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TMI Tax Updates - e-Newsletter
September 10, 2012
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Shareholders of the company can gift their shares in favour of the company. - There is no bar - HC
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Merely because the company has earned profits by selling some of the shares, that doesn't mean that the company is engaged in shares trading. - HC
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AO made addition as per TDS certificates without bringing to the notice of the assessee as to which of the income was covered under tax deducted at source certificate and which part of the income remained undisclosed - no addition - AT
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Interest paid to Head office (Japanese banking company) by assessee (PE-Indian branch) - not chargeable to tax in India. - AT
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A credit in the assessee's books of account, signifying a receipt, or a liability, has to be satisfactorily explained, to keep section 68 at bay. - AT
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Amount paid for purchase of switch 16 port used in plugging, batteries, UPS, flexible pipes, 44 ports to enable use of computer are in fact computer accessories & are of capital nature being items of enduring nature - AT
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Unaccounted deposits in bank account & sale proceeds - once the deposit in the bank has been accepted by the AO as unaccounted sales proceeds, then, the entire amount cannot be treated as undisclosed income - AT
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Receipt of Compensation - termination of rights - Capital or revenue - any compensation received for the loss of agency is a revenue receipt, whereas compensation which is attributable to restrictive covenants is a capital receipt - AT
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Unexplained creditors - nowhere it was held that when business income was estimated by the Revenue then the Revenue is precluded from making addition on account of unexplained cash credit. - AT
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Decision in Escorts Ltd not to be applicable to the situation where depreciation was claimed by a charitable institution in determining percentage of funds applied for the purposes of charitable objects.- AT
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Charitable Trust - advancement of Hinduism - Trust or institution whether engaged in charitable or religious if is found to be carrying on its activities, are to be registered u/s 12AA - AT
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Once the amount is correctly and rightly reflected in Form AS26, small or technical mismatch in the return should not be a ground to deny credit of the amount paid, in such cases, if the AO feels that benefit of TDS reflected in AS26 should not be given, he should issue notice to the assessee to revise or correct the mistake - HC
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Difficulties in receiving credit of Tax Deducted at Source - The assessees must be given an opportunity to file response or reply and the reply will be considered and examined by the Assessing Officer before any direction for adjustment is made. - HC
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Deduction under chapter VI-A - The Legislature by using the phrases “total income” and “gross total income” has tried to differentiate between the two - HC
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Disallowance expenditure towards replacement of machinery - Revenue OR Capital - not amounting to "current repairs" and to be not allowed as revenue expenditure - HC
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Expenditure on Depository Services and Dematerialisation of share certificates - the expenditure was allowable as normal business expenditure - HC
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Non issuance of Tax Deduction Certificate (TDC) u/s 197 - AO had rejected the application as the assessee had violated the provisions of TDS and proceedings under Sections 276B and 271C of the Act were pending, but none of these grounds validly form part of reasons for rejecting an application filed by an assessee under section 197(1) read with Rule 28AA of the Rules. - HC
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The report of the Valuation Officer cannot form the foundation for rejection of the books of account - HC
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Reference to VO is not valid as the AO has not brought any material on record to establish that the assessee had made any unaccounted investment in the construction of the building in question - HC
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Trading addition – rejection of books of accounts and application of higher G.P. rate – even after the rejection of books of account, no trading addition is required to be sustained - AT
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Deemed Dividend - addition of advance salary as deemed dividend - advance was not in the nature of loan and hence cannot be treated as deemed dividend u/s 2(22)(e) - AT
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Penalty u/s 272B - default u/s 139A(5B) - quotation of invalid PAN of deductees in TDS returns - no penalty is leviable when there is a technical or venial breach of the Act - AT
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Block assessment - seizure of unexplained cash - it would be justifiable to assess the peak credit of deposits as the income of the assessee. - AT
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Compensation paid to lender treated as interest - Disallowance for non deduction of TDS u/s 194A - Liability for payment has neither accrued nor paid/payable in the current year therefore disallowed and added back - AT
Customs
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Subletting of the customs area to some non-vessel operating cargo carriers - there is no restriction on the appellants not to sublet the premises - no specific contravention - no penalty u/s 117 - AT
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Interest – territorial jurisdiction – determination of the appellate forum based upon the situs of the Tribunal would lead to a anomalous result - HC
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Unjust enrichment - Refund - Non-availment of Modvat credit, C.A. certificate to the effect that the duty incidence has not been passed on by the respondent are sufficient supporting documentary evidences for Balance Sheet as main documentary evidence. - CGOVT
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Wrong declaration of imported goods - CARLVO Dual Sim Chinese Cellular Phones under Bill of Entry No.5256566 - goods ordered to be released - HC
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When the assessee authority held that the customs duty paid by the assessee was proper and no additional duty need be paid, they were under an obligation to refund this additional amount which was collected, which had no basis - HC
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Seeks to amend Notification no. 125/2011-Customs, dated 30-12-2011 prescribing preferential rates of customs duty for goods imported under SAARC Free Trade Agreement (SAFTA) so as to reduce the number of tariff lines in the sensitive list for Non-Least Developed Countries (NLDCs) - Notification
FEMA
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Overseas Investment by Indian Parties in Pakistan. - Circular
Service Tax
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Beneficiation of coal activity - Business auxiliary services - Activity of loading /unloading of the coal for bringing the coal into washery fall under the category of cargo handling services - Decided in favor of assessee - AT
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Taxability on allotment fees - Revenue brought it under the service tax to be rental receipt from immovable property - need to be tested by the officers at grass root level - AT
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As stated in Section 11B of the Central Excise Act,1944, the appellants are entitled for refund from the relevant date i.e. settlement of the dispute between the parties - AT
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Disallowance of cenvat credit of service tax paid on the invoices issued by Input Service Distributor(ISD) - AT
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Erroneous reversal of cenvat credit prompted by wrong audit objection and an inapplicable circular, has been rectified by the appellants by taking the suo motu credit of the reversed amount - credit allowed - AT
Central Excise
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Non payment of duty - as the appellant has paid the duty before issuance of the SCN, and there is no quantification of the interest, in that view the penalty is reduced to 25% - AT
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Refund - Government cannot retain the amount collected without authority - amount so paid by applicant is to be treated as voluntary deposit with department and same is to be returned the way it was initially paid - CGOVT
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Clandestine removal of goods - electricity bills disclosed the actual consumption of electricity and the Revenue has been able to show that the appellants suppressed production of M.S. ingots - AT
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Cenvat Credit on steel and cement purchased for constructing a storage tank – assessee is entitled to the benefit of cenvat credit - HC
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Denail of CENVAT credit on clearing and forwarding services - services received are in relation to the importation of waste paper such as container charges, handling charges incurred in the port etc. thus it cannot be said that there is no nexus with the final product - AT
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Interest cannot be claimed from the date of wrong availment of CENVAT credit - interest shall be payable from the date CENVAT credit is wrongly utilized - AT
Case Laws:
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Income Tax
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2012 (9) TMI 199
Profit of sale of shares - 'income from capital gains' OR 'income from business' - ingenuine gift deed - Held that:- To implement the objects of the company, two of the shareholders gifted 25000 shares of M/s. Infosys Technologies Limited, the said shares being shown as investment, thus merely because the company has earned profits by selling some of the shares, that doesn't mean that the company is engaged in shares trading. There is no bar for gifting the equity shares to its company as the company being a separate entity in law, the Shareholders of the company can gift their shares in favour of the company. For the solitary sale of shares, it cannot be said that the assessee is doing the business in shares. The assessee-company is only an investment company to buy, invest, acquire and hold the shares, stocks and debentures - As decided in CIT, NAGPUR v/s SUTLEJ COTTON MILLS SUPPLY AGENCY LIMITED [1975 (7) TMI 2 - SUPREME COURT] "in the absence of any evidence of trading activity in cases of purchase and resale of shares, it has to be held that the profit arising from the resale is an accretion to the capital - Thus the solitary sale of shares by the assessee cannot be treated as trade or business in the shares - in favour of assessee.
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2012 (9) TMI 198
Validity of revisionary order passed u/s 264 - dispute regarding remuneration paid to working partners - non-speaking order - Held that:- It is well settled position in law that one of the basic principle of natural justice is that the Authority concerned must pass a speaking order, so as to enable a party to know the reasons, as to why his application is being either accepted or rejected. This giving of reasons also ensures due application of mind to the facts by the Authority concerned. The impugned order is bereft of reasons and therefore, quashed and set aside. CIT directed to dispose of the petitioner's Revision application u/s 264 - Decided in favor of assessee.
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2012 (9) TMI 197
Service of notice issued u/s 148 - assessee contending non-serving of notice - Tribunal earlier remanded back matter to determine whether onus laid upon the revenue as regards the service of notice stands discharged or not - Held that:- There is no dispute that the address of the assessee mentioned in the CIT(A)’s order as well as in appeal papers filed by the assessee. It is, admitted fact that proper notice u/s. 148 was issued at the correct address of the assessee and was also dispatched through speed post to the assessee. The speed post cover containing the notice u/s. 148 did not return back to the Revenue Department. In terms of section 27 of the General Clauses Act, if a notice is properly addressed and dispatched through registered post, there is a presumption that it has been served upon the assessee. The assessee has not brought any material on record to rebut such presumption. It is, therefore, clear that the notice u/s. 148 was properly issued to the assessee - Decided against assessee
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2012 (9) TMI 196
Penalty u/s 271(1)(c) - Revenue contending intentionally concealment of income by inflating the cost of acquisition of house property thereby reducing long term capital gain - Held that:- Admittedly, there was a mistake in the computation of long term capital gain by the assessee and the assessee company furnished revised computation before the AO and also offered explanation for the mistake. This mistake cannot be considered as concealment of income by the assessee company. CIT(A) deleted penalty on observation that AO had not issued any show cause notice pointing out the mistake and no positive material was brought on record to prove that the assessee had inflated the expenditure and deflated the receipts to reduce the taxable income pertaining to long term capital gain. Since findings are based on justified and reasonable grounds, hence deletion of penalty is upheld - Decided in favor of assessee
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2012 (9) TMI 195
Enhancement of income by passing an order u/s 154 - income enhanced on ground that TDS certificates reveals more income than shown by assessee - Held that:- A bare reading of the passed u/s 154 reveals that the AO considered the reply of the assessee dated 15.5.2007 to the notice u/s 154 and made the enhancement of assessed income after lapse of two and half years without affording an opportunity to be heard to the assessee after substantial lapse of time. Also, no substantial material is seen pertaining to the fact that the income as shown by the assessee was higher as per TDS certificates submitted by the assessee and we are unable to find any justified reason of enhancement of income. Since, AO failed to confront the assessee for rebuttal and passed the order without even bringing to the notice of the assessee as to which of the income was covered under tax deducted at source certificate and which part of the income remained undisclosed, hence order of CIT(A) deleting such addition is upheld – Decided against Revenue
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2012 (9) TMI 194
Addition u/s 68 - unsecured loans from NRI - Revenue contested genuineness of transactions on ground of rotation of funds by first lending it from OD A/c and then taking back the same as unsecured loan - contradictory statement given by assessee since affidavit of Mrs. K was filed with CIT(A) bearing notarized date of 27.2.2009 whereas on 18.12.2009, assessee stated that it will take time to file notarized affidavit from a non resident - Held that:- From records it is observed that amount was transferred by Mrs K through her bank account and MRS K received these amounts from assessee’s own OD A/c, from her another bank account, and from relative and other party, bank accounts of whom had been furnished. Therefore, amount is fully explained with the facts and documentary evidence. Deletion of addition upheld - Decided against Revenue
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2012 (9) TMI 193
Interest paid to Head office (Japanese banking company) by assessee (PE-Indian branch) - dis-allowance - Held that:- Issue stands squarely covered by the decision rendered in case of Sumitomo Banking Corp. Mumbai (2012 (4) TMI 80 - ITAT MUMBAI ) wherein it was held that interest paid by the Indian Branch of the assessee bank to its overseas head office is not chargeable to tax in India. As further held by the Special Bench in the said case, the provisions of sec.195 consequently would not be attracted in case of such payment of interest by the Indian Branch to overseas Head office and the question of disallowance of the said interest by invoking the provisions of sec.40(a)(i) does not arise - Decided against Revenue
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2012 (9) TMI 192
Exparte order - non-serving of notice - assessee contended that hearing could not be attended and CIT(A) without ensuring service of notice, passed an exparte order - Held that:- Indisputably, the assessee did not communicate change in their addresss after filing the two appeals before the CIT(A). As a result of which appeals were disposed exparte. Approach of the assessee in not communicating change in address is not in accordance with law and apparently, the assessee did pursue these appeals in right earnest. However a mere glance at the impugned orders reveals that the orders passed by the CIT(A) is cryptic and grossly violative of one of the facets of the rules of natural justice, namely, that every judicial/quasi- judicial body/authority must pass a reasoned order, which should reflect application of mind by the concerned authority to the issues/points raised before it. It is pointed out that a ‘decision’ does not merely mean the ‘conclusion’. It embraces within its fold the reasons forming basis for the conclusion. Since, impugned orders suffers from lack of reasoning and are not speaking orders on any of the issues for which additions were made by the AO, hence impugned order is set aside and matter restored to file of CIT(A)
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2012 (9) TMI 191
Addition in respect of lorry hire charges payable and sundry creditors on account of the said credits being unexplained - Held that:- A credit in the assessee's books of account, signifying a receipt, or a liability, has to be satisfactorily explained, to keep section 68 at bay. It is to be appreciated that any credit, trade or non-trade, is essentially a 'receipt', when construed or considered broadly, i.e., in terms of 'funds', and not narrowly in terms of 'cash'. A receipt has to be satisfactorily explained as to its nature and source, else it is liable to be considered as income. In present case, matter, as discerned, is factually indeterminate, and requires proper verification and examination at the end of the assessing authority. Matter restored to the file of the AO Addition on account of net profit rate - dis-allowances in respect of various expenditures, for the reason of their being, not adequately evidenced - Held that:- No addition in respect of N.P. rate would by itself arise, i.e., without bringing some adverse material on record, and stands rightly deleted by the CIT(A). Similarly, a mere cryptic statement as to the expenditure being not properly evidenced or fully supported, without pointing out any specific defects, including their nature, and which could easily be done by subjecting the same to a test check, would be of no moment. And, thus, no dis-allowance would arise in consequence - Decided in favor of assessee
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2012 (9) TMI 190
Repairs & maintenance expenses including purchase of computer accessories - revenue or capital expenditure - Held that:- Amount paid for purchase of switch 16 port used in plugging, batteries, UPS, flexible pipes, 44 ports to enable use of computer are in fact computer accessories & are of capital nature being items of enduring nature and therefore are held to be of capital nature eligible for higher depreciation @ 60%. However, amount paid for granite polishing, table polishing and change of wall panel are building repaid expenses, and thus in the nature of current repairs eligible as revenue expenditure. Also, amount paid as license fees for system administration training expenses is clearly revenue expenditure - Decided partly in favor of assessee Interest on service tax - dis-allowance on ground of it being penal in nature - Held that:- Interest on service tax is compensatory in nature and not in the nature of penalty and dis-allowance cannot be made u/s 37(1) - Decided in favor of assessee. Dis-allowance u/s 14A - assessee contended that no expense was incurred for earning of exempt income and all investments were made from own resources of the assessee and investments related to earlier years and no interest cost was incurred for earning of exempt income - Held that:- Sub section (2) of section 14A deals with the cases where assessee specifies a positive amount of expenditure and sub section (3) applies to cases where the assessee asserts that no expenditure had been incurred in relation to exempt income. AO in the present case has not made such findings and he only proceeded on the basis of assumptions that some expenditure must have been incurred for earning of exempt income. Matter restored back
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2012 (9) TMI 189
Unaccounted deposits in bank account & sale proceeds - search and seizure operation - assessee adopted the rate of 5% of the total deposit as income from unaccounted sales for AY 2005-06 - Held that:- AO was not justified in treating the entire deposits in ICICI bank as unaccounted income of the assessee as that once the deposit in the bank has been accepted by the AO as unaccounted sales proceeds, then, the entire amount cannot be treated as undisclosed income - the estimation of the profit on account of unaccounted sales cannot be made on the line of profit on accounted sales since the assessee has already booked all indirect expenses in the books of account, therefore, the profit from the unaccounted sales is required to be worked out by reducing the direct expenditure relating to the unaccounted sales. Therefore, for computing the profit on unaccounted sale, the gross profit ratio on the accounted sale is a relevant factor - AO is accordingly, directed to compute the profit on deposits in the ICICI bank by taking the rate equivalent to the GP rate declared by the assessee - in favour of assessee. AY 2007 – 08 - addition of the peak credits - Held that:- As assessee admitted the deposits in the ICICI bank account as representing unaccounted sales proceeds and, accordingly, worked out the total unaccounted income at Rs. 25,45,500/- being the difference of total unaccounted sales including the deposits made in the bank account and the expenditure as recorded in the seized diary AO was bound to give credit for undisclosed income of Rs. 25,45,500/-already arrived at and added to the income of the assessee while making the addition on account of peak credit - same amount cannot be taxed twice once as offered by the assessee being profit on unaccounted sales and again being part of peak credit - in favour of assessee. AY 2008-09 - unexplained money by taking peak cash credit/balance as on 30/12/2007 - Held that:- When the entire transactions recorded in the seized diary were taken into account while computing the profit from unaccounted sales as well as peak credit, then, a further addition on account of peak credit, which is very much part of the entries of the diary already considered cannot be permitted - in favour of assessee.
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2012 (9) TMI 188
Rejection of books of account by AO - assessee has claimed huge expenditure against the gross receipts of civil works - Held that:- As there exists substantial and significant discrepancies in the supporting material and the books of account and the assessee has also failed to produce the relevant supporting evidence for claim of expenses. Thus, it is manifest from the record that the books of account of the assessee for these two years do not reflect the true and correct picture of affairs and financial results - against assessee. Addition under the head ‘other sources’ - Held that:- It is clear from the nature of the receipt that the said admitted income from interest on bank deposits, interest on income tax refund, interest received on loans and miscellaneous income cannot be treated as business income and, therefore, in our opinion the authorities below have rightly treated the same as ‘income from other sources’ - against assessee. Direction to the AO to estimate the profit at 10% on the contract receipts and to allow depreciation - Held that:- As in the earlier years, in similar circumstances, profit rate of 12.5% was applied by the Tribunal, thus the years under consideration no reason for not applying a similar rate - to maintain the principle of consistency the earlier decision of this tribunal is followed and accordingly hold that the profit rate could be at 12.5% of the gross receipts and further claim of depreciation is allowed - Order to modify the order of CIT(Appeals) - partly in favour of assessee. Disallowance at 20% of the total payments made to the sub contract on estimate basis - Held that:- Disallownace was made as that all the vouchers are self-made and in some of the cases there were no vouchers in supporting the claim and in some of the vouchers the name of the recipient is not there. In view of the these facts and circumstances, the inflation of payment cannot be ruled out and, therefore, the entire claim of the assessee cannot be accepted. As revenue has not disputed the execution of the work through sub contract and the profit ratio admitted by the assessee is not substantially low the estimation of disallowance need to be curtailed to 10% - partly in favour of assessee.
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2012 (9) TMI 187
Justification in invoking CIT's powers u/s 263 - setting aside the assessment order passed under section 143(3) - excess amount debited to the profit and loss account on account of purchases - Held that:- It is manifest from the assessment order that the AO has not at all examined the issue of the genuineness of purchases and excess claimed on account of purchases as pointed out by the CIT(A). When the AO has not discussed anything in respect of the claim of expenditure towards the purchases, then, it is a clear case where the AO has not applied his mind on this issue. There is nothing in the assessment order to indicate that the AO has applied his mind and has taken any view on the issue. When nothing has been recorded in the assessment order for addressing the issue in question on which the CIT has invoked the provisions of section 263, then, it cannot be said that the AO has taken any view on this issue. CIT has not finally decided the genuineness of purchases against the assessee because it requires a proper enquiry and verification of facts and record, therefore, the Commissioner is justified in setting aside the assessment order and directing the AO to re-do the same after conducting a proper enquiry - against assessee.
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2012 (9) TMI 186
Disallowance of expenses under rule 6D - assessee has itself disallowed in the computation of income an amount of Rs. 1,07,863 - Held that:- The claim of the assessee was disregarded by the AO who went on to calculate the disallowance as per provisions of Rule 6D for different units on the basis of per person per trip as decided in CIT Vs Arrow India ltd. [1997 (7) TMI 92 - BOMBAY HIGH COURT] - against assessee. Disallowance of guest house expenses u/s. 37(4) - Held that:- As decided in Britannia Industries Limited Versus Commissioner of Income-Tax And Another [2005 (10) TMI 30 - SUPREME COURT] claim by the assessee as expenses towards rent, repairs, depreciation and maintenance of a guest house need to be disallowed which was purportedly used in connection with the business of the company - against assessee. Non exclusion of interest receivable for A.Y. 1995- 96 u/s. 244A - Held that:- As decided in Commissioner of Income-Tax Versus British Paints India Limited [1990 (12) TMI 2 - SUPREME COURT] there was no justification for the assessee to vary from the regular accounting principle of valuing stock & ITO is justified under s. 145 to reject the books of accounts and determine the correct profits and gains - if any change or reduction in the amount of interest refund to the assessee u/s. 244A, the same has to be taken into account u/s. 154 of the Act - against assessee. Disallowance u/s. 40A(3) - the payments were made to employees to purchase tickets & furniture - Held that:- As the payments for purchase of tickets are concerned, the same is not in violation of section 40A(3) but payments made to buy furniture is in violation of Sec. 40A(3) therefore A.O. is directed to restrict the disallowance to 20% of Rs. 24,000 - partly in favour of assessee. Exclusion from taxable profits the sales tax exemption benefit - Additional ground submitted by assessee - Held that:- Adjudication of the ground will require going into the incentive scheme framed by the U.P. Government which was not available before the lower authorities, the issue is restored to the file of AO for passing a fresh order after necessary examination and after allowing opportunity of hearing to the assessee - in favour of assessee for statistical purposes. Disallowance of expenses - laying transmission line and the construction of access road - Held that:- Respectfully following the finding of the Tribunal given in the immediately preceding assessment year i.e. 1995-96 it is to be hold that the expenditure so claimed are capital in nature accordingly order of the Ld. CIT(A) is set aside and that of the AO is restored - against assessee. Disallowance of period prior interest - Held that:- As the claim of interest paid on borrowed capital as deductible expenditure in the immediately preceding year the expenses for the year under consider also need to be allowed - in favour of assessee.
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2012 (9) TMI 185
Depreciation on BSE membership Card - dis-allowance - assessee engaged in business of Share broking & dealing in shares and securities - Held that:- Right of membership is a "business or commercial right" and could be said to be owned by the assessee and used for business purposes in terms of section 32(1)(ii). See Techno Shares and Stocks Ltd. Vs CIT (2010 (9) TMI 6 - SUPREME COURT OF INDIA). In view of aforesaid depreciation on BSE membership Card is allowed. Computer software expenditure - revenue or capital - Held that:- In case of Amway India enterprises v/s DCIT (2011 (11) TMI 4 - DELHI HIGH COURT) it has been held that functional test becomes more important and relevant because of the peculiar nature of the computer software and its possible use in different areas of business touching either capital or revenue field or its utility to a businessman which may touch either capital or revenue field. Therefore, in the instant case issue is restored back to the files of the AO with a direction to examine the functions of the software with the nature of requirement of the business and then decide whether it is revenue or capital in nature. Dis-allowance of service charges paid by the appellant to M/s Sovereign to take over the clientele business of the said company pursuant to the SEBI regulations - Held that:- MOU clearly shows that assessee company has purchased entire clientele business of SGFPL. We fail to understand how payments made to SGFPL for purchase of its clientele business can be termed as service charges as no services have been provided by the said company except transferring its entire clientele as per MOU. Entire payment is of capital in nature and deserves to be added back to the returned income - Decided partly in favor of assessee
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2012 (9) TMI 184
Stamp duty valuation u/s 50C - capital assets versus stock in trade - suppressed sales - held that:- assessees had shown the sale value of flats/shops which is lower by more than 25% of the stamp duty value. - Although it is also possible that in some cases the market value may be lower than the stamp duty value but in case of steep fall with respect to stamp duty value, the assessee is required to explain properly the lower sale value. The matter requires fresh examination for arriving at a fair conclusion in the matter, it is correct to set aside the order of the CIT(A) and restore the issue to the file of the AO for passing fresh orders after necessary inquiry. Disallowance of 50% interest claim - Held that:- As the assessee could not give any evidence to show nexus between the borrowed funds and the corresponding investments in such circumstances, the entire interest could be disallowed. However, the AO has been reasonable and made the disallowance only @ 50%, therefore, no infirmity in the order of the CIT(A) while confirming the disallowance and the same is, therefore, upheld - against assessee. Rectification petition filed u/s 154 - addition of Rs.25 lakhs on account of understatement of sales - Held that:- As the order of the CIT(A) has been set aside and restored the issue relating to the addition of Rs.25 lakhs to the file of the AO for passing afresh orders after necessary examination the appeals filed by the assessee in relation to rectification orders have became infructuous - against assessee.
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2012 (9) TMI 183
Compensation from a German Company for termination of rights - capital receipt not chargeable to tax OR liable to be assessed as business income - Held that:- In terms of mechanics of the Product Support Agreement KHD Germany & the Clause in the termination agency reveals that the caveat on the assessee is not to act as an independent merchant of Deutz spare parts and approved exchange parts, and also not to compete with Deutz in any manner whatsoever as was being done hitherto - thus it is quite clear that the impugned amount of receipt was not for loss of agency, but it is attributable to negative or restrictive covenants put on the assessee - as decided in Guffic Chem (P) Ltd. versus C.I.T. and Others [2011 (3) TMI 6 - SUPREME COURT] any compensation received for the loss of agency is a revenue receipt, whereas compensation which is attributable to restrictive covenants is a capital receipt - in favour of assessee. Disallowance of expenditure for earning dividend - Held that:- As per the CIT (A) the assessee was found to have received 17 dividend cheques during the year and the relatable expenditure on employees cost, etc, attributable to such activity has been pegged at Rs 75,000/-, which, is reasonable as against 10% by AO and the action of the CIT (A) is accordingly affirmed - partly in favour of assessee. Disallowance out of telephone expenses - Held that:- In a case of a limited company expenditure incurred on telephone, vehicle etc., which are certified by the statutory auditors under the Companies Act, 1956 as well as under the Act cannot be disallowed - in favour of assessee. Disallowance out of interest claimed - Held that:- As identical issue has been restored back to the file of the AO in the assessee’s own case for the earlier assessment years, the same need also to be restored for the year in question- in favour of assessee for statistical purposes. Disallowance prior period expenses - Held that:- As decided in Saurashtra Cement & Chemical Industries Ltd [1994 (10) TMI 30 - GUJARAT HIGH COURT] claim of the assessee is need to be accepted - in favour of assessee. Allowance of Loss on sale of units of mutual funds - Revenue appeal - Held that:- The assessee did not make a claim in the return of income for a loss claimed to have been suffered on the sale of units of mutual funds and was made only during the course of assessment proceedings and not by way of a revised return which was admitted by CIT (A) - no reasons to interfere with the directions of the CIT (A) as powers of an appellate authority includes to admit fresh claims, which were hitherto not considered by the AO - against revenue. Disallowance of research and development expenditure - CIT (A) allowed it - Held that:- CIT(A) allowed the claim comprehensively dealing with the issue by apprising the activities carried out by the assessee on the basis of detailed applications made by the R & D unit to seek recognition from the Ministry of Science & Technology which have not been negated by the Revenue - with regard to the capital expenditure in question the nature of such expenditure has not been examined by the Assessing Officer on the basis of the details of expenditure but merely on the basis of the Directors’ report - against revenue.
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2012 (9) TMI 182
Addition on account of unexplained creditors - Held that:- From the perusal of ledger accounts of one creditor it can be concluded that the opening balance and closing balance are the same figure and no transaction was made during the year under consideration. It is also observed that the address of the sundry creditor was furnished to the Assessing Officer and the Assessing Officer has admitted in the assessment order that the letter written to the aforesaid creditor was delivered, thus there is no material on the record on the basis of which the amount could be treated as income of the assessee during the year under consideration - no material could be brought on record by the Revenue to show that the amounts ceased to exist as liability of the assessees during the year under consideration. No material had been brought on record by the Revenue to show that purchases from the second creditor by the assessee were not genuine or in fact, the both the assessees has paid any amount more than Rs. 2,30,000/- and 2,00,000/- respectively in the assessment year under consideration to the said party. In the above circumstances addition made for want of confirmation was not warranted when the purchases were duly supported by bills and substantial subsequent payment was made through banking channel. On addition in regard to third creditor the Revenue was not justified in making the addition being unpaid purchase price as at the year end only for want of confirmation without bringing on record any material to show that the entries made in the regular books of account were not correct. Thus, the entire addition is unsustainable - appeal in favour of assessee. Levy of interest u/s 234B - Held that:- As the addition made by AO have been directed to be deleted assessee is to granted consequential relief for interest under section 234B - in favour of assessee.
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2012 (9) TMI 181
Unexplained creditors - Addition on the basis of entries found in the books of account - only contention of the assessee is that as his income from the contract business was estimated by the AO @ 12.5% then addition on account of cash credit was not justified - Held that:- CIT (A) estimated the profit of the assessee at 8 per cent of the contract receipts as if the total addition made by the AO is allowed to remain or accepted, then the net profit of the assessee is nearly 28 per cent., which is not at all possible in the nature of the work undertaken by the assessee - nowhere in the aforesaid decision it was held that when business income was estimated by the Revenue then the Revenue is precluded from making addition on account of unexplained cash credit. Thus no force in the submission of the assessee - assessee has not offered any explanation with regard to the source of Rs. 30,40,000/- credited in his capital account or any explanation with regard to the sundry creditors of Rs. 11,74,500/- added by the CIT (A) - against assessee. Charging interest u/s 234B - Held that:- As the additions came to be made because the assessee failed to explain the source of credit of Rs. 30,40,000/- in his capital account and also could not give any explanation with regard to the sundry creditors of Rs. 11,74,500/-, thus no doubt the levy of interest u/s 234B and 234C are of mandatory nature - no force in the argument of assessee - against assessee.
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2012 (9) TMI 180
Disallowance of claim of depreciation - expenditure incurred on acquisition of capital asset has already been allowed - assessee is an AOP registered u/s 12AA - assessment was reopened u/s 147 - Held that:- The income of the appellant being exempt, the appellant is only claiming that the depreciation should be reduced from the income for determining the percentage of funds which have to be applied for the purpose of the Trust. There is no double deduction claimed by the appellant as stated by the Assessing Officer. It cannot be held that double benefit is given in allowing claim for depreciation for computing income for the purposes of Section 11 - against revenue. Decision in Escorts Ltd vs Union of India (1992 (10) TMI 1 - SUPREME COURT) distinguished.
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2012 (9) TMI 179
Claim of depreciation as well as application of income of the trust as per Section 11 - Held that:- As decided in CIT vs. Market Committee, Pipli [2010 (7) TMI 374 - PUNJAB AND HARYANA HIGH COURT] the assessee is not claiming double deduction on account of depreciation as has been suggested by counsel for the Revenue. The income of the assesse being exempt, the assesse is only claiming that depreciation should be reduced from the income for determining the percentage of funds which have to be applied for the purposes of the trust. There is no double deduction claimed by the assessee as canvassed by the Revenue - in favour of assessee. Decision in Escorts Ltd vs Union of India (1992 (10) TMI 1 - SUPREME COURT) distinguished. Decision in Escorts Ltd not to be applicable to the situation where depreciation was claimed by a charitable institution in determining percentage of funds applied for the purposes of charitable objects.
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2012 (9) TMI 178
Charitable Trust - registration granted u/s 12AA - subsequent cancellation on ground that assessee trust was engaged in advancement of Hinduism and the expenses thus could not be treated as applied for charitable purposes for general public utility - Held that:- Trust or institution whether engaged in charitable or religious if is found to be carrying on its activities and the said activities are genuine, then such trust or institution subject to fulfillment of the provisions of the Act, are to be registered u/s 12AA, in order to entitle the trust or institution to claim deduction allowable u/s 11/12. Since activities of the trust were not found to be non-genuine and further there is no finding that the trust was not carrying out its activities in accordance with the objects of the trust. In the absence of the same, exercise of power by the CIT u/s 12AA(3) is unwarranted and the same is hereby cancelled. CIT directed to grant registration to the assessee u/s 12AA - Decided in favor of assessee
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2012 (9) TMI 164
Unexplained investment in the purchase Farms - ITAT deleted the additions - Held that:- The additions have been made on the basis of statement of Sh. Rajinder Gupta, the brother of the assessee and the two brokers who had subsequently retracted from their earlier statements and there is nothing in the order of the Tribunal to show how it considered the statements made at the time of the search to be unreliable and what reasons prevailed upon them to hold that the retractions supported by sworn affidavits were genuine and should be upheld. It is also not clear as to what the Tribunal means when it says that no other material was placed on record by the Assessing Officer in support of the claim that the assessee had made undisclosed investment. The statements are good material on which the conclusions can be drawn - There is no evidence of any threat or coercion from the officers of the search party and the allegation of the deponents to the contrary remains unsupported. They did not choose to complain against any high handed behavior of the authorised officers. It is also not known as to what the Tribunal means when it says that neither the vendors of the properties have admitted to receiving any money over and above the stated consideration nor any extra ordinary cash was found in the course of the search - These are vital aspects which the Tribunal has omitted to take into consideration; on the contrary it took into consideration irrelevant material such as retractions, absence of any statements by the sellers of the properties that they received on-monies and the fact that there was no seizure of any “extra ordinary” cash during the search - the Tribunal erred in endorsing the order of the CIT (Appeals) deleting the addition of Rs.4,71,05,000/- made by the Assessing Officer for unexplained investment in KG Farms and Jyoti Farms - against assessee. Undisclosed capital gains on sale of land at Jaipur Highway - Held that:- The capital gains can arise only if property is sold within the meaning of Section 2 (47) of the Act. The assessee is still holding a part of the land for which no consideration has been received. Therefore, there is no sale of the property which can be said to give rise to any capital gain. Even the original cheques form part of the seized documents which shows that the transfer did not take place. Therefore, there is no question of any undisclosed capital gains - in favour of assessee. Unexplained commission paid in cash to broker - Held that:- As it was consequential to the addition made for unexplained investment in KG Farms, it need to be warranted - against assessee. Assessment of Mani Kakkar who sold KG Farms to Kedarnath Gupta - Held that:- It is trite law that if the Assessing Officer does not have the jurisdiction to make an assessment, whatever decision he takes on the merits of the matter and all subsequent proceedings, including appellate proceedings, vis-ŕ-vis the merits of the matter are only an academic exercise or a nullity, not having any legal effect. It cannot be disputed that the recording of the satisfaction that the undisclosed income found in the course of the search belongs to another person is a pre-condition for validly assuming jurisdiction to make an assessment under Section 158BD. The CIT (Appeals) has held that since no satisfaction to this effect was recorded by the Assessing Officer making the assessment of Kedarnath Gupta, the Assessing Officer having jurisdiction over Mani Kakkar had not validly assumed jurisdiction to issue a notice under Section 158BD and to make an assessment on her - against revenue.
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2012 (9) TMI 163
Difficulties in receiving credit of Tax Deducted at Source - Held that:- Section 245 envisages prior intimation to the assessee so that he can respond before any adjustment of refund is made towards a “demand” relating to any other assessment year. Thus opportunity of response/reply is given and after considering the stand and plea of the assesse, an order/direction for adjustment when justified and proper is made. The section postulates and mandates a two stage action. Prior intimation, and then a subsequent action when warranted and necessary of adjustment, of the refund towards arrears - as accepted by department that when a return is processed under Section 143(1), the CPU itself adjusts the refund due against the existing demand i.e. there is adjustment, but without following the procedure prescribed under Section 245, which requires prior intimation so that the assessees can respond or give their explanation, thus interim direction to the respondents that they shall in future follow the procedure prescribed under Section 245 before making any adjustment of refund payable by the CPU at Bengaluru. The assessees must be given an opportunity to file response or reply and the reply will be considered and examined by the Assessing Officer before any direction for adjustment is made. Difficulties in getting refunds on account of adjustment towards arrears - Held that:- There can be small and insignificant mismatches, which if purely technical should be condoned or ignored. After all tax has been paid or credited in the name of the assessee. Once the amount is correctly and rightly reflected in Form AS26, small or technical mismatch in the return should not be a ground to deny credit of the amount paid, in such cases, if the AO feels that benefit of TDS reflected in AS26 should not be given, he should issue notice to the assessee to revise or correct the mistake and only if the necessary rectification or correction is not made, an order under Section 143(1) should be passed and the demand should be raised. We issue an interim direction to this effect. As in several cases refunds have been adjusted on account of the debit entry made under the head “modified”. These entries are made by the AO and thus the refund is reduced to nil or zero. Copies of two such adjustment orders have been shown, thus the said orders will be filed in the Registry and copies will be given to the counsel for the Revenue, who will take appropriate instructions on this aspect. It is stated that there are thousands of cases of similar nature. Learned counsel for the Revenue will obtain instructions whether directions can be issued to the AO to provide full details and particulars of the entries made under the head "modified". We may note that in these cases, processing has been done for the purpose of intimation under Section 143(1) of the Income Tax Act, 1961.
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2012 (9) TMI 162
Deductions under Section 80HH/80IA on the profits of each unit separately - Held that:- On perusal of the bare provisions of the Act it is clear that while calculating deductions under Chapter VI-A only the profits derived from priority units are to be taken into consideration. Section 80A(2) specifically provides that the amount of deduction shall not in any case exceed the gross total income of the assessee. There can be no manner of doubt that Section 80AB has overriding effect and will govern the other provisions of Chapter VI-A. This also clearly indicates that only the income derived from a priority undertaking is to be taken into consideration while making deduction. Section 80B(5) indicates that gross total income means the total income computed in accordance with the provisions of this Act. Therefore, we are of the considered view that the phrase “gross total income” will include profits and losses from other units whether they be priority units or non-priority units. The Legislature by using the phrases “total income” and “gross total income” has tried to differentiate between the two as Gross total income has been defined to mean the total income computed in accordance with the provisions of this Act. Therefore, it will include the profits and losses of all units of the assessee whether they be priority units or non-priority units. However, while computing the deductions specified under Section 80C to 80U only the income derived from the priority units has to be taken into consideration. The deductions shall be calculated only in respect of the income whether profit or loss of the priority unit(s) - If the gross total income is nil, then as laid down in Synco Industry [2008 (3) TMI 13 - SUPREME COURT] the assessee cannot get any benefit of such deductions. Section 80A(2) leaves no manner of doubt that the amount of deductions cannot exceed the gross total income of the assessee.
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2012 (9) TMI 161
Disallowance expenditure towards replacement of machinery - Revenue OR Capital - Held:- As decided in CIT v. Sri Mangayarkarasi Mills P. Ltd. [2009 (7) TMI 17 - SUPREME COURT] that the entire textile mill machinery for spinning yarn cannot be regarded as a single asset and each separate machinery was held to be an independent entity - Replacement of an old machine with a new one would constitute the bringing into existence of a new asset and not repair of the existing machine as asset gives the purchaser (assessee) an enduring benefit of better and more efficient production over a period of time. Such replacement of assets was held to be not amounting to "current repairs" and to be not allowed as revenue expenditure - in favour of revenue.
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2012 (9) TMI 160
Non satisfying of conditions stipulated u/s 54B - assessment u/s 143(3) - recovery proceedings - Held that:- As the bank account of the petitioner in the State Bank of India and certain immovable properties had been attached pursuant to the said assessment order that would substantially cover the tax demand made against the petitioner direction to the third respondent to dispose of the appeal filed by the petitioner on merits and no recovery proceedings shall be initiated against the petitioner - assessee's writ allowed accordingly.
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2012 (9) TMI 159
Allocation of interest to be allocated to dividend income for deduction u/s 80-M - Held that:- As it had been found that no part of interest was attributable to earning income from dividend, as the respondent had sufficient funds for making the said investments, thus Tribunal was justified in law in not allowing interest to be allocated to dividend - in favour of assessee. Disallowance of financial advisory and due diligent services - Held that:- As the payments had been made for financial advice and for due diligence services with regard to utilization of resources / raw material for the respondent's plant and therefore, had to be allowed as an allowable business expenditure - in favour of assessee. Exemption of interest on a gross basis - Held that:- The Party had paid interest to the assessee in respect of the loans advanced to it and the assessee paid interest to party in respect of the outstanding bills issued by party. There was no connection between the two transactions. The section does not require or permit the netting of payments under two independent contracts albeit between the same parties - in favour of assessee. Disallowance of expenditure on Depository Services and Dematerialisation of share certificates - Held that:- The dematerialisation of shares did not result in either a quantitative or qualitative enhancement or improvement in the respondent's assets viz. the said shares. It resulted in the assessee's complying with the SEBI regulations and indeed facilitated the assessee's receiving dividends in respect of the investments. It did not however, affect the value of the shares to any extent whatsoever - the expenditure was allowable as normal business expenditure - in favour of assessee.
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2012 (9) TMI 158
Non issuance of Tax Deduction Certificate (TDC) u/s 197 - assessee is subsidiary of Serco BPO Holdings Private Limited - Held that:- The power vested in the Assessing Officer for non issuance of TDC is to be exercised in a judicious manner & is required to furnish reasons while deciding the application filed by the assessee. The perusal of the application filed by the assessee clearly demonstrates that the AO had rejected the application as the assessee had violated the provisions of TDS and proceedings under Sections 276B and 271C of the Act were pending, but none of these grounds validly form part of reasons for rejecting an application filed by an assessee under section 197(1) read with Rule 28AA of the Rules. The Assessing Officer cannot be held justified to plead that though the assessee fulfills the requisite conditions stipulated under Rule 28AA or the concerned rule, but shall not grant the certificate in exercise of his discretion - direction to the Assessing officer to re-decide the application - in favour of assessee for statistical purposes.
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2012 (9) TMI 157
Difference in the estimated cost determined by the Valuation Officer and the actual cost - addition of undisclosed income - assessee contested against reference made to the Valuation Officer for valuation of the cost of construction - Held that:- On a plain reading of section 142A it is apparent that the question of estimating the value of any investment would arise only when the books of account are not reliable and accordingly the AO would first be required to reject the books of account before making a reference to the Valuation Officer, thus as rightly contended by the assessee that the report of the Valuation Officer cannot form the foundation for rejection of the books of account. From the tenor of the order of the AO it is apparent that he has made the reference to the Valuation Officer merely to seek expert advice regarding the cost of construction. There is nothing in the assessment order to suggest that the AO had any doubt regarding the cost of construction or that he was not satisfied regarding the correctness or completeness of the books of account - prior to making the reference to the Valuation Officer, the AO has not ascertained as to what was the defect in the cost of construction disclosed by the assessee in its returns of income - as the AO has not brought any material on record to establish that the assessee had made any unaccounted investment in the construction of the building in question and that the books of account do not reflect the correct cost of construction the reference made to the Valuation Officer for estimating the cost of construction was not Valid - in favour of assessee.
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2012 (9) TMI 156
Addition u/s 68 - share application money - addition made on ground that there was no compliance of the notices issued - debit entries are mostly same as credit entries - debit entries and credit entries in the bank statement are mostly in round figures - multitude of companies from same addresses - outright refusal of the assesse to furnish details to the satisfaction of AO as requirement of section 68 - no compliance to produce the Principle Officers of such companies who had allegedly furnished funds the ascertain the genuineness and creditworthiness of such parties – Held that:- CIT(A) while deleting the addition, took into consideration the orders passed by the ITO/CIT(A)/ITAT in respect of share applicant companies and further taking into consideration that in A.Y. 2007-08 the AO had accepted the allotment as genuine, deleted the addition. Admittedly, these details were not before the AO and CIT(A) also did not even call for a remand report from the AO in respect of these documents. Thus, there was a clear violation of mandatory requirements of Rule 46A. Further we find that the confirmations filed by various share applicants are all undated and these confirmations have been given mostly by one person on behalf of various entities except in one or two cases. Under such circumstances, unless the directors were produced before the AO, he could not carry out further investigations. Since CIT(A) has taken into consideration fresh evidence, which was not confronted to the AO and by not producing the directors assessee installed all further enquiry into the matter, it would be in the interest of justice that the mater be restored back to AO for denovo considerations.
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2012 (9) TMI 155
Trading addition – rejection of books of accounts and application of higher G.P. rate – assessee not an EOU in the first period of year under consideration disclosing G.P. rate of 20.51% and was an EOU in the second period disclosing G.P. rate of 40.01% - CIT(A) upheld the rejection of books of account but reduced the GP addition to Rs.1 lakh - Held that:- Though assessee has claimed that the rejection of books of account was not justified but he was unable to satisfy us how the rejection of books of account was not justified. In fact, his main thrust of the arguments was also on the application of proper rate of gross profit rather than the rejection of books of account. We, therefore, uphold the rejection of books of account. However, it is a settled law that even after the rejection of books of account, a reasonable rate of GP is to be applied. Admittedly, the GP rate of preceding two years is lower than the GP rate disclosed by the assessee in the first period and GP rate of second period is more than G.P. rate of first period. However, business of the assessee in the second period is different from that of first period. Therefore, GP of the first period is to be compared with the GP of preceding three years, which shows that GP rate disclosed by the assessee is better than the average rate of preceding three years. Hence, even after the rejection of books of account, no trading addition is required to be sustained – Decided against Revenue
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2012 (9) TMI 154
Deemed Dividend - addition of advance salary as deemed dividend - Held that:- From the facts and circumstances of the case, it is observed that the debit balance in the account of assessee at a given point of time is not in the nature of loan or advance. But, it is a running account wherein the assessee had taken the amount as adjustable against future salaries which were being credited to his account monthly. Therefore, advance was not in the nature of loan and hence cannot be treated as deemed dividend u/s 2(22)(e) - Decided in favor of assessee.
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2012 (9) TMI 153
Dis-allowance u/s 14A of ad-hoc expenditure assumed for earning exempt dividend and interest income from shares and mutual funds & RBI tax free bonds - assessee contended that there is no provision under the law for such dis-allowance on an estimate and arbitrary basis for the AY 2007-08 - Held that:- It is observed that out of total income of Rs 29,75,609/-, a sum of Rs.21,66,023/- related to income from old investments and income from new investments is only to the tune of Rs.8,09,586/- and that too as dividend from mutual funds for which assessee need not to incur any expenses. Therefore, the disallowance @ 0.5% of total of average investment as per Rule 8D is not justified as a very small amount of new investment has been made during the year. Moreover, Rule 8D is not applicable for the year under consideration and assessee has not incurred any interest expenditure for earning of the exempt income. Hence, no disallowance of expenditure u/s 14A can be made in the present case - Decided in favor of assessee.
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2012 (9) TMI 152
Deduction u/s 80HHC - exclusion of profit on scrap sale - AO concluded that no expenditure was incurred on generation of scrap and the deduction u/s 80HHC was recomputed by reducing the total sale value of scrap as profit on sale of scrap - Held that:- Aforesaid treatment would mean that the generation of scrap is an activity leading to 100% profits as against normal 10% to 15% profits on the production of finished output of the enterprise. Therefore, only the profit element in the sale of scrap is to be excluded from the profits of the business for determining the profits eligible for deduction u/s 80HHC - Decided in favor of assessee
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2012 (9) TMI 151
Penalty u/s 272B - default u/s 139A(5B) - quotation of invalid PAN of deductees in TDS returns - Held that:- In the instant case, it is an undisputed fact that the amount of tax deducted at source by the assessee was deposited within time allowed under the relevant provisions of the Act. There was no revenue loss to the Income Tax department. It is also an admitted position that the assessee also submitted revised statement in Form No. 24Q on 16.09.2010. The assessee did not derive any benefit whatsoever by filing invalid PAN and PAN was corrected after ascertaining the same from the respective deductees. Even otherwise also, no penalty is leviable when there is a technical or venial breach of the Act - Decided in favor of assessee.
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2012 (9) TMI 150
Adoption of Higher % of net profit - Assessee failed to produce books of account - AO applied net profit rate of 12% - Difference in amount of wages as found in assessee's computer during survey and amount shown in Profit & Loss A/c - Held that:- As the audited accounts are not in confirmation with print-out in possession during survey - Although print-outs taken during survey are unsigned but having great significance - As decided by CIT(A) on the basis of earlier assessment years applied net profit rate at 7% - As the fact of case are not similar to earlier assessment - AO having sufficient materials on record warranting adoption of higher percentage of net profit then the rate earlier estimated by ITAT could not be adopted - Decision matter remanded back to CIT(A). Addition on account of net interest expenditure - AO made addition on basis of TDS certificate - Corresponding interest income not shown in P&L a/c - Held that:- Paper books were available to AO & the details shows that assessee claims interest expenditure net of income therefore, no separate addition could be made on account of interest income. Decision in favor of assessee. Addition on account of Sub-contract work on estimated basis - Assessee claims that expense of sub-contract work should be reduce from gross receipt on the basis of decided case - Fact of case were not similar as assessee failed to produce books of account - AO compute income on the basis of TDS certificates - That is profit margins that he would earned if assessee execute such contract i.e half of such margin - Held that:- Assessee can claim payment made to sub-contractor as expenditure but the turnover cannot be reduced. And also there is no evidence to show that sub-contract work was given on the same rates as received by the assessee in other contracts. Decision remanded back case to AO.
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2012 (9) TMI 149
Block assessment - seizure of unexplained cash - various cash deposits and subsequent withdrawals from Bank account - assessee contending for assessment of income at peak credit and not on entire amount of deposits found in the bank accounts - also seized cash is explained to be source of various cash deposits - Held that:- During the course of assessment proceedings, the assessee has changed his stand and stated that he was carrying on the business of trading in gold biscuits and the transactions in its bank account represented such trading. However, assessee has failed to bring on record any material to substantiate his changed stand. Also, possibility of rotation of funds cannot be discounted with. The tax authorities, cannot simply ignore the withdrawals made by the assessee. Accordingly, it would be justifiable to assess the peak credit of deposits as the income of the assessee. Matter set aside to file of AO for determining the peak credit Amount of peak credit become taxable due to the legal fiction contained in section 68, 69 etc. due to the failure of the assessee to properly explain the bank transactions. It is the responsibility of the assessee to show that the said amount was available with him and it was kept idle for more than nine months. Hence, income declared by the assessee for the AY 1997-98 to 2002-03 cannot be considered as a source for the amount of Rs.65.00 lakhs seized by the police officials - Decided partly in favor of assessee.
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2012 (9) TMI 148
Re-invocation of Section 147 - AO had made assessment u/s 147 - Later on AO observed that he compute income by giving deduction under 80HHC but without deducting profit from undertaking claiming deduction u/s 80IA - AO again invoked the provision of u/s 147 and issue notice u/s 148 - Held that:- Assessee has disclosed all the material and relevant particulars, in respect of claim u/s 80IA and 80HHC of the Act - AO has invoked the provisions of Section 147 read with proviso thereunder on the basis of mere change in opinion and without bringing any tangible material for the formation of record. Therefore AO not complied with the statutory conditions contained in the provision of the section 147. Decision in favor of Assessee.
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2012 (9) TMI 147
Compensation paid to lender treated as interest - Disallowance for non deduction of TDS u/s 194A - Expenditure must be accrued or paid/payable in the current year - Held that:- Explanation to Section 194A r.w.s. 2(28A) provides that when such interest is credited in any account by whatever name it may be called, then such credit will be deemed to be credit of such income to the account of the payee and provisions of Section 194A will apply - Liability for payment has neither accrued nor paid/payable in the current year therefore disallowed and added back - Decided in favor of Revenue. Deduction allowed for expenditure u/s 14A - Computation of book profit under MAT u/s 115JB - Held that:- The provision of section 14A cannot be imported into while computing the book profit u/s 115JB of the Act as decided in case of Goetze (India) Ltd. 2009 (5) TMI 615 - ITAT DELHI - Therefore no addition to the book profit shall be made on account of alleged expenditure incurred to earn exempt income while computing income u/s 115JB of the Act - Decided in favor of Assessee
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Customs
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2012 (9) TMI 177
Subletting of the customs area to some non-vessel operating cargo carriers - handling both import and export of the goods as custodian (CFS) - penalty u/s 117 on violation of the provisions of Section 45 2(b) - Held that:- As per Section 45 (2) (b) there is no restriction on the appellants not to sublet the premises but is not permitted for the removal of goods the Customs area without the permission of the proper officer. As there is no allegation against the appellants that they have removed the goods without the permission of the proper officer they have not violated the provisions of Section 45 (2) (b) as alleged in the impugned order and exists no finding on violation of the Handling of Cargo in Customs Area Regulations, 2009 - when there is no specific contravention of the Act which has been violated by the appellant, penalty under Section 117 of the Customs Act is not sustainable - in favour of assessee.
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2012 (9) TMI 176
Interest – territorial jurisdiction – Held that:- High Court situated in the State where the first court is located should be considered to be the appropriate appellate authority - determination of the appellate forum based upon the situs of the Tribunal would lead to a anomalous result - appeal is rejected for want of territorial jurisdiction. Decision in Ambica Industries v. Commissioner of Central Excise (2007 (5) TMI 21 - SUPREME COURT OF INDIA(S.C.).) followed. Decision in Canon Steels Pvt. Ltd. v. Commissioner of Customs (Export Promotion) (2007 (11) TMI 17 - SUPREME COURT OF INDIA) distinguished.
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2012 (9) TMI 175
Unjust enrichment - Refund claim of custom duty - refund claim was sanctioned by the adjudicating authority, however, he order to re-credit the claimed amount in the consumer welfare fund on the ground that the respondent failed to prove that the duty burden had not been passed on by them – Held that:- Non-availment of Modvat credit, C.A. certificate to the effect that the duty incidence has not been passed on by the respondent are sufficient supporting documentary evidences for Balance Sheet as main documentary evidence. All such documentary evidences are sufficient to prove that duty incidence has not been passed on by the respondent
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2012 (9) TMI 146
Wrong declaration of imported goods - CARLVO Dual Sim Chinese Cellular Phones under Bill of Entry No.5256566 - Held that:- As the petitioner had paid the entire customs duty payable on the enhanced value of the goods, based on the assessment made by the authorities concerned the respondents are directed to release the goods in question provisionally subject to the adjudication process and the consequential orders that may be passed thereon - As it is not the case of the respondents that the goods in question are prohibited goods, the petitioner is prepared to furnish a personal bond, as required by the authorities concerned, for the release of the goods in question.
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2012 (9) TMI 145
Refund of the extra duty deposit by the assessee – Held that:- When the assessee authority held that the customs duty paid by the assessee was proper and no additional duty need be paid, they were under an obligation to refund this additional amount which was collected, which had no basis - order is legal and valid and does not suffer from any legal infirmity which calls for interference - appeal is dismissed.
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2012 (9) TMI 144
SCN - Held that:- Notice was issued alleging non-payment of customs duties - But under what circumstances this customs duty is payable have not been disclosed - subject says “non-realization of customs duty”. The body of the show cause notice does not disclose how there is non-realization of customs duty or short payment of it - it is completely devoid of any grounds or reasons or particulars in support of its claim for short paid customs duty against the appellant/writ petitioner - show cause notice set aside
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Service Tax
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2012 (9) TMI 205
Beneficiation of coal activity - Business auxiliary services - Held that:- As the beneficiation of coal carried out by the appellant is definitely a part of mining activity. The service provided by to any other person is relating mining or case has been brought under the ambit of service tax w.e.f. 1-6-2007 and in the case under appeal the period is prior to 1-6-2007 and therefore the conclusion is that for the relevant period the activity carried out by the appellant would not be liable to service tax as mining service.- in favour of assessee. Activity of loading /unloading of the coal for bringing the coal into washery fall under the category of cargo handling services - Held that:- As the appellant has entered into a contract with their customers for the purpose of beneficiation of coal, which would also include bringing the raw coal to their washery and supply the washed coal to their customers, thus it cannot be held that the appellant is cargo handling agency providing services to another person. Further, the said loading /unloading is required to be done by the appellant for himself. Such service is not being provided by him to any other person. The said activity is so integrally connected with the activity of beneficiation of coal that the same cannot be segregated and it cannot be held that the same was a different and separate activity falling under the definition of cargo handling services in as much - in favour of assessee.
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2012 (9) TMI 204
Taxability on allotment fees - Revenue brought it under the tax to be rental receipt from immovable property - Held that:- Considering sample copy of the receipt shown to impress that the receipts were of Fees in nature are need to be tested by the officers at grass root level - dispensing with requirement of pre-deposit appeal is remanded to learned Adjudicating Authority to re-do the adjudication examining nature of transaction, event of levy.
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2012 (9) TMI 203
Denial of refund claim as time-barred - dispute of eligibility of CENVAT credit - Held that:- As there was a dispute of eligibility of CENVAT credit availed by assessee which was settled in their favour on 28.1.2009, within one year of the said order, they have filed the refund claims and as per clause (6) of the Notification No.5/06 the appellants are required to file refund claim within one year as stated in Section 11B of the Central Excise Act,1944, the appellants are entitled for refund from the relevant date i.e. settlement of the dispute between the parties - in favour of assessee.
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2012 (9) TMI 202
Demand of service tax - Appellants are in the business of constructing buildings - levy was introduced with effect from 10-9-2004 – Held that:- Construction of shops were completed before 10-9-2003 - construction work was completed before levy was imposed on 10-9-2004 and there is no merit in the case of the department.
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2012 (9) TMI 168
Disallowance of cenvat credit of service tax paid on the invoices issued by Input Service Distributor(ISD) - Held that:- As appellant has clearly indicated in the submissions to adjudicating authority that they are enclosing 900 copies of the invoices which are co-related with the service distributed to them by ISD against which the adjudicating authority has recorded his finding that appellant has not produced any evidence co-relating the service distributed, thus this issue needs to be reconsidered after calling for the invoices in connection with the service tax credit distributed by the ISD - in favour of assessee by way of remand.
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2012 (9) TMI 167
Goods transport agency - Denial of claim of Notification No.34/2004-ST dated 03.10.04 - Held that:- As the adjudicating authority has disposed the show cause notice without considering the submissions of the appellant submitting an alternative plea of eligibility for abatement of 75% of the value of the amount paid by them towards the goods transport agencies the matter need to be remanded back to the adjudicating authority to reconsider the issue afresh.
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2012 (9) TMI 166
Cenvat Credit - suo mout credit after reversal - held that:- As such, the erroneous reversal made by the appellants, prompted by wrong audit objection and an inapplicable circular, has been rectified by the appellants by taking the suo motu credit of the reversed amount which is not the same as taking refund of excess duty amount paid. - the Larger Bench decision in the case of BDH Industries Ltd. (2008 (7) TMI 78 - CESTAT MUMBAI ) has no application to the present case. As regards the interest amount paid by the appellants – Held that:- The same amounts to excess payment except to the extent it relates to the period 1-9-2004 to 9-9-2004. The refund of the same is required to be considered in terms of Section 11B of the Central Excise Act, 1944 as made applicable to the service tax cases - appellants have filed a refund claim within the time-limit on 13-12-2006, the same requires to be considered by the original authority - appeal is allowed
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2012 (9) TMI 165
Demands are confirmed after denying the benefit of Notification No. 32/2004-S.T - benefit is denied on the ground that necessary declaration as required under the Notification is not on the consignment notes – Held that:- Board has issued a Circular No. 137/154/2008, dated 21-8-2008 wherein it has been clarified that general declaration under Notification No. 32/2004 is sufficient for availing the benefit of Notification - pre-deposit of dues is waived
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Central Excise
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2012 (9) TMI 174
Non payment of duty - Held that:- Considering the statement of Accountant of the appellant wherein he has clearly admitted the five numbers of brown chits and details contained therein and that the bags mentioned in the brown chits were cleared without invoice and without payment of duty of Central Excise and the said statement has not been retracted by the appellant at any stage of adjudication or further, demand is hereby confirmed - as the appellant has paid the duty before issuance of the SCN, and there is no quantification of the interest, in that view the penalty is reduced to 25%.
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2012 (9) TMI 173
Disallowance of input service credit on outdoor catering service - Held that:- As decided in CCE, Nagpur Versus Ultratech Cement Ltd.[2010 (10) TMI 13 - BOMBAY HIGH COURT] that as per Rule 2(l) of CCR 2004 any input service is eligible for CENVAT credit which has been used by the assessee in the course of their business of manufacture - Services having nexus or integral connection with the manufacture of final products as well as the business of manufacture of final product would qualify to be input service under Rule 2(l) of 2004 Rules - in favour of assessee.
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2012 (9) TMI 172
Cenvat credit on capital goods - M.S. Plates/ H.R. Plates/ C.R. Sheets - Held that:- The appellant deserves an opportunity to place its defence in the light of law developed in CCE, Jaipur vs. Rajasthan Spg. & Wvg. Mills Ltd [2010 (7) TMI 12 - SUPREME COURT OF INDIA] & Vandana Global Ltd. Versus CCE [2010 (4) TMI 133 - CESTAT, NEW DELHI (LB)] wherein its is held that Goods like cement and steel items used for laying 'foundation' and for building 'supporting structures' cannot be treated either as inputs for capital goods or as inputs in relation to the final products and therefore, no credit of duty paid on the same can be allowed under the CENVAT Credit Rules.
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2012 (9) TMI 171
Revision applications - 100% EOU - cleared their goods on payment of duty through Cenvat Account with an intent to claim rebate of duty in respect of the said export consignment cleared in terms of Rule 18 of the Central Excise Rules, 2002 - they came to know that there was no provision for an EOU to claim rebate of duty under Rule 18 - refund claim - Applicants had cleared goods for export on payment of duty without availing benefit under Notification No. 24/2003-C.E. – Held that:- Government cannot retain the amount collected without authority - amount so paid by applicant is to be treated as voluntary deposit with department and same is to be returned the way it was initially paid - erroneously paid amount may be allowed to be recredited in their Cenvat Credit Account - order-in-appeal is modified to this extent
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2012 (9) TMI 170
Waiver of pre-deposit – clandestine removal of goods - manufacture and sale of M.S. ingots – Held that:- MSEB’s G-7 Forms and electricity bills disclosed the actual consumption of electricity and the Revenue has been able to show that the appellants suppressed production of M.S. ingots - when the department discharged their initial burden of proof by showing excess consumption of electricity (a major input) by the appellants, the latter did not have any valid explanation to offer. Hence the Revenue cannot be faulted for demanding duty on the steel ingots which could have been manufactured by consuming the excess quantity of electricity - Suppression of relevant facts is inbuilt in clandestine production of excisable goods and its removal without payment of duty, and the same, prima facie, stands established in these cases - assessees directed to deposit
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2012 (9) TMI 169
Cenvat Credit on steel and cement purchased for constructing a storage tank – Held that:- Once a storage tank and pollution control equipment constitutes capital goods and any raw material purchased for construction of those goods, the duty paid could be utilized as a cenvat credit by the assessee notwithstanding the fact that the storage tank is an immovable property - appellate authority committed a serious error firstly in holding that the storage tank is an immovable property and secondly, on the ground that it cannot be bought and sold in the market, the criteria which is totally unwarranted - assessee is entitled to the benefit of cenvat credit - in favour of the assessee
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2012 (9) TMI 143
Denail of CENVAT credit on clearing and forwarding services - no nexus between input services and the final products - Held that:- As appellant is engaged in the manufacture of MG craft importing waste paper for the manufacture of final product the services received are in relation to the importation of waste paper such as container charges, handling charges incurred in the port etc. thus it cannot be said that there is no nexus with the final product - in favour of assessee. Invoices are not in the name of the appellant - Held that:- As the lower authorities who have simply denied this claim on the ground that the appellant's name was not found in some of the invoices are required to re-examine the issue and allow the credit if the appellant is able to fulfill the requirement of the proviso to Rule 9(2) of Cenvat Credit Rules, 2004 wherein it is mentioned that if invoice does not contain all the particulars but contains the details of service tax payable, description of the service, assessable value, registration number of the service provider, details of the manufacture/first stage dealer/second stage dealer or provider of textile service, the Assistant Commissioner if he is satisfied that services have been received and accounted for can allow the credit - appellant may have to show that the persons whose names appear in the invoices have not availed cenvat credit so that availment of credit by more than one person can be avoided - issue remanded back to decide afresh.
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2012 (9) TMI 142
Classification of product - under Chapter No. 31 OR Chapter 38 - Held that:- As the copy of report of Chemical Examiner dated 01.7.2011 opining that product of the appellant will not get covered under Chapter No. 31 such copy was not provided to the appellant on which adjudicating authority has relied in deciding the classification issue - set-aside the impugned order and direct he lower authorities to give a copy of the report to the assessee.
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2012 (9) TMI 141
Waiver of pre-deposit - demand of interest - on the ground that the appellant has availed Cenvat credit on the inputs which were used in production of exempted as well as dutiable products – Held that:- Interest cannot be claimed from the date of wrong availment of CENVAT credit - interest shall be payable from the date CENVAT credit is wrongly utilized
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