Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
September 15, 2012
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
Indian Laws
Articles
News
Notifications
Central Excise
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35/2012 - dated
14-9-2012
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CE
Amends Sl. No. 70 and 71 of Notification No. 12/2012-Central Excise.
Companies Law
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F. No.1/1/2003 CL.V (Pt. file) - dated
30-8-2012
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Co. Law
Delegation of Powers to Regional Directors u/s 17,18,19,141 and 188 of the Companies Act,1956.
Customs
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41/2012 - dated
13-9-2012
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ADD
Seeks to amend notification No. 103/2007-Customs, dated 14th September,2007 so as to continue, up to and inclusive of 12th September, 2013, the anti-dumping duty on imports of Ductile Iron Pipes , originating in, or exported from, China PR.
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52/2012 - dated
13-9-2012
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Cus
Seeks to amend notification No. 94/1996-Customs - Exemption to re-imported goods exported under various Export Promotion Schemes.
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51/2012 - dated
13-9-2012
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Cus
Seeks to amend notification No.12/2012-Cus,dated 17.03.2012 to provide concessional rate of duty on Gold Findings and to extend the list of items under Sr. No.282.
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Contingent deposits from the leasing/hire purchase customers with a view to protect themselves from sales tax liability - assessee claims that it is refundable in case he wins the sales tax case - held as taxable income - SC
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Business income or Income from other sources - Interest income on Foreign Currency Deposit Account - Matter remitted back to ITAT to decide afresh after examining as done by the Madras High Court in the case of Menon Impex Private Limited [2002 (9) TMI 75]. - SC
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Neither Section 80HH nor Section 80I statutorily obliged assessee company to maintain its accounts unit-wise - it was open for it to maintain its accounts in a consolidated form in order to put an end to the litigation between the Tax Department and the PSU - SC
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Charitable purpose u/s 2(15) - In the place like Mumbai, where we are encountered only with tall buildings and sky scrapers, a park is maintained and developed which not only gives fresh air but invites the people at large to come, enjoy and spend time in the company of fresh grass, flowers, and gives a breath of fresh air, would certainly fall within the words, "preservation of environment" - AT
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Royalty expenditure - Capital OR Revenue - assessee purchased distribution rights of the Punjabi film - As the AO has ignored the Board Circular No. 92 dated 18.9.1972 pertaining to writing off royalty/distribution expenses of films which is binding on tax authorities thus the action of the AO was based on surmises and conjectures, without considering the nature of business of the assessee which was supported by hyper approach ignoring the Board Circular - AT
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TDS on commission/fee paid to Consortium Members - travel agents - Since the assessee only distributed the income in terms of the agreement and this did not amount to incurring of an expenditure no infirmity in the findings of the CIT(A) in deleting the disallowance u/s 40a(ia). - AT
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Interest on refund of income tax received by the PE of the assessee - taxability - applicability of Article 12(5) or Article 12(2) of DTAA between India and France - not taxable - AT
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Disallowance u/s 14A r.w.r. 8D - Even where the assessee claims that no expenditure has been incurred in relation to income which does not form part of total income, the AO is required to verify the correctness of such claim but in the instant case the AO was handicapped, because of failure of the assessee to furnish relevant details/particulars - matter remanded back - AT
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Rectification u/s 154 - Admittedly, this is a mistake apparent from record as this business loss determined in AY 1998-99 can be carried forward till 2006-07 and not in the relevant AY 2007-08. - AT
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LTCG - exemption u/s 54F - At this point of time, it is not possible to verify the condition of the building and or to whether it was habitable at the time of its purchase. - benefit u/s 54F allowed - AT
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Capital gains - sale of flat allotted by cooperative housing society - cost of acquisition, non-allowance of registration expenses and cost of improvement - cost as claimed by assessee accepted - AT
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Issues which were neither the subject matter of AOs order u/s.143(3) nor the subject matter of the appeal before the CIT(A) - CIT in exercise of his powers u/s.263 cannot compel the AO to consider those aspects. - AT
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The income relatable to earlier year cannot be added to the income of this year - AT
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Interest on government loan - Government company - assessee has not paid even a single instalment of either the principal amount or the interest - claim of of deduction as accrual of interest not accepted - AT
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Constitution of an Expert Committee on GAAR to undertake stakeholder consultations to finalize the guidelines for General Anti Avoidance Rules (GAAR) - Scope of terms of Reference of Expert Committee on GAAR expanded - Order-Instruction
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Assessment of business income - whether the assessee should be held to be an agent of the State or an arm of the State and exempt from assessment of income? - AT
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Revision u/s 263 by CIT(A) - It is settled position of law that failure to make enquires which are required in the facts of the case would itself make the assessment order erroneous and prejudicial to the interest of the revenue. - AT
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Rental income from the property - the income does not become income from trade or business if the hiring is inclusive of certain additional services such as heating, cleaning, lighting or sanitation, which are relatively insignificant and only incidental to the use. - AT
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Principle of Mutuality - as predominant object of the assessee has been found the welfare of its members and in the process if any income is received from a person other than the members it would not change the status of the assessee - AT
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Addition u/s 40A(3) - cash purchases above Rs 20,000 - assessee made final purchases from the Arhatiyas (commission agents / traders) and same cannot be treated as agents of the assessee firm within the meaning of Rule 6DD(k). - AT
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Best judgement assessment - rejection of books of accounts - trading addition made on ground of decrease in G.P. rate - Explanation of the assessee can not be rejected in totto. - AT
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Deduction u/s 80IC - items were being manufactured at the specification of the customers and certain bought items were put together for supply the complete unit, i.e. certain paints - deduction allowed. - AT
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Exemption u/s 54EC - once money is deposited in the bank account it gets merged with other funds of the assessee and it is impossible to locate which funds have been used for purchase of specified assets because the normal businessman would keep on doing various transactions in the bank account. Deduction allowed - AT
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Since the acquisition of land is of capital nature and therefore, interest paid for borrowings for the purpose of purchasing of such land is not allowable. - AT
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Long term capital gain - dispute regarding computation of fair market value(fmv)as on 01.04.1981 - Valuation as per registered valuation accepted - however with regard to cost of improvement, assessee has miserably failed, to prove the factum of incurring of the expenses - AT
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DTAA between India & UAE casual attitude of the DRP leads to harassment of the assessee and drag them to protracted litigation - AT
Customs
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Seeks to amend notification No. 94/1996-Customs - Exemption to re-imported goods exported under various Export Promotion Schemes. - Notification
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Seeks to amend notification No.12/2012-Cus,dated 17.03.2012 to provide concessional rate of duty on Gold Findings and to extend the list of items under Sr. No.282. - Notification
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Seeks to amend notification No. 103/2007-Customs, dated 14th September,2007 so as to continue, up to and inclusive of 12th September, 2013, the anti-dumping duty on imports of Ductile Iron Pipes , originating in, or exported from, China PR. - Notification
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Petition for contempt - illegible search despite court orders - Assistant commissioner found guilty of contempt - punish him with simple imprisonment of three months - HC
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Drawback claim - conversion of shipping bill from DEPB scheme to Duty Drawback Scheme - powers are vested with the Commissioner of Customs and not with the Assistant Commissioner - HC
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If the goods are seized or detained by the proper officer, the assessee shall not be charged with any rent or demurrage on the goods - AT
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Section 48 is not a contravention of the nature prescribed under Section 117 of the Customs Act, 1962 for non-filing of bill of entry within 30 days under Section 48 of the Act - AT
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Refund - burden of proof Where a person claims refund of fine or penalty, there can be no presumption that he has passed on this incidence to any other person - AT
FEMA
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Overseas Direct Investments by Indian Party Rationalisation - Circular
Corporate Law
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Delegation of Powers to Regional Directors u/s 17,18,19,141 and 188 of the Companies Act,1956. - Notification
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Winding-up petition on arrears of rent - Whether the provisions of Order 2 Rule 2 of the Code of Civil Procedure (CPC) would have any impact on a proceeding u/s 433, 434 and 439 of the Companies Act, 1956 - appeal allowed in part - SC
Indian Laws
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Disclosure to the Media was by SEBI in breach of confidentiality - Directions with regard to reporting of matters (in electronic and print media) which are sub judice - guidelines on reporting cannot be framed across the Board. - SC
Service Tax
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Interior Decorators versus Works contract - making wooden furniture as per design and drawing - civil work, painting work, plumbing work and electrical work - held as not an activity in the nature of Interior Decorators - AT
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Non registration - as the cause explained by the Appellant not to follow the provisions of the Finance Act, 1994 is reasonable no penalty u/s 76 is levied in view of the provisions of Section 80 - AT
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Clearing and forwarding agent - 16-7-1997 to 31-8-1999 - case of the assessee comes within the definition of bona fide doubt and in that event, the extended period is not applicable - HC
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Penalties under Sections 76 and 77 - CBEC has directed not to commence proceedings where the assessee discharges full amount of service tax and interest - penalty waived - AT
Central Excise
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Amends Sl. No. 70 and 71 of Notification No. 12/2012-Central Excise. - Notification
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EOU Unit can claim exemption from payment of SAD if the goods are cleared into DTA are not exempted by the State Government from the payment of Sales Tax - AT
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Denial of rebate claim - non-adherence input/output norms - claim application was also found to be blank in some respect - no rebate / refund - AT
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Power of CBEC to issue clarification u/s 37B on demand with respect to levy of duties of excise on such goods - petitioner has no such right to demand a clarification - HC
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Export of goods Drawback claim in the absence of retest of remnant samples as the remnant samples were not available - original authority directed to sanction the drawback claims- CGOVT
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Classification - manufacture of Potato wafers the goods, in question, are snacks (Namkeens), the same are covered by Notification No. 4/97-C.E. - exemption allowed - AT
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Cenvat Credit - Rule 6(1) shall apply in respect of goods used as fuel and on such application, the credit will not be permissible on such quantity of fuel which is used in the manufacture of exempted goods. - AT
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Rebate claim rejection of claim for non-endorsement of the name of the merchant exporter in the CT-I Certificate - substantive benefit cannot be denied for procedural lapses - CGOVT
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Refund / Rebate claim EHTP unit - payment of duty on exempted goods Government cannot retain the amount collected without authority. - Re-credit allowed - CGOVT
Case Laws:
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Income Tax
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2012 (9) TMI 373
Non entitlement to deduction of the 'provision' made in respect of irrecoverable Non Performing Assets - Held that:- Decided in favour of Revenue as decided in M/s Southern Technologies Ltd. versus Joint Commnr. of Income Tax, Coimbatore [2010 (1) TMI 5 - SUPREME COURT OF INDIA] Provision for possible loss are only notional for purposes of disclosure, hence, they cannot be made an excuse for claiming deduction under the IT Act, hence, add back - against assessee. Contingent deposits from the leasing/hire purchase customers with a view to protect themselves from sales tax liability. - ITAT treated it as assessee's income - Held that:- It is now well settled that in determining whether a receipt is liable to be taxed, the taxing authorities cannot ignore the legal character of the transaction which is the source of the receipt - As in the present case, the assessee received Rs. 36,47,585/- in the assessment year 1998-99 and as per his own statement in Court the said sum was not kept in a separate interest bearing bank account but it formed part of the business turnover. - In view of the said statement no reason to interfere with the impugned judgment constituting the addition to the income. - The said amount was part of the turnover. The said amount was collected from the customers. The said amount was collected towards sales tax liability - against assessee. Decision in the case of Bazpur Co-operative Sugar Factory Ltd. (1988 (5) TMI 4 - SUPREME COURT) distinguished.
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2012 (9) TMI 372
Business income or Income from other sources - Interest income on Foreign Currency Deposit Account - whether assessee is entitled to get the benefit of Section 10A? - Held that:- As similar question arose in CIT Versus Menon Impex P. Ltd. [2002 (9) TMI 75 - MADRAS HIGH COURT] wherein the deduction u/s 10A was allowed. In the case of Commissioner of Income Tax vs. Sterling Foods [1999 (4) TMI 1 - SUPREME COURT] it was held that the mere fact that the deposit was made for obtaining Letter of Credit which Letter was, in turn, used for the purpose of business undertaking did not establish a direct nexus between the interest and industrial undertaking. Remit the cases to the ITAT for deciding the matter afresh after examining the transaction in question as done by the Madras High Court in the case of Menon Impex Private Limited.
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2012 (9) TMI 371
Denial of deduction u/s 80HH and 80I for Petrochemical Unit - the basis of allocation of profits amongst the three units as shown in the Computation of Income was not explained - Held that:- Though neither Section 80HH nor Section 80I statutorily obliged assessee company to maintain its accounts unit-wise and that it was open for it to maintain its accounts in a consolidated form in order to put an end to the litigation between the Tax Department and the PSU the case is remitted to the AO to ascertain whether the assessee had correctly calculated its net profits for assessment year 1992-93 in respect of its petrochemical unit for the purposes of claiming deduction under Sections 80HH and 80I. As in the present case, assessee company has prepared its Financial Statements on Consolidated Basis from which it has worked out unit-wise net profits and once such working is certified by the Auditors the net profit computation (unit-wise) could be placed before the AO who can find out whether such profit(s) is properly worked out and on that basis compute deduction under Section 80HH/80 - in favour of assessee by way of remand.
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2012 (9) TMI 370
Disallowance of depreciation - cost of acquisition of capital asset has been claimed as application of income for charitable purposes in the year of acquisition - CIT allowed the claim - Held that:- As the assessee is registered u/s 12A it did not claim benefit of provisions of sec. 11 & 12 in view of insertion of first proviso to section 2(15) as introduced by the Finance Act, 2009 w.e.f 01.04.2009 - The CIT(A) did not analyse the issues in proper perspective and merely followed decisions rendered prior to insertion of the aforesaid first proviso to sec. 2(15) despite the undisputed fact that the assessee itself did not claim benefit of provisions of sec. 11 & 12 in the computation of income annexed with return, filed report of audit in form 3CD in terms of provisions of sec. 44AB and declared suo motu income under the head Profits and Gains of the Business or Profession. Section 250(6) mandates that the order of the CIT(A) while disposing of the appeal shall be in writing and shall state the points for determination, the decision thereon and the reasons for the decision - set aside the order of the ld. CIT(A) and restore the matter to his file for deciding the aforesaid issues, afresh in accordance with law - in favour of revenue.
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2012 (9) TMI 369
Charitable purpose u/s 2(15) - Cancellation of Registration u/s 12AA(1)(b)(iii) - the object pertaining to the maintenance of the park has been struck down by the Charity Commissioner - Held that:- On going through the remaining object of the trust, read with the provisions of sections 2(15), 12A, 12AA it is found that there has been compliance to section 12A as required under the provisions, so far as provisions of section 2(15) are concerned that the amendment talks about preservation of environment. In the place like Mumbai, where we are encountered only with tall buildings and sky scrapers, a park is maintained and developed which not only gives fresh air but invites the people at large to come, enjoy and spend time in the company of fresh grass, flowers, and gives a breath of fresh air, would certainly fall within the words, "preservation of environment", because if the assessee trust had not come forward to maintain it, it may have been used by other nefarious and unhealthy elements, which would otherwise, make the environment unhealthy. No doubt, the specific clauses have been struck out by the Charity Commissioner, under the Trust Act, but still the object would fall in the ambit of clause (8) mentioning about the benefit of the locality residents and the environment - assessee trust must be granted the registration u/s 12AA - in favour of assessee.
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2012 (9) TMI 368
Disallowance of commission expenses - CIT(A) allowed it - Held that:- Considering the written submissions of the assessee before the CIT(A) wherein the assessee submitted the particulars of parties, details of payment and TDS certificates related to the payment of commission on sales in question AO made disallowance on commission payment of sales on the basis of a superficial approach supported by surmises and conjectures without making any due inquiry in regard to the genuineness of the parties and services rendered by the recipients of commission to the assessee in lieu of commission. As AO did not consider all material and the evidence placed before him by the assessee nad the CIT(A) followed a due procedure and admitted the additional evidence following Rule 46A of the Rules and after affording due opportunity to the AO to confront the same allowed the claim - as CIT(A) rightly followed the rule of consistency which was earlier followed by the AO in the preceding years of assessment allowing the payment of commission by the assessee on sales and in the absence of any material to substantiate that the payment of commission as claimed by the assessee are bogus, the disallowance cannot be made and sustained - in favour of assessee.
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2012 (9) TMI 367
Royalty expenditure - Capital OR Revenue - assessee purchased distribution rights of the Punjabi film Jee Aayan Nu for three years - AO stated to treat the expenditure as capital and deducted depreciation @25% thereon - Held that:- On observing a detailed chart of income and expenses from film Jee Aayan Nu it reveals that the assessee paid Rs.34,34,406 for film development and Rs.75,00,000/- as expenditure for payment of royalty and both these expenses have been segregated in four years. As per Auditors Report and final accounts of the assessee the assessee claimed Rs.20,60,706 as film developing charges and Rs.45,00,000 as royalty expenses i.e. 60% of actual expenditure in the assessment year under consideration and remaining 40% expenditure left to be claimed in another three years to come (subsequent to the first year of actual payment expenditure). As AO did not dispute the fact that 60% of the film development expenses was allowed in the year of expenditure and the rest 40% to be treated as deferred revenue expenditure in the forthcoming years but he deviated from this stand while considering the royalty expenditure allowability and held that the same expenditure was capital in nature. As the AO has ignored the Board Circular No. 92 dated 18.9.1972 pertaining to writing off royalty/distribution expenses of films which is binding on tax authorities thus the action of the AO was based on surmises and conjectures, without considering the nature of business of the assessee which was supported by hyper approach ignoring the Board Circular - in favour of assessee.
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2012 (9) TMI 366
TDS on commission/fee paid to Consortium Members - Disallowance under Section 40{a)(ia) - Held that:- In this case the assessee entered into a consortium agreement with 12 other members who are travel agents for booking air tickets through the platform provided by M/s Amadeus Pvt. Ltd. - As is evident from the terms and conditions of the consortium agreement, the payment by the assessee to other consortium members is not voluntary .The assessee is under a legal obligation in terms of the agreement to pay the amount to other consortium members in accordance with settled terms. There is nothing to suggest that the assessee rendered any service to Amadeus. It is the settled legal position that income accrues when an enforceable debt is created in favour of an assessee. The terms of the consortium agreement do not reveal any such right in favour of the assessee, thus income of 52,22,326/-rightfully belonged to the other consortium members, to whom the amount was distributed by the assessee - Since the assessee only distributed the income in terms of the agreement and this did not amount to incurring of an expenditure no infirmity in the findings of the CIT(A) in deleting the disallowance u/s 40a(ia). As the notices issued by the ld. CIT(A) were never served upon it and the issues raised in ground nos. 2 & 5 in this appeal having not been adjudicated by him, it is fair and appropriate to vacate the findings of the CIT(A) and restore the matter to his file with the directions to readjudicate the issues in the light of aforesaid decision of the ITAT on identical facts in the AY 2006-07 after allowing sufficient opportunity to both the parties
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2012 (9) TMI 365
Interest on refund of income tax received by the PE of the assessee - taxability - applicability of Article 12(5) or Article 12(2) of DTAA between India and France - Held that:- Tribunal in the case of the assessee itself for the AY 2002-03 and 2003-04 after detailed deliberation has held that interest on income tax refund is liable to tax @ 10% as per Article 12(2) of DTAA between India and France. It has been observed that assessee is not in the business of obtaining interest income tax refund therefore, the interest is neither derived from nor attributable to the business activity of the assessee. It is merely fall out of the profits earned by the assessee and is an appropriation of profit and when excess amount then what is due under the Act is appropriated, assessee get refund thereto, and when there is a delay in granting such refund, assessee is granted interest thereon which is taxable under the head income from other sources. Therefore, interest earned by the assessee cannot be held to be related to activity of PE. Thus cannot be related to Article 12(5) of the DTAA - Decided against Revenue
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2012 (9) TMI 364
Disallowance u/s 14A r.w.r. 8D - assessee contested that no interest cost had been incurred by the assessee on any borrowings for the purpose of investment nor any interest was debited to P&L account - Held that:- There is no dispute that part of the income of the assessee from its business is from dividend which is exempt from tax whereas the assessee was unable to produce any material before the authorities below showing the source from which such shares were acquired the mere fact that those shares were old ones and not acquired recently is immaterial. It is for the assessee to show the source of acquisition of those shares by production of materials that those were acquired from the funds available in the hands of the assessee at the relevant point of time without taking benefit of any loan. Even where the assessee claims that no expenditure has been incurred in relation to income which does not form part of total income, the AO is required to verify the correctness of such claim but in the instant case the AO was handicapped, because of failure of the assessee to furnish relevant details/particulars and accounts while making the disallowance in terms of provisions of sec. 14A . There is nothing in the assessment order or impugned order as to whether the assessee placed the relevant details & accounts before the AO or the ld. CIT(A) nor these authorities seems to have undertook any exercise to ascertain the details of expenditure incurred in managing and supervising the aforesaid huge investments in various funds & securities, objectively - set aside the order of the CIT(A) and restore the matter to the file of the AO for deciding the issue afresh.
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2012 (9) TMI 363
Validity of assumption of jurisdiction by Commissioner u/s 263 reassessment purported on ground that discount allowed cannot be claimed u/s.36(1)(vii) - A.O. should have made further inquiries - AO dis-allowed Rs 61,12,431 out of total discount claimed of Rs 81,49,937 assessment order read as under Dis-allowance of discount allowed as discussed - assessee contended examination of issue in detail by AO Held that:- It was the case of the CIT to further verify the order of the AO when he has already noted that the claim was the loss of the Revenue and shall not be allowed. No merit is found in contention of the Revenue insofar as the facts leading to claim of bad debt and allowance of discount were closely linked as observed by the AO cannot leave any room for doubt as sought to be assumed by CIT u/s.263 insofar as he has not given any direction to the AO which would lead to the finding that the order of the AO was erroneous coupled with the fact that it was prejudicial to the interest of revenue. Further, Commissioner while setting aside assessment u/s.263 should not give specific direction to the Assessing Officer to complete assessment in a particular manner. See Development Construction & Allied Services (India) P. Ltd v. ITO (2011 (3) TMI 850 - ITAT, MUMBAI ). Assessment u/s 263 is quashed Decided in favor of assessee.
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2012 (9) TMI 362
Penalty u/s 271(1)(c) addition on account of unexplained investment and dis-allowance of agricultural income assessee contended that statement of agricultural income disclosed by the appellant was on estimate basis and the AO has disallowed certain amount of agricultural income on estimate basis - as returned income and assessed income both being on estimate basis, penalty u/s 271(1)(c) is not attracted - Held that:- Estimation cannot result in levy of penalty straight way in a mechanical manner. The assessee had neither concealed any income nor furnished any inaccurate particulars. It was a denial of the assessing authorities which was adjudicated upon by the Tribunal, which assessee has submitted as mentioned above. In the light of the same, penalty levied u/s. 271(1)(c) on the part estimation sustained by the Tribunal is cancelled Decided in favor of assessee
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2012 (9) TMI 361
Rectification u/s 154 - dis-allowance of adjustment of brought forward loss of AY 1998-99 against profit for the AY 2007-08 on the ground that eight AYs have been passed - original assessment order passed u/s 143(3) allowed b/f business loss for AY 1998-99 to be c/f and same was also allowed to be carried forward in appeal effect order dated 11.06.2010 u/s 251/143(3) - Held that:- Admittedly, this is a mistake apparent from record as this business loss determined in AY 1998-99 can be carried forward till 2006-07 and not in the relevant AY 2007-08. On limitation period of four years for rectification u/s 154 it is observed that original assessment was framed u/s 143(3) for the AY 2007-08 on 31.12.2009 and the appeal effect order was passed u/s 251/143(3) on 11.06.2010, hence within time limit. In view of aforesaid, it is held that AO has rightly rectified the mistake, which is apparent from the records that this loss cannot be carried forward in AY 2007-08 - Decided against assessee.
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2012 (9) TMI 360
Long Term capital gain - exemption u/s 54F - dis-allowance on ground that investment made by assessee in purchase of a residential house may not be fit for habitation, because the house was too small to exists on half acre of land - Held that:- This is hardly the basis on which one can conclude that the assessee did not purchase a residential house. Evidence filed by the assessee viz description of property in sale deed, payment of house tax, electricity connection, sufficiently justifies the existence of a house. The claim of the assessee is that it was habitable and there is no material on record to disbelieve the claim of the assessee. At this point of time, it is not possible to verify the condition of the building and or to whether it was habitable at the time of its purchase. In the circumstances, the benefit of doubt should go in favour of the assessee. On the material available on record, we are satisfied that the assessee has fulfilled the conditions for grant of exemption u/s 54F. We therefore, direct that the exemption claimed be allowed - Decided in favor of assessee
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2012 (9) TMI 359
Capital gains - sale of flat - adoption of lower indexed cost of acquisition, non-allowance of registration expenses and cost of improvement - indexed cost of acquisition taken at Rs 3,77,700/- against indexed cost of acquisition, registration and improvement taken by assessee at Rs 19,91,784/- Held that:- It is observed that cost of acquisition was taken from registered sale deed executed on 04.06.2002 by the Vijaya Bank Employees Housing Cooperative Society in favour of the assessee wherein only a sum of Rs.3,06,410/- was mentioned. However no cognizance taken of confirmation letter issued by Society itself to assessee certifying payment of sum of Rs.7,75,305/- during the period from 30.04.1996 to 01.06.2000 by way of installment and also certificate from Engineer contractors certifying improvement cost of 3,10,000/- and other related expenses Even going by common sense it is clear that no flat in BTM Layout in 2002 was available at the rate of Rs.300/- adopted by AO. In view of adoption of aforesaid cost, CIT(A) rightly held that indexed cost of acquisition, improvement and registration far exceeds Rs.19.80 lakhs resulting in taxable LTCG at NIL - Decided against Revenue
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2012 (9) TMI 358
Dis-allowance of interest expenses on account of interest free advances given to subsidiary company and advances given to sister concerns at concessional interest rates - Held that:- It is clear that the loan to the sister concern at concessional rate of interest as well as the investment in the subsidiary had not taken place during the previous year. As rightly contended by assessee, the revenue has accepted the fact that same were either out of own funds or were owing to commercial expediency. Even otherwise, we find that the investment in the subsidiary was only in the nature of an advance for the purchase of shares. Shares however had not been actually allotted. In such circumstances, it cannot be said that the interest free loans are investments in the subsidiary for the purpose of earning income which will not form part of total income under the Act so as to justify invoking section 14A. Since, there was commercial expediency in giving the advance by the assessee to its subsidiary, dis-allowance cannot be even sustained u/s 36(1)(iii). As far as loans to the sister concern at concessional rate of interest is concerned, we are of the view that it would be just and appropriate to direct the Assessing Officer to examine the availability of overall funds Decided in favor of assessee for statistical purposes.
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2012 (9) TMI 357
Validity of revisionary order u/s 263 banking company alleged incorrect computation of book profits on account of non-consideration of Provision for NPA, Provision for Standard Advances and Bad investments written off Held that:- Order sought to be revised is the order dt.18.3.2010 giving effect to the order of the CIT(A) dt. 13.1.2010. Scope of such proceedings is restricted to the issue/matters that was considered and decided by the CIT(A). Issues with regard to adding Provision for NPA, Provision for Standard Advances and Bad investments written off while computing book profits u/s.115JB were neither the subject matter of AOs order u/s.143(3) nor the subject matter of the appeal before the CIT(A) or considered in the order of the CIT(A). In such a situation where the AO is precluded from considering the above issues, the CIT in exercise of his powers u/s.263 cannot compel the AO to consider the above aspects. He cannot term the order of the AO as erroneous and prejudicial to the interest of the revenue for failure to consider the above issues. The order of the AO dt.18.3.2010 cannot therefore, said to be erroneous for not considering the above issues. On this short ground the order u/s.263 in so far as it relates to the issues with regard to adding Provision for NPA, Provision for Standard Advances and Bad investments written off while computing book profits u/s.115JB, is liable to quashed and is hereby quashed - Decided in favor of assessee
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2012 (9) TMI 356
Validity of revisionary order passed u/s 263 - under-assessment of capital gain - non-applicability of Section 50C by AO - Held that:- In instant case, AO has not examined the applicability of section 50C. Nothing has been brought on record to show that any such enquiry had been made by the AO in the course of assessment proceedings. In view of the specific provisions of section 50C, the AO ought to have examined this aspect and failure to do so renders the order of assessment erroneous and prejudicial to the interests of revenue. Therefore, CIT was justified in initiating proceedings u/s. 263 With regard to the merits of the order, it is found that provisions of section 50C(2) provide for a reference to the DVO, if the assessee makes a claim that the guidelines value for the purpose of stamp duty exceeds the fair market value of the property as on the date of transfer. Since the AO has not made any enquiries with regard to the application of section 50C, the assessee had no occasion to exercise his right u/s. 50C. Hence, AO is directed to make a reference to the DVO u/s 50C and thereafter compute the capital gain on transfer of capital asset. Thus, the order u/s. 263 is modified as stated above - Decided partly in favor of assessee.
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2012 (9) TMI 355
Capital gains - dispute regarding value of cost of construction - assessee contended that why the cost of construction of the flats while computing short term capital gain is adopted at Rs.900/- when cost of construction was accepted at Rs.1,300/- while determining long term capital gain by the CIT (Appeals) - Held that:- It is found that long term capital gain for the very same flats have been accepted by the CIT (Appeals) to have a cost of construction at Rs.1,300/-. There cannot be apparently any valid reason to adopt cost of construction at Rs.900/- while computing short term capital gain. We, therefore, hold the cost of construction be adopted at Rs.1,300/- while determining short term capital gain. Accordingly, appeal of the assessee is partly allowed.
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2012 (9) TMI 354
Estimation of the net profit from sale of liquor at 3% as directed by CIT(A) - DR contended that even in case of exclusive wines, the ITAT recently has directed for estimation of profit at 5% - non-verifiable nature of sales admitted in the return due to non production of sale bills - Held that:- As the entire understatement of sales cannot be treated as undisclosed income of the assessee for the year under consideration it is well settled law that the best guide for estimation of income after rejecting the books of accounts is either past history of the assessee or any other comparable cases - In the present case, admittedly the assessee is not an exclusive wine shop and it also runs restaurant along with Bar and food items are sold along with liquor. Therefore, the profit in case of the assessee cannot be same as in the case of exclusive wine shop - Thus, considering the fact that the sale of food items are very less compared to sale of liquor and beer and also considering the fact that the ITAT has also in some cases directed for estimation of net profit in case of wine shops at 5% it is reasonable to direct the AO to estimate the profit at 10% of purchases or stock put to sale during the year subject to the assessed income is not less than the returned income - The CIT (A)s order is modified to this extent - partly in favour of assessee.
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2012 (9) TMI 353
Deletion of penalty u/s 271(1)(c) by CIT (A) - Held that:- As particular purchases made was recorded twice in the books of the assessee once when invoice was received in the month of March, 2000 and again when the goods were received in the month of April, 2000 with no mistake detected by the auditors either at the time of statutory audit or tax audit & when a mistake came to the notice during the block assessment proceedings, the assessee filed revised return voluntarily offering income to tax being accepted by AO while completing assessment u/s 143(3) r.w.s. 147 on protective basis without making any other additions, thus no penalty can be imposed on concealment of income or furnishing inaccurate particulars of income. As the conduct of the assessee in coming out voluntarily and offering the amount of Rs.1.68 crores to tax, a liberal view has to be taken in the matter of imposition of penalty u/s 271(1)(c) - in favour of assessee.
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2012 (9) TMI 352
Best Judgement assessment - alleged suppression of gross profit - real estate - Punjab Urban Planning & Development Authority (PUDA) Rules prescribed wastage of land for the developer at 40.33% and developer is not entitled to sell that part - assessee following mercantile system of accounting debited provision of the expenditure on development in the trading account and correspondingly included the same in closing stock - claimed construction expenses and PUDA fees fully - deducted non-saleable area out of total land while accounting for closing stock - Revenue contending construction expenses and PUDA fees to be debited proportionately on the basis of area of land sold as divided by the total area of colony and deducting cost of non-saleable area of land on proportionate basis of land sold viz-viz total area of land Held that:- A.O. has ignored the rule of consistency when the assessee had been adopting mercantile system of accounting and development expenses have been accounted for on mercantile system basis and have been accepted by the Department in the preceding year. Though by debiting development expenses in the trading account and correspondingly by crediting amount to the closing stock does not affect the revenue. As per PUDA rules, a developer has to account for 40.33% as wastage is not under dispute. PUDA fees and construction charges have been incurred wholly and exclusively for the purpose of business. In the absence of any defects in the books of account, the AO is not justified in invoking the provisions of section 145(3) and therefore no addition is called in the facts and circumstances of the present case - Decided in favor of assessee
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2012 (9) TMI 351
Interest on government loan - Government company - dis-allowance on ground that the government order sanctioning the loan did not specify any terms and conditions with regard to payment of interest or penal interest - assessee has not paid even a single instalment of either the principal amount or the interest - no action initiated by the government to recover the amount - Held that:- In the absence of any action initiated by the government to recover the amount, claim of deduction of the accrued interest on such loan may not be justified. Even though the assessee was maintaining mercantile system of accounting when the assessee defaulted in payment of the principal amount continuously for long time no interest would accrue on such loan even on principles of mercantile system of accounting. Dis-allowance upheld Addition of prior period income - Held that:- Admittedly, the assessee is maintaining books of account on mercantile system. Therefore, the income relatable to earlier year cannot be added to the income of this year. Addition is deleted. Addition of interest on government loan outstanding as on 31-03-2004 - Held that:- The loan was outstanding from the year 1996. The interest accrued was already converted into share capital. When a portion of the principal alongwith the interest and penal interest was converted into share capital there is no question of any further charging of interest. Therefore, the CIT (A) has rightly confirmed the addition
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2012 (9) TMI 350
Writ Petition alleged that financial statement of the petitioner- company were allegedly fudged. Allegedly sales and interest income for several years have been overstated, fictitious deposits allegedly were shown in the balance-sheet Held that:- It was the case of the company before the Central Board of Direct Taxes that the Department had acted on the basis of false claims of payment of taxes made by the previous management by rectifying the assessment and raising tax demands - no hearing was given to the petitioner-company - Central Board of Direct Taxes, in the peculiar facts and circumstances of this case, ought to have heard the petitioner-company, which they have not done - representations made by the petitioner require further details to be furnished - special leave petition accordingly, disposed of.
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2012 (9) TMI 335
Disallowance of service charges - services agreement between the assessee and its holding company - allegation of clear intention of reducing the tax liability of the assessee and increasing the non-taxable profits - Held that:- CIT (A) has identified some of the expenditure on electricity, rent advertisements etc which is selective and not appropriate according to the facts. - considering the extent of expenditure in both the cases and the fact that in both the companies are reporting the above amount as service charges recovered/paid from/to each other, no reason to doubt that assessee has not incurred the expenditure and the other company has not provided any services - also levy of service tax exists in each month's bill at 12.5% as if only tax avoidance is main issue in allocation of expenditure to assessee, there is no need for allocating the expenditure to assessee paying service tax at 12.5% directly on the gross amount - direction to AO to allow the expenditure - in favour of assessee. Disallowance of deputation charges - common services in the areas of Finance, Accounts, Taxation, Legal, Administration, HRD, education, Training, Research etc. - Held that:- the expenses on account of deputation charges as well as other expenses are not covered under the aforesaid agreement. The other reasons given by the AO for making the impugned disallowance cannot also be sustained - in favour of assessee. Non deduction of TDS while making payment towards purchase of software - Disallowance u/s 40(a)(ia) - the payment in question is in the nature of Royalty as per AO - Held that:- Following the view expressed by the Hon'ble Dellhi High Court in the case of DIT v. Ericsson AB (2011 (12) TMI 91 - DELHI HIGH COURT) that consideration paid merely for right to use cannot be held to be royalty which is favourable to the Assessee to hold that the consideration received by the Assessee for software was not royalty. Admittedly the Assessee who is a non resident does not have a permanent establishment and therefore business income of the Assessee cannot be taxed in India in the absence of a permanent establishment - as the assessee was asked to explain whether the facts involved in assessee's own case (payments to non residents) wherein payments made to non-residents has held that the amounts are royalty in nature are similar to the payments made to the Indian Companies where the assessee expressed inability to furnish the details immediately and has no objection if the matter is examined by AO direction to AO to examine the issue afresh in the light of facts before the Hon'ble High Court of Karnataka and the facts involved in payments made to Indian Companies and decide the issue fresh after giving due opportunity to assessee. Disallowance of an amount u/s 14A while computing the book profits under section 115JB - Held that:- Once AO has made the disallowance on account of interest expenditure, it was for assessee to produce evidence that the investments were made out of free surplus funds of assessee and that no part of the interest bearing funds had been used for the purposes of making the investments. As the assessee failed to prove the disallowance of the proportionate interest expenditure has to be necessarily made by the mandatory method prescribed in Rule 8D - No reason to interfere with the orders of the authorities for disallowing proportionate expenditure under section 14A and consequent to the above disallowance, the same is also to be disallowed under section 115JB working as well - against assessee.
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2012 (9) TMI 334
Interest u/s 234A/234B - Whether the interest levy is mandatory ? - Held that:- As decided in CIT Versus Anjum M. H. Ghaswala And Others [2001 (10) TMI 4 - SUPREME COURT] the Board has issued circulars by Notification No. F. No.400/234/95-IT(B), dated May 23, 1996 as per which it has empowered that the Chief Commissioner of Income-tax and Director-General of Income-tax may waive or reduce interest charged under sections 234A, 234B and 234C beneficial to assessees, such benefit can be conferred on assessees who have approached the Settlement Commission under Section 245C on such terms and conditions as contained in the circular. As this aspect has not been considered in the present case by the High Court in its impugned order it need to be set aside directing the Tribunal to consider whether the assessee would be entitled to waiver of interest under the Circular - in favour of assessee by way of remand.
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2012 (9) TMI 333
Reopening of assessment - claim for depreciation at the higher rate at 40% - Held that:- In the scrutiny assessment, AO with respect to depreciation claimed has raised a specific query and called upon the petitioner to justify the claim by giving details of vehicles on which depreciation at the rate of 40% was claimed. In reply to such question, the assessee made a detailed representation stating that company had purchased and leased commercial vehicles during financial years between 1.4.1994 to 31.3.1995 and 1.4.1995 to 31.3.1996. Details of such purchases were provided. It was also pointed out that the company was claiming depreciation at the rate of 40% on the commercial vehicle. It was stated that on certain vehicles, the company had claimed depreciation at the rate of 20% having reference to the vehicles purchased by the company during the second half of the year and therefore, half of otherwise available depreciation could be claimed. As the assessee company had placed full facts before the AO in the original assessment itself and also during the course of scrutiny assessment detailed submissions were given as despite commercial vehicles have been leased out, higher rate of depreciation was justified. This is therefore, not a case where income chargeable to tax can be stated to have escaped assessment for the reason of assessee failing to disclose truly and fully all material facts - in favour of assessee.
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2012 (9) TMI 332
Disallowance of expenditure in connection with VRS - Held that:- this question of fact viz. whether the payments had been made under the Voluntary Retirement Scheme had been raised unnecessarily by the Commissioner of Income Tax (Appeals). The Assessing Officer had not disallowed the same on this ground. - even assuming that the appellant is entitled to raise this issue in appeal, it would not raise a substantial question of law. MAT - book adjustment - ITAT hold that the extraordinary items in the form of Rs.30 crores representing profit on transfer of land for development and Rs. 73 crores representing reversal of provisions for construction cost credited by the assessee in its accounts should be excluded from the net profit as per books which is computed as per Part II and Part III of Schedule VI to Companies Act on the ground that no income can be included in the book profit under section 115JA based on mere book entries? - Decision of ITAT sustained. VRS payment of Rs.27.92 crores, made to workers for closure of factory - It is pertinent to note that before the Tribunal, the appellant had not contended that the decision of this Court in the matter of Commissioner of Income-Tax Versus Bhor Industries Ltd.( 2003 (2) TMI 20 - BOMBAY HIGH COURT) is inapplicable to the present facts in fact, in it's appeal to the Tribunal the appellant-Revenue had urged that Bhor Industries is inapplicable only because the decision has not been accepted by the Department. Therefore, it is not open to urge a new ground or facts in third appeal.
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2012 (9) TMI 331
Assessment of business income - whether the assessee should be held to be an agent of the State or an arm of the State and exempt from assessment of income in his hands - Held that:- The entire case of the assessee in the instant case, hinges on clause (2) or clause (3) of Article 289 of the Constitution of India - The basic purport of Article 289(2) is to neutralize clause (1)which says The property and income of a State shall be exempt from Union Taxation, but with a rider that, if there is any trade or business done on behalf of the Government or any operations connected therewith or any property issued or occupied for the purposes of such trade or business, or any income accruing or arising in connection therewith. To make this clause effective, even for Government / State, conduct of trade or business is necessary, which simply means involvement of commercial and profit motive for the vendor. The observation above read together with section 113(3A) of MR&TP Act, 1966, shall emerge that the activity so performed by the assessee is nothing but an act of State without any profit or commercial motive attached with it. The only clause left for our consideration then would be clause (3), which shall come into play once clause (2) is disbanded which operates only if Parliament may by Law declare to be incidental to the ordinary functions of Government. Here, in the instant case, we have to read Parliament as State Government because in the instant case, it is the State Government which has authorized the assessee to perform the development projects at Navi Mumbai, Vasai- Virar, Waluj and such other places - as soon as the Project is complete, the project gets handed back to the State, i.e. when there is a development project, as per phases, and in the case of local authority, as and when the authorizing committee is satisfied, the reins are transferred to the municipal boards, from whom, the project was taken over, as we have seen from Resolution no. 10375 dated 06/08/2010. No agreement with the argument of the DR that there is no document which has drawn out the Agent-Principal relationship, because the very first Resolution dated 18th March, 1970 mention in para no. 2 that
which would act as an agent of Government for the development of the areas with a view to secure the above objective, and in para no. 3 of this Resolution clearly say, The subsidiary company will work under the control and supervision of the State Government in the General Administrative Department. Thus the first Resolution itself makes it clear that the assessee is to be an agent, but functions as an arm of the State Government, because, if the assessee can only work under the control and supervision of the State Government, meaning thereby that the assessee cannot make / take any decisions suo moto, then, in such a case authority for performance of all activities lie somewhere else. In any case, as per this Resolution, it clearly makes the assessee an agent of the State - looking into the financial functions of the assessee it is founded that all dealings have to be routed through authorizations by the Government and all funds receivable shall be in compliance and with intimations to State Industrial and Investment Corporation of Maharashtra Ltd. Bombay - as the department has been assessing the assessee as a State Government undertaking for the last three years, therefore, even this cannot be called as an afterthought and applying the rule of consistency the department cannot be allowed to take a distinctive approach in the current year - in favour of assessee.
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2012 (9) TMI 330
Unexplained investment - addition on account of peak credit available in the account - Held that:- As CIT(A) has rightly permitted the assessee to place on record bank statement, copies of the DDs and copy of the invoices exhibiting purchase of medicines by M/s. Shiva Distributors. However, from the record no conclusive evidence could be found showing that assessee is having a proprietaryship concern which is running a medical store in the name of Shiva Distributors. The only evidence produced by the assessee is that DDs were issued from his account to the suppliers of medicines coupled with the sales bills raised by those suppliers upon Shiva Distributors, thus these documents are insufficient to say that assessee was running Shiva Distributors. Thus looking to the nature of bank account that amounts have been deposited and withdrawn systematically which suggest that there is circulation of the money. As only credit sides are not to be considered as unexplained investment the benefit of set off representing the withdrawals has also to be granted to the assessee, in such situation, the learned first appellate authority has rightly held that peak credits in the bank account is to be assessed as income of the assessee - against assessee.
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2012 (9) TMI 329
Invoking revision powers u/s 263 by CIT(A) - cancelling the assessment order passed u/s 147 r.w.s. 148 - investment in the house property - Held that:- As the revenue was in possession of information that the assessee had purchased various lands which were not reflected in the return and once the issue was reopened to investigate the purchase of various lands then the AO was duty bound to make enquiries to examine the purchase of these land as well as the sources for the same - as AO has simply issued notice u/s 142(1) and 143(2) which is standard for format of the notice and had never bothered to call for copies of various agreements of sale, the AO has proceed to make assessment u/s 143(3) r.w.s. 147 merely on the basis of statement of affairs and made addition in respect of amounts stated in the statement of affairs which could not be proved. This clearly shows that the AO has not examined what was actual consideration for purchase of land and what were the sources. It is settled position of law that failure to make enquires which are required in the facts of the case would itself make the assessment order erroneous and prejudicial to the interest of the revenue. As in the notice the issued, Commissioner recorded that the AO had accepted an addition in house property at Rs. 7.02 lakhs without holding any enquiry and as from the report of CBI, ACB Gauhati that according to CBI investment made in the aforesaid house property was made by one Shri Moti Lal Datta son-in-law of the assessee and according to the CBI, the cost of acquisition of the house was Rs. 16,16,500/-. On these facts the Ld. Commissioner in the notice issued recorded his opinion that the assessment in question being without necessary enquiries was erroneous and prejudicial to the interest of the revenue. As the revisionary order has been passed in respect of assessment order passed u/s 143(3) r.w.s. 147 on 31.12.2009 the power u/s 263 is available to CIT(A) to revise any order passed by the assessing authority and re-assessment order within from the end of Financial Year in which the order has been passed i.e. 31.3.2010 and would expire on 31.3.2012 whereas the order challenged here has been passed before 28.3.2012 i.e. well within time limit prescribed u/s 263(2). Therefore, the order is very much within the limitation period, thus order passed u/s 263 need to be uphold - against assessee.
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2012 (9) TMI 328
Rental income from the property 'Income from house property' versus Profits & Gains of Business or Profession or under the head Income from other sources, as held by Revenue - Held that:- In the instant case, though assessee contended that assessee derived income from exploitation of commercial asset, however not even a whisper is made in the impugned order as to whether or not the assessee derived income from exploitation of property as a commercial asset or as an owner. Apparently, the issue has not been examined in proper perspective. Where income is derived from house property by the exercise of property rights properly so called, the income falls under the head 'income from property; however where house property is given on lease or licence basis for earning income therefrom, the true character of the income derived is income from property. The said character is not changed and the income does not become income from trade or business if the hiring is inclusive of certain additional services such as heating, cleaning, lighting or sanitation, which are relatively insignificant and only incidental to the use. A mere glance at the impugned order for the year under consideration, reveals that the order passed by the CIT(A) is cryptic and grossly violative of one of the facets of the rules of natural justice, namely, that every judicial/quasi- judicial body/authority must pass reasoned order, which should reflect application of mind by the concerned authority to the issues/points raised before it. Decision does not merely mean the conclusion. It embraces within its fold the reasons forming basis for the conclusion. In view of the foregoing, especially when the CIT(A) have not passed a speaking order, matter is restored to file of CIT(A) to bring out clearly as to whether or not the assessee derived income from exploitation of property as a commercial asset or as a owner Decided in favor of assessee for statistical purposes
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2012 (9) TMI 327
Principle of Mutuality - CIT(A) allowed it - revenue appeal - Held that:- As decided in assessee's own case for the assessment year 2006-07 on similar facts the Tribunal held that the assessee is a mutual concern as there is complete identity between the contributors and participators - the assessee is a society of industries of hazardous nature and the object is the treatment of waste produced by these industries to keep environment clean. The observation of the AO that it is not mentioned in the return that the principle of mutuality applies to the assessee has been held having no merit because what is important is the actual conduct of the assessee even if it is not mentioned in the return, it makes no difference to the status of the assessee - as predominant object of the assessee has been found the welfare of its members and in the process if any income is received from a person other than the members it would not change the status of the assessee - in favour of assessee. Addition on account of membership contribution - CIT(A) deleted it - Held that:- As decided in assessee's own case for the assessment year 2006-07 on similar facts CIT(A) has deleted the addition made on account of membership subscription on the basis that the assessee is covered by the doctrine of mutuality - as doctrine of mutuality proved in favour of assessee addition need to be deleted - in favour of assessee. Interest earned on fixed deposits made out of subscription money received - CIT(A)treated it as income of the assessee - Held that:- As decided in assessee's own case for the assessment year 2006-07 the Tribunal held that the decision of CIT(A) in respect of treatment of interest income are contradictory. He had deleted interest income of Rs. 1,34,234/- on the basis of concept of mutuality but had upheld the addition of interest income of Rs. 247113/- and Rs. 23,506/- - thus following the same direct the AO to delete the addition on interest on fixed deposit made out of the subscription money received from subscribers - in favour of assessee.
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2012 (9) TMI 326
Treatment of TDS amount as actual income of the assessee company - Addition by applying 4% commission on debit and credit entries - the assessee did not conduct land development work for M/s. PACL India Ltd. and PGF Ltd. - CIT deleted the additions - Held that:- It is an established proposition of law that result of past years under similar facts is the best guidance for estimating the income, thus under these circumstances the CIT(A) was justified to take assistance of the immediately previous assessment year to estimate the profit of the assessee. There is no dispute that in the assessment year 2007-08 on identical issue arose wherein CIT(A) has deleted the addition made in respect of TDS amount and addition made on account of commission has been restricted to 2.24% of the gross receipt shown in the profit and loss account from M/s. PACL India Ltd. and others. As the revenue has not questioned the first appellate order for the assessment year 2007-08 on an identical issue under similar facts before the Tribunal, thus the CIT(A) has rightly deleted the addition made on account of TDS treating the amount claimed from M/s. PACL India Ltd. and PGF Ltd. as real income of assessee and in restricting the addition made on account of 4% commission on debit and credit entries regarding providing accommodation entries to the said companies to 2.24% of the gross receipt shown in the profit and loss account keeping in view the precedent of last assessment year 2007-08 under similar facts which remained unquestioned by the revenue - in favour of assessee.
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2012 (9) TMI 325
Penalty u/s 271(1)(c) - undisclosed income - Notices u/s 153A - Held that:- In case of a search initiated on or after 1.6.2007 as provided in Explanation 5A, the assessee will be liable for penalty/s 271(1)(c) both in respect of assets as well as any income based on any entry in any books of account or other documents or transactions. But no such provision relating to entries was in existence in Explanation 5 prior to insertion of Explanation 5A in section 271(1). Hence the scheme of assessment till insertion of Explanation 5A and section 271AAA by the Finance Act, 2007 gave immunity to the assessees in respect of undisclosed income based on entries recorded in seized material In the case of the assessee the search was conducted on 22.11.2006 and cash of Rs. 1,11,45,350/- was found from the possession of the assessee. The assessee had undisclosed commission income as well as purchases and sales as seen from the statement of affairs made by the assessee based on seized material. The assessee had drawn cash flow statement for the entire period of six years in order to determine undisclosed income based on seized material for each of six assessment years. Explanation 5 to section 271(1) of the Act cannot be invoked in assessment year 2004-05 merely on presumption that the assessee might have been in possession of cash throughout the period covered by search assessments. The income offered to tax u/s 153A for assessment year 2004-05 is based on entries recorded in the seized material. Unlike provisions of Explanation 5A, the provisions of Explanation 5 cannot be invoked in assessment year 2004-05 in respect of entries recorded in seized material - in favour of assessee.
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2012 (9) TMI 324
Addition u/s 40A(3) - cash purchases above Rs 20,000 - business of commission agency and trading of vegetables and foods - Held that:- CIT(A) has correctly held that the case of the assessee is not covered either under Rule 6DD(f) or Rule 6DD(k) of Income-tax Rules, 1962. Firstly, Rule 6DD(f) is applicable only in the cases when the payments are made in cash for the purchase of the agricultural produce directly to the cultivators, growers or producers of the agricultural produce, whereas in present case, appellant has made no such payments to the cultivators, growers or producers of the agricultural produce. Secondly, appellant has made final purchases from the Arhatiyas (commission agents / traders) and same cannot be treated as agents of the assessee firm within the meaning of Rule 6DD(k). Circular No. 34 dated 5.3.1970 makes it clear that the payment to Arhatiyas do not fall for exclusion under above sub clause. Thirdly, there is no material on record to show that there was exception or unavoidable circumstances for making payments in cash. Payments to same party were made by cheques and by cash also. Therefore, invoking the provisions of section 40A(3) of the Act was justified. On contention of assessee that authorities below have not doubted the genuineness of the payments made in cash it is held that those genuine and bonafide payments could not be taken out of purview of section 40A(3) after amendment of the Rules by the Finance Act, (1995) which was clarified vide Board's Circular No. 117 dated 14.8.1995 - Decided against assessee
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2012 (9) TMI 323
Best judgement assessment - rejection of books of accounts - trading addition made on ground of decrease in G.P. rate - cash payments made on account of purchase - self made vouchers maintained - purchase not fully verifiable as no stock register was maintained - Held that:- In view of facts, rejection of books of account were justified since certained purchases remain unverifiable. However, trading addition at Rs.1,79,919/- is on higher side. It is seen that AO has not asked the reason for decline in GP rate. Further, making payment in cash does not attract any trading addition if it is not found that purchases are inflated. It was explained before CIT(A) that turnover was pursistently decreasing & there was a stiff competion in the market as market was flooded with the cheap Chinese furniture, therefore, turnover as well as profit was on decreasing side. It is further seen that though assessee has made purchases from few parties in cash however Vat was paid and bills were received & payments has also been made by cheque. Explanation of the assessee can not be rejected in totto. In view of aforesaid and decreasing trend of the profit, trading addition of Rs.40,000/- is sustained that will meet the end of justice - Decided partly in favor of assessee
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2012 (9) TMI 322
Validity of reopening of assessment earlier framed u/s 143(3) after expiry of four years from the end of the relevant AY - assessment reopened on ground that amount surrendered on account of excess stock and excess cash is an unexplained investment in the stock and unexplained money and is deemed income of the assessee u/s 69 and 69A - assessee had claimed remuneration to the partners against the income surrendered by the assessee firm at the time of survey operation u/s 133A(1) - Held that:- At the very outset, it is observed that initiation of re-assessment proceedings was based on change of opinion of the AO which is not permissible in law. It is an admitted fact that the assessee has fully and truly disclosed all material facts necessary for assessment at the time of filing of return and also during the course of assessment proceedings and the assessment was completed u/s 143(3). It is well settled law that re-assessment proceedings cannot be initiated merely by fresh application of mind of the Assessing Officer to same set of information which is nothing but change of opinion, which is not permissible under the law. There was no material or information which had come to possession of Assessing Officer after completion of the original assessment to justify the reopening - Decided in favor of assessee
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2012 (9) TMI 321
Deemed Dividend - partnership concern constituted of two partners C & H - said C was also Director of M/s V having 23% share holding in the said company - addition made on premise that holdings of the partners of the erstwhile partnership concern were more than 10% and hence provisions of S2(22)(e) were applicable - Held that:- Where the conditions laid down in S2(22) with regard to minimum shareholding by the shareholders in the assessee company were not fulfilled, the shareholding of various different persons could not be clubbed to decide the issue of fulfillment of condition laid down in section 2(22)(e). Undoubtedly the assessee had business relations with M/s V and over and above the sales amount, the said company had given cheques to the assessee. The said transactions though were in the nature of advances or loans, but no shareholding was held by the assessee partnership concern in the Indian company and in the absence of the same, the provisions of section 2(22)(e) were not attracted, which comes into operation only when there is shareholding of more than 10% of voting power and there is interchange of funds for non-business purposes - Decided in favor of assessee.
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2012 (9) TMI 320
Deduction u/s 80IC - partial dis-allowance - assessee engaged in the business of steel fabrication and manufacturing of prefabricated structure, mainly supplied to the Defence and Paramilitary Organization - units at both Chandigarh and Baddi - profits of the Baddi unit claimed as deduction u/s 80IC - deduction claimed u/s 80IC restricted partially on account of three components - apportionment of administrative and general expenses in certain ratio between the Chandigarh unit and the Baddi unit - ineligibility of deduction u/s 80IC on ground of profit earned from civil works contract - Trading vs. Manufacturing activities Held that:- In view of the admission of the assessee during the assessment proceedings as evidenced by the recalculation of the allocation of the ratio between Baddi unit and Chandigarh unit, addition to the extent of Rs.4,03,445/- is upheld. Further allocation of Rs.2,02,213/- to the Baddi unit on account of exclusion of excise duty from the sales turnover of Chandigarh unit for computing percentage ratio is also upheld. Consequently, the deduction u/s 80IC being reduced to the extent of Rs.6,05,658/- is upheld. Profit earned from civil works contract - Admittedly, assessee is not entitled to deduction u/s 80IC on the profits arising on civil contract work carried out by the assessee. However, following the principles of natural justice, we remit this limited issue back to the file of the AO to determine the profits from work contract. Trading vs. Manufacturing activities - Held that:- Merit is found in the plea of the assessee that the assessee was engaged in the business of manufacturing of prefabricated sheets/cabins as per order received from the Ministry of Defence. The said items were being manufactured at the specification of the customers and certain items were not manufactured by it, but were put together for supply the complete unit, i.e. certain paints were bought and supplied alongwith manufactured items, final coat of paints was not put on the sheds as the said items were being transported for a long distance and only on being erected the paints were put by the army itself and the said items were not sold by the assessee, but were part of the contract deal of supply of the manufactured items. Therefore, it is held that assessee is entitled to benefit of claim of deduction on the said bought out items and there is no need to rework the deduction u/s 80IC Dis-allowance u/s 40(a)(ia) - non-deduction of tax at source from payment of erection charges - Held that:- In case amount has been paid as on the close of the year, no disallowance is warranted u/s 40 a(ia) in view of the ratio laid down in case of ACIT V. Merilyn Shipping & Transports (2012 (4) TMI 290 - ITAT VISAKHAPATNAM). However, in case the said payment has been made after the close of the year then the said amount is dis-allowable. Further, where the amount is disallowed, the said is added back to the profits of the business and the assessee is entitled to the claim of deduction u/s 80IC on the said profits being eligible profits for claiming the said deduction. Matter remitted back to file of AO for requisite verification
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2012 (9) TMI 319
Registration u/s 12AA - rejected on invocation of Section 13(1)(ii) and lifelong membership of the trustees and assessee being both society and Trust - assessee Trust running a school - Held that:- CIT while granting registration U/S 12AA has to look into the objects of the Trust and whether the Trust is carrying on the said objects of the Trust. See Surya Educational & Charitable Trust(2011 (10) TMI 47 - PUNJAB AND HARYANA HIGH COURT). Objects of the present assessee Trust were in the line of Education and the assessee was running both school and college. Once a Trust is engaged in the activities of providing Education by way of setting up school and college, which is one of the recognized object of charitable activity and no evidence having being brought on record, that the said activities of the Trust were not genuine, the said Trust is entitled to Registration u/s 12AA. The satisfaction of conditions of Sec. 11 to 13 is to be gone into by AO, while determining the income of Trust at the time of assessment and not to be gone into by CIT, while granting registration U/s 12AA. On objection that assessee is both Trust and society is recognized system and once it is registered as Trust, provision of election are not applicable to Trusts. The next objection that Trustee and their successor were lifelong member and hence activities of trust being not genuine are not correct, it is held that Rule against perpetuity is not applicable in case of Public charitable Trust, as per section 18 of Transfer of Property Act. CIT directed to grant Registration U/S 12AA - Decided in favor of assessee
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2012 (9) TMI 318
Deduction u/s 80IC - dis-allowance - manufacturing of foundation anchor rods for windmills on its own behalf and on behalf of the third party - dis-allowance - Held that:- Issue stands covered by the order of the Tribunal in assessee's own case relating to AY 2005-06 wherein it was held that activity carried on by the assessee amounts to manufacture and the profits earned by the assessee from carrying on the manufacturing activity are eligible for the deduction u/s 80IC Addition made on account of technical knowhow charges taking the same as income of the assessee from undisclosed sources, not eligible for deduction u/s 80IC - Held that:- Issue raised in the present appeal is identical to the issue raised in the earlier years and following the same it is held that bifurcation in the income from business and income from undisclosed sources has been carried out by the AO only on presumptions, which have no basis. No merit in the said estimation of income from undisclosed sources. Deduction u/s 80IC is allowed - Decided in favor of assessee
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2012 (9) TMI 317
Exemption u/s 54EC - dis-allowance - LTCG on sale of properties - sale consideration deposited in Bank out of which FDR was purchased and some money was given loan to certain persons - later REC bonds purchased - this sum according to the AO had been received by way of transfer from another bank account of the assessee - dis-allowance on ground that investment in purchase of REC bonds were not out of capital gain - Held that:- Only requirement u/s 54EC is that investment in specified assets should have been made within a period of six months from the date of transfer of such capital asset. This condition has been complied by the assessee and there is no further condition that the funds should be given out of capital gain. Otherwise also once money is deposited in the bank account it gets merged with other funds of the assessee and it is impossible to locate which funds have been used for purchase of specified assets because the normal businessman would keep on doing various transactions in the bank account. Deduction allowed - Decided in favor of assessee
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2012 (9) TMI 316
Interest paid for acquisition of capital assets for existing business or expansion of business - violation of section 36(1)(iii) - addition - Held that:- Since the acquisition of land is of capital nature and therefore, interest paid for borrowings for the purpose of purchasing of such land is not allowable. As far as other items are concerned, it was stated that no business purpose is there. Order of CIT(A) upheld confirming addition on account of interest dis-allowance - Decided against assessee Addition u/s 40(a)(ia) - non-deduction of tax at source from amount paid as repair and maintenance - Held that:- Since the payments have already been paid, provisions of section 40(a)(ia) are not applicable. Addition is directed to be deleted. See ACIT V. Merilyn Shipping & Transports (2012 (4) TMI 290 - ITAT VISAKHAPATNAM) - Decided in favor of assessee
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2012 (9) TMI 315
Long term capital gain - dispute regarding computation of fair market value (fmv)as on 01.04.1981 - assessee contending rate of Rs.50/- per sq. ft against Rs.36/- per sq. ft adopted by Revenue - Held that:- Adoption of the rate by the AO and subsequent reduction of the same by the CIT(A), cannot be sustained, in view of the relevant documentary evidence filed by the assessee in the form of report from the registered valuer and a comparable case. Therefore, impugned rate shown by the assessee is founded, on relevant documentary evidence - Decided in favor of assessee Non-consideration of cost of improvement in building in AY 88-89 and 89-90 - Revenue contended non-furnishing of evidence by assessee in support of same - Held that:- Assessee merely referred to certain pages of the diary, which cannot be construed as credible and reliable evidence. The submission made by the assessee is not plausible and in the absence of cogent and corroborative evidences, the same cannot be accepted. Needless to say that the onus to prove the incurring of expenditure, on renovation squarely lies on the assessee and the assessee has miserably failed, to prove the factum of incurring of the expenses - Decided against assessee Addition u/s 68 - Cash deposits in bank accounts - Held that:- From records it is evident that deposit has been made from the withdrawals made from the banks. Therefore, CIT(A) rightly deleted the addition made on this ground - Decided in favor of assessee.
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2012 (9) TMI 314
DTAA between India & UAE assessee (UAE company) engaged in the business of shipping operations of running feeder line between India and Dubai taxability of slot hire charges assesse contended non-taxability in view of Advance Ruling (AAR) in the appellants own case - Held that:- The assessee's main contention that its case is covered by AAR ruling, has not been analyzed at all. In impugned AAR ruling there is a categorical averment that income derived by the assessee by operations of ships in international traffic would be governed by Article 8 of the DTAA. It is evident that the assessee's submissions and objections have been brushed aside without giving any proper reasons and sufficient consideration. This casual attitude of the DRP leads to harassment of the assessee and drag them to protracted litigation In view of aforesaid, order is set aside and matter remitted to the file of the DRP to consider the objections of the assessee and pass a proper and speaking order giving direction u/s 144C Decided in favor of assessee for statistical purposes.
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Customs
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2012 (9) TMI 349
Petition for contempt - impugned seizure and detention order quashed - deliberate and willful non-compliance and violation of order non release the truck and the betel nuts loaded - Held that:- From the scheme of the procedure of the seizure, investigation and confiscation it is quite apparent that there is no scope for continuance of the investigation after the seizure and detention of the goods had been quashed by the court of law after considering the merits or otherwise of the claim of the respective parties based on their pleadings and materials. Hence the plea raised on behalf of the opposite parties with respect to investigation and confiscation is absolutely frivolous and ridiculous, to say the least, and had obviously been raised by their counsel merely to save them from the punishment of contempt, which they have clearly committed and continued committing it merely to punish the petitioner for his fault of approaching this Court. As clear from the records that till date the opposite parties are giving effect to the show cause notice dated 18.11.2011 and are not releasing the goods, which is in direct confrontation with the judicial order of this Court dated 14.11.2011 passed which remained in force at least till 25.04.2012 when order of stay was passed in L.P.A. No. 131 of 2012 i.e. for more than five months, although the direction was for immediate release of goods. However, in any view of the matter order of the Assistant Commissioner, Customs dated 18.11.2011 was clearly in the teeth of and in violation of the said order dated 14.11.2011 passed by this Court. Thus Court has no option but to hold the the Assistant/Deputy Commissioner, Customs (Prevention) Division, Forbisganj, District Kishanganj contemner guilty of contempt and punish him with simple imprisonment of three months, which must start within 30 days from the date of passing of this order and also with fine of Rs.2,000.00 which must be paid within 30 days from date of this order in favour of Patna High Court Legal Aid Society as he has orchestrated the things and misconstrued the provisions of law to the detriment of the petitioner merely with the purpose to overreach the order of this Court dated 14.11.2011 passed in C.W.J.C. No. 12197 of 2011 - in favour of assessee.
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2012 (9) TMI 347
Drawback claim - conversion of shipping bill from DEPB scheme to Duty Drawback Scheme - Assistant Commissioner, rejected the claim of the petitioner treating the same as a claim for conversion from DEPB scheme to draw back scheme, on the ground that the petitioners claim for DEPB scheme has not been denied, which is a condition precedent for conversion of the claim under the DEPB scheme to one under the Drawback scheme Held that:- Power to consider the claim under the proviso to Rule 12 is squarely on the Commissioner of Customs. As such, the Assistant Commissioner of Customs was bound to place the matter before the Commissioner of Customs for an order under the proviso to Rule 12(1) of the Drawback Rules - Assistant Commissioner had not done that - 3rd respondent directed to consider the claim of the petitioner for benefits under the drawback scheme by exercising his discretion under the proviso to Rule 12(1)
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2012 (9) TMI 313
Rent or demurrage charges on goods detained or confiscated - goods not kept in Bonded warehouse - Held that:- As the assessee were advised to shift the goods to bonded warehouse and in compliance to it he approached the bonded warehouse but as there was no space in the bonded warehouse, same was intimated to the department - as per Notification No.26/09-Cus. (N.T.) dt. 17.3.2009 clearly explicit that if the goods are seized or detained by the proper officer, the assessee shall not be charged with any rent or demurrage on the goods. Therefore, the first appellate authority has rightly held in the impugned order that respondents are not liable to pay detention and demurrage charges - in favour of assessee.
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2012 (9) TMI 312
Penalty - respondents sought to file the bills of entry after a lapse of more than thirty days from the date of unloading of the imported goods Held that:- Section 48 stipulates that, if the imported goods are not cleared for home consumption or warehoused or transshipped within 30 days from the date of unloading thereof at a customs station or within such other and with the permission of the proper officer he sold by the custodian. Thus, Section 48 of the Customs Act empowers the proper officer either to grant further time for clearance of imported goods or to permit the custodian to sell off such goods. The Section does not contain any penal consequences in the event a bill of entry is not filed or goods are not cleared within the time stipulated - appeal filed by the Revenue dismissed
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2012 (9) TMI 311
Refund - burden of proof Held that:- Where a person claims refund of fine or penalty, there can be no presumption that he has passed on this incidence to any other person - If the department seeks to deny cash refund to such a person on the ground of unjust enrichment, the burden is on them to show that the incidence of fine/penalty has been passed on by the claimant to any other person - refund is not hit by the bar of unjust enrichment In favor of assessee
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Corporate Laws
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2012 (9) TMI 346
Winding-up petition on arrears of rent - Whether the provisions of Order 2 Rule 2 of the Code of Civil Procedure (CPC) would have any impact on a proceeding u/s 433, 434 and 439 of the Companies Act, 1956 - Held that:- Appellant herein as landlord filed a suit for eviction against the respondent company on the ground of default in making payment of the rents and also on grounds of reasonable requirement, in the City Civil Court at Calcutta, under the provisions of the West Bengal Premises Tenancy Act, 1956. The proceedings under Section 439 not being a suit, but a Petition, the provisions of Order 2 Rule 2 CPC would not be attracted since the bar indicated therein is with regard to suits - Order 2 CPC deals with the frame of suits and the various rules contained therein also refer to suits for obtaining the reliefs of a civil nature and on the other hand, a proceeding under Sections 433, 434 and 439 of the Companies Act, 1956, is not a suit, but a Petition which does not attract the provisions of Order 2 Rule 2 CPC, which deals with suits. Petitioner has submitted that the West Bengal Premises Tenancy Act, 1956, does not make any provision for recovery of arrear rents and provision has only been made under the provisions of Section 17 for deposit of the arrear rents which are admitted by the tenant at the time of entering appearance and filing Written Statement in the suit for eviction. Provision has also been made for payment of such arrears in instalments, but there is no provision for recovery of the arrear rents for which a separate suit has to be filed, as has been indicated by the Division Bench of the Calcutta High Court. Set aside the findings of the learned Single Judge in regard to the application of the provisions of Order 2 Rule 2 CPC to a winding-up proceeding under the Companies Act that may be filed for recovery of the dues payable by the Respondent-tenant to the Appellant-landlord. We are, however, ad idem with the Division Bench that the relief of the Appellant-landlord, if any, in this case, will not lie in a winding-up petition, but in a suit filed for the said purpose, particularly when the said relief is not available under the rent laws which only deal with protection of tenants from eviction and the right of the landlords to recover the tenanted premises on the grounds specified therein.
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2012 (9) TMI 310
Winding up of company - dispute on tenancy rights - Wacoma a company claiming to be a tenant of the self-same bungalow as against Incandescent's who went into liqudation - At one point of time Wacoma was Incandescent's subsidiary but subsequently the companies became independent of each other - Held that:- Incandescent was a tenant in respect of the property under Tivoli Park, since 1970. Admittedly, there was no evidence that the tenancy was terminated at any point of time - Unless the tenancy is terminated, it would continue to remain. If a tenant defaults in making payment of rent, the tenancy does not automatically come to an end. It would depend upon a positive consequential act of the parties. The landlord may give notice to quit. The tenant may accept such notice and quit the tenancy. If he does not do so, the landlord has to approach a Civil Court for a decree of eviction and recovery of possession. In the instant case, Incandescent was paying rent. At one point of time Wacoma was its subsidiary. Subsequently the companies became independent of each other Incandescent had gone in liquidation in September 2002. There was evidence on record to show that Incandescent paid rent even in August 2002. Wacoma claimed tenancy since April 2002, on the strength of the receipts, thus there could not be two tenancies in respect of one self-same premises. Incandescent paid rent even in August 2002 that would automatically demolish the case of Wacoma, having entered into agreement for tenancy in March, 2002. Pertinent to note, Wacoma could not produce any document except the receipts to prove their tenancy - in absence of a surrender of tenancy by Incandescent there could not be any new tenancy created in favour of Wacoma - Incandescent paid rent up to August 2002 and as it went in liquidation in September 2002. Hence, the case made out by Wacoma that they got the tenancy under Tivoli through Sutodia in March, 2002, falls to the ground. The company in liquidation admittedly does not own the property Tivoli cannot be forced either to sell or let it out to Wacoma as Court cannot create tenancy without the consent of the landlord.
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Service Tax
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2012 (9) TMI 378
Service tax liability under Business Auxiliary Service - penalty u/s 76, 77, & 78 - assessee contested that no liability at all because no Business Auxiliary service was provided by the assessee - Held that:- It can be fairly concluded from the activities carried out by the assessee that the assessee provided Business Auxiliary service in promoting market for its principal therefore, service tax element is confirmed. No scope to grant relief of penalty under Section 77 - Penalty u/s 76 is set aside by Commissioner (Appeals) - penalty under Section 78 is concerned, looking to the controversy involved penalty should be limited to 25% of service tax element payable by the assessee within 30 days of receipt of communication from adjudicating authority on re-computation.
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2012 (9) TMI 377
Consulting Engineer Service - Short payment of service tax - assessee contested to consider the service as Intellectual Property Right Service - Held that:- Considering reply to the show cause notice the appellants submitted that they had paid R & D Cess and what was received by them was Intellectual Property Rights Service. Obviously there was a mistake on the part of the appellants in showing the classification of service in the return wrongly but it cannot be said that they treated the service as consulting engineering service in view of the fact that they had paid R & D Cess in September 09 itself i.e. before filing the return for the period ending 30.09.09 as evident from challans submitted. As the Commissioner (Appeals) would have examined the contract, nature of service received and give reasons as to why the service cannot be classified as Intellectual Property Right Service matter is required to be remanded to the Commissioner (Appeals) to pass a well reasoned order - orders for waiver of predeposits.
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2012 (9) TMI 376
CENVAT credit - input services - activities related to initial public offer Held that:- Services availed in connection with floating initial public offer and the allied business activities would fall within inclusive part of the definition of input service under Rule 2(1) - waiver of pre-deposit granted
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2012 (9) TMI 375
Demand - Interior Decorators Held that:- Assessee engaged in making wooden furniture as per design and drawing supplied by their customer and also undertook civil work, painting work, plumbing work and electrical work - Their activity will not come under the category of interior decorator as it is apparent on record that the assessees in question are engaged in the activity of execution of work of the design and drawing supplied to them by their clients for civil work, sanitation work plumbing work, electrical work and wooden furniture. Matter remanded back for re-adjudication.
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2012 (9) TMI 339
Non registration under maintenance and repairing service under Clause:(zzg) and erection, commissioning and installation service under Clause:(zzd) - Revenue appeal against non imposition of penalty - Held that:- As the Appellant could not take the registration and pay the Service Tax under bona fide belief that due to changes introduced in the above-mentioned services from time to time and on being pointed out, they obtained the Service Tax Registration and paid the dues - As they also paid the Service Tax from their own pocket on not receiving anything from their clients there was no intention on their part not to pay the Service Tax within time - as the cause explained by the Appellant not to follow the provisions of the Finance Act, 1994 is reasonable no penalty u/s 76 is levied in view of the provisions of Section 80 - in favour of assessee.
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2012 (9) TMI 338
Short payment of service tax - penalty u/s 70 & 76 - Held that:- As the appellants are not contesting the levy of Service Tax nor imposition of penalty under section 70 for delay in filing of ST-3 return but contested only against levy of penalty u/s 76 need to be set aside as the applicant could not pay the Service Tax due to reasonable belief that since their value of taxable service is Rs.8 lakhs therefore there was a reasonable cause for failure to pay Service Tax which they have already paid.
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2012 (9) TMI 337
Extended period of limitation clearing and forwarding agent - 16-7-1997 to 31-8-1999 - Held that:- Show cause notice under the provisions of Section 65, 66 and 67 of the Finance Act, 1994 was issued on 2-7-2002 after a period of about three years - no omission or failure on the part of the assessee to make return under Section 70 of the Finance Act, 1994 for any prescribed period or to disclose wholly and truly all material facts necessary for assessment for any prescribed period and the value of taxable service for that prescribed period has escaped assessment or has been under assessed - case of the assessee comes within the definition of bona fide doubt and in that event, the extended period as provided under Section 73 of the Finance Act, 1994 would not be applicable - appeal is dismissed.
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2012 (9) TMI 336
Penalties under Sections 76 and 77 - appellant had paid service tax promptly as soon as the omission was pointed out - appellants were under the impression that they were not required to pay interest and after paying service tax they had intimated the department on 19-12-2008. However no reply to this letter was received and the department initiated proceedings by issuing show cause notice on 12-7-2009 and even though the appellant paid the interest as soon as the show cause notice was issued - CBEC has also issued a letter dated 3-10-2007 wherein the field offices have been directed not to commence proceedings where the assessee discharges full amount of service tax and interest Penalty under Section 78 Held that:- Where there was no need for the appellants to resort to suppression or mis-declaration since whatever service tax was to be paid, they were eligible for the credit - By evading the payment of service tax, the appellant stands to lose rather than getting any undue benefit. By delaying payment of service tax, the assessee had to pay interest on the amount which is not available as cenvat credit - in this case, suppression of fact or mis-declaration could not have been invoked for imposition of penalty under Section 78 of the Finance Act, 1994 - there is no other evidence to justify imposition of penalty - appeal is allowed
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Central Excise
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2012 (9) TMI 348
EOU Unit - Denial of benefit of Notification No. 23/2003-C.E Exemption from payment of SAD - Held that:- Notification No. 23/2003-C.E. grants exemption from payment of SAD on the condition that if the goods are cleared into DTA are not exempted by the State Government from the payment of Sales Tax - appellants cleared the goods by availing the benefit of Notification issued by the State Government, therefore, appellants are not entitled for the benefit of Notification No. 23/2003-C.E. Appeals are dismissed
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2012 (9) TMI 345
Denial of rebate claim - Held that:- As in terms of Notification No. 05/2006-CE(NT) dated 14.3.2006 where non-adherence input/output norms have been brought out the authority examined that there was failure to fulfil the condition of notification. The appellant also could not prove whether Cenvat credit was availed or not and the claim application was also found to be blank in some respect, thus all the factors which negated the claim - against assessee.
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2012 (9) TMI 344
Clarifications on the petitioner's representations - writ of Mandamus - Power of CBEC to issue clarification u/s 37B on demand with respect to levy of duties of excise on such goods - Held that:- The relief prayed for by the petitioner cannot be granted, as the petitioner has not been in a position to show that they have a right to demand the issuance of the clarifications, as prayed for in its vaan representations, dated 12.01.2012, 14.04.2012 and 25.04.2012, and that there is a concomitant obligation on the part of the respondent to issue such clarifications - Writ dismissed.
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2012 (9) TMI 343
Delay of 39 days in filing - Held that:- On considering the assessee's submission there is no proper explanation given for condonation of delay that the factory of the appellant is closed since November, 2006 and therefore Director of the appellant lives at its native place at Rohtak, Haryana who came to know about the receipt of Order-in-Appeal though RTI from family members only on 1st week of December when he visited his family member and then immediately arranged for drafting and filing of the appeal but by that time, there was already a delay of 39 days in filing the appeal. Appellant has not made out a case for condonation of delay in filing the appeals before the Tribunal.
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2012 (9) TMI 342
Export of goods Drawback claim Denial of drawback claim is based on test report retest of remnant samples - Held that:- Denial of drawback claim on the basis of first test report cannot be held to be legal and proper - Department has not been able to produce any other evidence confirming misclassification of goods - in the absence of retest of remnant samples as the remnant samples were not available - original authority directed to sanction the drawback claims
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2012 (9) TMI 341
Classification - manufacture of Potato wafers Held that:- Rings made out flour of rice, wheat and potato; the dry pellets are obtained by the respondent from M/s. TTK Pharma Ltd - dry pellets are fried and after adding salt and flavours, the same are packed in unit containers for sale - Since the goods, in question, are snacks (Namkeens), the same are covered by serial No. 3 of the table of Notification No. 4/97-C.E., dated 1-3-1997 and hence the benefit of duty exemption has been rightly extended - Revenues appeal is dismissed.
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2012 (9) TMI 340
Extended period of limitation - conversion of rejected materials into granules - suppression Held that:- reprocessing of rejected goods if yielded only scrap, process would amount to manufacture and the scrap is removable on payment of duty. Necessary intimations were given by the appellant on 4-2-2002 and subsequently there were correspondences with the Revenue, which prove that the facts were not suppressed by the appellant from the department In favor of assessee
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2012 (9) TMI 309
Cenvat Credit on inputs used in manufacture of exempted final products - Low Sulphur Heavy Stock (LSHC) used as fuel in the generation of steam which was in turn used in the manufacture of exempted fertilizer - the assessee contested that exclusion of fuel-inputs from the purview of sub-rule (2) of Rule 6 would mean that such inputs are also automatically excluded from sub-rule (1) - Held that:- Sub-rule (1) is plenary and it restates a principle, namely, that CENVAT credit for duty paid on inputs used in the manufacture of exempted final products is not allowable, thus sub-rule (1) is plenary, hence, it cannot be said that because sub-rule (2) is inapplicable to fuel-input(s), CENVAT credit is automatically available to such inputs even if they are used in the manufacture of exempted goods. The cumulative reading of sub-rules (1) and (2) makes it abundantly clear that the circumstances specified in sub-rule (2), which inter alia requires separate accounting of inputs, are not applicable to the fuel-input(s). However, the said sub-rule (2) nowhere says that the legal effect of sub-rule (1) will stand terminated in respect of fuel-inputs which do not fall in sub-rule (2). Therefore, sub-rule (1) shall apply in respect of goods used as fuel and on such application, the credit will not be permissible on such quantity of fuel which is used in the manufacture of exempted goods. In view of the fact that fuel was used for generation of steam or electricity and these are not final products but intermediate products, the restrictions are not applicable and they are covered by the phrase for any other purpose. The Hon ble Supreme Court has taken the view that if the fuel is used for the manufacture of non dutiable final product, credit is not eligible. It may be seen that the Tribunal had not considered the provisions of Rule 6 and had also not considered the fact that Rule 6(1) is the plenary rule. The decision of the Apex Court in the GNFC [2009 (8) TMI 15 - SUPREME COURT] was rendered on 17.08.09 whereas the decision in the assessee's own case was rendered on 16.07.08. Not only the decision of the Apex Court in GNFC was subsequent to the decision in the assessee's own case but also in the case of GNFC, Apex Court had considered the relevant provisions of the law, applied them to the facts which are similar to the case of GSFC and came to the conclusion and therefore the ratio decidendi in that case would be definitely applicable to the present case.
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2012 (9) TMI 308
Condonation the delay in filing the appeal - Held that:- As there is no power vested in the appellate authority to condone the delay of over six months in preferring the appeal, the appeal made by the assessee is hereby dismissed considering delay of 525 days in filing the present appeal - against assessee.
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2012 (9) TMI 307
Maintainability of appeal Held that:- National Litigation Policy was also published on 20-10-2010 giving instructions not to file an appeal to the High Court where the subject matter of the appeal is Rs. 2 lakhs and below - appeal is dismissed.
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2012 (9) TMI 306
Rebate claim rejection of claim for non-endorsement of the name of the merchant exporter in the CT-I Certificate, non-execution of bond on behalf of merchant exporter Held that:- ARE-1 contains the names of manufacturer as well as merchant exporter and the Central Excise Invoice No., Mark & No. of the packages of goods - no dispute about the actual export of the goods - procedural infractions of notifications/circulars should be condoned if exports have really taken place and the law is settled that substantive benefit cannot be denied for procedural lapses - original authority is directed to accept the proof of export by ignoring the said procedural lapses rebate claim allowed
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2012 (9) TMI 305
Refund export of goods applicant a EHTP Unit which exported certain consignments on payment of duty and filed rebate claims which were rejected by the lower authorities that as the applicant being EHTP Unit, a export oriented undertaking, are not required to pay duty as per provisions of Section 5A(1) of Central Excise Act Held that:- Government cannot retain the amount collected without authority. Applicant has also requested that at least the Cenvat credit may be allowed to be recredited in their cenvat account - amount so paid by the applicant is to be treated as voluntary deposit with department and same is to be returned the way it was initially paid - Government directs that the said excess paid amount may be allowed to be recredited in their Cenvat Credit Account
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Indian Laws
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2012 (9) TMI 374
Disclosure to the Media was by SEBI in breach of confidentiality - Directions with regard to reporting of matters (in electronic and print media) which are sub judice - whether Postponement orders constitute restriction under Article 19(1)(a) and whether such restriction is saved under Article 19(2)? - Held that:- Anyone, be he an accused or an aggrieved person, who genuinely apprehends on the basis of the content of the publication and its effect, an infringement of his/ her rights under Article 21 to a fair trial and all that it comprehends, would be entitled to approach an appropriate writ court and seek an order of postponement of the offending publication/ broadcast or postponement of reporting of certain phases of the trial (including identity of the victim or the witness or the complainant), and that the court may grant such preventive relief, on a balancing of the right to a fair trial and Article 19(1)(a) rights, bearing in mind the principles of necessity and proportionality and keeping in mind that such orders of postponement should be for short duration and should be applied only in cases of real and substantial risk of prejudice to the proper administration of justice or to the fairness of trial. Such neutralizing device (balancing test) would not be an unreasonable restriction and on the contrary would fall within the proper constitutional framework. Exhaustively referring to the contents of the IAs filed by Sahara and SEBI the right to negotiate and settle in confidence is a right of a citizen and has been equated to a right of the accused to defend himself in a criminal trial. In this case, Sahara has complained to this Court on the basis of breach of confidentiality by the Media. In the circumstances, it cannot be contended that there was no lis. Sahara, therefore, contended that this Court should frame guidelines or give directions which are advisory or self-regulatory whereas SEBI contended that the guidelines/directions should be given by this Court which do not have to be coercive. In the circumstances, constitutional adjudication on the above points was required and it cannot be said that there was no lis between the parties. As right to freedom of expression under the First Amendment in US is absolute which is not so under Indian Constitution in view of such right getting restricted by the test of reasonableness and in view of the Heads of Restrictions under Article 19(2). Thus, the clash model is more suitable to American Constitution rather than Indian or Canadian jurisprudence, since First Amendment has no equivalent of Article 19(2) or Section 1 of the Canadian Charter.In this case, this Court is only declaring under Article 141, the constitutional limitations on free speech under Article 19(1)(a), in the context of Article 21. The exercise undertaken by this Court is an exercise of exposition of constitutional limitations under Article 141 read with Article 129/Article 215. When the content of rights is considered by this Court, the Court has also to consider the enforcement of the rights as well as the remedies available for such enforcement. In the circumstances, we have expounded the constitutional limitations on free speech under Article 19(1)(a) in the context of Article 21 and under Article 141 read with Article 129/Article 215 which preserves the inherent jurisdiction of the Courts of Record in relation to contempt law - what constitutes an offending publication would depend on the decision of the court on case to case basis. Hence, guidelines on reporting cannot be framed across the Board.
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