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Newsletter: Where Service Meets Reader Approval. TMI Tax Updates - e-Newsletter September 12, 2012 Case Laws in this Newsletter: Income Tax Customs Corporate Laws Service Tax Central Excise Wealth tax Articles 1. CAPTIVE CONSUMPTION. By: DR.MARIAPPAN GOVINDARAJAN Summary: Captive consumption refers to the use of goods produced by one division of an organization and consumed by another division within the same entity for further manufacturing. Excise duty liability arises upon manufacturing but is collected upon removal from the manufacturing site, regardless of sale. The assessable value for captive consumption is 110% of the cost of production, as per Central Excise Valuation Rules, 2000. Cost components include materials, wages, direct expenses, overheads, quality control, R&D, packing, and administrative costs related to production. Adjustments for stock, scrap, and by-products are made, while financial charges and abnormal costs are excluded. News 1. 21 FDI Proposals Amounting to Rs. 2410 Crore Approved. Summary: The Indian government approved 21 Foreign Direct Investment (FDI) proposals totaling approximately Rs. 2410 crore, based on recommendations from the Foreign Investment Promotion Board. Notably, eight proposals worth Rs. 1842.55 crore in the brownfield pharmaceuticals sector were approved, subject to conditions related to maintaining production levels of essential medicines, research and development expenses, and technology transfer information. The approved proposals span various sectors, including agriculture, financial services, industrial policy, mines, commerce, consumer affairs, information broadcasting, telecommunications, and health. These decisions aim to enhance foreign investment in diverse industries across India. 2. Anand Sharma Inaugurates India Show in Brno, Czech Republic Over 135 Indian Engineering Companies Showcase Products and Services. Summary: The India Show in Brno, Czech Republic, was inaugurated by India's Commerce and Industry Minister and the Czech Minister of Industry and Trade. Over 135 Indian engineering companies showcased their products and services, highlighting India's engineering capabilities across various sectors. The event aimed to enhance bilateral trade, with discussions focusing on mining, automotive, heavy industries, and textiles. Both countries agreed to double bilateral trade to two billion dollars within three years and to establish Joint Working Groups in skills, innovation, heavy engineering, and pharmaceuticals. The India Show was organized by India's Ministry of Commerce and Industry and the Engineering Export Promotion Council. 3. Indian Institute of Corporate Affairs Conference on Corporate Governance- “Inspiring Confidence in Indian Business”. Summary: The Indian Institute of Corporate Affairs (IICA) organized a conference on corporate governance titled "Inspiring Confidence in Indian Business" to address compliance challenges in India, particularly for small and medium enterprises. The conference highlighted the importance of integrating compliance into organizational processes and the ongoing refinement of corporate governance norms in India. Key issues identified for non-compliance include high costs, lack of knowledge, inadequate monitoring systems, and inconsistent enforcement. As part of their efforts, IICA, in collaboration with Intel, developed a Legal Compliance Manual to assist businesses in understanding compliance obligations. Additionally, IICA partnered with research institutions to study corporate governance in India. 4. Net Direct Tax Collections During April-August 2012-13 up by 28.15 per cent and Stood at Rs.1,23,969 Crore as against RS. 96,738 Crore in the Same Period Last Year. Summary: Net direct tax collections in India for April-August 2012-13 increased by 28.15%, reaching Rs. 1,23,969 crore compared to Rs. 96,738 crore in the same period the previous year. Gross direct tax collections rose by 6.51% to Rs. 1,64,413 crore. Corporate tax collections slightly increased by 0.15% to Rs. 96,738 crore, while personal income tax collections grew by 17.09% to Rs. 67,420 crore. Wealth tax collections surged by 40.63% to Rs. 225 crore. However, securities transaction tax collections decreased by 14.94% to Rs. 1,719 crore from Rs. 2,021 crore the previous year. 5. Minsitry of Finance Releases “India’s External Debt: A Status Report 2011-12”. Summary: The Ministry of Finance released the "India's External Debt: A Status Report 2011-12," analyzing the country's external debt position as of March 2012. The report highlights India's external vulnerabilities, exacerbated by the euro-zone crisis and global economic slowdown, with rising current account deficits, depreciating currency, and increasing short-term and commercial borrowing. Despite these challenges, India's external debt remains manageable, with a debt-to-GDP ratio of 20% and a debt service ratio of 6%. Long-term debt constitutes 77.4% of total external debt, indicating a maturing market economy. India's debt indicators are favorable compared to other developing countries. Notifications VAT - Delhi 1. .F.7(433)/Policy-II/VAT/2012/585-595 - dated 5-9-2012 - DVAT Regarding online submission of Form T-2. Summary: The Government of the National Capital Territory of Delhi, through the Department of Trade and Taxes, mandates that dealers submit details of invoices and goods receipt notes online for all goods purchased or received as stock transfers from outside Delhi. This requirement, issued by the Commissioner of Value Added Tax, is intended to enhance the administration of the Delhi Value Added Tax Act, 2004. Dealers must use Form T-2 to submit these details online, using their login credentials, before the goods physically enter Delhi. This notification has been superseded by a subsequent notification dated March 21, 2013. Circulars / Instructions / Orders VAT - Delhi 1. 18 - dated 7-9-2012 Online issue of Central Declaration Forms. Summary: The Department of Trade and Taxes in Delhi has launched an online system for issuing Central Declaration Forms 'C', 'F', and 'H'. Initially available to dealers in Wards 201 to 206, it is now accessible to all registered dealers. Dealers can log in to the department's website using their TIN and password to request, download, and print the forms without any human interaction. Detailed instructions are provided under 'User Manuals' on the website. Dealers are encouraged to use this facility for forms from 2012-13 onwards and report any issues via the 'Helpdesk' link on the login page. 2. 17 - dated 5-9-2012 Online submission of Form T-2. Summary: The Department of Trade and Taxes in Delhi mandates dealers to submit invoice and goods receipt details for goods entering Delhi from outside, effective October 1, 2012. This is to be done online using Form T-2 via the department's website. The information will integrate with the system for issuing Central Declaration Forms 'C', 'F', and 'H', eliminating the need for separate bill entries. Failure to submit Form T-2 may lead to restrictions on Central Declaration Forms. Dealers are urged to comply timely to avoid penalties or adverse assessments. DGFT 3. 16 (RE2012)/2009-14 - dated 6-9-2012 Corrections/Amendments in Appendix 37A and Appendix 37D of Handbook of Procedures Volume I. Summary: The Directorate General of Foreign Trade has issued amendments to Appendix 37A and Appendix 37D of the Handbook of Procedures Volume I for 2009-2014. Corrections include renumbering and updating product codes and descriptions, specifically for items like "SPILENTHUS CEOROSA" and "Project Goods." Several entries were missing or incorrect, such as those for "Other Derivatives of Pyradine" and "Bulk Drugs/APIs including Loratadine." The notice also revises ITC (HS) Codes for various products, ensuring eligibility for incentives. These changes aim to rectify errors and harmonize codes for better trade facilitation. 4. 15 (RE 2012) /2009-2014 - dated 6-9-2012 Modification in the description of import item under SION A2337. Summary: The Directorate General of Foreign Trade has issued a modification to the Standard Input Output Norms (SION) A2337, correcting a typographical error in the description of an import item. The item previously listed as "Hydrocol Cement" is now correctly identified as "Hydrocal Cement." This change affects the import description for the export item "Plaster of Paris (Dental Grade)" with no other alterations to the existing norms. The correction ensures accurate documentation and compliance with the Foreign Trade Policy 2009-14. Highlights / Catch Notes Income Tax Section 80IA Deduction Denied: Lack of Separate Accounts for Raw Material Sales & Yarn Manufacturing Income Justification. Case-Laws - SC : Deduction u/s 80IA - as no reason has been imparted as to why separate accounts were not maintained for the raw material sold and for the income derived from manufacture of yarn, deduction not allowed - SC Visit to Get Source Investment Allowance u/s 32A: Assessee Must Prove Nature of Mining and Export Activities; Case Remanded for Review. Case-Laws - SC : Investment allowance u/s 32A - production - as the assessee has not led evidence before AO as to the exact nature of activities undertaken by it in the course of mining, polishing and export of granites - matter remanded back - SC Visit to Get Source High Court Rules Tribunal Exceeded Authority by Recalling Order for New Hearing u/s 254. Case-Laws - HC : Rectification of mistake u/s 254 - Tribunal was not justified in recalling the order passed by it in toto and setting the matter down for a fresh hearing - HC Visit to Get Source Supreme Court: Excise Duty Exclusion in Closing Stock Valuation Valid, Rejects Income Addition for Taxpayer. Case-Laws - SC : Undervaluation of closing stock - non inclusion of excise duty into computation - addition to the income on the ground of undervaluation of the closing stock was wrong - SC Visit to Get Source Tribunal Overturns Revenue Decision; Approves Deduction Claim for Scientific Research u/s 35(1) Due to Procedural Oversight. Case-Laws - HC : Expenditure on scientific research u/s 35(1) - Tribunal itself ought not to have decided this question without the opinion of the prescribed authority - the reference ought to have been sought by the revenue before the Board to the prescribed authority and not having done so, the Tribunal was justified in reversing the orders of the revenue authorities rejecting the assessee's claim for deduction. - HC Visit to Get Source Court Rules Amendments to Sections 28 and 80HHC Apply Prospectively, Not Retroactively, for Large Exporters. Case-Laws - HC : Challenge against insertion of clause (iiid) and (iiie) to Section 28 and third and fourth provisos to Section 80HHC - operation of the said section could be given effect from the date of the amendment and not in respect of earlier assessment years of the assessees whose export turnover is above Rs. 10 Crore. - HC Visit to Get Source Tribunal Mistakenly Challenges DVO's Use of CPWD Rates for Commercial Building Valuation by Assessment Officer. Case-Laws - HC : Valuation of cost of construction of the commercial building - AO has power to refer to DVO - Tribunal has committed an error in holding that CPWD rates adopted by the District Valuation Officer was not correct. - HC Visit to Get Source Companies Dealing in Shares: All Transactions Considered Speculative u/s 73 of the Income Tax Act. Case-Laws - AT : Deemed Speculative Income – Section 73 -if part of its business consists of dealing in shares then all types of transactions, whether delivery based or nondelivery based, will be treated as speculative transactions. - AT Visit to Get Source No Penalty for Incorrect Deduction Claim: Section 271(1)(c) and 80IB Reviewed, No Inaccurate Particulars Found. Case-Laws - AT : Penalty u/s 271(1)(c) - denial of deduction u/s 80IB - Making an incorrect claim cannot tantamount to furnishing inaccurate particulars. - no penalty - AT Visit to Get Source Court Rules Deposited Funds from Income Surrendered During Searches Should Not Be Taxed. Case-Laws - AT : Viability of taxing amount deposited in bank accounts which assessee contended to be out of income surrendered during search operations - Addition is directed to be deleted - AT Visit to Get Source Income Not Taxable Under Sec 41(1) IT Act Without Actual Liability Cessation; Presumed Remission Insufficient. (1. Case-Laws - AT : Addition u/s 41(1) on account of presumed remission of liability - unless there is a cessation of liability, income cannot be added as per the provisions of Section 41(1) - AT Visit to Get Source Section 69B Addition for Omitted Figures Deleted; Total Would Have Been 4 Crore if Included. Case-Laws - AT : Addition made u/s 69B – The five figures have been omitted by the assessee while preparing this paper and if five figures are added in the figure of 400 then it will become 4,00,00,000/-. - addition deleted - AT Visit to Get Source Court Upholds Section 69A Addition: Assessee's Explanation of Cash Gifts for Old Age Expenses Found Unsatisfactory. Case-Laws - AT : Addition u/s 69A - Cash deposits in bank contended by assessee to be out of gift made by his father for his old age / hospitalization - Addition u/s 69A justified as explanation not satisfactory - AT Visit to Get Source Tax Addition Deleted: Section 40A(2)(b) Allows Salary for Nephew in Part-Time Studies, No Prohibition Found. Case-Laws - AT : Dis-allowance u/s 40A(2)(b) - salary payment to nephew who was studying also - If any person is working, he can at the same time, continue his study also in part time, and there is no bar in studying part time. Addition made deleted - AT Visit to Get Source Interest on Delayed Bill Payments Not Considered Loan Interest u/s 2(28A), No Disallowance u/s 40(a)(ia. Case-Laws - AT : As the interest paid by assessee is not for any loan or debt but for the delay in payment of bills for purchases effected cannot be termed as interest as defined u/s. 2(28A) - no disallowance u/s. 40(a)(ia) - AT Visit to Get Source Taxes Paid by Employer for Employee Are Employer's Obligation, Exempt Under Income Tax Act Sec 10(10CC. Case-Laws - AT : Combined reading of section 10(10CC) & 17(2iv) shows that Taxes borne by the employer were obligation, otherwise such payments would have been payable by the assessee. - exempt under the provisions of section 10(10CC) & non-monetary consideration - AT Visit to Get Source No penalty for incorrect tax claim u/s 271(1)(c); not considered inaccurate particulars or income concealment. Case-Laws - AT : Penalty u/s 271(1)(c) – merely making a wrong claim in the return of income cannot a ground for imposing penalty u/s 271(1)(c) of the Act as it neither amounts to furnishing inaccurate particulars nor amounts to concealment of income. - AT Visit to Get Source Court Rules Tripartite Real Estate Sale Income as Business Income, Not Other Sources, Per Memorandum of Understanding (MOU. Case-Laws - AT : Whether in real estate business tripartite sale on basis of MOU is business income or income from other source - held as business income - AT Visit to Get Source Telecom and Cable Fees for Tower Installations on Terraces Classified as Income from Other Sources. Case-Laws - AT : Licence fee from various telecommunication and cable network operators on account of installation of towers/antennas on terrace of the property - Receipts were held as income from other sources. - AT Visit to Get Source Case Remanded: AO's One-Hour Deadline for Tax Details u/s 145 IT Act Deemed Insufficient for Fair Assessment. Case-Laws - AT : Addition made on account for rejection of books u/s 145 - AO has given one hour to produce details - Case remand back to AO - AT Visit to Get Source Section 80IB Deduction Approved for Conversion Charges in Manufacturing; Same Machinery and Labor Used. Case-Laws - AT : Deduction under section 80IB - manufacturing process - the conversion charges received is in course of manufacturing activity by using the same machinery and labour - deduction allowed - AT Visit to Get Source Depreciation on Loaned LPG Cylinders Permitted for Taxation; Security Deposit Transactions Clarified. Case-Laws - AT : Depreciation on the LPG Cylinders - loaning of the cylinders against security deposit - depreciation allowed - AT Visit to Get Source AO Must Evaluate Interest Claims in Land Acquisition Cases, Cannot Dismiss Without Proper Examination. Case-Laws - AT : Assessment of interest on compensation on acquisition of land - AO was not justified in totally ignoring the claim of petitioner without examining - AT Visit to Get Source Interest Levied Automatically for TDS Non-Deduction; Penalty u/s 271C Requires Officer's Discretion Per Section 273B. Case-Laws - AT : Non deduction of TDS - Levy of interest u/s 201(1A) is automatic, however it is not so in case of imposition of penalty u/s 271C. Section 273B provides a discretion to the AO towards imposition of penalty u/s 271C - AT Visit to Get Source Compulsory donations for student admissions disqualify tax exemption u/s 10(23C) and Section 11 of the Income Tax Act. Case-Laws - AT : If donations are received compulsorily for the admission of students, the assessee would not be entitled for exemption either under S.10(23C) or under S.11 of the Act - AT Visit to Get Source Section 68 Additions Upheld: Partners Failed to Prove Source of Introduced Capital in Tax Returns. Case-Laws - AT : Additions u/s 68 - capital introduced by partners - - The availability of funds with the partners was not at all disclosed in their respective returns of income. - addition confirmed. - AT Visit to Get Source Broader Interpretation of Section 80-IA(4)(ii) Deductions: Public Call Offices May Qualify for Telecom Tax Benefits. Case-Laws - AT : Deduction under section 80-IA(4)(ii) – telecommunication services - If the assessee can be given exemption, then a person running even a public call office (PCO) should be entitled for the same deduction. - AT Visit to Get Source Customs Customs Duty Refund Approved After Overpayment Due to Ignorance of Concessional Rate Notification. Case-Laws - AT : Refund of customs duty - higher rate was paid in ignorance of notification which allowed him payment of concessional rate of duty - refund allowed - AT Visit to Get Source EOUs in Service Activities Exempt from Central Excise Manufacturing Rules; Different Treatment from Manufacturing Units. Case-Laws - AT : The concept of manufacture in the Central Excise law cannot be brought into for the purpose of 100% EOU Undertaking service activities. - AT Visit to Get Source Bona fide car buyers cleared by Customs exempt from redemption fines; original importer liable for duty shortfall. Case-Laws - HC : Bona fide purchaser of a car which is cleared by the Customs Department is not liable to pay redemption fine even if the car was under valued and the original importer is liable to pay the difference in duty - HC Visit to Get Source DGFT DGFT Modifies SION A2337 Item Description to Align with Current Trade Practices and Regulatory Compliance. Circulars : Modification in the description of import item under SION A2337. - Public Notice Visit to Get Source DGFT Announces Amendments to Appendix 37A and 37D in Handbook of Procedures Volume I for Trade Policy Clarity. Circulars : Corrections/Amendments in Appendix 37A and Appendix 37D of Handbook of Procedures Volume I. - Public Notice Visit to Get Source Corporate Law Court Can Dissolve Company If Official Liquidator Lacks Funds to Proceed with Winding Up Process. Case-Laws - HC : When Official Liquidator can not proceed with the winding up of the Company for want of funds or for any other reason, the Court can make an order dissolving the Company from the date of that order. - HC Visit to Get Source Wealth-tax Court Examines Proper Notification and Rebuttal Opportunity u/s 18(1)(c) of Wealth Tax Act Penalty Case. Case-Laws - HC : Penalty u/s 18(1)(c) of wealth tax act - Had the assessee been put to notice with respect to explanation(4) of section 18(1)(c) of the Act and consequently given opportunity to rebut the presumption, perhaps the situation would have been different. - HC Visit to Get Source Service Tax Service Tax Refund Approved: Protest Payment Addressed Unjust Enrichment Issue Successfully. Case-Laws - AT : Refund claims – unjust enrichment – service tax paid under protest – refund allowed - AT Visit to Get Source Appellate authority's order for full service tax payment overturned due to lack of prior notice, procedural oversight cited. Case-Laws - AT : Provisional assessment under service tax - Appellate authority should not have, without putting the appellant to notice, pass an order directing the appellant to discharge the service tax liability on the entire amount - AT Visit to Get Source Cenvat Credit Eligibility on Outdoor Catering for Factories with Up to 250 Workers Discussed in Service Tax Case. Case-Laws - AT : Cenvat Credit - outdoor catering service for supply of food to workers - not more than 250 workers in their factory - pre-deposit ordered - AT Visit to Get Source Penalty Waived for Non-Payment of Service Tax on Overseas Agent Commissions; Considered Revenue-Neutral. Case-Laws - AT : Non payment of service tax on commission paid to the agent located outside India - revenue-neutrality - penalty waived - AT Visit to Get Source Penalties Apply Only if Valid Recovery u/s 73(1) Initiates; Section 80 Excludes Section 73 from 'Non Obstante' Clause. Case-Laws - HC : The question of penalty proceedings would arise only when there could be valid recovery proceedings under Section 73(1) of the Act. That is the reason when the ‘non obstante’ clause in Section 80 refers to only Sections 76, 77 and 78 and not to Section 73 of the Act. - HC Visit to Get Source Cenvat credit permissible for courier services and vehicle insurance premiums as they are linked to business activities. Case-Laws - AT : Cenvat credit on input services namely, Courier service and insurance premium on vehicles cannot be denied - these services are related to activity of business. - AT Visit to Get Source Central Excise PDI and after-sales service charges included in transaction value u/s 4(3)(d) if imposed on buyer. Case-Laws - HC : As per Section 4(3)(d) of the Central Excise Act, 1944 the PDI and free after sales services charges can be included in the transaction value only when they are charged by the assessee to the buyer - - HC Visit to Get Source Government Must Re-credit Erroneously Collected Duties on Exempt Goods to Exporter's Cenvat Account. Case-Laws - CGOVT : Export of goods - payment of duty on exempted goods - Govt. cannot retain any amount which is not due to it, the amount so collected is allowed to be re-credited in Cenvat Account. - CGOVT Visit to Get Source Rule 8(3A) Change: Excise Duty Payment Without CENVAT Credit If Deadline Missed, Effective June 1, 2006. Case-Laws - AT : Due date for payment of duty u/r Rule 8(3A) - forfeiture of facility of utilization of cenvat credit - Only with effect from 1-6-2006, Rule 8(3A) has been amended specifically providing for payment of excise duty without utilizing the CENVAT Credit. - AT Visit to Get Source SSI Exemption: No Need to Reverse Input Credit on Stock or Work in Progress, Confirms Court Decision. Case-Laws - AT : Reversal of input credit on stock or work in progress when the appellant opts for SSI exemption - no demand in vie of earlier HC decision - AT Visit to Get Source Cenvat Credit from Manufacturing Can Offset Liability on Commission to Foreign Agents under Business Auxiliary Services. Case-Laws - AT : The Cenvat Credit availed on manufacturing activity can be utilized for discharging the deemed liability on commission paid to foreign agents under Business Auxiliary Services - AT Visit to Get Source Export Unit Wins Right to Cenvat Credit Despite Exemption Notification 30/2004-C.E.; Demand Against Them Overturned. Case-Laws - AT : Entitlement of the appellant to avail Cenvat credit - 100% E.O.U. - Export under bond - exemption notification no. 30/2004-C.E. - demand confirmed against them while denying the credit is not justified. - AT Visit to Get Source CA Certificate Valid for Overcoming Unjust Enrichment in SAD Refund Claims per Circular No. 18/10-Cus. Case-Laws - AT : Refund claim of SAD - unjust enrichment - CA certificate is sufficient as per the Board’s Circular No. 18/10-Cus., dated 8-7-2010, to discharge the liability of bar of unjust enrichment - AT Visit to Get Source VAT Online Submission of Form T-2 for VAT and Sales Tax Now Available, Streamlining Compliance and Boosting Efficiency. Notifications : Regarding online submission of Form T-2. - Notification Visit to Get Source Tax Administration Launches Online Submission for VAT and Sales Tax Forms to Simplify and Streamline Filing Process. Circulars : Online issue of Central Declaration Forms. - Circular Visit to Get Source New Circular Requires Online Submission of Form T-2 for VAT Compliance to Simplify Tax Reporting and Reduce Paperwork Circulars : Online submission of Form T-2. - Circular Visit to Get Source Case Laws: Income Tax 2012 (9) TMI 268 Non maintenance of a separate trading and profit and loss account for the goods manufactured - claim of deduction u/s 80IA - manufacturing of yarn - Held that:- No defect in AO's attempt to work on his own the manufacturing account giving a bifurcation in terms of quantity of raw wool produced can be pointed out as the assessee ought to have maintained a separate account in respect of raw material which it had sold during the assessment year as if the assessee had maintained a separate account, then, in that event, a clear picture would have emerged which would have indicated the income accrued from the manufacturing activity and the income accrued on the sale of raw material - as no reason has been imparted as to why separate accounts were not maintained for the raw material sold and for the income derived from manufacture of yarn appeal of assessee dismissed. 2012 (9) TMI 267 Disallowance of investment allowance u/s 32A - Held that:- Whenever assessee claims investment allowance under Section 32A it has to lead evidence to show that the process undertaken by it constitutes 'production' - as the assessee has not led evidence before AO as to the exact nature of activities undertaken by it in the course of mining, polishing and export of granites the case is remitted back to AO giving opportunity to the assessee to produce relevant evidence. 2012 (9) TMI 266 Rectification of mistake u/s 254 - Disallowance of commission paid to dealers - ITAT allowed it - rectification application by assessee accepted on drastic disallowance to the extent of 10% for two succeeding assessment years i.e 2005-06 and 2006-07 - Held that:- Section 254(2) of the Act makes it amply clear that a 'mistake apparent from the record' is rectifiable. To attract the jurisdiction under Section 254(2), a mistake should exist and must be apparent from the record. The power to rectify the mistake, however, does not cover cases where a revision or review of the order is intended. Considering the legal position, the Tribunal was not justified in recalling the order passed by it in toto and setting the matter down for a fresh hearing - whether the dealer commissions remained constant throughout the previous years, or had to dwindle, according to the Tribunal’s understanding in its previous order of 30-11-2009, were matters that had to be gone into and were directed to be gone into by the AO. However, in the order by which previous order was rectified, the entire basis of its previous reasoning was substituted, and a wholly new result ensued. This court is clear that such re-appreciation did not amount to rectification of a mistake, but re-appreciation of a process of reasoning, which falls legitimately in the sphere of the appellate forum - As Tribunal took note of its order dated 9-10-2009 in respect of the AY 2005-06, and was to quite an extent influenced by it but is to be noted that the correctness of that order is under appeal before this court - thus the Tribunal could have not entirely substituted and re-written its previous order - the main order disposing of the matter on 30-11-2009 is hereby restored. 2012 (9) TMI 265 Undervaluation of closing stock - non inclusion of excise duty into computation - Held that:- As per Section 3 of the Central Excise Act, 1944 the levy of excise duty is on the manufacture of the finished product the same is quantified and collected on the value (i.e. selling price) and that the valuation of unsold stock at the close of the accounting period determines the trading results of that period and cannot be regarded as source of profits. The entry for stock which appears in the trading account is intended to cancel the charge for the goods bought which have remained unsold which should represent the cost of the goods - addition to the income on the ground of undervaluation of the closing stock was wrong - in favour of assessee. 2012 (9) TMI 264 Disallowance claim of expenditure on scientific research u/s 35(1) - no new product was developed as there was only modification in the existing product -ITAT allowed the claim - Held that - The Tribunal without discussing full materials on record, came to such conclusion that deduction u/s 35 need to be allowed as these are matters of extreme scientific complexities. What was the nature of the research undertaken, what was the improvement in the existing software aimed at or desired, whether ultimately the product which was launched by the assessee after undertaking such so called scientific research, was a new product substantially different from the existing one or not were some of the issues on which the Tribunal, without bestowing sufficient attention ruled in favour of the assessee. AO could not have rejected such a claim without making a reference to the Board - Held that:- Section 35(3) requires a reference to be made by the Board to the prescribed authority when a question arises as to whether and if so to what extent, any activity constitutes or constituted or any asset is or was being used for scientific research. The decision of the prescribed authority on such a question would be final, thus the AO not having obtained such a decision of the prescribed authority though a serious question in the present case had arisen, was not justified in rejecting the assessee's claim for deduction of expenditure incurred for scientific research. Thus rejection of reopening of the entire issue as the Commissioner held that a substantial portion of such expenditure was in any case of revenue nature and in respect of the provision of section 37(1) of the Act, the assessee was entitled to claim full deduction thereof - in favour of assessee. 2012 (9) TMI 263 Challenge against insertion of clause (iiid) and (iiie) to Section 28 and third and fourth provisos to Section 80HHC - Held that:- The impugned amendment is violative for its retrospective operation as in this type of substantive amendment, retrospective operation can be given only if it is for the benefit of the assessee but not in a case where it affects even a fewer section of the assessee - order to quash the impugned amendment only to this extent that the operation of the said section could be given effect from the date of the amendment and not in respect of earlier assessment years of the assessees whose export turnover is above Rs. 10 Crore. Decision in AVANI EXPORTS & OTHERS Versus COMMISSIONER OF INCOME TAX RAJKOT & ORS. [2012 (7) TMI 190 - GUJARAT HIGH COURT] followed. 2012 (9) TMI 262 Valuation of cost of construction of the commercial building - assessee contested against reference made by AO to District valuation officer regarding determination of cost of construction - Held that:- Considering amendment to the Income Tax Act u/s 142A AO has got power to refer the matter to the District Valuation Officer for the purpose of valuation. Further, the Tribunal has committed an error in holding that CPWD rates adopted by the District Valuation Officer was not correct without assigning any reason to arrive at such a conclusion. Hence, the order passed by the Income Tax Appellate Tribunal cannot be sustained. The amended section 142-A(3) contemplates that on receipt of the report from the Valuation Officer, AO must give the assessee an opportunity of being heard and then take into consideration such report in making such assessment or reassessment. In the instant case, on the objections field by the assessee, though the matter was referred to the District Valuation Officer for his comments, without waiting for further comments from the District Valuation Officer AO has proceeded with the matter without considering the valid objections raised by the assessee. The same was confirmed by the CIT (Appeals) - As the Appellate Authority set aside the said order without remanding the matter for reconsideration the matter requires to be reconsidered by the Assessing Authority afresh after getting necessary clarification from District Valuation Officer with regard to value of the building constructed by the assessee - in favour of assessee. 2012 (9) TMI 261 Penalty u/s 271(1)(c) – concealment of income and furnishing inaccurate particulars - expenditure claimed by the assessee as revenue expenditure being held by Assessing Officer as capital expenditure – Held that:- It is observed that assessee had furnished all the particulars of income and specifically to cover up the point of revenue or capital expenditure, the assessee vide Notes to computation of income had brought the fact before AO. Expenses claimed by the assessee as revenue expenditure was based upon the nature of expenses and assessee had relied upon various judicial pronouncements in support of its claim and from any angle it cannot be said that assessee had furnished inaccurate particulars of income. It is a matter of opinion and courts had given different opinions in respect of such items at different times. Further, mere non filing of appeal by assessee against the additions made by AO cannot be said to be admission by assessee of having submitted wrong claim. In view of aforesaid, penalty is directed to be deleted – Decided in favor of assessee. 2012 (9) TMI 260 Deemed Speculative Income – trading in the delivery basis – Held that:- Section 73 explanation is mandatory and has overriding effect and is applicable to all Private Limited Companies. CIT(A) has rightly examined and considered provisions of section 73 explanation and observed that in case of a company, if part of its business consists of dealing in shares then all types of transactions, whether delivery based or nondelivery based, will be treated as speculative transactions. Order of CIT(A) upheld Payment of interest to SEBI for late deposit of SEBI dues – dis-allowance on contention of it being penal – Held that:- It has rightly been concluded by CIT(A) that same is an accordance with provisions of SEBI Regulations and interest is of compensatory nature and same is not in the nature of penalty or damages for infraction of law. See CIT v. Prasad and Co (2012 (2) TMI 124 - DELHI HIGH COURT). Order of the CIT(A), deleting the dis-allowance is upheld – Decided against Revenue 2012 (9) TMI 259 Addition of certain sundry creditors as unexplained on the ground that the assessee has not able to furnish addresses of the creditors and their confirmations during the assessment proceedings - Held that:- It is observed that there was difference between the amount available in the ledger and the amount mentioned in the notice sent to the sundry creditors u/s.133(6), notice served but no reply received from certain Sundry Creditors and notice sent to certain sundry creditors returned unserved. Therefore, CIT(A) held total amount of Rs. 34,14,368 remained unexplained after considering issue threadbare and also basing on the remand report submitted by the AO. No infirmity in the order of the CIT(A) Dis-allowance u/s 40(a)(ia) - payment after due date but before filing of the return - Held that:- Amendment brought about by the Finance Act, 2010 w.e.f. 1.4.2010 has to be treated as retrospective w.e.f. 1st April, 2005,the date on which the Section 40(a)(ia) has been inserted by the Finance (No.2) Act,2004. Therefore, in view of payment before filing of return, dis-allowance u/s 40(a)(ia) is unwarranted. Order of CIT(A) confirmed - Decided against Revenue 2012 (9) TMI 258 Addition on account of Bogus purchases - transaction shown by the assessee in the name of M/s.T held to be paper entries only on ground of inability of assessee to furnish any clarification along with supporting evidences in regard to transaction - Held that:- Purchases could not be bogus if they have participated in the sales or in the closing stock. Paper entries are part of the books of account and the Excise authorities have accepted the purchases in accordance with the provisions of the Excise Duty Act which the assessee claims in accordance with the returns filed. Also, assessing authorities have accepted the Excise duty being the part of the turnover in accordance with the provisions of the I.T.Act to be allowed to the assessee. Further, outstanding balance to M/s.T cannot be denied as unexplained credit u/s.68 for holding certain purchases as bogus. Arrangement which is allowable under law by Excise authorities has been misconstrued to the extent that the very sales which has been accepted as genuine by the authorities below including the excise duty component as was taken care of under the Excise Duty Act was for purchases only. In view of aforesaid, addition made on account of bogus purchases is directed to be deleted - Decided in favor of assessee 2012 (9) TMI 257 Penalty u/s 271(1)(c) - denial of deduction u/s 80IB - net profit from Power Plant has been shown at Rs.7.59 crores from total sale of power of Rs.9.05 crores only i.e. the NP rate of 83.91% - AO contended that profit from Power Plant has been abnormally shown at a higher figure only for the purpose of claiming deduction u/s.80lA - assessee unable to substantiate profit in accordance with the expenditure incurred - Held that:- Provisions of section 271(1)(c) apply when there is concealment of the particulars of the income or inaccurate particulars are furnished. Where no information given in the return is found to be incorrect or inaccurate, the assessee cannot be held guilty of furnishing inaccurate particulars. Making an incorrect claim cannot tantamount to furnishing inaccurate particulars. Denial of deduction u/s 80IA as confirmed by the Tribunal was on the obvious claim of deduction when the gross income did not include the power supplied at the rate given by the Electricity Regulatory authority. Same could not trigger the invoking the provisions of Section 271(1)(c) - Decided in favor of assessee 2012 (9) TMI 256 Charitable institution - cancellation of registration u/s 12AA, pursuant to search operations, which however was restored by Tribunal - denial of claim u/s 11 in meantime - assessee submitted that the Assessing Officer has tried to put a meaning to the activities carried out by the assessee as commercial activity not relating to the charitable activities but at the same time concluding that the application of the income was properly rendered by holding that the revenue expenditure reflected in the income and expenditure account was to be allowed - Held that:- Issue is covered by the Tribunal’s decision in assessee's own case for earlier years, wherein it was held that the fact that assessee had been granted registration u/s.12AA must not be lost sight of when there are corroborative evidences which only related to the fact that the assessee had declared the incomes in accordance with the provisions of Section 11 and 13. In view of aforesaid, it is held that exemption u/s.11 has been claimed in accordance with law and the registration u/s.12A has not been revoked - Decided against Revenue 2012 (9) TMI 255 Viability of taxing amount deposited in bank accounts which assessee contended to be out of income surrendered during search operations and available to assessee as opening cash balance - assessee vehemently argued that having accepted the income as surrendered u/s.132(4) the assessing authorities have tried to tax the income held as an asset by the assessee which is nothing but double taxation - Held that:- Amounts purported to be brought to tax by the AO as confirmed by CIT(A) for the AYs 2003-04 and 2004-05 stood explained by the assessee to the extent that the amounts generated and rendered to tax was the amounts available on the basis of declaration of income up to the AY 2006-07 when the search took place in August,2005. Therefore, having paid tax u/s.132(4) the undisclosed investment u/s.69 cannot be taxed when the Assessing Officer and the learned CIT(A) have contradicted their own findings that the assessee was having sufficient funds to make these deposits by identifying the amount as belonging to it when the ultimate withdrawals could not be considered as expenditure. There was no requirement by the assessee to establish the nexus. Addition is directed to be deleted - Decided in favor of assessee. 2012 (9) TMI 254 Addition u/s 41(1) on account of presumed remission of liability - AY 08-09 - assessee had shown a liability of Rs.47,81,733 against M/s B whereas the balance as on 31.3.2007 was shown at Rs.16,61,281 - AO was of the view that the party has issued receipt in token of receiving of the amount at Rs.31,20,450 whereby the balance due to that party was reduced to Rs.16,61,281 as on the end of the year i.e., 31.3.2007 - Held that:- CIT(A) rightly held that unless there is a cessation of liability, income cannot be added as per the provisions of Section 41(1) Dis-allowance u/s 40(a)(ia) - sub-contract - assessee deducting TDS u/s 194C - Revenue contended applicability of Section 194I on ground that machineries have been used on hire basis - Held that:- CIT(A) rightly deleted the addition on ground that expression of Section 194C defines that for carrying on any work includes the use of labour, transportation and other miscellaneous activities jointly taken up for completion of the works. That being so deduction u/s.194C is very much right. Before the Tribunal the Department is merely contending that it was additional evidence but without establishing as to how the same is additional evidence, hence, the same is hereby dismissed - Decided against Revenue 2012 (9) TMI 253 Taxability of Sale proceed on DEPB - Weather entire sales proceeds received on transfer of DEPB is taxable - AO made addition of sales proceeds received on transfer of DEPB - Held that:- As decided in the case of Topman Exports 2012 (2) TMI 100 - SUPREME COURT OF INDIA, Sales proceed of DEPB is not taxable under PGBP - DEPB is taxable on two basis, first under clause iiib of sec. 28 when it receivable and secondly profit on transfer or sale of DEPB fall under clause iiid of sec. 28. And profit implies difference between the sale value and the face value of the DEPB. Appeal decided against revenue. 2012 (9) TMI 252 Search & Seizure – addition made u/s 69B – Revenue contended from seized documents that amount mentioned therein is nothing but the cost price paid by assessee to the seller of this land. The five figures have been omitted by the assessee while preparing this paper and if five figures are added in the figure of 400 then it will become 4,00,00,000/-. After reducing the amount recorded in books of account, the remaining amount of Rs. 2,61,66,611/- has been added u/s 69B – AO presumed that assessee had paid cash over and above the amount recorded in its books of account – deletion of addition by CIT(A) - Held that:- CIT (A) has taken into consideration the aspect that firstly the AO ’s view was that the cost of land was Rs. 4.55 crore or odd. Three show cause notices were given to the assessee for explaining that why the cost of the land be not taken at Rs. 4.50 crore or odd. All the three times, the explanation was filed and the AO was satisfied with the explanation. Therefore, the A.O. has not taken the cost of investment at Rs. 4.50 crore or odd. However, as per certain seized documents, where figure of 400 was mentioned, the AO took this value as cost of investment in the property. Neither the AO could co-relate the figure of 22.5 mentioned in the column no. 1 nor the figure mentioned in column no. 3 as per books of account. Therefore, there cannot be a presumption that figure of 400 mentioned in column no. 4 is figure of cost of land purchased by assessee. There must be some corroborative evidence to hold that this figure is related to cost of the land purchased by the assessee. Neither these findings could be controverted nor any other material were brought on record which can be said that findings of Ld. CIT (A) are not correct. Therefore, no infirmity exists in order of CIT (A) deleting addition made u/s 69B – Decided in favor of assessee 2012 (9) TMI 251 Addition u/s 69A - Cash deposits in bank contended by assessee to be out of gift made by his father for his old age/hospitalization - Held that:- Out of three ingredients of identity, capacity and genuineness, though identity of the donor is established, however no material whatsoever in respect of donor’s capacity has been furnished by the assessee at any stage. Assessee contends it to be out of sale of land by his father but no material has been produced to substantiate the same. Further, amount was stated to be gifted for medical treatment of his father, and assessee claims to have met the entire medical expenditure, but the same is again de hors any material. If the assessee has incurred the expenditure, he could furnish the relevant details; the money in any case would have only been withdrawn from his bank account/s or from other accounted source/s. Also, amount specifically set aside by the father for his illness and old age, was actually unspent and remained completely intact despite his prolonged illness/treatment. There are thus serious gaps in the assessee's explanation, which also impinge on the genuineness aspect of the transaction/s. Addition u/s 69A justified Addition made by estimating income from counseling and lecturing at Rs. 5.00 lacs, as against Rs. 3.52 lacs disclosed by the assessee, in the absence of maintenance of any books of account - assessee contesting power of estimation by AO on ground that assessee was not required to maintain books of accounts - Held that:- Assessee was required to maintain books of accounts u/s 44AA and if books are defective AO has power to estimate income, However that there has to be some basis with the AO in enhancing the assessee's income as declared, and which we find as completely absent in the present case. Accordingly, the addition supposing a higher income is, in our view, not sustainable in law, and is thus directed for deletion - Decided partly in favor of assessee 2012 (9) TMI 250 Addition u/s 68 - unsecured loans - Held that:- It is observed that all the persons from whom loans were taken, were identified as assessee has filed their confirmations, affidavits along with copies of election cards. The complete addresses were given. AO didn't bothered to summon these persons independently to examine further, if he wanted to examine them. Therefore, addition made u/s 68 is without merit. Dis-allowance u/s 40A(2)(b) - salary payment to nephew who was studying also - Held that:- It is undisputed that Shri Hani Jain was attending the work of assessee’s firm. It has not been pointed out by AO in his order that how the salary of Rs. 5,000/- paid to Shri Hani Jain is in violation of provisions of section 40A(2)(b), neither any other reasons have been assigned by the Assessing Officer. If any person is working, he can at the same time, continue his study also in part time, and there is no bar in studying part time. Addition made is deleted - Decided in favor of assessee 2012 (9) TMI 249 Disallowance u/s. 40(a)(ia) - non deduction of TDS on interest payment - Held that:- As decided in ITO v. Parag Mahasukhlal Shah [2011 (6) TMI 148 - ITAT, AHMEDABAD] that a payment which has direct link and immediate nexus with the trading liability being connected with the delayed purchase payments will not fall within the category of interest as defined in section 2 (28A) - as the interest paid by assessee is not for any loan or debt incurred by the assessee but for the delay in payment of bills for purchases effected cannot be termed as interest as defined u/s. 2 (28A) - no disallowance could be made u/s. 40 (a) (ia) - in favour of assessee. Disallowance of interest paid by the assessee on borrowals - Held that:- No addition of proportionate interest on interest free advance can be called for on the self same interest free advance made - in favour of assessee. 2012 (9) TMI 234 Income tax on salary paid by employer – Weather tax paid by foreign employer on salary is eligible u/s 10(10CC) – It’s monetary or non-monetary perquisite - Tax is calculated & paid by employer on behalf of assessee - Held that:- From the Combined reading of section 10(10CC) & 17(2iv), it can be concluded that taxes borne by the employer were obligation, otherwise such payments would have been payable by the assessee. Therefore are exempt under the provisions of section 10(10CC) & non-monetary consideration as decided in the case of RBF Rig Corporation (2007 (11) TMI 334 - ITAT DELHI-F). Decision in favor of assessee 2012 (9) TMI 233 Addition on account of scrap sales - assessee engaged in the business of manufacture and export of ready made garments - addition made on ground that assessee has disclosed lower scrap sale in comparison to other exporters in similar trade - Held that:- It is observed that AO has not found any defect in the books of accounts of the assessee. There is no finding about assessee’s supressed production. Manufacturing production and trading accounts have been duly accepted during preceding three years though assessments were completed u/s 143(3) and no addition on this account was ever made. Current year’s figures of production and trading has also not been doubted. AO made the addition purely on the basis of estimate. More importantly, the ITAT in assessee’s sister concern had deleted the addition made on this account. CIT(A) in his order tried to distinguish assessee’s case with the case of assessee’s sister concern on the basis of raw material used by both parties which according to him was different but did not bring on record any thing to support his findings that material used by assessee generated more scrap as compared to assessee’s sister concern. Therefore, on facts, addition is directed to be deleted - Decided in favor of assessee. 2012 (9) TMI 232 Penalty u/s 271(1)(c) – business income or capital gain - AO treat the gain as short term capital gain and initiated penalty proceeding u/s 271(1((c) - Assessee accepted the decision of the AO and went with the tax authorities by not contesting the issue and by paying the tax as required by the AO – Held that:- merely making a wrong claim in the return of income cannot a ground for imposing penalty u/s 271(1)(c) of the Act as it neither amounts to furnishing inaccurate particulars nor amounts to concealment of income. - Where there is no finding that any details supplied by the assessee in its return are found to be incorrect or erroneous or false there is no question of inviting the penalty under section 271(1)(c). - decision in Reliance Petro Products (P) Ltd. (2010 (3) TMI 80 - SUPREME COURT) followed. - In favor of assessee. 2012 (9) TMI 231 Addition made u/s 69B as unexplained investment – Can AO made addition on the basis circle rate of property – Whether Sec. 50C is applicable on purchaser – Assessee purchase agricultural land as stock in trade – AO found difference between circle rate & purchase rate of property - AO made addition by invoking Sec. 50C, Sec 142A & Sec. 69B as unexplained investment - Held that:- As the AO made addition on the basis of a presumption which according to I.T. Act can only be raised against seller, cannot be made in the hands of the purchaser. And provisions of sec. 142A cannot be applied against a transaction which is stock in trade. Decision in favor of assessee. Addition made on account of tripartite sale – Whether in real estate business tripartite sale on basis of MOU is business income or income from other source - Held that:- Assessee duly account for the income as business income The assessee is into the business of real estate and a tripartite property deal was a business transaction and the difference of earning revenue from MOU has been duly offered as business income. Decision in favor of assessee. 2012 (9) TMI 230 Addition on account of undisclosed sources/unexplained cash credit against sale of VIDS 97 declared jewelery(diamonds) on 09.01.98 – sum received through cheque - Revenue contended source of the ‘packet of cut and polished diamonds’ remain unexplained on ground that diamonds declared under VDIS were embedded in the necklace, earrings etc. and were not loose diamonds – also considered sale of jewelery to Kamal Gems and D.M. Corporation as sham nature of transactions – alleged purchasers of diamond M/s D.M. Corporation and M/s Kamal Gems were not found at the time of investigation conducted by ADIT (Inv), Surat Held that:- On bare reading of the report of ADIT(Inv), Surat dated 17.3.2010, it is observed that there is no specific fact showing that in the month of March 1998, there was no business in the name of M/s Kamal Gems in specific premises at Saiyedpura and of M/s D.M. Corporation at Ambika Society. There is also no mention about the fact that instead of aforesaid parties, any other firm/person or entity was using that premises in the month of March, 1998. Therefore, it is observed that the AO relied on the incomplete and ambiguous report submitted by ADIT(Inv), Surat and his findings that the assessee failed to substantiate the creditworthiness and genuineness of said purchasers cannot be sustained as the AO did not properly appreciate the evidence relevant to this fact. Accordingly, addition is deleted – Decided in favor of assessee. 2012 (9) TMI 229 Survey - books impounded reveal indulging of assessee in unaccounted sale and purchase outside the books of account - addition made for unexplained investment in business outside the books - addition on account of gross profit worked out on sales not recorded in books of a/c - addition of extra profit on turnover recorded in regular books of accounts - Held that:- it is found that at the time of survey the assessee himself admitted additional income of Rs.14,00,000/- and while filing return of income the assessee has surrendered only Rs.11,50,000/-. There are no convincing reasons for reducing the declaration made at the time of survey. We find whatever the items of additions which are estimated by the A.O. are covered by disclosure made at the time of survey for Rs.14,00,000/-. We, therefore, find that it will be fair and justice to both sides and to cover all lapses and deficiency which have been pointed by Revenue authorities if addition to the extent of Rs.2,50,000/- is sustained out of the total addition of Rs.23,40,650/- made by the A.O. We accordingly sustain addition to the extent of Rs.2,50,000/- and balance amount of addition is deleted - Decided partly in favor of assessee 2012 (9) TMI 228 Addition made by invoking S28(iv) treating certain liabilities as in-genuine liability - Held that:- In present case, assessee has shown liability of the aforesaid amounts in its books of account and the balance sheet. The liability is still existing, which is also noted in balance sheet. It is also evident that these were old loans, which were accepted by the Revenue in the preceding assessment year in the scrutiny assessment. Thus, these were opening balance coming up in the assessment year under appeal. The assessee has not written off or squared up any of the amounts in the accounts of the assessee. The amount in question has not been transferred to the P/L A/c. There is no waiver of the loan and the amounts have not been transferred to any reserve fund of the assessee. Therefore, the same cannot be treated as income of the assessee because the liability still existing in the books of the assessee. Dis-allowance u/s 14A - Held that:- Addition is clearly unjustified in the matter. Firstly, assessee has shown that investments have been made in shares in AYs starting from 1991-92 to December, 2006 and Nov. 2007. Thus, no investment has been made in the AY under appeal. Secondly, no borrowed funds have been used for the purpose of investment. AO has not proved any nexus between the borrowed funds and the amounts invested in shares in assessment year. Further, sufficient funds and profits are available to the assessee to make investment though no investment has been made in this year, but it was made several years back. Thirdly, interest received by the assessee are in a sum of Rs.2,62,656/-, but interest paid was Rs.1,48,913/-, thus, assessee practically did not incur any expenditure on the interest. Hence, provisions of section 14A have been wrongly applied. Addition is, therefore, deleted. Dis-allowance u/s 36(i)(iii) - loan given to HUF for no business consideration - Held that:- It is observed that assessee has sufficient capital, profit and interest-free funds available with him for the purpose of investment. No nexus between the borrowed funds and interest free funds has been established by the AO on record. Therefore, the addition would be unjustified in the year under consideration - Decided in favor of assessee 2012 (9) TMI 227 Addition made u/s. 36(1)(iii) treating the proportionate investment made towards purchase of property out of borrowed funds - Held that:- No reasons have been shown as to why proportionate interest has been disallowed in this case when sufficient capital withdrawals and taxable income is available to the assessee for the purpose of making investment in the property. Also, no loan was taken during the assessment year under appeal, instead there was reduction in unsecured loans. Hence it is held that assessee had sufficient funds for the purpose of making investment in the properties. Dis-allowance made is deleted hereby Adhoc addition made to cover possible leakages - Held that:- Assessee produced all the bills and vouchers in respect of the expenses. Nothing is pointed out specifically in the assessment order as to which of the expenses are not verifiable. Therefore, the addition is clearly unjustified - Decided in favor of assessee 2012 (9) TMI 226 Licence fee from various telecommunication and cable network operators on account of installation of towers/antennas on terrace of the property and parking rent - Income from house property vs Income from other sources - Held that:- CIT(A) placing reliance on the decision in case of Mukherjee Estate P. Ltd (2000 (3) TMI 35 - CALCUTTA HIGH COURT) opined that whatever additional income is derived over and above the letting out of property on hire cannot be treated as property income merely because of its nexus with such property. Receipts were held as income from other sources. Considering entirety of facts, circumstances and material on record, conclusion drawn by the CIT(A) is confirmed - Decided against assessee 2012 (9) TMI 225 Addition made on account for rejection of books u/s 145 - Assessee is not disclosing its correct business turnover – AO has given one hour to produce details - Assessee fail to produce complete books of accounts - AO applying survey calculations of the earlier year to compute turnover – AO has not been given adequate opportunity to produce necessary papers and documents - CIT (A) delete addition basis on earlier years ITAT order – Held that:- As there is a considerable distance and it was not practically possible to produce details within the given time which was very short - CIT(A) failed to remand back the matter to the AO for giving opportunity to the assessee to produce necessary books in order to do proper verification. No parity in facts and circumstances in this year and in the earlier years. Case remand back to AO 2012 (9) TMI 224 Disallowance of deduction under section 80IB - DFRC sales, DFIA sales, Interest receipts & Conversion charges - Held that:- As decided in M/s Liberty India Versus Commissioner of Income Tax [2009 (8) TMI 63 - SUPREME COURT] duty drawback, rebate etc. should not be treated as adjustment (credited) to cost of purchase or manufacture of goods - They should be treated as separate items of revenue or income and accounted for accordingly - duty drawback, DEPB benefits, rebates etc. cannot be credited against the cost of manufacture of goods debited in the Profit & Loss account for purposes of Sections 80-IA/80-IB as such remissions (credits) would constitute independent - sales from DFRC and DFIA cannot be treated as profit from the eligible business of the industrial undertaking for computation of deduction u/s. 80IBsource of income beyond the first degree nexus between profits and the industrial undertaking - against assessee. The interest income also cannot form part of the profit derived from the eligible business of the industrial undertaking for claiming deduction u/s. 80IB - against assessee. Conversion charges - Held that:- As the eligible business of the assessee is manufacturing of biscuits and the assessee has received the conversion charges by carrying out the manufacturing process on behalf of ITC Ltd and as the word 'manufacture' is of much wider connotation it would include any process as a result of which a different commodity having distinct name, use and character emerges from the raw material - the conversion charges received is in course of manufacturing activity by using the same machinery and labour which were used for manufacturing assessee's own product has a direct nexus with the eligible business of the assessee and the profit derived from conversion charges has to be included in the profit of the business for computing deduction u/s. 80IB - in favour of assessee. 2012 (9) TMI 223 Addition on capital introduced by the partners u/s. 68 - Held that:- partner had invested an amount of Rs. Rs. 17,53,653 towards capital contribution in the partnership firm by way of demand drafts having a capital of Rs. 19,05,96.58 as on 31.3.2005, thus it can be concluded having sufficient source of funds towards contribution made in the capital of the firm and could not be treated as unexplained at the hands of the assessee firm - no addition. Investment made by the other partner - Held that:- As the assessee has furnished the names and addresses of the parties from whom partner has collected advances of an amount necessary enquiry could have been made to find out the genuine findeness of the claim of the assessee but no such enquiry has been made either by the AO or by the CIT (A) - matter remanded back. Addition made towards unexplained credit - Held that:- The onus is on the assessee to prove the creditworthiness of the persons who have given the loan on credit which was not proved excepting the confirmation letter, the assessee has failed to produce any other document to prove the creditworthiness of Shri Tatiparti Venkata Rami Reddy - against assessee. Disallowance of 25% of an expenditure - Held that:- Considering the nature of expenditure claimed and proportion of such expenditure with regard to the total turnover of the assessee firm it is reasonable to restrict the disallowance to 10% of the total expenditure claimed - partly in favour of assessee. 2012 (9) TMI 222 Revision u/s 263 by CIT - CIT directing the AO to re-examine the outstanding liability in the names of HPCL and IOCL - Held that:- as it is standard practice with the public sector undertaking like HPCL and IOCL that they sell their products only against advance payment in the shape of Demand Drafts, the doubt entertained by the CIT is quite justified. These facts are not at all examined by the AO while completing the assessment which is very much evident from assessment order itself - against assessee. Addition towards quality control charges - Held that:- Since the assessee has executed work under Central and State Governments’ authorities only, the fact of deduction towards quality control can be easily ascertained from the concerned department under which the assessee executed the work. In the circumstances, therefore, addition can be made only after verifying facts from the concerned department - in favour of assessee for statistical purposes. Disallowance of deduction claim on Sub-contractor expenses - Held that:- It is therefore necessary to ascertain whether in fact any work has been executed by sub-contractor for which payment was made to him by the assessee as these facts have not been properly brought on record - direction to the AO to make necessary enquiry in this regard - in favour of assessee for statistical purpose. Depreciation on the temporary staff quarters - Held that:- once the AO has disallowed the expenditure claimed by holding it as a capital expenditure then the assessee is entitled to avail depreciation on such capital expenditure - in favour of assessee. 2012 (9) TMI 221 Disallowance of depreciation on the LPG Cylinders - loaning of the cylinders against security deposit - ITAT has directed the AO to make necessary investigation to ascertain whether the assessee has actually purchased the cylinders - Held that:- ITAT had remanded the matter only for the limited purpose of finding out whether the assessee has purchased the cylinders or not. Therefore, it was not open for the Assessing Officer to again go into the issue of loaning of cylinders. Referring to the terms and conditions mentioned in the subscription vouchers it can be concluded that the ownership of the cylinders always remain with the assessee even after loaning of the cylinders against security deposit & that the consumers have no right over the cylinders and the consumer cannot sell, mortgage or otherwise dispose of the cylinders. It has further been provided that the subscriber can take refund of the security deposit on surrendering cylinder along with the subscription voucher - Had it been the sale of cylinders as alleged by the Revenue authorities then the assessee will be under no obligation to refund the security deposit and there will be no restriction on the consumer also either to sell or mortgage the cylinder - direct the Assessing Officer to allow depreciation on the cylinders - in favour of assessee. 2012 (9) TMI 220 Assessment of interest on compensation on acquisition of land - income in the hand of individual or HUF - reopening of the assessment made u/s 147 - Held that:- From the return filed in compliance with the notice issued u/s 148 it is clear that the assessee from very inception of the assessment proceedings has taken a stand that the compensation along with interest awarded on acquisition of land does not belong to him but to the HUF. It is also a fact that the Land Reforms Tribunal in its order has observed that the agricultural land is an ancestral property and not a self acquired property. The pahani patrika also records the character of the land as ancestral property. When the assessee has taken a specific stand in the reassessment proceedings that the compensation awarded belongs to the HUF as the land acquired was an ancestral property belonging to the HUF, the AO was not justified in totally ignoring the claim of petitioner without examining it while completing the assessment. The CIT (A) has also not recorded any finding with regard to the ancestral character of the land - restore the matter to the file of the AO to re examine the assessee’s claim - in favour of assessee for statistical purpose. 2012 (9) TMI 219 Validity of the order passed u/s 263 by the CIT - Held that:- Going through the order of the CIT as well as the assessment order it can be found that the AO has not dealt with specific issues raised by the CIT in his order passed u/s 263. It is also seen from records that the CIT has passed his order after giving due opportunity of hearing to the assessee. We therefore do not find any infirmity in invoking jurisdiction u/s 263 by the CIT - against assessee Computation of the windmill income - interest paid on loan is to be deducted from the income of power generation while computing deduction u/s 80IA - Held that:- The assessee was sanctioned term loan on 20-5- 2004 and disbursement of the loan started from September, 2004. It is also seen that by the time the loan was taken the assessee has started generating income from windmill, thus it is necessary to find out whether the loan was taken for the windmill project. Since the CIT has not brought any material on record which could suggest that the concerned loan was taken for windmill project it is proper to set aside the order of the CIT and direct the AO to examine the end utilisation of loan amount - in favour of assessee for statistical purposes. Direction for applicability of section 40a (ia) - Held that:- If any amount remains payable on the date of balance sheet on which tax was not deducted at source only that amount can be disallowed by invoking provisions contained u/s 40a (ia)- direct the AO to examine the facts and find out whether the amount has been paid within the relevant previous year or remains payable on the date of balance-sheet - in favour of assessee for statistical purposes. Direction for applicability of section 40A (2)(b) with regard to purchase of film - Held that:- As seen from the order of the CIT that he has only directed the AO to examine the applicability of section 40A (2)(b) and reasonableness involved in payment of consideration with regard to purchase of film . Since the AO has not examined this issue which is very much relevant for the assessment, the CIT set aside the assessment. Since the CIT has not directed the AO to disallow payment made by applying the provisions of section 409A (2)(b) and has only directed to examine the issue, the assessee can raise the contentions before the AO with regard to applicability of section 40A (2)(b) and also reasonableness of the payment made - against assessee. 2012 (9) TMI 218 Levying penalty u/s. 271C - Non deduction of TDS - an order u/s. 201 (1A) by AO raising a demand - TDS u/s. 194J as against sec. 194C - Held that:- Considering submission of assessee that he was under bonafide impression that he was not required to deduct tax at source since the recipient company is filing its returns regularly and paying legitimate tax dues by way of advance tax and self assessment tax - When there is no loss of revenue to the department on account of failure on the part of the assessee to deduct tax at source, penalty should not have been imposed u/s 271C Levy of interest u/s 201(1A) is automatic, however it is not so in case of imposition of penalty u/s 271C. Section 273B provides a discretion to the AO towards imposition of penalty u/s 271C considering the reasonableness of the cause shown by the assessee for failure on its part to deduct tax at source. It is seen from the penalty order u/s 271C that the AO has accepted the fact that the recipient of the printing and processing charges i.e., M/s. Prasad Productions Pvt. Ltd., has declared income received in its return of income filed and has paid taxes. Therefore, no order u/s 201 was passed against the assessee treating it as an assessee in default - in favour of assessee. 2012 (9) TMI 217 Rejection of exemption claim u/s 10(23C)(iv) - non approval from the prescribed authority - assessee society is registered u/s. 12A - CIT(A) allowed the claim - Held that:- If donations are received compulsorily for the admission of students, by whatever name it may be called, i.e. donation, building fund, auditorium fund, etc. over and above the prescribed fee, from the students, the assessee would not be entitled for exemption either under S.10(23C) or under S.11 of the Act As the issue is relating to allowability of exemption under S.11 or under S.10(23C), and while adjudicating on this issue one has to see the eligibility of claiming of deduction under S.11. This aspect has not been properly addressed by the CIT(A)/AO while granting the alternative claim of the assessee for exemption under S.11. Since the Assessing Officer has no occasion to examine the claim of the assessee under S.11 suitable directions to be given to the Assessing Officer for verification and to find out whether the assessee has received any money over and above the fees prescribed and thereafter decide the issue afresh - in favour of revenue for statistical purposes 2012 (9) TMI 216 Additions of capital introduced by partners - CIT (A) deleted the addition - Held that:- The explanation given by the assessee regarding source of fund available to the partners to introduce capital is not supported by any evidence - The availability of funds with the partners was not at all disclosed in their respective returns of income. Being so, it is not possible to come to a conclusion that the partners are having sources to introduce capital in the firm - that in such a situation where there is a credit entry in the books of account of the assessee and there is no satisfactory explanation, then it will be deemed to be the income of the firm and will be added to the income of the firm and can be accordingly taxed. The view taken by the CIT (A) appears to be erroneous on the face of it - against the assessee. Addition made on account of estimation of income - CIT (A) restricted the addition to Rs. 75,000 - Held that:- The books of account of the assessee are not reliable and expenses were not supported by proper vouchers. Being so, AO is justified in rejecting the books of account and estimating the income. However, the estimation of income at 10% of the gross receipts is at higher side, thus the net profit at 9% of gross receipts instead of 10% as estimated by the Assessing Officer need to be made - CIT (A) was not justified in sustaining only Rs. 75,000 towards this count without any basis - partly in favour of Revenue. 2012 (9) TMI 215 Deduction under section 80-IA(4)(ii) – Held that:- Assessee herself has not developed any telecommunication service system or as such she is not operating and maintaining any system independently - in order to get exemption as provided under section 80-IA, it is necessary for the assessee to obtain licence from the Department of Telecommunication (DOT), Government of India or from the Telecom Regulatory Authority of India (TRAI) on the basis of a written agreement, which the assessee has not obtained - assessee is not eligible for deduction provided under section 80-IA(4)(ii). Customs 2012 (9) TMI 248 Entitled for promotion to the post of Senior Hindi Translator with effect from the date of her Junior has been promoted - Held that:- As Central Administrative Tribunal had time and again clarified the position that there is no question of any vacancy in a specific region and it has to be based on all India basis concluding to absence of a sanctioned post in the Cochin Customs, i.e., Senior Hindi Translator and as the department was unable to understand the implications and the directions given in the order dated 13.11.2006 and have erroneously adopted a shortcut method to consolidate the seniority list of Junior Hindi Translators of various regions and arranged them in chronological order based on their promotion to the post of Senior Hindi Translator. This was rightly held as a shortcut method adopted by the department without actually implementing the directions issued in the order dated 13.11.200. 2012 (9) TMI 247 CHA licence - order of prohibition requires – Held that:- Signing of blank shipping bills for monetary consideration - appellant’s licence would require to be revoked - Regulation 21 does not provide for any notice of hearing to be given before issuing an order of prohibition and hence the impugned order cannot be faulted on that count nor the same requires to be stayed - stay application filed by the appellant is rejected. 2012 (9) TMI 246 Refund of customs duty - Held that:- Higher quantum of duty was paid by the appellant without their being dispute on the rate of duty or otherwise - higher rate was paid in ignorance of notification which allowed him payment of concessional rate of duty - payment of higher rate before clearance of goods from the warehouse - Bills of Entry filed prior to the date of revision in tariff value and rate of duty cannot be held to be involving any dispute inasmuch as at that point of time, the lower tariff value or lower rate of duty was not holding the field and was not available - there was no notification in the field and no dispute on the same – refund allowed 2012 (9) TMI 214 Suspension of CHA license - illegal import of OPC and illegal export of goods which are prohibited goods - Held that:- The Commissioner while exercising his power vested in him under Regulation 20 (2) of CHALR, 2004, has suspended the CHA license by recording the reason for which he has come to the conclusion for the said suspension with immediate effect. He has also ordered for the proceeding for revocation of license under Regulation 20 (2) of CHALR, 2004. Net result of suspension or revocation of the license is to stop/end the operation and that the Commissioner has ordered for revocation of license under Regulation 20 (2) of CHALR, 2004 and the Department has already been issued the show-cause notice under Regulation 22 of CHALR, 2004, it can be find that the proceedings for revocation of license are on and are likely to be completed. Therefore, revoking the suspension at this stage would clearly give relief to the appellant for interim period while the proceedings for revocation of license is already on. In these circumstances no reason to interfere with the impugned Order-in-Original and the same is upheld and the appeal is dismissed - against assessee. 2012 (9) TMI 213 Import of car - undervaluation – confiscation – redemption fine – Held that:- Bona fide purchaser of a car which is cleared by the Customs Department is not liable to pay redemption fine even if the car was under valued and the original importer is liable to pay the difference in duty - in favour of assessee 2012 (9) TMI 212 Duty, interest and penalty - irregularities in importing the goods - alleged that the appellant was the person who had master minded the entire activity, right from planning, creation managing and monitoring of all operations of M/s. Suntech with a mala fide intention to evade customs duty – Held that:- This is a case of mis-declaration, non-declaration and over declaration and under valuation of the goods consigned to M/s. Suntech. in respect of consignment received - in favour of the revenue 2012 (9) TMI 207 Refund claim - unjust enrichment - adjudicating authority sanctioned the refund amounts but credited it to the consumer welfare fund – Held that:- Bar of unjust enrichment is applicable to the facts of this case when the appellants have filed a refund claim of SAD paid by them at the time of import of goods which were cleared by them on payment of VAT. As the appellants have obtained a certificate from Chartered Accountant confirming that the duty liability of SAD has not been passed on the buyers by the appellants, the same is sufficient as per the Board’s Circular No. 18/10-Cus., dated 8-7-2010, to discharge the liability of bar of unjust enrichment and the bar of unjust enrichment is not applicable to the case of the appellants - appellant is entitled for refund 2012 (9) TMI 206 Withdrawal of permission - Export Processing Zone – import of used diesel engines for the purpose of re-construction and to export - subsequent permission granted was withdrawn by the Development Commissioner – Held that:- Withdrawal retrospectively is not permissible - sale in DTA on payment of duty based on the earlier permission granted to the Appellants, cannot be held to be in violation of the provisions of para 9.10(b). The term, “Manufacture” in the context of Exim Policy includes activities like re-construction and repair. - The concept of manufacture in the Central Excise law cannot be brought into for the purpose of 100% EOU Undertaking service activities. The finding of the Commissioner that the payment for DTA sale was not from EEFC Account, is clearly beyond the scope of the show cause notice Corporate Laws 2012 (9) TMI 211 Winding up of company - application moved by Official Liquidator u/s 481 for dissolution of company - possession of the Regd. Office of the Company could not be taken - no assets available for realization - non-availability of books of accounts - factory premises and Fixed assets at factory taken over by UPEC and sold under SARFASI Act - no claims received by the Official Liquidator by secured & unsecured creditors and workmen of the company - Held that:- Supreme Court in case of Meghal Homes (P) Ltd. v. Shree Niwas Girni K.K. Samiti, held that when Official Liquidator can not proceed with the winding up of the Company for want of funds or for any other reason, the Court can make an order dissolving the Company from the date of that order. In view of aforesaid, the liquidation proceedings deserve to be brought to an end. The present application and the Company Petition No. 354/2005 are disposed off and the Official Liquidator is discharged. Service Tax 2012 (9) TMI 272 Refund claims – unjust enrichment – service tax paid under protest – Held that:- Incidence of the said service tax had not been passed on by them to any other person and it was not recovered from the clients - service tax amount was paid subsequently and under protest - appellant is following cash method of accounting and the Chartered Accountant's certificate specifically states that incidence has not been passed on - appellants have been able to show that there is no unjust-enrichment - appeals are allowed 2012 (9) TMI 271 Demand - Extended period of limitation - Erection, Commissioning and Installation Service – appellants are providing the services of erection, commissioning and installation of green houses – Held that:- Where there is a bona fide belief that their activity amounts to manufacturing and are not liable to service tax, as contended by the appellants, demands only for normal period are sustainable - activity undertaken by the appellants are covered under Erection, Commissioning and Installation Service - appellants should be directed to make pre-deposit of the demands of service tax for the normal period - appeals are disposed of by way of remand 2012 (9) TMI 270 Provisional assessment under service tax - Management, Maintenance & Repairs Service - recipient/importer of services from the service provider located outside India - most of the services were done outside India, part of the services were rendered in India – According to the appellant it was not possible to determine the exact value of taxable service performed in India and accordingly the appellant had requested for provisional assessment and payment of service tax on provisional basis - Held that:- Appellate authority should not have, without putting the appellant to notice, pass an order directing the appellant to discharge the service tax liability on the entire amount indicated in the relevant contract without taking into account and giving a finding with respect to how much service has been rendered in India and what is the value of such service and what is the consideration for such service - matter remanded to the original adjudicating authority to consider the request of the appellant for provisional assessment in terms of Rule 6(4) of the Service Tax Rules, 1994 - appeals are allowed by way of remand 2012 (9) TMI 269 Waiver of pre-deposit - CENVAT credit denied to the appellant on rent-a-cab service – Held that:- Earlier appeals of the same assessee, similar stay applications were allowed - there will be waiver of pre-deposit and stay of recovery Cenvat Credit - outdoor catering service for supply of food to workers – Held that:- They did not have more than 250 workers in their factory to make it obligatory for them to provide canteen facility within the factory premises - statutory obligation of the manufacturer under the Factories Act to provide internal canteen facility to workers exceeding 250 in number has a bearing on any claim for CENVAT credit on outdoor catering service employed in such canteen for supply of food to the workers - appellant directed to make pre-deposit 2012 (9) TMI 238 Non payment of service tax on commission paid to the agent located outside India - invoking reverse charge mechanism - Held that:- As the appellant has paid service tax after issuance of the SCN the assessee's are liable to get the refund as the appellants are exporter, if they have paid the service tax they will get service tax paid by them by way of refund creating a situation of revenue-neutrality - invoking the provisions of Section 80 and waive penalty under Section 76 against the appellant is thus warranted - in favour of assessee. 2012 (9) TMI 237 Denial of input service credit on rent-a-cab service - Held that:- The matter is remanded back to the adjudicating authority for verification whether rent-a-cab service availed by the appellant for the purpose of official use because as decided in CCE, Nagpur Versus Ultratech Cement Ltd.[2010 (10) TMI 13 - BOMBAY HIGH COURT] the appellants are entitled for input service credit on rent-a-cab service if the same is used by them for the official purpose and for bringing and dropping of their employees from their residence to the place of work as the said activity availed by them is in the course of business of manufacture - in favour of assessee by way of remand. 2012 (9) TMI 236 Penalty - Scientific and Technical Consultancy Service – non-payment of service tax – assessee submitted that in respect of grant-in-aid consultations, service tax is not payable as per the guidelines issued by the Central Excise Department and CSIR and that the short payment of service tax was under bona fide condition of not properly classifying the funds received by IICT under dutiable consultation charges and exempted charges – Held that:- Penalty proceedings are not automatic and there ought to be necessary material to show that the assessee is guilty of willful suppression, fraud and misrepresentation. Under Section 80 of the Act if the assessee proves that there was a reasonable cause for the failure to pay the service tax, the competent authority can always drop the penalty proceedings. The question of penalty proceedings would arise only when there could be valid recovery proceedings under Section 73(1) of the Act. That is the reason when the ‘non obstante’ clause in Section 80 refers to only Sections 76, 77 and 78 and not to Section 73 of the Act. When the limitation period under Section 73(1) of the Act has expired and when the case does not fall under the proviso thereto, the question of penalty proceedings would not arise. Extended period of limitation – Held that:- Issue of show cause notice dated 21-2-2006 requiring to pay the service tax for the period from 16-7-2001 to 9-9-2004 - non-payment of service tax in respect of five above named projects is due to bona fide doubt regarding the activity 2012 (9) TMI 235 Cenvat Credit on input services - denial of credit on the input service on the ground that these services were not used in or in relation to the manufacture of final product – Held that:- CAS-4 has considered all the services such as medical benefit, subsidized food, education allowance, canteen bill, etc., to form part of the cost of final products. Therefore, I agree with the learned Chartered Accountant that these services which have been received have been rendered only in relation to the manufacture of the final products - Cenvat credit on input services namely, Courier service and insurance premium on vehicles cannot be denied - these services are related to activity of business. Central Excise 2012 (9) TMI 245 Reversal of input credit on stock or work in progress when the appellant opts for exemption - Held that:- As decided in CCE, Chandigarh vs. C.N.C. Commercial Ltd. [2007 (10) TMI 203 - HIGH COURT PUNJAB AND HARYANA ] the assessee-respondent had correctly availed and utilized the credit of duty paid by them on those inputs when these final products were chargeable to excise duty - As there was no one to one relationship of the inputs used and the final products manufactured and cleared from the factory the credit of duty paid on inputs cannot be confined to a particular raw-material to which the credit is related and out of which a final product is manufactured. Hence denied recovery of Cenvat credit by the mode of reversal when a Small Scale Industry opts for exemption - in favour of assessee. 2012 (9) TMI 244 Inclusion of cost of pre delivery inspection( PDI) and free after sales services to assessable value of the vehicles sold - assessee contested against department's reliance on clause no.7 of the Circular bearing No. 643/34/2002CX dated 1st July, 2002 read with Circular No. 681/72/2002CX dated 12th December, 2012 as it is violative of the provisions of the Central Excise Act, 1944 - Held that:- As and when the car is removed out of the factory of the petitioners, Excise duty was payable. The assessable value was to be determined as per the provisions of Section 4(1)(a) of said Act as amended as the petitioners and the dealers were not related to each other and the price was the sole consideration. In such a case, the value to be taken up for the purposes of Excise duty was the transaction value. As admitted by the petitioners that after a car is sold to a dealer on the terms and conditions entered into mentioned in the dealer’s agreement, a dealer is required to carry out Pre Delivery Inspection as well as said services in regard to a car which is sold to a customer. From the record it is seen that a dealer is required to pay an amount to the petitioners towards the cost of the car and a dealer cannot charge more than the amount specified by the petitioners. The difference between the price so fixed by the petitioners and the price paid by the dealer constitutes what is called as dealer’s margin. A dealer has to spend money to conduct PDI as well as render said services. We are inclined to accept the stand of the petitioners that the dealer is required to perform PDI as well as said services as a part of the dealer’s responsibility cast on him as per the dealership agreement. On consideration of the Clause 7 of Circular dated 1st July, 2000, it is apparent that the respondents have brought into existence a deeming provision that is to say the respondents have treated all the manufacturers of cars on one platform and by fiction taken a decision to add the expenses incurred towards PDI and said services in the assessable value. It will have to be mentioned that in all cases where the expenses incurred towards PDI and said services are solely borne by the dealer and the manufacturer like petitioners have nothing to do with the said expenses then adding those expenses in the assessable value would be contrary to the provisions of Section 4(1)(a) r/w Section 4(3)(d) of the said Act. Looking to the facts and circumstances of this case, the respondents have not been able to place on record any material to show that the amount incurred towards PDI and said services can fall within the definition of the transaction value - thus as per Section 4(3)(d) of the Central Excise Act, 1944 the PDI and free after sales services charges can be included in the transaction value only when they are charged by the assessee to the buyer - in favour of assessee. 2012 (9) TMI 243 Proof of invoices as issued by manufacturer - Held that:- It is not improper to direct the adjudicating authority to inquire as to whether quadruplicate copy of bills were issued by the manufacturer of capital goods and, also to inquire whether the excise duty collected through those bills have gone into the treasury. 2012 (9) TMI 242 Maintainability of appeal - appeal under Section 35G of the Central Excise Department of 1944 – Held that:- Appeal shall lie to the High Court from every order passed in appeal by the Appellate Tribunal, in case, High Court is satisfied that the case involves a substantial question of law - no substantial question of law is involved in the present case, which may require for interference by this Court under Section 35G of the Act – appeal dismissed 2012 (9) TMI 241 Export of goods - payment of duty on exempted goods - claim of rebate under ruel 18 - By virtue of this amendment and insertion of explanation in clause 5A(1A), the applicant cannot pay duty as the goods were exempted from payment of duty of excise – Held that:- Duty paid erroneously cannot be called as duty of excise but it becomes mere a deposit with Government - Govt. cannot retain any amount which is not due to it, the amount so collected is allowed to be re-credited in Cenvat Account. Government allows the applicant to take re-credit of said amount in their Cenvat Credit Account. The impugned order-in-appeal is modified to this extent. 2012 (9) TMI 240 Due date for payment of duty u/r Rule 8(3A) - SSI Unit - forfeiture of facility of utilization of cenvat credit - they opted to go out of the small-scale exemption scheme - held that:- during the impugned period, an assessee could discharge duty liability either out of PLA or by utilizing CENVAT Credit. Only with effect from 1-6-2006, Rule 8(3A) has been amended specifically providing for payment of excise duty without utilizing the CENVAT Credit. - the Appellants cannot be faulted for having paid duty for the period, 20-10-2005 to 19-12-2005 by utilizing CENVAT Credit. As regards the secondary contravention of not paying the duty consignmentwise – Held that:- Appellants’ bona fide belief that since paragraph 2(i) of the small-scale exemption Notification No. 8/2003-C.E., dated 1-3-2003 was merely a condition of the small-scale exemption, they were entitled to opt out of the same, but they were still qualifying under the criteria of the small-scale exemption and hence, they were entitled to pay duty by the 15th day of the following month - Their bona fide belief is reflected in various correspondences they have made to the jurisdictional Commissioner as well as to the Member, Central Excise in the Board - penalty reduced - penalties have been imposed both on the Appellant Managing Director and Appellant Executive Director of the Appellant Company, which are not warranted 2012 (9) TMI 210 Utilization of Cenvat Credit for discharging the deemed liability - Held that:- The Cenvat Credit availed on manufacturing activity can be utilized for discharging the deemed liability on commission paid to foreign agents under Business Auxiliary Services as decided in Commissioner, Central Excise Commissionerate. Versus M/s Nahar Fibres [2010 (8) TMI 766 - PUNJAB AND HARYANA HIGH COURT] - in favour of assessee. 2012 (9) TMI 209 Disallowance on Cenvat credit for default documents - invoice in the name of registered office was used for multiple claims by the appellant for it is various units - Held that:- The appeal is remanded back to the adjudicating authority to call for an affidavit from the appellant stating clearly that the present claim in this appeal is the only claim against the invoice concerned existed in the name of registered office and no multiple claim has been made or shall be made in respect of the same invoice and there should be specific statement in the affidavit that for any loss of Revenue in future in respect of the same invoice the appellant shall indemnify Revenue. 2012 (9) TMI 208 Demand for duty - entitlement of the appellant to avail Cenvat credit - assessee is 100% E.O.U. - cleared the goods in those circumstances, at the same time had sought to avail exemption under Notification No. 30/2004-C.E., dated 9-7-2004 allegedly by mistake – Held that:- Once it is not in dispute that the appellants were 100% E.O.U. and all the goods manufactured by them were cleared for export and were actually exported under B-17 Bond executed by the appellants on 27-1-04, and there is a clear statement on the part of the appellants that reference to the Notification No. 30/04-C.E., dated 9-7-04 was by mistake on their part, considering the provisions of law comprised under Rule 6(6) of the Cenvat Credit Rules - demand confirmed against them while denying the credit is not justified. Wealth tax 2012 (9) TMI 239 Penalty u/s 18(1)(c) of wealth tax act - concealment of wealth – Held that:- In the penalty order that the Assessing Officer passed, he did not give any clear findings as to for which breach such penalty was being imposed i.e. for concealment of the particulars of any asset or for furnishing inaccurate particulars of any asset. - AO erred in imposing the penalty without any clear findings as to whether there was concealment of particulars of any assets or providing of inaccurate particulars of any assets. His main thrust seemed to be on the ground of concealment of particulars which as we have noted was not a valid ground. - Decision in favour of assessee. Rebuttal of presumption u/s 18(1)(c) - For valuation of house property which is used wholly or mainly used for residential purposes, the formula provided under rule 1BB of the Rules is to be applied. The assessee instead, valued the property on the basis of its books of accounts. - Had the assessee been put to notice with respect to explanation(4) of section 18(1)(c) of the Act and consequently given opportunity to rebut the presumption, perhaps the situation would have been different.
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Newsletter: Where Service Meets Reader Approval.

TMI Tax Updates - e-Newsletter September 12, 2012

Articles

1. CAPTIVE CONSUMPTION.

News

1. 21 FDI Proposals Amounting to Rs. 2410 Crore Approved.

2. Anand Sharma Inaugurates India Show in Brno, Czech Republic Over 135 Indian Engineering Companies Showcase Products and Services.

3. Indian Institute of Corporate Affairs Conference on Corporate Governance- “Inspiring Confidence in Indian Business”.

4. Net Direct Tax Collections During April-August 2012-13 up by 28.15 per cent and Stood at Rs.1,23,969 Crore as against RS. 96,738 Crore in the Same Period Last Year.

5. Minsitry of Finance Releases “India’s External Debt: A Status Report 2011-12”.

Notifications

1. .F.7(433)/Policy-II/VAT/2012/585-595 - dated 5-9-2012 - DVAT

Circulars / Instructions / Orders

1. 18 - dated 7-9-2012

2. 17 - dated 5-9-2012

3. 16 (RE2012)/2009-14 - dated 6-9-2012

4. 15 (RE 2012) /2009-2014 - dated 6-9-2012

Highlights / Catch Notes

Income Tax

Section 80IA Deduction Denied: Lack of Separate Accounts for Raw Material Sales & Yarn Manufacturing Income Justification.

Investment Allowance u/s 32A: Assessee Must Prove Nature of Mining and Export Activities; Case Remanded for Review.

High Court Rules Tribunal Exceeded Authority by Recalling Order for New Hearing u/s 254.

Supreme Court: Excise Duty Exclusion in Closing Stock Valuation Valid, Rejects Income Addition for Taxpayer.

Tribunal Overturns Revenue Decision; Approves Deduction Claim for Scientific Research u/s 35(1) Due to Procedural Oversight.

Court Rules Amendments to Sections 28 and 80HHC Apply Prospectively, Not Retroactively, for Large Exporters.

Tribunal Mistakenly Challenges DVO's Use of CPWD Rates for Commercial Building Valuation by Assessment Officer.

Companies Dealing in Shares: All Transactions Considered Speculative u/s 73 of the Income Tax Act.

No Penalty for Incorrect Deduction Claim: Section 271(1)(c) and 80IB Reviewed, No Inaccurate Particulars Found.

Court Rules Deposited Funds from Income Surrendered During Searches Should Not Be Taxed.

Income Not Taxable Under Sec 41(1) IT Act Without Actual Liability Cessation; Presumed Remission Insufficient. (1.

Section 69B Addition for Omitted Figures Deleted; Total Would Have Been 4 Crore if Included.

Court Upholds Section 69A Addition: Assessee's Explanation of Cash Gifts for Old Age Expenses Found Unsatisfactory.

Tax Addition Deleted: Section 40A(2)(b) Allows Salary for Nephew in Part-Time Studies, No Prohibition Found.

Interest on Delayed Bill Payments Not Considered Loan Interest u/s 2(28A), No Disallowance u/s 40(a)(ia.

Taxes Paid by Employer for Employee Are Employer's Obligation, Exempt Under Income Tax Act Sec 10(10CC.

No penalty for incorrect tax claim u/s 271(1)(c); not considered inaccurate particulars or income concealment.

Court Rules Tripartite Real Estate Sale Income as Business Income, Not Other Sources, Per Memorandum of Understanding (MOU.

Telecom and Cable Fees for Tower Installations on Terraces Classified as Income from Other Sources.

Case Remanded: AO's One-Hour Deadline for Tax Details u/s 145 IT Act Deemed Insufficient for Fair Assessment.

Section 80IB Deduction Approved for Conversion Charges in Manufacturing; Same Machinery and Labor Used.

Depreciation on Loaned LPG Cylinders Permitted for Taxation; Security Deposit Transactions Clarified.

AO Must Evaluate Interest Claims in Land Acquisition Cases, Cannot Dismiss Without Proper Examination.

Interest Levied Automatically for TDS Non-Deduction; Penalty u/s 271C Requires Officer's Discretion Per Section 273B.

Compulsory donations for student admissions disqualify tax exemption u/s 10(23C) and Section 11 of the Income Tax Act.

Section 68 Additions Upheld: Partners Failed to Prove Source of Introduced Capital in Tax Returns.

Broader Interpretation of Section 80-IA(4)(ii) Deductions: Public Call Offices May Qualify for Telecom Tax Benefits.

Customs

Customs Duty Refund Approved After Overpayment Due to Ignorance of Concessional Rate Notification.

EOUs in Service Activities Exempt from Central Excise Manufacturing Rules; Different Treatment from Manufacturing Units.

Bona fide car buyers cleared by Customs exempt from redemption fines; original importer liable for duty shortfall.

DGFT

DGFT Modifies SION A2337 Item Description to Align with Current Trade Practices and Regulatory Compliance.

DGFT Announces Amendments to Appendix 37A and 37D in Handbook of Procedures Volume I for Trade Policy Clarity.

Corporate Law

Court Can Dissolve Company If Official Liquidator Lacks Funds to Proceed with Winding Up Process.

Wealth-tax

Court Examines Proper Notification and Rebuttal Opportunity u/s 18(1)(c) of Wealth Tax Act Penalty Case.

Service Tax

Service Tax Refund Approved: Protest Payment Addressed Unjust Enrichment Issue Successfully.

Appellate authority's order for full service tax payment overturned due to lack of prior notice, procedural oversight cited.

Cenvat Credit Eligibility on Outdoor Catering for Factories with Up to 250 Workers Discussed in Service Tax Case.

Penalty Waived for Non-Payment of Service Tax on Overseas Agent Commissions; Considered Revenue-Neutral.

Penalties Apply Only if Valid Recovery u/s 73(1) Initiates; Section 80 Excludes Section 73 from 'Non Obstante' Clause.

Cenvat credit permissible for courier services and vehicle insurance premiums as they are linked to business activities.

Central Excise

PDI and after-sales service charges included in transaction value u/s 4(3)(d) if imposed on buyer.

Government Must Re-credit Erroneously Collected Duties on Exempt Goods to Exporter's Cenvat Account.

Rule 8(3A) Change: Excise Duty Payment Without CENVAT Credit If Deadline Missed, Effective June 1, 2006.

SSI Exemption: No Need to Reverse Input Credit on Stock or Work in Progress, Confirms Court Decision.

Cenvat Credit from Manufacturing Can Offset Liability on Commission to Foreign Agents under Business Auxiliary Services.

Export Unit Wins Right to Cenvat Credit Despite Exemption Notification 30/2004-C.E.; Demand Against Them Overturned.

CA Certificate Valid for Overcoming Unjust Enrichment in SAD Refund Claims per Circular No. 18/10-Cus.

VAT

Online Submission of Form T-2 for VAT and Sales Tax Now Available, Streamlining Compliance and Boosting Efficiency.

Tax Administration Launches Online Submission for VAT and Sales Tax Forms to Simplify and Streamline Filing Process.

New Circular Requires Online Submission of Form T-2 for VAT Compliance to Simplify Tax Reporting and Reduce Paperwork

Case Laws:

Income Tax

Customs

Corporate Laws

TMI Tax Updates - e-Newsletter
September 12, 2012