TMI Tax Updates - e-Newsletter
September 18, 2012

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws Service Tax Central Excise

Articles

1. BUNDLED SERVICES.

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Auction for Sale of Government Stocks.

Notifications

Customs

1. 83/2012 - dated 17-9-2012 - Cus (NT)

Making E-payment of Customs duty mandatory.

2. 82/2012 - dated 14-9-2012 - Cus (NT)

Amends Notification No. 62/1994-Custom (N. T.) - Customs ports — Appointment for specified purposes.

3. 81/2012 - dated 14-9-2012 - Cus (NT)

Amends Notification No. 36/2001-Customs (N. T.) dated the 3rd August, 2001.

Circulars / Instructions / Orders

Central Excise

1. F.No.354 /135/2012-TRU - dated 10-9-2012

Cenvat credit of basic excise duty for payment of NCCD.

Highlights / Catch Notes

Income Tax

• Loan Forgiveness for Capital Asset Purchase Not Taxable as Income u/s 41(1) of Income Tax Act.

  Case-Laws - HC : Taxation on cessation of liability to repay a loan - the cessation of liability to repay a loan taken to purchase a capital asset does not result in a revenue receipt. - no addition u/s 41(1) - HC
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• High Court Allows Bank's Claim for Bad Debt Write-Offs in Ordinary Business Operations.

  Case-Laws - HC : As the assessee carried on business of banking and the amounts being written off as bad debts was the money lent in the ordinary course of its business. - claim of bad debt allowed - HC
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• Set-off loss on derivative trading isn't speculative loss due to Stock Exchange procedural delays.

  Case-Laws - AT : Disallowance of set-off loss on derivative trading - can not be held as loss from speculation business, simply because procedural mechanism has taken a long time to recognize the Stock Exchange - AT
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• Procedural Rules Are Retrospective: No New Rights or Obligations Created, Focus on Mechanisms Only.

  Case-Laws - AT : When a rule or provision does not effect or empower any right or create an obligation but merely relates to procedural mechanism, then it is deemed to be retrospective - AT
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• Tax Authorities Cannot Disregard Consistently Used Accounting Method Chosen by Taxpayer Without Justifiable Reason.

  Case-Laws - HC : Method of accounting adopted by the taxpayer consistently and regularly cannot be discarded by the Departmental authorities on the view that he should have adopted a different method of keeping accounts or of valuation - HC
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• Loss from Selling Non-Convertible Debentures Not Part of Acquisition Cost for Convertible Debentures, Court Rules.

  Case-Laws - HC : Loss on the sale of debentures - non-convertible Part B of the 15% redeemable partly convertible debentures - the loss suffered could not be construed to be a part of the cost of acquisition of convertible Part A of the PCD retained by the appellant - HC
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• High Court Admits Review Petition on Appellant's Business Connection in India Regarding Permanent Establishment (PE) Case.

  Case-Laws - HC : Review petition - Business connection of the appellant in India / PE - questions recorded against the appellant may cause prejudice to the appellant. - Review Petitions admitted - HC
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• Penalty u/s 271(1)(c) Deemed Inappropriate for Surrender of Additional Income; No Concealment Found.

  Case-Laws - AT : Penalty u/s. 271(1)(c) - it is not a fit case for levy of penalty u/s. 271(1)(c) on the surrender of additional income - AT
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• Court Debates if Share Sale Profits are Business Income or Capital Gains; Volume of Trades Not Decisive.

  Case-Laws - AT : Profit on sale of shares/mutual funds - Business income OR income from capital gain - mere volume of transactions transacted by the assessee would not alter the nature of transactions. - AT
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• No Penalty u/s 271(1)(c) for Deemed Dividend: No Intent to Conceal or Furnish Inaccurate Income Details.

  Case-Laws - AT : Penalty u/s 271(1)(c) - addition to deemed dividend - No intention of either furnishing inaccurate particulars of income or concealment of any particulars of income is, therefore, manifest. - no penalty - AT
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• No Time Limit in Section 158BD, But Equity Demands Timely Proceedings to Avoid Prolonged Uncertainty for Taxpayers.

  Case-Laws - AT : Though, the Act does not lay down any time limit for initiating proceedings u/s.158BD yet, equity demands that proceedings should not be kept pending indefinitely and the Sword of Damocles be kept hanging over the head of the taxpayer for an indefinite period - AT
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• Capital Gains Tax: Inherited Property's Acquisition Cost Based on Ancestor's Original Purchase Price, Not Inheritance Date.

  Case-Laws - HC : Capital Gain - computation - inheritance - the cost of acquisition must be determined to be the cost at which the respondent's grandfather / father acquired the property and not the date on which the respondent acquired it. - HC
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• Deduction Allowed for Prior Period Interest Liability Expenses Once Crystallized in Current Year.

  Case-Laws - AT : Prior period expense - Interest liability - Whether liability of earlier years has been crystallized in this year – Deduction allowed - AT
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• High Court Affirms Section 132: No Seizure of Business Stock-in-Trade in Searches Post-June 1, 2003.

  Case-Laws - HC : Initiation of search and seizure u/s 132 - stock-in-trade of business cannot be seized during search and seizure operations conducted on or after June 1, 2003 - HC
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• Tax Notices Error: Incorrect Status on Sections 143(2) and 142(1) Notices Doesn't Invalidate Assessment, Rules Commissioner.

  Case-Laws - AT : Notices u/s 143(2)/142(1) - status of assessee mentioned wrongly - The defect in issuance of notice and assessment noted by the CIT(A) was not fatal so as to render the assessment null and void. - AT
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• No Incriminating Evidence Found: Assessee Cleared in Truck Business Case u/s 44AE of Income Tax Act.

  Case-Laws - AT : Business of plying of trucks - computation u/s 44AE - Assessee has sold 7 and acquired 4 - allegation of benami ownership of trucks - no incriminating evidence were found - in favor of assessee - AT
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• High Court Upholds Denial of Section 80G Registration for Non-Charitable Objectives; Revenue Department to Pay Costs.

  Case-Laws - HC : Refusal to extend/continuance of Registration under Section 80G – main object should be charitable activity and not maintenance of accounts - revenue to pay cost of Rs. 25000/- - HC
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Customs

• Electronic Payment Now Mandatory for Customs Duties to Boost Efficiency and Transparency in Transactions.

  Notifications : Making E-payment of Customs duty mandatory. - Notification
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• Amendment to Notification No. 62/1994-Customs: Updates on Customs Ports Appointment for Specific Functions.

  Notifications : Amends Notification No. 62/1994-Custom (N. T.) - Customs ports - Appointment for specified purposes. - Notification
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• Customs Notification 36/2001 Amended: Key Updates to Regulations for Compliance with Current Practices.

  Notifications : Amends Notification No. 36/2001-Customs (N. T.) dated the 3rd August, 2001. - Notification
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• Refund Claim Denied Due to Processing Delay; Respondent Entitled to Interest on Delayed Amount.

  Case-Laws - HC : Disallowance of claim for refund – there is delay in making the refund of the amount - respondent would be entitled to interest - HC
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• Importer Wins Case: Price Lists Deemed Quotations, Not Reflective of Actual Transaction Value for Customs Purposes.

  Case-Laws - AT : Enhancement of transaction value - price list reflects the retail sale price of the items in the domestic market - price lists are merely the quotation of the prices has no reflection on the transaction value – in favor of importer - AT
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Corporate Law

• Court Rules Section 397 Proceedings Non-Withdrawable, Cannot Be Treated Like Civil Suits Under Companies Act.

  Case-Laws - HC : Application for withdrawal of the proceedings - That a proceeding under Section 397 of companies act could not be equated with a civil suit - not allowed to be withdrawn - HC
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Service Tax

• Appellate Authority Must Consider Submissions from Personal Hearings if No Reply Filed Initially in Installation Service Cases.

  Case-Laws - AT : Erection, installation and commissioning - if there is no reply filed before adjudicating authority, those submissions made before the appellate authority at the time of personal hearing should have been appreciated in a proper perspective - AT
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• Appellant's Admission of Tax Liability Bars Reliance on Ruling Against Revenue for Pre-Taxable Works Contract Services.

  Case-Laws - AT : As the appellant categorically admitted their tax liability on principle in their memorandum of appeal, it is not open to them to rely on the cited judgement wherein a view was declared against the Revenue on the question whether service tax could be levied under the head “Works Contract” for any period prior to the date on which that service became taxable - AT
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• Credit Denial Overturned: Credit May Be Allowed for Pre-Provided Services in Mall Construction Case.

  Case-Laws - AT : Denial of credit is on the ground that services were received purpose of construction of a mall which was prior to the services provided - credit may be allowed - AT
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Central Excise

• Cenvat Credit Allowed for National Calamity Contingent Duty Payments Using Basic Excise Duty Credits: Clarification Issued.

  Circulars : Cenvat credit of basic excise duty for payment of NCCD. - Circular
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• Higher Court Overturns Trial Court's Discharge Due to Lack of Evidence Time u/s 9, Central Excise Act.

  Case-Laws - HC : Complaint under Section 9 of the Central Excise - trial court discharged the accused from prosecution - complainant was not given reasonable time to adduce evidence - order is not sustainable and is accordingly set aside - HC
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• Appeal Restored After Assessee Deposits Rs. 14,17,723; Case to Be Reconsidered on Its Merits.

  Case-Laws - SC : Restoration of appeal - Held that:- As the assessee has deposited an amount of Rs. 14,17,723/- the appeal rejected is need to be restored to the file for being disposed of on merits - SC
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• Goods Sent to SEZ Developers Deemed Exports, Rule 6(3) Reversal Not Required for 10% Exempted Goods Value.

  Case-Laws - AT : Non reversal of the amount of 10% of the value of the exempted goods send to an SEZ developer - to be treated as deemed exports and the provisions of Rule 6(3) are not applicable - AT
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• Court Rules Actual CENVAT Credit Must Be Reversed, Not 115% Duty of Production Cost.

  Case-Laws - AT : Removal of Inputs as such - actual cenvat credit availed is to be reversed not the duty on value as 115% of the cost of production - AT
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• Government Cannot Keep Voluntarily Paid Excise Duty Without Pending Confirmed Demand Against Taxpayer.

  Case-Laws - AT : Refund of excise duty paid during investigation – voluntarily payment - the department has no right to retain any amount so long as there is no confirmed duty demand pending against the assessee - AT
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Case Laws:

• Income Tax

• 2012 (9) TMI 449
  Taxation on cessation of liability to repay a loan - Held that:- As decided in Mahindra and Mahindra Ltd. v. CIT [2003 (1) TMI 71 - BOMBAY HIGH COURT] the cessation of liability to repay a loan taken to purchase a capital asset does not result in a revenue receipt. Further, the amount of Rs.29.17 lacs was not taxable u/s 41(1) as the same was not an expenditure incurred in the earlier years thus the cesation of liability is not taxable either under Section 41(1) or 28(iv) - in favour of assessee.

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• 2012 (9) TMI 448
  Disallowance claim u/s. 36(1)(vii) r.w.s. 36(2) - AO invoked Section 14A for disallowance - assessee is a statutory corporation established under the SIDBI Act, 1989 - ITAT allowed the claim - Held that:- Section 14A of the Act would have no application to the present facts. It is not the revenue's case that bad debts have been incurred in relation to income which does not form part of the total income. Section 50 of SIDBI Act,1989 only exempts payment of income tax. It does not provide that such income of the SIDBI Bank will not be a part of the total income. As the assessee carried on business of banking and the amounts being written off as bad debts was the money lent in the ordinary course of its business. In terms of Section 36(1)(vii) the assessee is entitled to claim deduction of an amount of debt or part thereof written off as irrevocable in the year in which business claims that a particular debt is not recoverable. In this case, the respondent-assessee in the assessment year 2003-04 had taken a business decision that the amount of Rs.178/- crores had become bad and had to be written off as bad debt. This decision has to be of the business alone. However, this bad debt is allowable under Section 36(1)(vii) subject to satisfaction of Section 36(2)(i). In this case admittedly the respondent-assessee satisfies the same. The debt which is being written off represents money lent in its ordinary course of business of banking - no substantial question of law arises - in favour of assessee.

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• 2012 (9) TMI 447
  Disallowance of set-off loss on derivative trading - loss from speculation business - Held that:- AO has treated such as a loss as speculation loss mainly on the ground that Notification number 46 of 2009, issued by the CBDT, on 22nd May 2009, recognizing MCX as recognized Stock Exchange for the purpose of section 43(5), only from the said date and has prospective effect and, therefore, such a derivative trading in commodity through MCX prior to the said date will amount to speculation business. From the combined reading of clause (d) of proviso to section 43(5), Rule 6DDA, 6DDB and Explanation (ii) to section 43(5), it would be seen that the rules which has been prescribed are only procedural in nature. When a rule or provision does not effect or empower any right or create an obligation but merely relates to procedural mechanism, then it is deemed to be retrospective unless such an inference is likely to lead to an absurdity - Once in the statute, it has been provided that w.e.f. 1st April 2006, an eligible transaction carried out in a recognized Stock Exchange will not be treated as speculation transaction, then simply because procedural mechanism has taken a long time to recognize the Stock Exchange - in favour of assessee.

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• 2012 (9) TMI 446
  Disallowance of depreciation on investments - investments were held as stock in trade - Held that:- As decided in United Commercial Bank Versus Commissioner of Income-Tax [1999 (9) TMI 4 - SUPREME COURT] that for valuing the stock, it is open to the assessee can value it at the cost or market value, whichever is lower & in the balance sheet, if the securities and shares are valued at cost but from that no firm conclusion can be drawn a taxpayer is free to employ for the purpose of his trade, his own method of keeping accounts, and for that purpose, to value stock-in-trade either at cost or market price Method of accounting adopted by the taxpayer consistently and regularly cannot be discarded by the Departmental authorities on the view that he should have adopted a different method of keeping accounts or of valuation. - in favour of assessee by way of remand. Disallowance of amortization premium paid on purchase of securities - Held that:- This amortization expenses was disallowed on the ground that the securities are held as "investment" and, therefore, whenever such securities are transferred, the profit or loss arising therefrom would be computed after taking into account the cost of the acquisition. Since the issue about nature and character of securities is remanded to the AO and the outcome of this issue would depend upon the said determination, this issue also stands remanded back to the AO also. Disallowance of interest paid to sellers - expenditure was capitalized by the assessee itself - Held that:- According to assessee in fact Rs.15.61 crores was debited in PLL account and not Rs.13.52 crores and the matter can be examined by the AO in this behalf. As the respondent, during arguments, himself suggested that this can be verified by the AO for this reason, this issue is also remanded to the AO and the deduction shall be allowed subject to verification.

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• 2012 (9) TMI 445
  Disallowance of expenditure on VRS u/s 35DDA - non compliance with Rule 2BA - ITAT allowed the deduction - Held that:- Rule 2BA is in the form of guidelines for the purpose of Section 10(10C), which relates to taxation of income/amount received by an employee under VRS scheme. The said Rule does not deal with the expenditure incurred by the employer when the assessee makes payment under the VRS scheme formulated by them. The treatment of expenditure or outgoing of the employer has to be dealt with under Section 35DDA and the prescribed rules, if applicable. Rule 2BA, which is applicable to the recipient i.e. the employee, cannot be applied - in favour of assessee. Disallowance of Depreciation on UPS - ITAT allowed @ 60% treating the same as computers - Held that:- As decided in CIT Vs. BSES Yamuna Power Ltd [2010 (8) TMI 58 - DELHI HIGH COURT] that computer accessories and peripherals form an integral part of a computer system and, therefore, depreciation has to be allowed at the rate of 60% - as that the higher depreciation was not only allowed in respect of UPS but also in respect of printers, switches etc. - in favour of assessee. Disallowance of deduction of 1/5th of the expenses relating to legal and professional expenses relating to closure of the Daruhera unit - ITAT allowed it - Held that:- As decided in C.I.T v. D.C.M [2009 (1) TMI 2 - HIGH COURT DELHI] the expenditure incurred on payment of retrenchment compensation and interest on money borrowed for payment of retrenchment compensation on closure of one of the units, amongst other businesses, of the assessee-company was revenue expenditure. It also held that closure of one unit did not amount to closure of business as it was not a separate and distinct business - in favour of assessee.

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• 2012 (9) TMI 444
  Disallowance of loss on the sale of debentures - non-convertible Part B of the 15% redeemable partly convertible debentures - ITAT treated it as part of the cost of acquisition of the convertible Part A of the debentures - Held that:- A separate treatment given by the assessee to its two separate types of property is not illegal and, therefore, it cannot affect the assessee’s interest in any adverse manner whether for tax purposes or otherwise - that convertible Part A of the PCD was severable from the non-convertible Part B which was transferred at a loss by the assessee to Citi Bank and therefore the loss suffered could not be construed to be a part of the cost of acquisition of convertible Part A of the PCD retained by the appellant and thus the claim of loss of the assessee in the matter of sale of Part B of the PCD in the self-same rights issue was permissible as short term capital loss. Set aside the impugned order passed by the learned tribunal to the extent it confirmed the disallowance of Rs. 28,17,945/- as short term capital loss as claimed by the assessee and allowed by CIT (Appeals) - in favour of assessee.

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• 2012 (9) TMI 443
  Review petition - Business connection of the appellant in India - review petitions that some questions of law raised by the assessee have not been addressed in the judgment - Held that:- whether ANR as its agent could be treated as Permanent Establishment - questions recorded against the appellant may cause prejudice to the appellant. - what would be the reasonable arm’s length price at the hands of ANR/PE and not the profits earned by the assessee. - Review Petitions admitted against the original decision (2011 (8) TMI 313 - DELHI HIGH COURT).

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• 2012 (9) TMI 442
  Penalty u/s. 271(1)(c) - surrender of income of Rs.5,00,000/- by assessee - orders of penalty enhancement - Held that:- The AO initiated the penalty for filing inaccurate particulars of income, but in the assessment order, the AO failed to point out any specific instance of inaccurate particulars of income or instance of concealing the particulars of income, for which assessee made surrender of income. - It would mean that the AO was not sure which particulars of income was inaccurate - it is not a fit case for levy of penalty u/s. 271(1)(c) on the surrender of additional income - Since the substantial penalty has been cancelled the issue of enhancement of penalty would not arise - in favour of assessee. Penalty u/s. 271(1)(c) - unsecured loan - Held that:- As the assessee failed to file any explanation regarding bogus liability shown in the books of account, the levy of penalty is justified against the assessee - against assessee.

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• 2012 (9) TMI 441
  Profit on sale of shares/mutual funds - Business income OR income from capital gain - Held that:- That the mere volume of transactions transacted by the assessee would not alter the nature of transactions. Since there is no evidence on record that the assessee traded in the aforesaid shares/mutual funds regularly and frequently, considering the magnitude of transactions in shares/mutual funds and the CBDT circular No. 4 of 2007 of 15-6-2007 itself envisaging the possibility of having two portfolios, i.e., an investment portfolio comprising of securities which are to be treated as capital assets and a trading portfolio comprising of stock-in-trade which are to be treated as trading assets, thus the assessee’s version that the aforesaid shares/mutual funds were held by way of investment in the years under consideration has to be accepted. Since the DR did not place any material controverting the aforesaid findings of facts recorded by the CIT(A) nor brought to our notice any contrary decision, we have no alternative but to uphold the findings of the ld. CIT(A) - in favour of assessee. Disallowance of the claim of loss on share transaction - CIT(A) allowed it - Held that:- On test checking the details and documents pertaining to the claim of loss on future and option shares and the claim of the appellant appears to be supported by vouchers and contract notes which are verifiable with reference to the books of accounts. Therefore, no hesitation to conclude that the assessee has provided the necessary details and discharged the onus cast on it. The Assessing Officer has not brought anything on record to dispute the facts/details furnished by the assessee - as. DR did not place any material controverting the aforesaid findings of facts recorded by the CIT(A) nor brought to our notice any contrary decision the disallowance need to be deleted - decided in favour of assessee.

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• 2012 (9) TMI 440
  Penalty u/s 271(1)(c) - addition to deemed dividend - Held that:- As all the concerned facts were duly disclosed by the assessee in the assessment proceedings, stating that a sum of Rs. 7,65,921/- was due to the assessee from the company and also that the amounts received represented Rs. 6 lac as security deposit against property given on rent to the company and advance of Rs. 4,50,000/- received against salary in the capacity of director holding 67.40% of the company’s shareholdings. The balance sheet of the company contains the name of the assessee under the schedule of ‘Loans and advances.’ No intention of either furnishing inaccurate particulars of income or concealment of any particulars of income is, therefore, manifest. The belief of the assessee regarding both the components, i.e., the security deposit, as well as the advance received, has not been shown to be not bona fide. Orders for addition on the difference of credit and debit balance amounting to Rs. 18,94,309/- and the assessee did not file any appeal against the addition, thus mere fact that the assessee did not prefer any appeal against addition in the quantum proceedings does not lead to automatic levy of concealment penalty, particularly when the belief nurtured by the assessee has not been shown to be mala fide - in favour of assessee.

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• 2012 (9) TMI 439
  Undisclosed income of another person u/s 158BD - validity of assessment proceedings u/s 158BC r.w.s. 158BD, when proceedings was initiated after the completion of the assessment of the person searched - search u/s.132 carried out at the business premise of Ohm Developers on 29.10.1999 and assessment of same completed on 30.11.2001 - notice u/s.158BD r.w.s. 158BC issued to assessee on 22.01.2007 - Held that:- Several Co-ordinate Benches have unanimously held that the belated issuance of notice u/s.158BD was barred by limitation. Therefore, CIT(A) rightly deleted the addition on observation that there was an inordinate delay in initiating and completing the proceedings u/s.158BC r.w.s. 158BD. Though, the Act does not lay down any time limit for initiating proceedings u/s.158BD yet, equity demands that proceedings should not be kept pending indefinitely and the Sword of Damocles be kept hanging over the head of the taxpayer for an indefinite period - Decided in favor of assessee

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• 2012 (9) TMI 438
  Time limit for initiation of proceedings under Section 158BD - The act nowhere specifically prescribes any time limit or limitation for initiation of proceedings under Section 158BD or for recording of satisfaction before taking action under that provision - Held that:- Following the decision in case of CIT, Ludhiana v. Mridula, Prop. M/s Dhruv Fabrics(2010 (7) TMI 664), ITAT does not find any justification in initiation of block assessment proceedings u/s 158BD against the assessee after long gap of completion of the assessment in the case of persons searched u/s 132 or 132A. NO substantial question of law arises in this issue. Decided in favour of assessee.

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• 2012 (9) TMI 437
  Addition on account of construction of building – Whether revenue can refer valuation of asset to DVO under any section other than section 55A & 269L under I.T. Act 1961 - The factory premises was referred to DVO by the ADIT – There was vast difference between the estimated cost of construction as per valuation report and the investment in construction of the factory as per the books - AO made an addition on the basis of as unaccounted investment u/s 69 – Held that:- As decided by the Hon’ble Supreme Court in the case of Smt. Amiya Bala Paul Vs CIT (2003 (7) TMI 4) held that the DVO would not have jurisdiction to give a report to the AO under the Income Tax Act except in terms of Section 55A or to Competent Authority u/s 269L. Appeal decided in favour of assessee. Addition on the basis of actual purchase consideration was more that registry rate of asset as unexplained investment u/s 69 – Assessee made investment in purchase of Land – AO found during search u/s 132 that, actual purchase consideration was higher than property registry rate - Addition was made on the basis of statements made by seller and broker that unaccounted payment received by them - Assessee contended that the statements were made under coercion which was endorsed by both the persons by retracting from their statements during cross examination - Held that:- The addition made merely on the basis of statements which allegedly given under pressure. The assessee filed sufficient material in support of retraction. There is no other material on record basis of which it can be said that on money was paid in transaction. Appeal decided in favour of assessee Addition made on account of unaccounted cash u/s 69A – During course of Search cash seized by AO from assessee residence - The assessee filed cash flow statement without supporting with evidence – The assessee could not maintain the personal book account - Held that:- No one has appeared before us even proper notice has been served on the assessee’s legal heir. Assessee submitted before the AO cash was found withdrawal made by him as a Director from the company. As per balance sheet submitted before the A.O., the assessee had shown hardly cash balances. Appeal decide in favour of revenue. Addition on account of household valuables - Assessee did not submit any explanation during the course of search u/s 132 & assessment proceeding - The assessee had not admitted the ownership of these valuable items - Held that:- It is the primary duty of the assessee to explain the source of things/valuables found during the course of search. Assessee even did not file any evidence regarding purchase of these household. Appeal decide in favour of revenue. Disallowance on account of Interest on deposit – The A.O. has noticed interest free advances whereas the assessee claims interest expenditure on deposit – Held that:- As the advance given prior to 3 years under year under consideration. In past, it appears that there was no disallowance under this head made by the A.O. Further, the A.O. has not established the nexus between interest free advances and interest bearing loans taken. Therefore appeal decides in favour of assessee. Addition on account of household expenses – Assessee had not withdrawn any amount for household purposes – Held that:- It is undisputed that he was having independent establishment for running the kitchen at his house. The assessee had not withdrawn a single penny for household purposes. There is no evidence produced by the assessee that he had received food from factory canteen. Appeal decides in favour of revenue

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• 2012 (9) TMI 436
  Addition on account of treating receipt as income - Assessee is engage in civil construction works – Receives capital & revenue grants from government - Follow cost plus method for revenue recognition - Held that:- Where the receipt is treated as revenue corresponding expenditure actually incurred wholly and exclusively for doing the work for which the revenue was received must be allowed. Appeal decided against revenue.

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• 2012 (9) TMI 434
  Computation of Arm's length price - disallowance for administration charges/rebate being reimbursement of expenses - Held that:- As admitted that there was no element of profit in the transactions of payments made by the assessee to The parent company Braitrim U.K (BUK) which in turn was paid by BUK to its retailers. This is an expenditure, incurred by the assessee, routed through BUK, necessarily to get new customers via BUK. The assessee further submitted that there was no dispute by the AO, on the factum of payment of commission by the assessee to BUK and BUK to its retailers, which is the reason, that the AO had infact, restricted the addition only to the amount determined by the DRP. As seen from the reconciliation, that the assessee has recorded its expenditure on the basis of sales made by it to the manufacturers, whereas BUK has recorded them on the basis of invoices raised by them on the assessee, which is at a later date/time - As that the deduction allowed by the AO is on the basis of the direction of the DRP, which had based its findings on the amounts recorded in its books in the earlier year and the expenditure booked for the current year for which BUK raised invoices in the subsequent year, then there cannot be any reason for disallowance in the current year, because, the assessee, being a company, has to follow mercantile system of accounting and guided by the accounting standards, wherein the assessee has to record its expenditure of commission/discount at the time of making its sales, irrespective of the date of raising of invoice by BUK. - As the assessee submission of reconciliation had not been submitted before the DRP it would be just and reasonable if the assessment order is set aside and the matter is restored to the file of the DRP with the directions to consider the reconciliation statement - in favour of assessee for statistical purposes.

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• 2012 (9) TMI 433
  Addition on account of prior period expense - Whether liability of earlier years has been crystallized in this year – Assessee calculation of interest based on simple interest while the bank charging at compounded interest - Bank debit the interest of earlier years in current year - Interest liability booked by assessee as prior period expense - Held that:- There would be some dispute or at least misunderstanding in the mind of the assessee about method of accounting the interest i.e. whether it should be simple interest or compound interest. The rate of tax for all these years remains the same. Therefore, following the decision in the case of CIT vs. Shriram Pistons & Rings Ltd and vs. Vishnu Industrial Gases Pvt. Ltd., assessee is entitled to deduct this amount in computing the income. Decision is in favor of assessee.

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• 2012 (9) TMI 432
  Initiation of search and seizure u/s 132 - residential-cum-business premises - Held that:- Clause (c) of Section 132(1) concerns money, bullion, jewellery or other valuable article or thing. In order to proceed under clause (c) there must be information with the authorizing authority relating to any person is in possession of money bullion, jewellery or other valuable article or thing and such money, bullion, jewellery or other valuable article or thing represents either wholly or partly income or property which has not been or would not be disclosed for the purpose of the Act, thus there are materials available on record for which the specified authority had reason to believe that the condition precedent to issue the warrant of authorization to conduct search and seizure operation in terms of Section 132 at the residential-cum-business premises of the petitioner existed, thus the warrant of authorization cannot be quashed - in favour of revenue. Seizure of bullion, jewellery or valuable article of thing being stock-in-trade - Held that:- The Finance Act, 2003, has amended Section 132 to provide that any bullion, jewellery or other valuable article or thing being stock-in-trade of the business, found as a result of search shall not be seized but the authorized officer shall make a note or inventory of such stock-intrade. Thus, stock-in-trade of business cannot be seized during search and seizure operations conducted on or after June 1, 2003 - thus the seizure of jewellery being stock-in-trade by the authorized officer is wholly without authority of law and contrary to the statutory provision contained in proviso to Section 132 (1) (iii) and third proviso to Section 132(1) (v) - in favour of assessee.

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• 2012 (9) TMI 431
  Loan from creditor deemed as income u/s 68 – Weather assessee is under the obligation to prove source of sum deposited in the creditor’s bank account – Loan made by creditor through cheque - Credit entry shown in the bank statement of the assessee – AO contended that the source of the loan was sale of property - Assessee also submit PAN card, bank statement, copy of ITR for said year and proof of residential address and source of loan – Creditor receive an advance from another person to finance the loan to assessee – Held that:- It was not necessary that the amount advanced by the creditor had to be out of the current years income only, as the returned income of creditor shown off lesser income as compare to loan given to assessee. Bank statement of creditor clearly shows the deposit of said sum from another person. AO has neither conducted any inquiry, nor had any material been brought on record to doubt the source of the deposit entries in the creditor’s account. Assessee had duly discharged his onus of establishing the identity and credit worthiness of the creditor, as well as the genuineness of the transaction. The findings of fact recorded therein remained irrational. Decision against revenue.

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• 2012 (9) TMI 430
  Disallowance on account of loss of derivatives – Assessee incurred loss on derivative transactions - Notification issued by the Central Govt. u/s 43(5) read with Rule 6 DDA, and 6 DDB, on 25.1.2006 - Treated derivative transaction as speculative loss – Held that:- CIT(A) examined that assessee did not incur net loss during this period. Prior to the notification, assessee received net gain from transactions in F&O. AO has no basis for arriving at a derivative trading loss. Therefore appeal decide in favour of assessee Addition on account of unexplained cash credit u/s 68 – Held that:- Department representative has not pointed out any factual error in the findings of CIT(A). The assessee has filed all these evidence before the AO. The AO in his order has in a very casual manner, without giving any reasons as to why the evidence furnished by the assessee was not acceptable, made the addition. Therefore, ITAT do not find any reason as to why the issue is to be set aside to the file of the AO. Appeal decides in favour of assessee Disallowance of interest expense - The bank granted overdraft facilities for business purposes – AO made addition on basis that assessee has surplus funds in the form of undistributed profits of the earlier year – Addition made on presumption that the surplus funds have to be held as used for giving money to directors/sister concerns - Held that:- where the assessee has own funds as well as borrowed funds and it advanced funds to the sister concern for allegedly non business purposes, then a presumption can be made that the advances for non-business purposes have been made out of own funds following the decision Reliance Utilities Limited (2009 (1) TMI 4). Appeal decides in favour of assessee.

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• 2012 (9) TMI 429
  Penalty u/s 271(1)(c) - assessee surrendered dis-allowance of depreciation - Held that:- On careful consideration of the facts and circumstances of the case it is held that AO was factually wrong in mentioning that the assessee has wrongly claimed additions to its assets. The fact is that the claim of additions to assets was rightly made. The only issue is whether the assessee has put these additional assets to use, for enabling it to claim depreciation. The issue as to whether the assets were put to use, has not been tested in this case as the assessee has surrendered the claim. The assessee has declared a loss and surrendering part of the depreciation would only result in reduction of loss. Either way the assessee is not saddled with any tax liability. Under these circumstances, the assessee had agreed to forego part of its claim for depreciation. The fact remains that in the subsequent AY, the Revenue has allowed the claim of the assessee for depreciation on these assets. Under these circumstances, claim of the assessee was bonafide, and CIT (A) has rightly deleted the penalty u/s 271(1)(c) - Decided in favor of assessee

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• 2012 (9) TMI 428
  Reasonableness of declaring the assessment made by the AO as null and void by observing that the notices u/s 143(2)/142(1) were issued in status of “Local Authority” whereas status of assessee is of "Artificial Juridicial Person" without appreciating the fact that the proforma of notices u/s. 143(2)/142(1) are prescribed and there is no claim in these notices where the status of the assessee can be mentioned - Held that:- On the facts and circumstances of the case, CIT(A) was not correct in holding that assessment is null and void. The defect in issuance of notice and assessment noted by the CIT(A) was not fatal so as to render the assessment null and void. It was curable defect. Matter remitted to the file of the AO to consider the issue afresh.

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• 2012 (9) TMI 427
  Addition on account by applying the GP rate on assumed turnover – Assesse is in business of plying of trucks – Assessee has sold 7 and acquired 4 during the F.Y - AO apply GP rate on the basis that, assessee has transferred the vehicles in question on paper only as a colourable device to avail Sec. 44AE – Held that:- During search proceedings no incriminating evidence were found by the department to suggest that the vehicles even after the sale thereof in fact belonged to the assessee and that the assessee owned them as benami and was actually the owner of the more than 10 trucks in any of the relevant assessment years. Sale proceeds from vehicles were recorded in the bank account and the value of the block of assets was reduced by the said amount. If AO has applied the GP rate, he has also to allow the depreciation thereafter and by doing so, the income becomes lower than the returned income of the assessee. Decision in favour of assessee. Addition on account of unexplained expenditure - Addition was made on basis of some entries written by pencil on the loose paper found during search – Held that:- In the absence of any evidence before us to controvert the findings given by the CIT(A), hold that no interference is called for in the order of the CIT(A) on this issue. Appeal decides in favour of assessee Addition on account of unexplained expenditure u/s 69C – Addition on the basis of some seized loose paper found during search - On which some petty cash advances written on different dates given to persons – Held that:- As the entries mentioned in the loose paper tallies with the regular books of accounts of the assessee, there remains no valid reason for making any addition under section 69C. Decision in favour of assessee

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• 2012 (9) TMI 426
  Refusal to extend/continuance of Certificate of Registration under Section 80G of the Income Tax Act – alleged that on verification of the books of account, bills and vouchers produced, discrepancies were noticed – Held that:- main object should be charitable activity and not maintenance of accounts in the way the authorities want. Books of account are maintained substantially as required under law and as long as money is not spent for any other purpose other than charitable purpose, they should be granted the benefit - Unnecessarily the assessee is made to find litigation before this Court. He would have spent that time in conducting charitable activities – in favor of assessee - respondent shall pay a sum of Rs. 25,000 to the assessee towards cost of this appeal

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• Customs

• 2012 (9) TMI 425
  Exhibit B (wrongly typed as Exhibit D) - Whether declaration contained therein would be construed as authorization under Regulation 13(a) in favour of CHA? - Held that:- Considering Exhibit B on the letterhead of the appellant it is titled as shipping instructions. As a part of this document, a declaration is purported to be signed by the exporter. This document at Exhibit B is not referred to in the order in original dated 22.8.2008 passed by the Commissioner of Customs (General), Mumbai Zone-I and also not in the order dated 12.1.2010 passed by the CESTAT - no point in answering this question. Revocation of CHA License - Held that:- Having gone through the statement of Mr. Parmesh as well as Mr. Vikas Doshi it is noticed that Mr. Vikas Doshi managed to get the cargo of M/s. Doshi International and M/s. Kumar Enterprises for export. The statements of Mr.Parmesh and Mr. Vikas Doshi clearly indicate that documents such as invoices, SDF Form along with Annexure B duly signed by the exporter/exporter's representative were received by the department from the exporter through Shri Vikas Doshi, however, the fact remains that the authorization as contemplated in Regulation 13(a) and 13(b) were not filed in respect of the shipping bills of M/s. Darshan International and M/s. Kumar Enterprises. The statements of Mr. Parmesh as well as Mr. Vikas Doshi clearly go to show that Mr. Parmesh or any other employee of the said company were not knowing the exporters i.e. M/s. Darshan International and M/s. Kumar Enterprises. It is seen that Mr. Vikas Doshi, procured the documents from M/s. Darshan International and M/s. Kumar Enterprises and by using the CHA Licence of the said company the cargo was sought to be cleared without authorization - as the major charges levelled against the appellant stand proved cannot be faulted The CHA Licence of the Appellant shall stand suspended from 19.8.2008 till 30.9.2012 - directions to deposits the security deposit as per the present rules and regulations, with the appropriate officer on or before 30.9.2012 to get CHA licence restored with effect from 1.10.2012 - against assessee.

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• 2012 (9) TMI 424
  Disallowance of claim for refund – Held that:- Appellant was liable to refund and the same has been refunded pursuant to the order passed by the CESTAT on 10-1-2001, it is not now open to the appellant to contend that no documents are produced to show that the amount was with the appellant and that the original documents were not produced regarding the amount which was to be refunded and therefore there is delay in making the refund of the amount - respondent would be entitled to interest - appeal of Revenue dismissed

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• 2012 (9) TMI 423
  Enhancement of transaction value - import of sanitary items - Revenue entertained a view that the discounts mentioned in the invoice are on the higher side, they released the goods provisionally on execution of bank guarantee – Held that:- Value declared by the other importers is more or less same as declared by the present respondent - price list relied upon by the Revenue reflects the retail sale price of the items in the domestic market and not the export prices in the international market - price lists are merely the quotation of the prices has no reflection on the transaction value – in favor of importer

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• Corporate Laws

• 2012 (9) TMI 422
  Grievance of oppression and mismanagement u/s 397 and 398 - application for withdrawal of the proceedings - Held that:- That a proceeding under Section 397 could not be equated with a civil suit where the learned Judge could not have any say if a plaintiff wants to withdraw his suit and a proceeding under Section 397 could not be withdrawn and/or dismissed merely at the whims of the parties. The resistance to allow withdrawal and/or dismissal must come from someone who had authority to resist the same. A non-party can only resist dismissal or withdrawal if he is able to show that continuance of the said proceeding would benefit him. In the instant case, Amita brought the action making allegation against the then management. After her death her sons sold off their shares. They categorically asserted before us that they were no more shareholders of the company - Status of Ajit is yet to be decided either in the proceeding under Section 111A or in his suit, thus in absence of such decision his prayer for substitution in case of original petitioners, could not be acceded to.

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• Service Tax

• 2012 (9) TMI 454
  Erection, installation and commissioning - no reply filed by the appellant before adjudicating authority - Held that:- As the first appellate authority has dismissed the appeal only on the ground that the grounds taken before him are additional submissions this cannot be the reason for dismissal of the appeal and if there is no reply filed before adjudicating authority, those submissions made before the appellate authority at the time of personal hearing should have been appreciated in a proper perspective - remand the matter back to adjudicating authority to reconsider the issue afresh.

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• 2012 (9) TMI 453
  Waiver of pre-deposit - demand of service tax - Construction Services - appellant had categorically admitted tax liability and challenge to valuation – Held that:- In any case, as the appellant categorically admitted their tax liability on principle in their memorandum of appeal, it is not open to them to rely on the cited judgement wherein a view was declared against the Revenue on the question whether service tax could be levied under the head “Works Contract” for any period prior to the date on which that service became taxable - Instant application to be one fit for summary dismissal on the ground of maintainability - No case for modification of the stay order has been made out by the appellant - directed to make pre-deposit

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• 2012 (9) TMI 452
  Waiver of pre-deposit - denial of credit is on the ground that these services were received by the appellant for the purpose of construction of a mall which was prior to the services provided i.e. renting of immovable property, sale of space or time for providing advertisement services – Held that:- Credit to the services which in relation in setting up premises of provider of output service should be granted - If it is undisputed, that if an assessee to provide an output service, the credit of input service tax paid on the input services for the creation of such premises cannot be denied - appellant has made out a prima facie case for the waiver of pre-deposit of the amounts involved

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• 2012 (9) TMI 451
  GTA services - Declaration on consignment note - denial on the ground that the declarations required to be made on the consignment note were not made by the service providers – Held that:- In the absence of specific condition in the notification, substantive benefit cannot be denied by issue of a circular prescribing additional conditions

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• Central Excise

• 2012 (9) TMI 450
  Demand of duty and penalty - Punishable offense - trial court discharged the accused from prosecution - Complaint under Section 9 of the Central Excises and Salt Act - assessee company manufactured and cleared eight varieties of such papers for which classification was claimed by the respondents under sub-heading 4805.90 of Central Excise Tariff Act, 1985 - It appears that with such characteristics such varieties of paper attracted classification under heading No. 48.06 of the said schedule instead of heading No. 4805.90 and said varieties were not entitled to concessional rate of duty as envisaged in Notification No. 25/84-C.E., - Held that:- Complainant examined, Superintendent of Central Excise Department - He admitted in cross-examination that he had not visited the factory premises with the preventive staff. He is also not aware who took the sample which was sent for chemical examination - there is no evidence on record to prove the charge against the accused persons for commission of offence punishable under the Act - Magistrate has not exercised jurisdiction properly in closing the evidence of the complainant - complainant was not given reasonable time to adduce evidence - order is not sustainable and is accordingly set aside

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• 2012 (9) TMI 421
  Restoration of appeal - Held that:- As the assessee has deposited an amount of Rs. 14,17,723/- in the office of the Adjudicating Authority as directed in PRESTIGE FOOD LTD. VERSUS COMMISSIONER CENTRAL EXCISE & ANR. [2012 (9) TMI 415 - MADHYA PRADESH HIGH COURT] & a copy of the receipted Challan has been placed on record the appeal rejected is need to be restored to the file for being disposed of on merits - till the appeal is disposed of no coercive steps shall be taken by the respondent for the recovery of the balance additional demand - in favour of assessee.

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• 2012 (9) TMI 420
  Non reversal of the amount of 10% of the value of the exempted goods send to an SEZ developer - Held that:- As decided in SUJAKO INTERIORS PVT. LTD. Versus COMMR. OF CENTRAL EXCISE, AHMEDABAD [2011 (2) TMI 624 - CESTAT, AHMEDABAD] the supplies made by the appellant to SEZ developers were to be treated as deemed exports and the provisions of Rule 6(3) of the Cenvat Credit Rules requiring the appellant to pay an amount of equal to 10% of the value of exempted final product are not applicable - in favour of assessee.

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• 2012 (9) TMI 419
  Non-accounting of consumption of inputs - penalty under rule 27 - Held that:- As the proceedings were initiated for not accounting of consumption of 23594.380 Kgs. of inputs namely CI Casting in their daily stock account for the period from December, 2000 to March, 2004 and the demand was issued on 27.12.2005 beyond the normal period prescribed under section 11A which has been made applicable as per the provisions of Rule 12 of CENVAT Credit Rules, 2002. As there is was no allegation of suppression, willful misstatement in the show cause notice and the department could not bring out that the appellant have removed the inputs or finished goods or scrap clandestinely in these circumstances the demand is hit by limitation of time - in favour of assessee.

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• 2012 (9) TMI 418
  Removal of Inputs as such - cenvat credit in respect of steel strips as also coils - Subsequently the said inputs were cleared by them to their own sister unit located nearby, on reversal of credit so availed by them - Revenue entertained a view that instead of reversing the MODVAT Credit, they should have paid the duty on the said input by adopting the assessable value as 115% of the cost of production or manufacture of such goods – Held that:- Where the inputs or capital goods have been purchased from outside and in case of their removals as such to their another unit, then it would be reasonable to adopt the value shown in the invoice on the basis of which CENVAT Credit was taken by the assessee in the first place - lower authority’s impugned Order-in-Original confirming the duty, imposing penalty and demanding interest, is not sustainable and deserves to be set aside - Revenue’s appeal is rejected.

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• 2012 (9) TMI 417
  Refund of excise duty paid during investigation – alleged that department made them debit the above said amounts in the PLA under coercion and the amount was not voluntarily paid – Held that:- No duty confirmed against the Respondent and there was not even a Show Cause Notice till the date of hearing - assessee can claim refund against a deposit made voluntarily - they have filed a refund claim would show that the deposit was not made voluntarily but was made under duress. Further even if the deposit is made voluntarily they can claim refund of such deposit as in the case of any other duty payment or duty deposit and the department has no right to retain any amount so long as there is no confirmed duty demand pending against the assessee - appeal filed by the Department is rejected.

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• 2012 (9) TMI 416
  Demand of duty, interest and penalty - Valuation – on the basis of seized one document it was alleged that assessee under valued the Texturised yarn which was sold through broker Shri Mahesh Mistry – Held that:- Appellants never cleared goods to M/s. Kala W works and if so, the rate of M/s. Kala W works cannot be applied to work out the differential amount - though the department quoted complete details of sale transaction of entire disputed period, no investigation was extended to any customer that they had made any payment on extra consideration to the appellant - no corroborative evidence available on record about the receipt of any extra consideration - Demand of duty, interest and penalty set aside

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