8) TMI 805
Disallowance of Capital Loss on Transfer of shares - invalid transfer of the shares which were pledged with the IDBI Bank - Held that:- The assessee did transfer whatever rights it had in the shares to the purchaser company. If such transfer is not recognized by the IDBI and there are other legal implications of breach of undertaking given to IDBI, such issue would have to be thrashed out between the concerned parties but insofar as income tax proceedings are concerned, that by virtue of section 2(47), the assessee was entitled to claim that upon transfer of shares or interest thereon, it had suffered long term capital loss which it was entitled to set off against the capital gain on sale of shares during the same previous year. In the present case, of course, there is a further angle of the shares in question being pledged to IDBI and therefore it would not be possible for the assessee to deliver the original share certificates to its purchaser along with the duly signed transfer forms. As already noted, such special angle in the present proceedings is not concerned by this court with such internal possible dispute between the assessee and the said financial institution. This, however, by itself would not establish that the sale of shares was only a paper transaction and a device contrived by the assessee to claim loss which it did not suffer and thereby seek set off against the capital gain received by it during the year under consideration as there is no provision in the Act which would prevent the assessee from selling loss making shares. Simply because such shares were sold during the previous year when the assessee had also sold some shares at profit by itself would not mean that this is a case of colourable device or that there is a case of tax avoidance - As long as the Revenue could not doubt the sale price of the shares, it would not be open for the Revenue to contend that the assessee had shown loss which it did not really suffer - in favour of assessee.
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2012 (8) TMI 804
Entitlement to carry forward losses from the previous year 2001-02 and 2002-03 u/s 79 - whether the company-investors came within the description of those owning “not less than 51% of the voting power” beneficially through the two individual shareholders - Held that:- As at the time of original incorporation (within the assessment year 2000-01) on 16.8.2000, the arrangement between the shareholders and real owner i.e. foreign investor companies, was always that the former were to facilitate the process awaiting approval. While such conclusion is permissible in law, lack of any discussion in the present case by the lower authorities should have led the Tribunal to either examine or remand the matter for reconsideration. As appears from a reading of the Tribunal’s order and FEMA order, at the time of incorporation, the share capital was Rs. 2,000/- and the foreign investors infused Rs.49.90 lakhs during the subsequent assessment year which was treated as share application money and later appropriated as share capital after allotment of shares to the foreign investors, thus this disclosed arrangement is not forthcoming from the record , thus the matter has to be remitted to the AO for reconsideration of the entire record and returning findings with specific reference to the arrangement, if any, which existed between original shareholders of the company and the foreign investors - in favour of assessee by way of remand.
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2012 (8) TMI 803
Whether the deduction u/s 80IB can be allowed in relation to the profit earned by the assessee from job work activity done on behalf of the sister concern - whether the job work activity can be considered as manufacturing activity - Held that:- There is no provision in section 80IB as in the case of section 80IA that deduction cannot be allowed in case of contract work and therefore, the deduction has to be allowed in case the assessee had manufactured the goods on behalf of the assessee on job work basis. What constitutes “manufacture” is well settled that it is only when the change or a series of changes, take the commodity to the point where commercially it can no longer be regarded as original commodity but is recognized as a new distinct article, manufacturing can be said to have taken place. Deduction u/s 80IB cannot be disallowed only on the ground that the product by the assessee has been used as a raw material by the sister concern. In case the product is a distinct commercial product different from the raw materials used by the assessee, the claim has to be disallowed. We, therefore, set aside the order of the CIT(A) and restore back the matter to the AO for limited purpose to verify whether emulsifier produced by the assessee on behalf of the sister concern is a new commercial product difference from the raw materials used and recognized as such in the market.
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2012 (8) TMI 802
Addition u/s 69A - search - alleged unexplained advances and unexplained investment in pawned silver articles on ground of shortage of funds noticed in Girvi register and pawned silver articles found from the searched premises - assessee contended that there was no shortage of fund for making advances as the opening capital and incomes generated during the A.Y. under consideration was sufficient enough to explain this shortage, and appellant was engaged in money lending business for which silver articles were pawned with the appellant group by borrowers of money - Held that:- There is uncontroverted finding in the impugned order that capital was available with the assessee before the search. Even as per the appraisal report, prepared by the department, the opening capital from Girvi register was arrived at Rs.1,12,85,080/- and the assessee group claimed that it was doing money lending business for the last 40 years. In view of this uncontroverted claim, we are of the view that the AO misdirected himself ignoring both the opening capital and repayment receipt, while making the additions. Notional interest on provision of interest free loan - assessee contended that it was personal loan given to the family friend to facilitate him to purchase the land and the property was merely mortgaged as a security and was to be returned back after return of money - Held that:- Addition was made by the AO on the plea that full details of the transactions were not furnished by the assessee and he drew adverse inference. In the absence of any positive material brought by the Revenue, addition is deleted since notional income is not taxable under the Act - Decided in favor of assessee
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2012 (8) TMI 801
Dis-allowance u/s 40(ba) - interest paid to directors/trustees - assessee, a registered trust, being assessed as AOP - Held that:- Whether or not the assessee is assessed in the status of AOP or individual, it does not matter. The dis-allowance u/s 40(ba), can be made only with regard to the interest paid to the members of the AOP. The trustees of the assessee trust cannot be described as members of the AOP. See Shardaben Bhagubhai Mafatlal Public Charitable Trust (2000 (9) TMI 45 - BOMBAY HIGH COURT ). CIT(A) was justified in deleting the said dis-allowance - Decided in favor of assessee Dis-allowance made u/s 40A(2)(b) - interest paid on unsecured loans @ 18% - AO applying rate of 15% based on the lending rate of banks - Held that:- It is pointed out that the banks lend money after accepting security and the trustees had given unsecured loans to the trust. Also, Tribunal in various cases has held that interest paid at 24% p.a. cannot be said to be unreasonable. In view of aforesaid, matter restored to file of AO to consider de novo, and contention of the assessee with regard to the fact that the payment of interest at 18% p.a.is not excessive and unreasonable
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2012 (8) TMI 800
Addition u/s 68 - unsecured loans - assessee contended the same to share application money received during the last year and not during the year under consideration and transferred to the head “unsecured loan” by passing necessary journal entries during the year - Held that:- It is found that complete details of these share applicants such as name, address and ledger account showing receipt of application money through Banking channels were submitted before the AO to show the identity and genuineness of the transaction. Also, in subsequent AY 2008-09, assessee company has duly issued share certificate to all these share applicants. Confirmations of share applicants and share certificates also furnished. In view of aforesaid and as no new loans were taken during the year, the AO was not justified in making addition u/s 68 - Decided in favor of assessee
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2012 (8) TMI 799
Addition on account of undisclosed brokerage income received on sale of land not offered for tax – assessee contended that income was earned by sister concern of the assessee M/s. SPL, however records reveal that SPL as not engaged in brokerage business and did not had requisite manpower – Held that:- It is found from record that brokerage income was received by the assessee in respect of services rendered by it for sale of land. All the work relating to brokerage income was undertaken by the assessee company, but this income was not offered in the return of income. Mere entering of MOU between the assessee and its sister concern SPL will not allow the assessee to divert its income to the sister concern. Since the rendering of services for which income was not only accrued but also received by the assessee, we do not see any reason for not offering the same in assessee’s hands. It was actual income of the assessee, therefore, the AO was justified in making addition of income actually earned and received by the assessee during the year under consideration. Merely because this income was offered by SPL in its return of income will not exonerate the assessee from inclusion of such income in its return which was earned and received by it – Decided against assessee
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2012 (8) TMI 798
Addition u/s 68 - unexplained loan credit from M/s C and M/s A - part of transaction with M/s C held genuine and addition made deleted, other part sustained - confirmation with identity was not presumed sufficient compliance - Held that:- In respect of amount of Rs.2 lacs from M/s A, it is found that confirmation was available with signatures of the partners and PAN. In DCIT v. Rohini Builders (2001 (3) TMI 9 - GUJARAT HIGH COURT), it has been held that identity of creditor could be proved from PAN. As far as loan from M/s C was concerned, the Tribunal has rightly observed that Rs.1,50,000/- was part of the same total amount which was considered for deleting the addition u/s 68. When two amounts belonged to the same transaction, and in respect of one part, the confirmation was available from PAN and the statement of account filed by the very party, the creditworthiness and genuineness of the whole transaction could have been considered from those documents. Appeal of revenue dismissed.
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2012 (8) TMI 797
Estimation of profit at 10%, based on the statement recorded during course of survey after considering the incriminating documents found at assessee’s business premises - books of accounts rejected in view of the admission of assessee of estimation of profit - subsequent retraction of statement - Held that:- During the survey operations, on the basis of incriminating documents the appellant himself admitted that the accounts of contract business were maintained in a rough manner. Appellant also admitted illegal payments. Assessee had not only accepted 10% net profit but also computed profit thereon and surrendered income and also agreed to pay tax thereon. Therefore, keeping in view such glaring defects in the books of account and the statement of the appellant during the course of survey A.O. has rightly applied provisions of section 145(3). When the profit is accepted by the assessee at 10 %, all the expenditure/deductions allowable under the provisions of Section 30 to 38 are deemed to be allowed. Accordingly, we confirm the action of the lower authorities for dis-allowance of claim of depreciation. It is not merely question of rejection of books of account, but the issue of application of 10% profit rate as accepted by the assessee himself is based on the incriminating documents found during survey and the non-maintenance of basic records to indicate true and correct profit, therefore, plea of the assessee to the effect that the rate of profit decided by the AO in cases of other civil contractors should be applied, is of no substance where facts are materially different - Decided against assessee
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2012 (8) TMI 796
Capital expenditure vs Revenue expenditure - development fee paid to manufacturer (foreign company) based on an agreement, which required manufacturer to supply the required quantities of the items(developed as per its specification) to the assessee for a period of five years - development fee developing Liquid Crystal Display Units – assessee contending the same to be revenue in nature - Held that:- It is undisputed that payments were made for customized products. Also, if the components so developed were sold to any other persons by M/s.Fujitsu, then royalty was payable to assessee. Hence, it led to the creation of a type of asset, which could give rise to royalty income to the assessee in future. Therefore, payments resulted in creation of a commercial right to the assessee over such developed components. Further, benefit was of an enduring nature. Same has been rightly held as intangible asset eligible for depreciation. Moreover, assessee himself has treated it as a capital out go and claim of it being revenue in nature was never made by filing a revised return. In the original return, assessee had itself claimed only depreciation – Decided against assessee
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2012 (8) TMI 795
Application for registration filed u/s 12A – rejection on ground of non-charitable purposes – assessee-institution formed with primary object of setting-up suitable memorials to perpetuate the memory of National War heroes – Held that:- The Finance No. 2 Act, 2009 with retrospective effect from 1.4.2009 had inserted 'the preservation of environment or preservation of monuments or places of objects of artistic or historic interest' as part of the definition of 'charitable purpose' within the meaning of section 2(15). Admittedly, assessee is desirous of constructing monuments in the memory of war heroes and once such monument is constructed, the preservation of the said monument would be charitable purpose entitling the assessee to fall within the amended definition enshrined in section 2(15). The assessee has not constructed any such war memorials till date. However, perusal of other objects of assessee like setting up educational institutions, arranging seminars, and further to inculcate moral, spiritual, physical and patriotic spirit in the public in general, reflect the nature of advancement of other objects of general public utility. Consequently, the assessee is entitled to the benefit of registration u/s 12AA – Decided in favor of assessee
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2012 (8) TMI 794
Reopening of assessment – after a period of about six years - petitioner contended that the fact regarding the show-cause notice issued by the customs authorities as well as the report in the newspaper and the electricity theft were well within the knowledge of the Assessing Officer while framing the original assessment – Held that:- If the Income-tax Officer had considered and formed an opinion on the said material in the original assessment itself, then he would be powerless to start the proceedings for reassessment - Income-tax Officer had not considered the material and subsequently came by the material from the record itself, then such a case would fall within the scope of section 147(b) of the Act. In the circumstances, the said contention also does not merit acceptance - pre-requisite conditions necessary for assumption of jurisdiction under section 147 of the Act after the expiry of a period of four years from the end of the relevant assessment year, having been satisfied - Reopening of assessment upheld Though various contentions have been advanced by the learned advocate for the petitioner contending that the electricity was being used only by the contractors and that the petitioner was not utilising the electricity for production and that the machinery on which depreciation had been claimed by the petitioner was leased out to the contractors and as such, the petitioner did not have any unaccounted production on account of theft of electricity ; all those contentions relate to the sufficiency of the reasons recorded by the Assessing Officer. It is well settled legal position that while examining the validity of proceedings under section 147 of the Act, the court is only required to see whether there was prima facie some material on the basis of which the assessment could be reopened. The sufficiency or the correctness of the material cannot be considered at this stage.
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2012 (8) TMI 787
Reopening of assessment - non inclusion of loss from trading goods for calculating of deduction u/s 80HHC - Held that:- As on the issue of excess deduction allowed under section 80HHC, the assessee has given his consent for making addition - Close perusal of the reasons recorded would immediately establish that, quite apart from no suggestion in the reasons regarding any attribution on the part of the assessee in fully and truly not disclosing material facts, all facts necessary for framing the assessment with respect to the said issue were very much before the AO when he previously took the return of the assessee for scrutiny assessment. - Decided in favor of assessee. Attempt, on the part of the Assessing Officer to rope in question of deemed dividend under section 2(22) needs to be noted only for rejection out of hand as in view of the settled legal position, if the reopening of assessment fails, on account of non-existence of reasons for such reopening, the Revenue cannot either sustain such reopening or bring within the assessment proceedings any other head of escaped income not mentioned in the reasons for reopening - in favour of assessee.
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2012 (8) TMI 781
India and Australia DTAA - applicant acquired 100% equity of an Australian company - whether the payments made to Infosys Australia for the sub-contract work is chargeable to tax in India, OR under the DTAC - Held that:- The source of income of Infosys Australia has to be fixed as India as no services are performed in India by Infosys Australia the source could be the payer. It cannot be held under the circumstances, on the materials available, that Infosys Australia is making available any technical service to the applicant so as to satisfy the requirement of clause (g) of paragraph 3 of Article 12 of the DTAC. As what is paid by the applicant to Infosys Australia is fees for technical services, the question of the existence of a Permanent Establishment does not arise. What is paid to Infosys Australia is fees for technical services under section 9(1)(vii) of the Act, but it is not royalty in terms of Article 12 of the DTAC between India and Australia in terms of the requirements of paragraph 3(g) of the said Article. Payments to overseas subsidiary towards sub contracting charges will not be liable for deduction of tax at source u/s 195 as there is no income chargeable to tax in India.
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2012 (8) TMI 780
Taxability on the Settlement Amount payable under the Stipulation pursuant to the judgment and Final approval of the US Court - whether the applicant is required to deduct income tax u/s 195 at the time of deposit of the Settlement Amount into the Initial Escrow Account to the final Escrow Account - Held that:- Under the terms of the settlement subsequently approved by the Court,three stages in this transaction of IC (Indian Company), First, when IC deposits the amount in the segregated account in India in its own name, second when it goes from the segregated account to the initial escrow account in New York and third, when it moves from the initial escrow account to the final escrow account to be treated as Qualified Settlement Fund (QSF)- The segregated account stood in the name of IC (Indian Company)and the interest earned on the deposit belonged to IC and the principal deposited stood transferred to the initial escrow account at the conversion rate prevailing on the date of transfer of the fund. The interest was to the benefit of IC and the title to it did not pass to QSF. The right to sue arose out of the misrepresentation of IC, by the alleged manipulating of the financial statements of IC with the alleged connivance of A and B, followed by the confession of the Managing Director of IC about the inaccuracy of the financial statements. All these took place in India. The suit could be filed in India - On a settlement of the class action, the sums were agreed to be paid and the source of the compensation is the alleged tort perpetrated in India. Therefore, the right to the compensation arose in India. The source of the compensation is the alleged tort in India - Once it is found chargeable to tax in India, IC will have the obligation to withhold tax on the amount under section 195 on the transfer of the fund from the segregated account in India to the initial escrow account in the U.S. When a settlement is arrived at subject to the approval of Court and steps are taken thereunder, then the approval of court will be approval of each step taken as part of the settlement. That would mean that IC would lose its title to the fund from the date of deposit once the court approved the settlement subject to the terms of the settlement, like the stipulation regarding interest earned in the segregated account and the right to withdraw the taxes that may be found payable in India from the initial escrow account, thus the amount deposited by IC as part of the settlement of the class action dispute with Lead counsel is income from other sources in the hands of Lead counsel or the QSF and that income arises in India - the applicant is required to deduct income-tax @ 30% when the settlement amount moves from the segregated account to the initial escrow account.
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2012 (8) TMI 779
Entitlement to the benefit of Section 80IA - the profit derived form realization of TV/Films rights given on lease - Held that:- As ITAT on the basis of the rule of consistency and has remitted the case to the AO for Assessment Year 1999-2000 as no material was brought on record indicating the process undertaken or the activity undertaken by the assessee which would constitute manufacture or processing of goods under the Explanation to Section 33B the assessee has succeeded before the Assessing Officer on the matter being remitted back to the Assessing Officer for the Assessment Year 1999-2000 in respect of other assessment years also and it has been held that the activity undertaken by the assessee constituted manufacture under the Explanation to Section 33B - in favour of assessee. This case is remitted to the High Court to consider whether the Revenue has accepted the order of the Assessing Officer/CIT(A) for the Assessment Year 1999-2000 in favour of the assessee
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2012 (8) TMI 778
Assessee in default for non-compliance with Section-194H - imposed a TDS liability on Commission or brokerage - Held that:- The use of the expressions “discretion” and “subject to such conditions as he may think fit to impose in the circumstances of the case” imply that AO is under a duty to apply his mind and after taking into account the necessary and appropriate circumstances, pass the most suitable order as may be warranted on the facts before him. The Instructions relied upon only reinforce the element of discretion; by no means can it be construed as limiting the choice of the AO who may have a greater latitude in taking into account other circumstances depending on the facts of the given case. It is a cardinal principle of construction that when a legislation confers power, its amplitude cannot be cut down by instructions or rules or regulations made by subordinate authorities. Instructions and Rules can only supplement but can never supplant or limit the width of the statutory powers - In this case, the AO as is evident from a reading of the impugned order has not applied his mind at all to the facts much less considered what are the circumstances which either justify the grant of relief or its refusal. Furthermore, even the petitioner does not appear to have been given any opportunity to make even a briefest submission in support of its case - writ petion allowed - in favour of assessee.
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2012 (8) TMI 777
Denial of registration as charitable trust under Section-12AA (1)(B) - no charitable activity had in fact taken place since the society was a newly established one - Held that:- Considering the procedure for registration as lead in Section 12AA the statute does not prohibit or enjoin the Commissioner from registering Trust solely based on its objects, without any activity, in the case of a newly registered Trust. The statute does not prescribe a waiting period, for a trust to qualify itself for registration. When the society/trust of assessee itself was formed on 30.05.2008 with the money available with the trust, one cannot expect them to do activity of charity immediately and because of that situation the authority cannot come to a conclusion that trust was not intending to do any activity of charity. In such a situation the objects of the trust have to be taken into consideration by the authority and the objects of the trust could be read from the trust deed itself - in favour of the assessee
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2012 (8) TMI 776
Disallowance of deduction u/s. 80M - addition of gross dividend without deducting estimated expenses there from - Held that:- Section 20 refers to deduction from interest on securities in the case of banking company whereas Section 80M comes under Chapter VI-A of the Income Tax Act referring to special deduction in respect of inter corporate dividends - deductions contemplated by section 80M referred to actual expenditure whereas, deductions contemplated by section 20(1) are estimated proportionate expenses and interest, therefore, one cannot import deductions from interest on securities in the case of a banking company under section 20(1) into the deductions contemplated by section 80M - as decided CIT Vs. United Collieries ltd. [1992 (4) TMI 18 - CALCUTTA HIGH COURT ] the special deduction u/s 80M is allowable on the net dividend which is arrived at after taking into account actual expenditure incurred by the assessee in earning the dividend income and that there was no scope for any estimate of expenditure being made and there was no scope for allocation of notional expenditure unless the facts of a particular case so warranted - in favour of assessee. Unaccounted expenses under the head making up charges - Held that:- As payments were made by account payee cheque on bills raised by the contractor/job workers and tax at source had also been deducted in respect of the aforesaid payments made for making up charges to the contractor/job workers, it is not necessary that in every case expenses are to be allowed only upon confirmation letters being filed from the recipients of the amounts - as the expenditure is backed by considerable evidence, including the registers maintained as per the requirement of the Central Excise Authorities the claim is to allowed - in favour of assessee. Change in the method of valuing closing stock - Held that:- Any change in the method of valuing closing stock was not done to undervalue profit and there was no mala-fide intention on the part of the respondent-assessee and the Accounting standard issued by the Institution of Chartered Accountants of India made it mandatory that the inventories should be valued at the lower of costs or the net realizable value - there is no need to change the valuation of the opening stock for the year when there is change in value of the closing stock due to a change in the method - the valuation of closing stock on the basis of cost or net realizable value which is lower, done by the assessee which is mandatory requirement of law cannot be faulted - in favour of assessee.
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2012 (8) TMI 775
Unexplained investment in Gold - assessee contested against no nexus or proximity between the alleged acquisition of primary gold and the investment in Gold Bond Scheme - Held that:- It is no doubt true that all that was seized was only Gold Jewellery from the premises of the assessee and there is hardly any explanation from the assessee as regards the import of gold using the services of two persons about whom the assessee was not in a position to say anything - There is equally no explanation as regards the keeping of the gold for the period of nine months except for the Finance Minister's speech proposing a Scheme on Gold Bond investment in the course of his Budget Speech on 29.2.1992 for the year 1992-93 but unless and until there is a definite enactment made one could not take advantage of the Minister's Speech to buttress the argument that the import was made consequent on the speech made by the Minister - against the assessee
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2012 (8) TMI 774
Disallowance of Guest House expenditure u/s 32 - Held that:- As decided in Britannia Industries Limited Versus CIT And Another [2005 (10) TMI 30 - SUPREME COURT]disallowance of a sum, which was claimed by the assessee as expenses towards rent, repairs, depreciation and maintenance of a guest house which was purportedly used in connection with the business of the company - against assessee. Deduction u/s 80HH, 80I and 80IA are not allowable in view of Section 80AB - Held that:-when separate books of accounts are maintained by these Units and there was no mixing up of accounts of one unit with the other and there was no inter-dependency, the income earned from export goods from the Bangalore Unit merited to be considered independently for 100% relief as one falling under Section 80HHC(3)(a) of the Income Tax Act, the question of applying the formula did not arise - the assessment on the relief under Chapter VIA be set aside and the matter be remanded back for working out the relief, keeping however in the background that the relief under Chapter VIA cannot exceed the business income arrived at by the Officer.
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2012 (8) TMI 773
Depreciation on Motor cars - ITAT entitled the assessee to depreciation at the rate of 50% as against 20% fixed by AO - Held that:- As it is agreed that the vehicles in the present case are light motor vehicles (LMV) Rule 5(1) of the Income Tax Rules, 1962 defines that Depreciation on it subject to the provisions of sub-rule(2), the allowance under clause (ii) of sub-section (1) of section 32 in respect of depreciation of any block of assets shall be calculated at the percentages specified in the second column of the Table in Appendix-I. As per APPENDIX-I PART-A (TANGIBLE ASSETS), III MACHINERY AND PLANT (3) (vi)Note 6 of the table “Commercial vehicle” means …............. “light motor vehicle” , thus vehicles in respect whereof depreciation has been claimed by the respondent at 50% per annum are light motor vehicles and that the above provisions of the Act and the Rules apply in the present case - in favour of assessee.
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2012 (8) TMI 772
Revaluation of stock - non moving stock - deterioration in quality of the ink resulting in erosion of its value - Held that:- As accepted by both the authorities i.e. CIT (A) and the Tribunal the assessee's valuation of closing stock after having reduced the amount attributable to loss on account of slow moving/ non moving stock. It is not alleged that the finding of the authorities is perverse - as it is not disputed that the valuation of the closing stock has been taken as the valuation of the opening stock in the subsequent assessment year and also that the valuation of the inks gets depreciated due to passage of time as a consequence of deterioration of quality being evident of the Chemical Engineer to support its contention that value of some chemicals in stock had eroded and consequently they had to be revalued - ITAT was correct to delete the addition - in favour of assessee.
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2012 (8) TMI 771
Set off of brought forward business loss and unabsorbed depreciation - denial - invocation of provisions of Section 79 - change in shareholding - shares of the company carrying more than 51% of the voting power were beneficially held by the new shareholders - Held that:- There is no dispute to the fact that the shareholding pattern has changed on 10-09-2003 and the assessee had accumulated business losses on that date. It is also found that various exceptions provided in the said provisions are not applicable to the facts of the case. Therefore, no infirmity found in the order of CIT(A) denying set of brought forward business loss and unabsorbed depreciation - Decided against assessee
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2012 (8) TMI 770
Validity of revisionary order passed u/s 263 - proceedings initiated on ground that assessee had claimed a sum of Rs. 3.47 crores towards “loss of fixed assets sold, written off, discarded, etc under the head “Manufacturing and other expenses” - though the said amount was added back, depreciation on same was wrongly allowed even though they were not put to use - CIT(A) alleged non-allowability of depreciation on ground that assets are not used and non-verification by AO - assessee claimed that once an asset become part of the block of assets then it loses its individual identity and depreciation is allowable on the entire block Held that:- It is found that proper enquiry was made by AO during assessment proceedings. So far as issue of depreciation allowed on assets which have entered into the block of assets but not used during the year is concerned, the same in our opinion is a debatable issue. Allegation of CIT of inadmissible depreciation on assets not used in the business in our opinion is a possible view. For assuming jurisdiction u/s.263 the twin conditions namely (i) the order is erroneous and (ii) the order is prejudicial to the interest of the revenue must be satisfied. In the instant case the order may be prejudicial to the interest of the revenue because of higher allowance of depreciation but cannot be said to be erroneous since the AO has taken a possible view. See Malabar Industrial Company Ltd. (2000 (2) TMI 10 - SUPREME COURT ). Therefore, CIT in our opinion is not justified in assuming jurisdiction u/s 263 - Decided against Revenue
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2012 (8) TMI 769
Penalty u/s 271(1)(c) - dis-allowance of management fee - business expediency - Held that:- Confirming the quantum addition or acceptance of the quantum addition itself cannot be a reason for levy of penalty. Assessment proceedings and penalty proceedings are two different proceedings and one is not substitute to the other. To levy penalty u/s. 271(1)(c), there should be conclusive evidence to prove that there is concealment of income or furnishing of inaccurate particulars of income. Where the assessee came forward with additional income though after deduction on account of that the assessee was not in a position to explain properly, and express remorse, in its conduct un-hesitantly, the Assessing Officer might have to exercised the discretion in favour of such assessee as otherwise the expression ‘may’ in section 271(1)(c) of the Act remains redundant. If it is to be understood that in a case of admitted concealment penalty is not automatic. The case before us is most befitting case to exercise such discretion, particularly there is divergence of opinion about the issue. Payment of Non-compete fees - revenue expenditure vs capital expenditure - Held that:- Payment was made to a rival company to ward off competition in business. However, by making this payment, the assessee has not derived any advantage of enduring nature to hold the expenses as capital in nature. The agreement was only for a limited period of 3 years. Said payment was made for the purpose of running the business and not for the purpose of acquiring the business. The expenditure incurred was not related to the acquisition of an asset or a right of permanent character or an advantage of enduring nature. Such expenditure cannot be, therefore, held as capital expenditure and has to be allowed as revenue expenses u/s 37 - Decided in favor of assessee
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2012 (8) TMI 768
Dis-allowance of Revenue expenditure holding them to be Capital Work in Progress – assessee(SPV) engagd in development & construction services - commencement of business in AY 06-07 itself – Held that:- It has been agreed in principle that the business of the assessee has commenced, hence, we direct the AO to allow expenditure which are not directly attributable to the development of project but are expenses incurred from year to year for general running of the business. Directly attributable expenses shall be capitalised and added to the WIP. Interest received from Bank on certain deposits – capital receipt vs Income from other sources – Held that:- Since it has been held for AY 06-07 that assessee has set up the business and the revenue expenditure are allowed. That being so interest income cannot be considered as a capital receipt for AY 07-08. Also it is held in the case of M/s. Tuticorin Alkali Chemicals & Fertilisers Ltd v CIT (1997 (7) TMI 4 - SUPREME COURT) that interest income from deposits even during preoperative period is assessable as income from other sources.
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2012 (8) TMI 767
Deemed dividend – amount advanced to assessee who holds 10% of voting rights in company – company having accumulated profits as on the date of granting of the loan, which was more than the amount lent – assessee contended inapplicability of S 2(22)(e) on ground that amount has not been provided out of accumulated profits and it is out of amount withdrawn from CC A/c - Held that:- All the requirements of sec 2(22)(e) have been satisfied in the present case. The Assessee holds more than 10% of equity shares in M/s HFP (P) Ltd. The Company had lent Rs. 40,00.000/- at the instance of the assessee and in the books of accounts of the company the Assessee is shown as the debtor. Even though the loan was repaid within a short period the factum of the loan being granted cannot be denied. Therefore, amout of loan given to the Assessee is taxable as deemed dividends in the hands of the Assessee – Decided against assessee. On issue of granting of additional depreciation from accumulated profits in the hands of the company the CIT(A) has held that the issue does not arise for consideration as the company had not claimed additional depreciation
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2012 (8) TMI 766
Capital assets u/s 2(14) - assessability of capital gains on sale of land situated at Rajendra Nagar Mandal, within municipal limits of Rajendra Nagar – assesee contended that Rajendra Municipality is not notified by the Central Government and therefore land cannot be considered as capital asset u/s 2(14) - Held that:- Issue is covered by decision in case of Ghousia Begum and others (2011 (11) TMI 475 - ITAT HYDERABAD) wherein it has been held that impugned land is in fact urban land akin to the Hyderabad Municipality situated within 8 KM from the local limits of Hyderabad Municipal Corporation, liable for tax on capital gains irrespective of the fact whether it falls under the limits of Rajendra Nagar Mandal or otherwise. Further, mere fact that the land in question was agricultural land cannot be a ground to claim for exemption u/s 2(14) as the land is situated within the local limits of Hyderabad Municipal Corporation, and consequently, tax leviable u/s 45. Order of CIT(A) set aside and matter restored to file of CIT(A) – Decided against assessee-
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2012 (8) TMI 765
Interest on borrowings in respect of house let out – dis-allowance on ground of failure to furnish supporting evidence of same – Held that:- Interest payable on borrowings in respect of let out properties, the interest will be allowable only if the loan is taken for the acquisition of the house or for repaying a loan taken for acquisition of the property. Assessee has not produced any evidence to show that the loan has been taken for acquisition of property. Therefore, order of CIT(A) confirming dis-allowance is confirmed Various cash deposits in Bank – Held that:- Assessee had filed particulars of rent received and credited to the bank account. In the interest of justice, we remit this matter to the file of the AO for deciding the issue de-novo
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2012 (8) TMI 764
Penalty u/s 271(1)(c) - deduction u/s 80-IB claimed even after the expiry of 10 consecutive AYs - withdrawal of claim u/s 80IB suo-moto by filing revised statement of income during assessment proceeding and payment of requisite tax voluntarily - Held that:- Assessee has disclosed all the necessary particulars in the return. The assessee was allowed the deduction u/s 80-IB in the earlier years and accordingly it claimed deduction. The moment the assessee has taken legal advice, he withdrew the claim by paying the taxes due on withdrawal of the claim suo mottu and voluntarily. The bona fide of making the claim for deduction u/s 80-IB and withdrawal thereof, is duly proved. "Inaccurate particulars" means that particulars have not been furnished in correct/exact manner as is required to be furnished to determine the correct income chargeable to tax. A mere making of claim, which is not sustainable in law, by itself, will not amounting to furnishing inaccurate particulars regarding income of assessee - more particularly in present case of respondent wherein the claim of deduction u/s 80-IB was withdrawn and tax duly paid on the same. CIT (A) is justified in deleting the penalty - Decided against Revenue
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2012 (8) TMI 763
Penalty u/s 271(1)(c) - consideration for transfer of ownership rights of a film received in AY 2006-07 - agreement signed in 2007-08 - assessee disclosed the consideration amount in AY 2006-07 - CIT (A) vide order for AY 06-07 held that the said amount could only be taxed in next AY 2007-08 - assessee filed revised computation of income for AY 07-08 before finalization of assessment of said AY, not accepted by AO - Held that:- Aforesaid factual matrix nowhere proves that the assessee had either concealed the income or furnished any inaccurate particulars. The very fact that it had duly mentioned the consideration in year of receipt itself proves its bonafides. Even otherwise also, every instance of addition in the assessment proceedings does not ipso facto led to conclusion that an assessee is guilty of concealment etc. as the penalty proceedings are altogether different in nature. Deletion of penalty stands confirmed - Decided against Revenue
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2012 (8) TMI 762
Deduction u/s 54 - capital gain on sale of property on 27.12.04 - new flat purchased on 04.07.03 - deduction denied on ground that new flat purchased on 4.7.2003, is beyond one year from the sale of the flat on 27.12.2004 - full consideration paid and possession taken on 29.04.05 - Held that:- As per the provisions of S2(47)(v), the transaction of transfer is deemed to be completed at the time when the conditions u/s 53A of the Transfer of Property Act are fulfilled. One of the essential conditions is handing over of the possession and part payment of consideration. Since in present case, new flat to be purchased by the assessee was not in existence at the time of agreement dated 5.7.2003; but was to be constructed by the builder, therefore, the transaction of purchase cannot be said to have been completed. Purchase of the new flat by the assessee will be treated on the date when the assessee has received the possession after it is constructed and not on the date of agreement for purchase when the flat itself was not in existence. Claim u/s 54 allowed - Decided in favor of assessee
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Customs
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2012 (8) TMI 793
Advance licence - job work - assessee has transferred the imported billets to MSRM thereby violating the condition (vii) of Notification No.51 of 2000 dated 27th April 2000 - Held that:- The argument of the Revenue is unacceptable as construing similar provisions contained in customs notification No.32 of 2005 dated 8th April 2005 issued under the Target Plus Scheme, the Directorate General of Foreign Trade has issued a public notice on 15th February 2008 stating therein that the beneficiary status holder whether a manufacturer exporter or merchant exporter can get the imported goods converted through a jobworker, thus prima facie it appears that sending the billets to a jobworker for conversion into angles by the manufacturer/exporters cannot be construed as transfer of billets especially when there is no bar for the manufacturer – exporter to get the raw materials imported under the advance licences get converted through a jobworker - the assessee has sold the goods after its conversion and not before its conversion. As DGFT has in the past admittedly granted advance licenses to assessee as a manufacturer exporter with the assessee as a supporting manufacturer for duty free imports under notification No.51 of 2000 dated 27th April 2000. Therefore, when according to the licensing authorities a manufacturer exporter can get the raw materials converted through a jobworker / supporting manufacturer, it would not be open to the Revenue to contend that the manufacturer / exporter cannot take assistance of a supporting manufacturer - it is a fit case for entertaining the appeal without any predeposit - in favour of assessee.
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2012 (8) TMI 761
Digital Multifunction Print and Copying machines - assessee pleaded for release as not of restricted category - Held that:- In respect of cases relating to which the authorised chartered engineers had not inspected the goods in question, the customs authorities concerned shall direct the inspection of such goods before they are released. Such goods may be directed to be released, on payment of the appropriate customs duty and on the fulfillment of the conditions prescribed by law - the assessee may plead for for the waiver of the detention and demurrage charges, if any - in favour of assessee.
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2012 (8) TMI 760
Order of suspension of the appellant's CHA license - Held that:- A close reading of the provisions of Regulation 20 (2) of the Customs House Agents Licensing Regulations, 2004 ('CHALR') disclose that the power to direct immediate action is confined to taking it within 15 days from the date of receipt of a report from the investigating authority whereas in this case the report of the investigating agency was received on 09.03.2011 concededly the Commissioner did not seek recourse to the power under Regulation 20 (2). The immediacy or urgency of the situation was allowed to lapse and eventually the Commissioner issued the suspension order on 10.10.2011. The net result is that where immediate suspension is called for, the Commissioner has to take swift action and cannot wait and if he does so suspension can be made only after the full inquiry is held as provided by Regulation 22. In this case the final report of the inquiry was made on 07.05.2012 and the appellant was issued with a show-cause notice on 05.06.2012 - the suspension order impugned in this case cannot be sustained and the authorities are, however, at liberty to proceed with the inquiry and pass any order in accordance with law - in favour of assessee by way of remand.
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Corporate Laws
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2012 (8) TMI 792
Appeal against dismissal of company petition by CLB on a preliminary issue of non-maintainability of the petition - petitioner did not qualify for relief either u/s 111 or for an order u/s 402 on the premises as available u/s 397 or 398 - petitioner did not fulfil the requisite qualification of holding a minimum of 10% of the shareholding of the company in terms of Section 399 - name of petitioner company not mentioned in shareholder Register - Held that:- It is observed that suit had been filed by petitioner for recovery of the funds, and petitioner had in fact at one point of time made an offer to the other shareholders of the company to take back his shares. Impugned Petition did not make much headway before the Company Law Board for want of company petitioner having commensurate qualification and that being the factual position and not much in dispute, we do not find any occasion to interfere with the order of the Company Law Board dismissing the company petition on preliminary issue.
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2012 (8) TMI 759
Winding up petition - case of the petitioner based on the Compromise Petition entered into before the CLB, wherein the respondent-company agreed to pay rent at agreed rate, however said payment has not been made - Held that:- Subsequent filing of a suit seeking recovery of rents by the petitioner has not been brought to the notice of this Court. In the said suit, respondent has specifically disputed the relationship of landlord and tenant. When the claim of the petitioner herein is that the sums have not been paid in terms of the deed and the same has been disputed at the earliest point of time even in the suit seeking recovery of rents, the defence taken by the respondent is bona fide and not a moonshine. It is based on facts and material. Therefore, when there is a bona fide dispute with regard to debt as claimed by the petitioner and when the dispute is likely to succeed in a point of law, it would be highly inappropriate to wind up the respondent-company. Petition dismissed.
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Service Tax
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2012 (8) TMI 817
Plea against dismissal of appeal by Commissioner(Appeals) on the point of limitation by observing that the same stands filed after normal period of limitation as also after the condonable period of 30 days - Held that:- Issue is well settled that Commissioner(Appeals) has no jurisdiction to condone any delay beyond the condonable period of 30 days. On assessee contention that order dated 18.06.08 was served to him on 30.10.10 it is held that it is found that Revenue has placed documentary evidences showing receipt of adjudication order by Shri Virendra Yadav at appellant's residence. As per para 47(2) of Adjudication Manual, the service of orders through local range offices is an approved mode of service. Also, Asstt. Commissioner in his reply dated 26.10.10 to assessee's letter dated 25.09.10 has clearly mentioned that adjudication order was served on 18.06.08. It is only the photocopy of the adjudication order which again stands supplied to the appellant. As such the service of the photocopy of the adjudication order for the second time cannot be taken as relevant date of receipt of the order for the purposes of limitation - Decided against assessee
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2012 (8) TMI 816
Club or association services - company incorporated, consequent upon the order of High Court for the purpose of treating the effluent discharged by the industries located in the GIDC area, Vapi - demand of service tax confirmed on the ground that the appellant is an association of industrial units in Vapi formed for the purpose of setting up and running common facility for treatment and recycling of effluent and solid waste discharged by the units who are required to become a member compulsorily and pay one time fee as well as monthly subscription - Held that:- Notification No. 1/2012 - S.T. dated 17.03.2012, the words "of dyeing units" was omitted. Consequent upon amendment made by Notification No.1/2012-S.T., club or association service provided by an association in relation to a common facility set up for treatment and recycling effluent or solid waste is exempted from the service tax. This notification has been given retrospective effect by Section 145 of Finance Act, 2012 from June, 2005. Therefore appellant is squarely covered by the exemption Notification and the activities undertaken by them is not liable to service tax - Decided in favor of assessee
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2012 (8) TMI 815
Whether debit in the Cenvat Credit Account cannot be considered as pre-deposit - held that:- Pre-deposit made by the appellants by way of debiting in Cenvat Credit Account is sufficient for the purposes of fulfilment of requirement of pre-deposit ordered by the ld. Commissioner - Commissioner (Appeals) is directed to hear this matter without insisting on any further deposit
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2012 (8) TMI 814
Demand of service tax - business of real estate development and construction residential houses - appellant in terms of their agreement with their customers for construction of residential units on a plot of land owned by them construct the duplex type houses for their customers – Held that:- It is only w.e.f. 1-7-2010, that explanation was added to Section 65(zzzh) of the Finance Act, 1994 providing that for the purpose of this sub-clause - for the period prior to 1-7-2010, the appellant’s activity cannot be treated as service provided by them to their customers
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2012 (8) TMI 786
Penalty under Section 76 of the Finance Act – Held that:- Appellant had paid the service tax and the interest as soon as the same was pointed out during the adjudication process and paid the penalty under Section 78 to the extent of 25% as per the law and is not contesting the penalty under Section 77 of Finance Act, 1994 - penalty imposed under Section 76 is not sustainable
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2012 (8) TMI 785
Penalty – Held that:- Tax demand has already been discharged with interest - section 80 is invokable - it may not be proper to penalise under section 76 and 78 of the Finance Act, 1994 - to remove hardship, it would be proper to direct the appellant to deposit 25% of the demand towards penalty under section 78 - appeal is allowed partly
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2012 (8) TMI 784
Payment of service tax though not applicable - belated payment has been used towards CENVAT Credit – Held that:- It must be treated as voluntary payment of service tax. If that amount is to be voluntarily permitted to be utilized towards CENVAT Credit, it is apparent that for late payment of service tax, interest amount needed to be paid
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2012 (8) TMI 783
Completion and finishing services – denial of benefit of Notification No. 1/2006-S.T. – Held that:- There is clear provisions in the Notification No. 1/2006-S.T. that 67% abatement would not be available in respect of completion and finishing services and since the activities of the appellant is completion and finishing services in respect of the construction of commercial or industrial complexes, 67% abatement would not be available to them - since the amount on which the VAT has been paid is the value of the material used for providing the services, this material cannot be said to have been sold within the meaning of this terms as defined is Section 2(h) of the Central Excise Act - benefit of Notification No. 12/2003-S.T. would not be available
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2012 (8) TMI 755
Demand of interest – Held that:- Though the credit of duty is entered in the account books unless the said credit is duly taken to discharge the duty payable the liability to pay interest for the delayed payment would not arise - In the case of wrong availment before the said duty is taken, if the entry is reversed it amounts to not taking the credit at all and therefore when admittedly no duty is payable, the question of payment of interest on the delayed payment of duty would not arise - in fovour of the assessee
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Central Excise
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2012 (8) TMI 791
Valuation - the wholesale price declared by the assessees is much less than the cost of production - what will be the "normal price" for the purpose of excise duty in terms of Section 4(1)(a) of the Act ? - Held that:- To attract Section 4(1)(a) what is required is to determine the 'normal price' of an excisable article which price will be the price at which it is ordinarily sold to a buyer in the course of wholesale trade and in the context of Section 4(1)(a) the word 'ordinarily' does not mean majority of the sales but that price should not be exceptional and by no stretch of imagination, can include extra-ordinary or unusual. In the instant cases as the assessees sell their cars in the market continuously for a period of five years at a loss price and claims that it had to do only to compete with the other manufacturers of cars and also to penetrate the market and if such sales are taken as sales made in the ordinary course, it would be anathema for the expression 'ordinarily sold'. Thus since the price charged for the sale of cars is exceptional,it cannot be accepted to give a meaning which fit into the meaning of the expression 'ordinarily sold'. In other words, in the transaction under consideration, the goods are sold below the manufacturing cost and manufacturing profit. Therefore, such sales may be disregarded as not being done in the ordinary course of sale or trade. Thus as the assessees are not fulfilling the conditions enumerated in Section 4(1)(a) of the Act and therefore, the valuation has to be done in accordance with Section 4(1)(b). Under Section 4(1)(b) of the Act, 1944, any goods which do not fall within the ambit of Section 4(1)(a) i.e. if the 'normal price' cannot be ascertained because the goods are not sold or for any other reason, the 'normal price' would have to be determined in the prescribed manner i.e. prior to 1st day of July, 2000, in accordance with Rules, 1975 and after 1st day of July 2000, in accordance with Rules, 2000. A bare reading of the rules does not give any indication that the adjudging authority while computing the assessable value of the excisable goods, he had to follow the rules sequentially. The rules only provides for arriving at the assessable value under different contingencies. Again, Rule 7 of the Valuation Rules which provides for the best judgment assessment gives an indication that the assessing authority while quantifying the assessable value under the said Rules, may take the assistance of the methods provided under Rules 4, 5 or 6 of the Valuation Rules. Therefore, contention of the Assessee that the assessing authority before invoking Rule 7 of the 1975 Valuation Rules, ought to have invoked Rules 4, 5 and 6 of the said Rules cannot be accepted - thus since the assessing authority could not do the valuation with the help of the other rules, has resorted to best judgment method and while doing so, has taken the assistance of the report of the 'Cost Accountant' who was asked to conduct special audit to ascertain the correct price that requires to be adopted during the relevant period. Therefore, exception of the assessable value cannot be taken of the excisable goods quantified by the assessing authority - against assessee.
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2012 (8) TMI 790
Online platform to facilitate the sale of goods by various merchants - Whether activities proposes to undertake warehouse amount to manufacture ? - Held that:- None of the assessee's activities alter the primary packing or the original labeling affixed by the merchant under applicable regulations. Also no change is made in the MRP/RSP of any item received in the warehouse. All the labeling requirements are required to be fulfilled by merchants themselves and the goods as received in the applicant's warehouse would have the MRP/RSP already pre-affixed or pre-printed - As the applicant carries all their activities to protect the merchant's goods, facilitate inventory management and the logistics of storage, retrieval, shipment and transportation of goods, thus, the different types of stickering done by them cannot come within the meaning of the expression labeling or relabeling for the purposes of the Act and would not amount to manufacture As the goods as received would be in retail packages with all required labeling and marking has not been disputed. As that the applicant's facility is only one of the channels for distribution available to the merchants who use it. The products that they list on the applicant‟s website would also, in the vast majority of cases, get distributed and sold through other conventional channels of retail trade and in the very form in which they are received in the applicant‟s warehouse. Hence the conclusion that inexorably follows is that they are already marketable. Thus, as the applicant is providing an online retail distribution channel and the associated logistical services His role therefore does come across clearly as one of service provider as the activities described in the application do not amount to manufacture within the meaning of S. 2(f) of the Central Excise Act, 1944.
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2012 (8) TMI 789
Maintainability of appeal – Held that:- No opinion is formed by the Committee of Commissioners about the illegality of the order as required under Section 35B of the Central Excise Act - There was no authorization by the Committee of Commissioners to file appeal on its behalf - record also does not disclose that these two officers applied their mind to the issue and recorded any opinion, as per the requirement of Section 35B of the Central Excise Act that the order of the Commissioner (A) was not legal or proper and warranted to be challenged by filing an appeal - there should be a meaningful consideration which should be reflected on the note sheets in order to comply with the requirement of Section 35(2) of the Act - file does not show any such satisfaction or opinion having been recorded by the Committee of Commissioners – appeal dismissed
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2012 (8) TMI 788
Whether no provision in the Act empowering the Board to issue directions to the Assessing Authorities or the Appellate Authorities in the matter of deciding disputes between the persons who are called upon to pay duty and the department – Held that:- Such orders are required to be passed by exercising independent mind and without impartiality and while doing so, such Authorities are required to consider various evidences made available to them - Circulars issued by the Department which are in the nature of guidance to such Authorities and, therefore the contents of such circulars could also be considered as evidence available before them - Assessing Authority has come to an independent finding on its own and therefore – matter remanded to Assessing Authority to consider the matters afresh
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2012 (8) TMI 758
Penalty u/s 11AC - common inputs used for manufacture of dutiable as well as exempted goods - alleged non-payment of duty as per the provisions of Rule 57CC of the Central Excise Rules, 1944 - assessee contended that High Court had set aside demand with reference to the longer period available under the proviso to Section 11A(1) - Held that:- In present case, demand has been raised beyond the normal period of 6 months provided under the provisions of Section 11A at the material time. Now, since the demand itself does not survive, the penalty is not warranted. Order set aside and the Appeal of assessee is allowed.
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2012 (8) TMI 757
Revenue appeal against Order of Commissioner (Appeals) allowing the rebate claim - Held that:- As per the provisions of Sec.35B of the Central Excise Act, the Tribunal has no jurisdiction in respect of the rebate claims where the order is passed by the Commissioner of Central Excise(Appeals) - appeal is dismissed as non-maintainable.
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2012 (8) TMI 756
Whether Tribunal was justified in ignoring the two Notifications on which reliance is placed by the revenue – Held that:- Appeal involves the interpretation of the aforesaid two Notifications - As the order relate to “among other things, the determination of question having a relation to the rate of duty of excise”, it is the Apex Court alone which is competent to adjudicate the said dispute. The jurisdiction of the High Court is ousted - appeal is rejected
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CST, VAT & Sales Tax
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2012 (8) TMI 818
Claim of 100% set off for tax paid on the coal purchased - whether the coal used in the process by the assessee was used as a raw material or as fuel ? - Held that:- Considering the Report of Head of the Department Metallurgical and Materials Engineering Visvesvaraya National Institute of Technology, Nagpur indicates that to convert iron ore into sponge iron the noncoking coal is used. It must be mentioned that the orders passed by the authorities did not use the specific word “Non-coking coal” - The report specifically mentions that inside the bed the Non-cooking coal plays the role of a reductant and that non-coking coal provides the gas carbon mono-oxide for satisfying the heat requirements of the process. On account of this, the author of the report has observed “It indirectly plays a role of fuel in the rotary kiln process”. It is seen that chemical qualities of Noncooking coal to generate heat are used. Merely because heat is generated in the process it cannot be a ground to hold that Noncooking coal so used was used as fuel. The above observations clearly shows that the coal used in the process of manufacturing of sponge iron is used as a raw material and not as a fuel - in favour of assessee. Entitlement to claim set off as regards purchase of HSD Oil - Held that:- Considering the provisions of Rule 54(b), it is clear that the use of HSD Oil i.e. motor spirit as a fuel does not fall within the aforesaid provisions for the purpose of claiming set off. On account of this specific provision which permits claiming of set-off under peculiar circumstances mentioned in Rule 54(b) of said Rules, the provisions of Rule 52 and Rule 53 cannot applied in favour of the assessee - The Assessing Officer as well as the Appellate Authority has rightly declined to grant set off to the respondent in regard to the HSD Oil - against assessee.
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Indian Laws
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2012 (8) TMI 782
RTI Act - application sought information and in appeal it was ordered that record which according to appellant was not traceable be reconstituted and then information be given – Held that:- Appellant should not have raised any grievance against such direction because it was a duty of the appellant to immediately make effort for reconstitution of the record when they came to know that record is not lying with them and for that purpose, they could have taken help even from the applicant by obtaining certain information or also the requisite documents from the party to whom the original record was related to - direction to reconstitute the record is only a one step in furtherance of providing the information to the applicant under the Right To Information Act - Single Judge was right in dismissing the writ petition preferred by the appellant
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