Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
September 13, 2012
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Commencement of business - The AO as well as CIT(A) have misdirected themselves in this regard by laying emphasis on flow of revenue as a condition precedent for coming to a conclusion that business of the Assessee has been set up - AT
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Technical Assistance Agreement - Acquiring of know-how - Once Section 35AB of the Act comes into play, then Section 37 of the Act has no application - SC
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TDS - commission or brokerage to the persons carrying on the business as “stamp vendors“ - bulk quantity - said discount is in the nature of cash discount - Section 194H has no application - SC
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Penalty u/s 271(1)(c) - ince Clause (2) did not prescribe the time limit within which the assessee should pay tax on income disclosed in the statement under Section 132(4) no default proved - immunity from penalty granted - SC
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Depreciation on Aeroplane-Aeroengines - whether the "Beechcraft Super King Air B-200C" purchased by the assessee fell within the description of aeroplane? - Depreciation allowed @40% - HC
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Interest income from loans - accrual of interest - in the year under appeal in which the borrowing companies were making handsome profits - held as taxable - HC
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Profit on sale of agricultural land - income from business OR capital gain - the assessee with a sole motive of dealing in land acquired the land and sold the same which can be nothing but adventure in the nature of trade - AT
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India-Denmark DTTA - The amount in question received by the assessee from MIPL, MLIL and SIPL was not in the nature of FTS and the same being part of the income from shipping business was not taxable in India - AT
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Deduction u/s.10A - he losses from non eligible units cannot be set off against the profit of the undertaking eligible for deduction u/s.10A - interest income will not be eligible for deduction u/s.10A - AT
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Penalty notice has been issued not in the course of survey proceedings u/s 133A but after its closure. - Thus, there is jurisdictional defect in assumption of jurisdiction for levy of penalty, which cannot be cured. - HC
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Best judgement assessment - the correct value of stock has to be adopted even if books are not rejected. - AT
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Co-operative Credit Society is distinct and separate from the Co-operative Bank nor it can be said as a Primary Co-operative Bank within the meaning of Banking Regulation Act, 1949. Hence, the assessee being a Co-operative Credit Society is entitled for deduction u/s. 80 P(2)(a)(i) - AT
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Application u/s 254 to rectify order of Tribunal on ground of mistake apparent from record - A decision on a debatable point of law is not a mistake apparent from the record. - AT
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Consultancy charges/fees for technical services paid to not residence working in overseas off shore oil and gas exploration projects it Nigeria - cannot be deemed to accrue or arising in India. - AT
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Validity of reopening of assessment - AO has merely proceeded on surmises, conjectures and suspicion to observe that income of the assessee has escaped assessment which in law cannot constitute a reason to believe for invoking section 147. - AT
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Since assets were put to use for less than 180 days, depreciation claimed only 50% of 15% - Balance additional depreciation was claimed by in instant assessment year - Law does not prohibit that balance 50% will not be allowed in succeeding year - AT
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
Customs
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Confirmation of demand and imposition of penalties by invoking extended period - SC granted stay partly on deposit of 203 crores - SC
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Export of the goods - claim of duty drawback - Mere allegation of wrong classification without proving intentional mala fide cannot lead to imposition of penalty - CGOVT
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Regarding inclusion of Inland Container Depot (ICD) Irungattukottai in the list of ports permitted for exports and imports under Export Promotion. - Notification
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Seeks to amend Notification 12/2012-Customs, dated 17-03-2012, regarding the withdrawal of duty exemption in respect of goods required for initial setting up or substantial of Mega/ Ultra mega power projects. - Notification
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Refund of customs duty - higher rate was paid in ignorance of notification which allowed him payment of concessional rate of duty - refund allowed - AT
FEMA
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ECB Policy – Repayment of Rupee loans and/or fresh Rupee capital expenditure – USD 10 billion scheme . - Circular
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ECB Policy – Bridge Finance for Infrastructure Sector. - Circular
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Trade Credits for Import into India. - Circular
Service Tax
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Demand of service tax with interest - information received by the appellants after passing of the adjudication order, under the RTI Act, is relevant to the facts of the present case - matter remanded to adjudicating authority - AT
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Ordinary taxi-operators on the street are not brought under tax net under the entry for “Rent-a-Cab” scheme - AT
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Service provided by CRRS is to the Airlines and the Air Travel agent is promoting the service provided to Airlines - service provided by the Appellants to CRRS is business auxiliary service and service tax is payable on the same.
- AT
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Refund claims – unjust enrichment – service tax paid under protest – refund allowed - AT
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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
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Cenvat Credit - outdoor catering service for supply of food to workers - not more than 250 workers in their factory - pre-deposit ordered - AT
Central Excise
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Regarding the withdrawal of duty exemption in respect of goods required for initial setting up or substantial of Mega/ Ultra mega power projects. - Notification
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Classification - 'Parts of Television Receivers’ under heading 8529 OR ‘Television Receivers’ under Tariff Entry 8528 - Revenue had rightly classified the goods- product as complete Television set even though it was subsequently disassembled - SC
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Manufacture of fire bricks grog - goods are sold in gunny bags in loose condition held as Waste and scrap of fire bricks to be non-excisable / dutiable - AT
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Rebate claim – Procedural infraction of Notification, circular, etc. are to be condoned if exports have really taken place, and the law is settled now that substantive benefit cannot be denied for procedural lapses - CGOVT
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The purpose of executing bond under Sections 58 & 65 of Customs Act, 1962 is entirely different - there is distinction between a bond executed for working as EOU and a bond executed for provisional release of seized goods. - AT
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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
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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
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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
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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
VAT
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Regarding online submission of Form T-2. - Notification
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Online issue of Central Declaration Forms. - Circular
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Online submission of Form T-2. - Circular
Case Laws:
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Income Tax
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2012 (9) TMI 300
Disallowance of revenue expenditure - Non commencement of business - the appellant company was of preoperative nature and the commencement of the business would start only when the appellant company starts exploitation of the project - Held that:- The main object of the Assessee as per Clause 3(A)(10) of the Memorandum of Association is to "To promote Schemes for irrigation and water supply in the State for utilization of water from the Sardar Sarovar". Thus in the light of the facts prevailing in Assessee's case, it can be said that the Assessee by supplying water through its main canal had in fact achieved the purpose for which it was established. One of the purpose for which the Assessee was set up was to supply water through canals. The canal was complete in respect of part of the stretch and that enabled supply of water through such canal to certain destinations. The fact that the entire stretch of canal up to the desired destination was not completed would not be sufficient to hold that the Assessee's business was not set up. The AO as well as CIT(A) have misdirected themselves in this regard by laying emphasis on flow of revenue as a condition precedent for coming to a conclusion that business of the Assessee has been set up as the flow of revenue from supply of water is not relevant as has been laid down in the case of CIT v. Sarabhai Management Corpn. Ltd. (1991 (8) TMI 6 - SUPREME COURT ). - In fact in the past the revenue has been taking a stand that flow of water through the canal would be the point of time when the business of the Assessee can be said to be set up. When that happened, the revenue is taking a stand that there should be flow of revenue on supply of water and only then it can be said that the business of the Assessee has been set up. This apparent contradiction in the stand taken by the Revenue is not acceptable, thus the stand taken by the revenue regarding absence of flow of revenue would be irrelevant. As the business of the Assessee was set up on 21.2.2001 when water was supplied through the main canals and all revenue expenditure after that date have to be allowed as deduction. As on pursuing the details of Schedule-I to the Balance Sheet as on 31.3.2001 which gives the break of the incidental expenditure pending capitalization. The salary, wages, gratuity and allowances and other employee costs, rent electricity would be in the range of Rs. 122 crores , the interest and discount on deep discount bonds is Rs. 566.99 crores and Rs. 148.10 Crores respectively. The interest income sought to be brought to tax by the revenue in this assessment year is Rs. 26,13,28,117/-. If business of the Assessee is held to be set up on 21.2.2001 then the proportionate expenses as set out above for the period from 21.2.2001 to 31.3.2001 would be much more than the interest income brought to tax. Therefore the other issues raised by the Assessee in its appeal do not require any adjudication in view of our above conclusion on the commencement/setting up of business - in favour of assessee.
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2012 (9) TMI 299
Technical Assistance Agreement - Acquiring of know-how - deduction u/s 37 OR amortized u/s 35AB - Held that:- As directed to assessee in his own case in CIT Versus Drilcos (India) Pvt. Ltd. [2003 (12) TMI 32 - MADRAS HIGH COURT] payment was required to be considered only u/s 35AB & not entitled to have the amount paid for acquiring know-how as an item of revenue expenditure allowable as a deduction u/s 37. As Section 35AB says that the expenditure should have been incurred for the purposes of the business of the assessee, in the present case, the Technical Assistance Agreement was entered into between the assessee and the American company for acquiring know-how which was, in turn, to be used in the business of the assessee. Once Section 35AB of the Act comes into play, then Section 37 of the Act has no application - against assessee.
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2012 (9) TMI 298
Non deduction of TDS - commission or brokerage to the persons carrying on the business as stamp vendors - Held that:- As satisfying with the decisions taken in assessee's own case in [2002 (6) TMI 32 - GUJARAT HIGH COURT] that 0.50% to 4% discount given to the Stamp Vendors is for purchasing the stamps in bulk quantity and the said discount is in the nature of cash discount, thus concluding that the impugned transaction is a sale and consequently, Section 194H has no application - in favour of assessee.
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2012 (9) TMI 297
Penalty u/s 271(1)(c) - search and seizure - assessee claimed immunity under clause (2) of Explanation 5 to Section 271(1)(c) - Held that:- The assessee is entitled to immunity from payment of penalty under clause (2) of Explanation 5 to Section 271(1)(c) as all the three conditions as defined under the section are satisfied by assessee as decided in assessee' sown case in 2004 (7) TMI 86 - RAJASTHAN HIGH COURT. As the statement was made by the Karta (assessee) during the search which concluded on August 1, 1987 that the unaccounted assets and incriminating documents found from his possession during the search have been acquired out of his income, which has not been disclosed in the return of income before expiry of time specified in Section 139(1), thus satisfying first condition - second condition was satisfied as the assessee had specified in his statement under Section 132(4), the manner in which such income stood derived - for satisfying third condition the only requirement stipulated for the assessee to "pay tax together with interest" as in the present case the assessee has paid tax with interest upto the date of payment, since Clause (2) did not prescribe the time limit within which the assessee should pay tax on income disclosed in the statement under Section 132(4) no default proved - decided in favour of assessee
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2012 (9) TMI 296
Disallowance u/s 14A - ITAT deleted it - Held that:- Considering law having been declared in Maxopp Investment Ltd. & Others Versus Commissioner of Income Tax [2011 (11) TMI 267 - DELHI HIGH COURT] that to ascertain the correctness of the claim of the assessee in respect of the expenditure incurred in relation to income which does not form part of the total income the assessing officer will have to verify the correcteness of such claim - AS Rule 8D r.w.s. 14A is applicable only from assessment year 2008-09 and, in respect of prior years, expenses relating to exempt income both direct and indirect have to be computed on a reasonable basis after allowing opportunity of hearing to the assessee - case is remitted back for reconsideration - in favour of assessee by way of remand. Depreciation on Aeroplane-Aeroengines - whether the "Beechcraft Super King Air B-200C" purchased by the assessee fell within the description of aeroplane ? - Held that:- With regard to the history of the entry all that can be inferred is that “aircraft” is a broader description which includes all manner of craft or means of transport aided by flight, (such as balloons, planes etc.) within the Depreciation Rule. For the reasons best known, the rule making authority confined and narrowed definition to “aeroplane”. This conclusion is also supported by the fact that other entries in Rule III(3) of the depreciation table extend to entire vehicles such as commercially pliable buses, cars etc. They do not confine the scope of depreciation only to parts of such vehicles - as aircraft owned by the assessee has fixed wings and has the characteristics of the aeroplane though it may be of a smaller capacity which is able to fly only nine passengers on board the aircraft owned by the assessee cannot be thrown out of the category of "aeroplane" and to be considered only as "Plant and Manchinery" which is a term distinct to such type of aircraft - Thus in view of the above discussion the Tribunal‟s judgment does not disclose any error as regards interpretation of Entry III(3)(i) of the Depreciation Rules and its upholding the depreciation allowable in the present case to the tune of 40% cannot be termed as unjustified or unwarranted - in favour of assessee. Claim of cash payment as deductible expenditure under Rule 6DD(k) - Held that:- As the charges payable and claimed by the assessee were in respect of the route navigational and parking charges for an aircraft required by Airport Authority of India there can be no dispute that the Airport Authority of India is a statutory body entitled to claim its dues and even entitled to frame Rules and Regulations under the parent Act in such an eventuality, once the authority required that cash had to be paid as a condition for flight clearance required by the assessee, it had really no choice in the matter. The interpretation urged by the revenue is far removed from reality - in favour of assessee.
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2012 (9) TMI 295
Interest income from loans - accrual of interest - Non inclusion in computation of income as that the borrowers were in a weak financial position - ITAT held it in favour of assessee - Held that:- As the debtor-companies were not loss making companies in the relevant previous years, that they were actually making profits and in this view of the matter, he held that the AO was justified in charging interest. Tribunal had decided the dispute in favour of the assessee for the assessment years 1997-98 and 1998-99 because in those years the borrowing companies were in a bad financial position making it impossible to realize any interest from them, whereas that fact-situation does not obtain in the year under appeal in which the borrowing companies were making handsome profits, thus these loans could not be treated as non-performing assets - against assessee.
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2012 (9) TMI 294
Profit on sale of agricultural land - income from business OR capital gain - Held that:- The main object clause suggests that the assessee's main business is to deal in real estate and the assessee carried on the activity of buying and selling of lands and in each case the land was not subjected to cultivation by the assessee - the argument of the assessee on an assumption the land is fit for agriculture and was used for agriculture purpose by somebody on behalf of the assessee is not acceptable as it is on record that there is a series of transactions by which the assessee bought the land and sold for profit. The land purchased by the assessee in the present case is subject matter of trade and it has purchased at regular intervals and it cannot be considered as investment activity of the assessee. Even after purchasing the agricultural land, the assessee cannot be said to be carrying on any agricultural operation. There were no activities connected with the land. Though the assessee taken a plea that the land was leased for agricultural operations, the evidence brought on record does not suggest that the agricultural operation was actually carried on the said land. Though the assessee shown the land as an investment in the Balance Sheet it cannot change the character of land as stock-in-trade. The entry in the books of account is not conclusive to hold that the assessee has not dealt with in land. The facts of case suggest that the assessee with a sole motive of dealing in land acquired the land and sold the same which can be nothing but adventure in the nature of trade and that the land dealt by the assessee is a stock-in-trade. Unable to appreciate this contention of the assessee that AO accepted the income arising out of sale of such land as income from agriculture in earlier year as each assessment year is a separate unit of assessment and principles of res judicata did not apply to the income-tax proceedings - against assessee.
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2012 (9) TMI 293
India-Denmark DTTA - amount received towards assessee's share of shared IT Global Portfolio tracking system - assessee in the present case is a non-resident company incorporated under the laws of Denmark - Held that:- The payments received by the Assessee are for providing a facility to its agents as that the payment received is nothing but a payment by way of reimbursement of the cost for providing a particular facility - AO in coming to the conclusion that the payment was for fee for technical services has relied on the fact that there has been use of sophisticated equipments, this by itself will not be sufficient to holding technical services being rendered. As decided in CIT v. Bharati Cellular Ltd.(2008 (10) TMI 321 - DELHI HIGH COURT) that to call a payment as fee for technical service, the payment should be for use of human skills and where only machines perform or give some services that would not be enough to call a payment a payment for FTS - As submitted by DR that the basic data is entered by human effort and therefore the payment should be treated as FTS cannot be accepted because ultimately the machine only performs and no human element is involved - that the huge cost for installation of the system and the huge payment made by the Assessee by itself is an indication that the payment is FTS is without any merit as the percentage of payment received by the Assessee towards reimbursement compared to the total receipts in the form of freight etc., from shipping business in India is less than 1%. Thus the receipt in question cannot be considered as Fees for Technical services rendered. The amount in question received by the assessee from MIPL, MLIL and SIPL was not in the nature of FTS and the same being part of the income from shipping business was not taxable in India as per Article 9 of the DTAA since the place of effective management of the assessee company is situated in Denmark - in favour of assessee.
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2012 (9) TMI 292
Reopening of the assessment u/s.147 - Held that:- From the perusal of the profit / losses the assessee had shown other income of Rs. 1,85,05,435/- but this schedule did not show any interest income. Further the assessee in the P & L A/c. had claimed deduction on account of net interest paid after netting the interest receipt which makes it clear that the interest income had not been shown separately in the P & L A/c. The interest income had been shown only in the Schedule M which gives the details of interest expenditure and here do full details of interest income has not been given. Thus only after making the some efforts, the interest income can be gathered from the accounts and, therefore, showing the interest receipt as part of the interest expenditure and not separately in the P & L A/c on the income side cannot be considered as true and full disclosure of facts relating to claim of deduction in respect of interest income - the assessee had failed to disclose truly and fully all the material facts necessary for the assessment in so far as the claim of deduction u/s.10A in respect of interest income is concerned, thus reopening of assessment is warranted - against assessee. Computation of deduction u/s.10A(4) - whether each units should be treated as independent unit or all the units should be taken as single unit for set-off - Held that:- As regards the set off of losses from some units against the profit of other units while computing the deduction u/s.10A is concerned, the assessee has maintained separate accounts in respect of each unit and profit and loss has been computed separately. The assessee has also filed the copies of separate P & L A/c. of each unit in the paper book and has also filed an auditors certificate in Form No.56F giving separate computation in respect of each unit. In our view, profit from each unit is eligible for deduction u/s.10A independently provided the profit could be computed separately, thus as there is no dispute that the assessee has maintained separate accounts in respect of each unit and profit has been computed separately. The losses from non eligible units cannot be set off against the profit of the undertaking eligible for deduction u/s.10A for the purpose of computation of deduction u/s.10A - in favour of assessee. Whether deduction u/s.10A is allowable in respect of other income - Held that:- As the profit directly arising from the export of articles or things or computer software will have to be considered as profit of business and not any other income which is incidental or attributable to such income while computing the profit derived u/s.10A(4). In the present case, the deduction has been claimed in respect of other income which includes dividend income, income from investment, profit from sale of assets, interest from ICD, bank deposits, interest on advance for business or to employees and other receipts, therefore, the interest income will not be eligible for deduction u/s.10A - against assessee.
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2012 (9) TMI 291
Concealment of income - Penalty and demand notices issued accordingly - Criminal prosecution against assessee - Held that:- Considering date of filing of the return, date of processing the return and date of issuance of the said notice, it is evident that the penalty notice, dated 24.2.1994, has been issued not in the course of survey proceedings u/s 133A but after its closure. Thus, there is jurisdictional defect in assumption of jurisdiction for levy of penalty, which cannot be cured. Consequently, the impugned penalty notice has been issued contrary to the express provisions of section 271(1)(c) as no penalty notice under Section 271(1) (c) was issued in the course of assessment proceedings, thus the assumption of jurisdiction by the AO for initiation of impugned penalty proceedings is not valid. Since the order whereby penalty was imposed on the petitioners had been quashed by the Tribunal, the criminal prosecution of the petitioners was liable to be quashed - in favour of assessee.
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2012 (9) TMI 290
Addition made on account of unexplained investment in Mutual funds and unexplained cash credits - assessee when confronted with the information received from AIR of investment in mutual funds filed revised Balance Sheet before the AO reflecting the above said investment - estimation of income without rejecting the books of account of the assessee - assessee claims to have filed the explanation before the AO which had not been accepted by latter - Held that:- From the perusal of the record we find that though the assessee had furnished various explanations before the AO and the CIT (Appeals), the same have not been considered in the proper perspective. The grievance of the Revenue is that even the CIT (Appeals) has accepted the contention of the assessee in violation of the provisions of Rule 46A of the Income Tax Rules. The plea of the assessee in this regard is that no fresh evidence was furnished before the CIT (Appeals). In view of aforesaid, we deem it fit to restore the matter back to the file of the AO to decide all the issues de-novo.
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2012 (9) TMI 289
Best judgement assessment - rejection of books of account - rice mill - alleged lower yield on comparison with yield of other rice mills - undervaluation of closing stock of by product - Held that:- Simply because the yield has been marginally less in case of the assessee, the books of account could not have been rejected. The Assessing Officer has not brought any material on record to show that actual yield was higher in case of the assessee. Therefore, addition in this respect is directed to be deleted. As far as addition in respect of valuation of closing stock of husk is concerned, in our opinion, the correct value of stock has to be adopted even if books are not rejected. Since we have not upheld the rejection of books of account still addition on account of correct value of closing stock can be maintained and accordingly we confirm the order of the ld. CIT(A) in this regard. Addition u/s 40A(2) - goods sold to sister concern at lower value - Held that:- It is settled law that Section 40A(2) can not be applied for making addition for the difference in value of sales at which the goods are actually sold and the value which in the opinion of the Assessing Officer is correct value. Further, Supreme Court in case of CIT V. Glaxo Smithkline Asia (P) Ltd (2010 (10) TMI 21 - SUPREME COURT OF INDIA ) has itself agreed that certain amendments are required to be made in Section 40A(2) if Transfer Pricing Regulations were required to be applied to domestic transactions between related parties. In view of aforesaid, provisions of section 40A(2) cannot be attracted for making addition on account of difference in sale value effected by the assessee in comparison to the fair market value - Decided in favor of assessee. Undervaluation of closing stock - Held that:- Stock has to be valued at cost or market value whichever is lower and the sale value cannot be applied for valuation of closing stock - Decided in favor of assessee
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2012 (9) TMI 288
Deduction u/s 80P(2)(a)(i) - Co-operative Credit Society engaged in providing credit facilities to its Member - dis-allowance on ground that in view of insertion of the of sub-sec(4) to Sec. 80P w.e.f. 1.4.2007, the said section will not apply to any Co-operative Bank - reference to Banking Regulation Act 1949 - Held that:- On plain reading of the Banking Regulation Act, 1949, nowhere it is suggested that the term "Co-operative Bank" also includes 'Co-Operative Credit Society" also. Meaning of any term or expression is to be ascertained in the context of provisions of referred Act. Interpretaion of AO that assessee Co-Operative Credit Society partakes the character of the Primary Co-operative Bank is not the correct interpretation. It is well settled principle in the interpretation of the 'taxing provisions' that the same are to be strictly construed and there is no room for any intendment. One has to fairly look into language used by the Parliament. The Parliament has adopted the definition of the Co-operative Bank by referring the same as given in the Banking Regulation Act, 1949. It is called Legislation by reference and we have to give the strict interpretation while interpreting the effect of Sub-sec. (4) to Sec. 80 P. In our opinion, Co-operative Credit Society is distinct and separate from the Co-operative Bank nor it can be said as a Primary Co-operative Bank within the meaning of Banking Regulation Act, 1949. Hence, the assessee being a Co-operative Credit Society is entitled for deduction u/s. 80 P(2)(a)(i) - Decided in favor of assessee.
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2012 (9) TMI 287
Application u/s 254 to rectify order of Tribunal on ground of mistake apparent from record - Revenue contended that there are factual errors, errors on account of non-consideration of the arguments and evidence led by the Department - Held that:- It is observed that Tribunal has considered all facts in totality and has come to the conclusion and therefore, we find no mistake apparent from record. The mistake u/s 254(2) has to be an obvious and patent mistake and not something which can be established by a long drawn process of reasoning on points on which there may be conceivably two opinions. A decision on a debatable point of law is not a mistake apparent from the record. It is an application u/s 254(2) which has got limited application, it should be a glaring and patent mistake, the mistake should not require any long drawn process of reasoning. It does not cover the review of the order, as was the intention of the Revenue, in the present application, who had been pointing out the fault in understanding the facts of the case by the ITAT and wanted the order to be re-written. Each and every mistake pointed out by the Revenue was capable of full debate and in long drawn process which is not permitted in law. Hence, Miscellaneous Application filed by the Revenue is clearly outside the scope and ambit of the provisions of section 254(2) and are thus dismissed - Decided against Revenue
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2012 (9) TMI 286
Second reopening attempted u/s 148 - exclusion of Duty Drawback and DEPB Licence values while computing deduction under Section 80-IB - First Reopening of assessment on deduction u/s 80HHC was given without invoking Section 80-IB(13) was pending - Held that:- Re-assessment was not initiated u/s 147(b) for a reason that the said section stood substituted by Direct Tax Laws (Amendment) Act, 1987 with effect from 1.4.89 giving wide power to the AO even to cover cases where the assessee had fully disclosed the material facts. No doubt, an exposition of law would declare the law as it stood all the time and could be a basis for rectification proceedings under Section 154 but, in our opinion, it cannot be a basis for resorting to a reopening where such reopening is done after the expiry of four years from the end of relevant previous year unless and until there is any failure on the part of the assessee in production of books of accounts or other evidence from which material evidence could with due diligence be gathered - the assessee has to succeed in this appeal.
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2012 (9) TMI 285
Disallowance u/s 40(a)(i) - rate of TDS - whether deduction of tax at source @ 11.33% in case of payments made to nine non-residents engaged in rendering services in connection with oil exploration business which are taxable under the Income-tax Act as per the provisions of section 44BB, is sufficient compliance of section 40(a)(i) of the Act or any disallowance out of such payment is warranted u/s 40(a)(i) of the Act. - held that:- following the decision of Apex Court in GE India Technology Centre (P.) Ltd., (2010 (9) TMI 7 - SUPREME COURT OF INDIA) and Frontier Offshore Exploration (India) Ltd vs DCIT, decided in favour of assessee. Disallowance u/s 40(a)(i) - consultancy charges/fees for technical services paid to not residence working in overseas off shore oil and gas exploration projects it Nigeria - Held that:- As the payments made by the assessee to non-resident consultants, were directly related to the Nigerian projects of the assessee, the fees paid to such consultants on its projects abroad has to be considered as fees paid for services utilized in the business of the assessee outside India. Therefore, clearly Section 9(1)(vii)(b) applied and the income earned by such non-residents cannot be deemed to accrue or arising in India. Therefore, assessee had every reason to hold a bonafide belief that no part of the payment had any element of income which was chargeable to tax in India & assessee could not be put in a position where it can be visited with the rigours associated with non-deduction of tax at source. It cannot be fastened with any liability associated with non-deduction of tax at source on such payments - in favour of assessee.
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2012 (9) TMI 284
Non-deduction of TDS on Wagon Facilitation Charges - TDS u/s 194I - Held that:- The assessee had entered into an agreement with Indian Railways to invest under Wagon Investment Scheme as public private partnership no lease charge payable against wagons investment in Railways and the assessee is only getting priority in allotment of rakes. Therefore, the investment in wagon Investment Scheme is only to acquire an entitlement and the assessee and other users are paying the usual freight to railways - as decided in Vodafone Essar Ltd. Versus DCIT [2010 (12) TMI 842 - ITAT, MUMBAI] Government owned machinery available for utilization cannot be at any point of time be considered as owned by the user thereof when the depletion in the license right has been held as claimed for depreciation during the license period - AO was therefore misdirected to hold that the arrangement was an arrangement as considered under the provisions of Section 194-I insofar as at no point of time the license to use the wagons could be considered for the peaceful enjoyment of the landlord being the assessee - in favour of assessee. Disallowance u/s. 43B - Outstanding entry tax payable - Held that:- Favor in the contention of the assessee to the extent that the amount which has not been claimed as deduction cannot be disallowed u/s.43B because it pertains to a liability created being a tax, cess or duty already subjected to tax. Therefore, the said disallowance is also directed to be deleted - in favour of assessee.
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2012 (9) TMI 283
Penalty u/s 271(1)(c) - dis-allowance of alleged excessive salary - assessee contended that AO has wrongly mentioned in the proceedings dated 28.12.2007 regarding confession of dis-allowance and addition in dispute, whereas assessee has not made any confessional statement before the AO - Held that:- It is found in assessment proceedings especially dated 28.12.2007 that neither the assessee nor his authorized representative has signed the proceedings in which the assessee has admitted for disallowance of the amount in dispute. Almost in each and every assessment proceedings, the assessee or his authorized representative has signed. But on 28.12.2007, the same are not there, giving benefit of doubt as well as the plausible explanation given by the assessee on the addition in dispute that penalty has been wrongly confirmed - Decided in favor of assessee
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2012 (9) TMI 282
Validity of reopening of assessment - alleged excessive deduction u/s 80IA on ground of deliberately reporting of higher profits, suppression of expenses, insufficient Plant & machinery for huge production - Held that:- AO has led no evidence whatsoever to either allege or establish that the expenses incurred were insufficient to carry out the manufacturing process. He has also led no material to assume that net profit declared was exceptionally high rate of profit. There is also no material to allege that P&M was insufficient to carry out the manufacturing process. AO has thus not relied upon any material or evidence, which could enable him to assume that income of the assessee, has escaped assessment either by understatement or expenses or overstatement of profits. He has merely proceeded on surmises, conjectures and suspicion to observe that income of the assessee has escaped assessment which in law cannot constitute a reason to believe for invoking section 147. Entire reassessment proceedings are therefore, found to be null and void and on this basis the assessment order is liable to be quashed - Decided in favor of assessee.
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2012 (9) TMI 281
Sales-tax subsidy – capital or revenue - object of the incentive is to fund a part of the cost of the setting up of the factory in the notified backward area – Held that:- Sales-tax incentive allowed to it during the previous year in terms of the relevant Govt. order constituted capital receipt and was not to be taken into account in computation of total income - since object of subsidy under scheme impugned therein was to set up a new unit in a backward area to generate employment, said subsidy was clearly on capital account - Revenue failed to distinguish and make out a markable difference in basic purpose of subsidy received by assessee and subsidy received in case of Reliance Industries – subsidy received by assessee in instant case was to be held as capital receipt Depreciation on computer peripherals - disallowance of depreciation on account of computer accessories - Held that:- Peripherals such as printers, scanners, NT server etc. form integral part of the computer and, therefore, are eligible for deduction of depreciation @ 60% as applicable to the computers Ad hoc disallowance for interest and administrative expenses attributable to the earning of dividend income – Held that:- Tax-free investments had been made out of the assessee's own funds, this did not mean that there was no expenditure incurred to earn tax-free income. Even though Rule 8D did not apply to AY 02-03, the AO had to consider whether disallowance could be made u/s 14A (1) - principle of consistency would not apply as s. 14A had introduced a material change in the law - matter remanded to the file of Assessing Officer Deduction of additional depreciation- Assessee purchased new assets during preceding previous year which were put to use for less than 180 days - Since assets were put to use for less than 180 days, in preceding assessment year assessee claimed only 50 per cent of 15 per cent - Balance additional depreciation was claimed by assessee in instant assessment year – Held that:- Assessee deserves to get the benefit in full when there is no restriction in the statute to deny the benefit of balance of 50% when the new plant and machinery were acquired and use for less than 180 days - restrictions cannot divest the statutory right. Law does not prohibit that balance 50% will not be allowed in succeeding year - The extra depreciation allowable u/s 32(1)(iia) in an extra incentive which has been earned and calculated in the year of acquisition but restricted for that year to 50% on account of usage. The so earned incentive must be made available in the subsequent year - in favour of assessee Foreign exchange fluctuation loss - Held that:- Loss suffered by assessee on account of fluctuation in rate of foreign exchange as on date of balance sheet is an item of expenditure under section 37(1) – in favour of assessee
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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
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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
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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
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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
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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
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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.
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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
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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.
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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
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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
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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
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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.
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Customs
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2012 (9) TMI 280
Confirmation of demand and imposition of penalties by invoking extended period - Held that:- Directions to stay the orders depositing a sum of ₹ 209 crores plus a sum of ₹ 9 crores and ten lacs, within six weeks' time from date of order as well as the demand notice issued for payment of penalty under Section 114-A of the Customs Act as directed in 2012 (7) TMI 233 - CESTAT, BANGALORE. Earlier CESTAT has decided the issue against the appellant involving various issues i.e. Jurisdiction, classification and valuation etc. relating to import of hardware, software and telecom equipment system
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2012 (9) TMI 279
Export of the goods - claim of duty drawback - Confiscation of goods & imposition of Fine and Penalty – classification – Held that:- Mere allegation of wrong classification without proving intentional mala fide cannot lead to imposition of penalty - goods in question are round metallic item with circular threaded inner surface and rough/embossed out surface and as per dictionary meaning it is a female screw - goods in question is better classifiable as similar articles of screw and should not fall under description of brass builder Hardware. Under such circumstances it merits classifiable under 7415 and not under 8302, as claimed by the applicant - importer declared the complete description of goods and there is no suppression/mis-declaration and hence, action on the part of lower authorities regarding confiscation and imposition of fine and penalty liable to be set aside
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2012 (9) TMI 278
Writ of Prohibition - directing the 1st and 2nd Respondents that all adjudication proceedings, to ensure that there are no divergent orders – Held that:- Department has been issuing Notification/Order under Sub-section (1) of the Section 4 and Sub-section (1) of Section 5 of the Customs Act, 1962 to appoint an officer of Customs to act as a common adjudicating authority to exercise the powers and discharge the duties conferred or imposed on the officer for the purpose of adjudicating matters relating to Show Cause Notice issued by the concerned Commissionerates/Sponsoring Authorities on the basis of their recommendation to appoint a common adjudicating authority - request from Petitioner has been received by the Board on the subject. The request is under examination - writ petition is disposed of with the direction to the respondent to decide the request of the petitioner
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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.
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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.
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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
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Corporate Laws
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2012 (9) TMI 277
Winding up petition u/s 433(e) and (f) r.w.s. 434 of the Companies Act, 1956 – acceptance of liability by respondent company, however payment not made – Held that:- Since now parties have resolved the dispute amongst themselves and the respondent has paid to the petitioner firm the said amount in full and final satisfaction of its claim, hence, petition does not survive for consideration. It is dismissed as withdrawn.
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Service Tax
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2012 (9) TMI 304
Goods transport services - Non fulfillment of Notification Nos. 32/2004-ST Dated 3/12/04 and 1/2006-ST Dated 1/3/2006 - Held that:- As from 12.03.6007 onward the declaration on every consignment note to the effect that no credit of duty paid on input of capital goods used for providing taxable service has been taken and not availed the benefit of notification No. 12/2003-S.T dated 20.06.2003 has become mandatory and prior to this date a certificate having the above declarations are also valid to avail the exemption benefit of the notifications. As the certificates produced by assessee are for the period of April 2005 to September 2006 by the appellant, as valid documents for availment of the exemption benefit of the notifications and accordingly the demand under the impugned order is set aside - in favour of assessee.
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2012 (9) TMI 303
Demand of service tax with interest - business auxiliary service – Held that:- Appellants also want to produce Chartered Accountant’s Certificate in support of their claim that the appellants have not provided any business auxiliary service - information received by the appellants after passing of the adjudication order, under the RTI Act, is relevant to the facts of the present case - matter remanded to adjudicating authority
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2012 (9) TMI 302
Demand of service tax - Rent-a-Cab service - contract with various units of Indian Army for making available such means of transportation against request – Held that:- Respondent is just like the services provided by any taxi-operator on the road who provides services to any person calling for taxi - Respondent is not placing any vehicle at the disposal of the army on any long term duration - Ordinary taxi-operators on the street are not brought under tax net under the entry for “Rent-a-Cab” scheme - Appeal filed by Revenue is dismissed.
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2012 (9) TMI 301
Demand in respect of commission from the company providing computer reservation system - appellants contended that CRS is being used by them for their own conducting business and cannot be held to be a service to others – Held that:- Travel Agents are promoting the business of CCRS who is providing service to the Airlines and the payment received by the Travel Agent from CRRS is in consideration for such service - service provided by CRRS is to the Airlines and the Air Travel agent is promoting the service provided to Airlines - service provided by the Appellants to CRRS is business auxiliary service and service tax is payable on the same. Valuation - It is not clear whether tax is paid on the basis of basic fare as claimed by the Appellant and the Revenue is again demanding tax on the commission received for booking ticket without considering the tax already paid as per provisions of Rule of 6(7) of Service Tax Rules. Such demand cannot be justified at this stage. - Stay granted.
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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
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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
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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
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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
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Central Excise
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2012 (9) TMI 276
Taxability of goods manufactured - 'Parts of Television Receivers’ falling under Tariff Entry 8529 OR ‘Television Receivers’ under Tariff Entry 8528 - Held that:- As decided in Commissioner of Central Excise, Nagpur Vs. Simplex Mills Co. Ltd. [2005 (3) TMI 117 - SUPREME COURT OF INDIA] resort must first be had only to the particular tariff entries, along with the relevant Section and Chapter Notes, to see whether a clear picture emerges. It is only in the absence of such a picture emerging, that recourse can be made to the Rules for Interpretation. In this case, the relevant Section Note is Section Note 2 to Section XVI of the Tariff wherein the clear stipulation contained to the effect that ‘parts’ of goods mentioned in the Chapters specified therein, shall in all cases be classified in their respective heading - closer scrutiny of the unique facts of this case reveals that the goods of the appellant may not be said to be ‘parts’ as per Section Note 2 to Section XVI of the Tariff. The appellant not only used to assemble all parts of the Television Receivers and make complete television sets, but the said Television Receivers were also operated in the manufacturing unit of the appellant and thoroughly checked and only upon it being confirmed that the Television Receivers were complete in all respects, they were disassembled and along with relevant material and individual serial numbers, sent to the various satellite units. Once the Television Receivers are assembled or are made completely finished goods, the manufacturing process is over and we are not concerned as to what happens subsequently. As it is not in dispute that complete Television was manufactured by the appellant and the time of the parts of the TV set being transported from the factory of the appellant, the parts manufactured by it are already identified as distinct units, thus the Revenue had rightly classified the goods- product as complete Television set even though it was subsequently disassembled - against assessee.
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2012 (9) TMI 275
Non payment of excise duty - manufacture of fire bricks grog - Held that:- As per OIO grog has been equated with refractory bricks stating that the same has been obtained after further processing like cutting to specific sizes whereas in the SCN allegation was that the grog was refractory bricks broken into pieces on certain specified sizes through grinding of refractory bricks thus finding force that the impugned order-in-original has traveled beyond the scope of the SCN on this score. As in the process of grinding and breaking, refractory bricks cannot retain its shaping and hence be excluded from the purview of Ch.69 by virtue of the restriction clause of Ch.Note 2 of Ch.69 - as concluded from the records the goods are sold in gunny bags in loose condition held Waste and scrap of fire bricks to be non-excisable/dutiable following the ratio of law laid in Birla Corporation Vs. Central Excise, Raipur [2002 (11) TMI 239 - CEGAT, COURT NO. IV, NEW DELHI] -- in favour of assessee.
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2012 (9) TMI 274
Rebate claim – rejection of claim for not following the procedure laid down in C.B.E. & C. Circular No. 294/10/97-CX. – Held that:- Procedural infraction of Notification, circular, etc. are to be condoned if exports have really taken place, and the law is settled now that substantive benefit cannot be denied for procedural lapses - core aspect or fundamental requirement for rebate is its manufacture and subsequent export. As long as this requirement is met other procedural deviations can be condoned - duty paid goods have been exported in this case and rebate claim is admissible to the applicant - orders-in-appeal are hereby set aside and case is remanded back to the original authority to sanction the rebate claim after verifying the duty deposit particulars as stated in ARE-I forms
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2012 (9) TMI 273
Bond – alleged that unit had executed a bond while obtaining ware-housing licence and contending that these bonds should have been enforced for confiscation and recovery of redemption fine imposable against these goods – Held that:- Goods can be confiscated only if the same are available for confiscation - goods were never seized neither available for seizure. If the goods are not seized, the question of confiscation of such goods does not arise and consequently there is no question of imposing redemption fine to release these goods Enforcing bond - unit had executed G-17 bond and all liabilities against 100% EOU are being covered by this bond - unit had executed a bond while obtaining warehousing licence and to manufacture for working as EOU – Held that:- No bond was executed for release of the goods confiscated and no redemption fine was imposed on release. Therefore, there is no question of enforcing any bond - The purpose of executing bond under Sections 58 & 65 of Customs Act, 1962 is entirely different. Needless to say that there is distinction between a bond executed for working as EOU and a bond executed for provisional release of seized goods. - Revenue’s appeal is rejected.
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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.
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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.
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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.
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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
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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.
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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
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