Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
September 19, 2012
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
Indian Laws
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Joint development agreement - Assessment of capital gain for Asst. Year 2007-08 - transfer of property - held as transfer - liable to capital gain - AT
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Addition u/s 43B - Conversion of interest payable in equity shares - As liability can be discharged in a number of ways, it does emphasize the fundamental principle that unless 'actual payment' is made, the restriction placed in section 43B will hold good and deduction cannot be allowed. - AT
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Concealment of income - survey u/s 133A - assessee contested as error in exercise of jurisdiction by the Asstt. Commissioner of Income Tax, Circle-IV (1) Agra as the corporate office was shifted to Delhi - against assessee. - HC
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As the transaction of lease and sub lease was proved to be bogus no question of allowance of depreciation arises here - HC
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Gift from NRIs - Department queried about financial capacity of the donors to make the gift(s) - HMay be the money came by way of bank cheques and was paid through the process of banking transaction but that itself is of no consequence - SC
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The assessee, who has already got deduction under Section 37 to re-work and claim the benefit under Section 35AB on the basis of amortization of capital expenditure- SC
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Deduction u/s 80IA - That raw material or input gets converted into a texturised yarn by reason of the thermo mechanical process held as amount to manufacture. - SC
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The interest paid has to be allowed as deduction u/s 36(1)(iii) as in existence during the assessment year 1999-2000 as a transaction of borrowing is not the same as a transaction of investment - HC
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Indra Vikas Patra – As IVPs assessed in the hands of company then how these IVPs can assess in the hands of assessee. - And there was nothing wrong to keep IVPs which are bearer in nature in the personal locker of directors. - AT
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Can genuine business expenditure disallow merely because of wrong nomenclature - As the recipient confirmed the receipt, on which TDS deducted & shown as income in his return. - claim of expense allowed - AT
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Provisions for bad and doubtful debt though statutorily required under the RBI guidelines do not qualify for deduction as business expenditure - AT
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Assessee’s society is covered by the doctrine of mutuality and this amount was not taxable - income received from the members is exempt and the income received from nonmembers is taxable - AT
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Disallowance of expense on account of late deposit of TDS u/s 40(a)(ia) – amendment to the provisions of Sec.40(a)(ia) of the Act, by the Finance Act, 2010 is retrospective from 1.4.2005 - AT
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Legal and professional charges - capital or revenue in nature – Fee paid to advocates for SLP filed before the Supreme Court - held as revenue in nature - AT
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Disallowance u/s 14A r/w Rule 8D - provisions of Rule 8D shall apply with effect from assessment year 2008-09 onwards. The Order of CIT (A) & AO is perverse - AT
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Condonation of delay of 290/287 days in filing appeals - Assessing Officer, meanwhile, got seriously preoccupied in the work - delay condoned being explained - HC
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Income-tax (Eleventh Amendment) Rules, 2012 - Insertion of rules 31ACB, 37J, Form Nos. 26A & 27BA. - Notification
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Section 144C of the Income-tax Act, 1961 - Dispute resolution Panel-Reference to - Reconstitution of DRP at specified areas of jurisdiction. - Order-Instruction
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Instructions regarding Income limits for assigning cases to Deputy Commissioners/Assistant Commissioners/ITOs - Order-Instruction
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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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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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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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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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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 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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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) - 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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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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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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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 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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Prior period expense - Interest liability - Whether liability of earlier years has been crystallized in this year – Deduction allowed - AT
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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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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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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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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
Customs
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Amends Notification No. 12/2012-Customs,dt.17.03.2012 related to exemption to maize bran from basic custom duty
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Provisional release of the goods - import of silk yarn - directed to release the goods in question on the petitioner paying the customs duty equivalent to 75% of the value of the goods - HC
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Import of goods – rejection of transaction value – no reference to any contemporaneous goods - no justifiable reasons to reject the transaction value and to enhance the value of the goods in question - AT
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Import - prohibited goods - Goods were old and used cut pieces, and cuttings etc. of various articles of iron and steel - the same were in fact melting steel scrap - Classifiable under Chapter 72 and not under 73 - not prohibited goods - AT
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Making E-payment of Customs duty mandatory. - Notification
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Amends Notification No. 62/1994-Custom (N. T.) - Customs ports - Appointment for specified purposes. - Notification
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Amends Notification No. 36/2001-Customs (N. T.) dated the 3rd August, 2001. - Notification
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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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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
DGFT
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Allocation of quantity of Rough Marble and Travertine Blocks for import for Financial Year 2012-13. - Trade Notice
FEMA
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Establishment of Liaison Office (LO) / Branch Office (BO) / Project Office (PO) in India by Foreign Entities – Clarification. - Circular
Corporate Law
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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
Indian Laws
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IT : Notified Cost Inflation Index for Financial Year 2012-13.
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Motor Vehicles Tax Act, 1974 - purchase of trucks which were earlier seized by the customs authorities and against with demand of duty is pending - Plaintiffs ought to have paid the taxes claimed by the Department under protest. - since they did not obtain NOC from transport department, no relief - HC
Service Tax
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Service Tax on commission - status - Commission agent versus dealer - from the perusal of facts, circumstances and agreement, assessee has been held as commission agent - AT
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Service tax on reverse charge basis on legal services received prior to 7.9.2009. - not leviable - AT
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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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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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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
Central Excise
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Cenvat credit of courier services -patching the final products to their customers and it is on F.O.R. basis. - credit to be allowed if found in order - AT
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Provisions of Rule 96ZO of Central excise Rules, permitting the minimum penalty for delay in payment without any discretion and without having regard to extent and circumstances for delay are held to be ultra vires of the Act - HC
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Warehousing of Petroleum products under central excise - storage loss beyond - limit of 0.5% - No set off of a gain or loss in a tank is permitted against the loss or gain in another tank - CGOVT
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Valuation of demo bike under central excise - Assessees have not been able to demonstrate any difference between the ‘demo bikes’ and the ‘normal bikes’ sold to dealers - transaction value cannot be accepted - AT
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Demand of excess paid drawback – recovery of duty drawback after revision in rate can be initiated u/s 11A read with Rule 16 of duty drawback rules, 1998 - CGOVT
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Cenvat credit of basic excise duty for payment of NCCD. - Circular
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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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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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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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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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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
Case Laws:
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Income Tax
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2012 (9) TMI 486
Assessment of capital gain for Asst. Year 2007-08 - transfer of property - assessee contested that as per Joint development agreement or the Supplementary agreement no event resulting in transfer of property took place in the previous year relevant to Asst. Year 2007-08 but in 2006-07 - Held that:- A contract can be termed to be "of the nature referred to in Section 53A of the Transfer of Property Act" it is one of the necessary preconditions that transferee should have or is willing to perform his part of the contract - on examining the JDA dated 21.12.2005 and the Supplementary Agreement dated 3.4.2006 fact revealed is that the assessee given possession of the property vide clause No. 6, however, the consideration receivable by the assessee in the form of flats is specifically determined by the Supplementary Agreement dated 3rd April, 2006. Being so, there is no progress pursuant to the Development Agreement in the A.Y. 2006-07 and nothing has been brought on record by the assessee to show that the development activities and determination of the consideration in A.Y. 2006-07 and no material is brought on record regarding the construction cost incurred in the year 2006-07, hence developer in the A.Y. 2006-07 had not shown his readiness or having made preparation for compliance of the agreement - thus as it is not possible to hold that the transferee is willing to perform his obligation in the A.Y. 2006-07 though the JDA was entered on 21.12.2005 the conditions laid down in section 53A of Transfer of Property Act were satisfied in A.Y. 2007-08, capital gain has to be taxed in A.Y. 2007-08 only - aginst assessee. Determination of cost of construction with regard to transfer of long term capital asset - Held that:- The sales consideration 'in the case of developer's case cannot be adopted because while selling the properties, the developer may have considered several factors like the floor on which a particular premises is situated, personal relationship between the buyer and the developer and so on & if the assessee itself had constructed the property, it can be presumed that the assessee also must have incurred, by and large, the same cost thus it is the actual cost of construction only which should be, adopted as the sales consideration in the case of the assessee - thus in the present case the cost of construction as determined in the case of the developer and adopted by the AO cannot be accepted, accordingly direct the AO to consider price inflation for each assessment year from 2001-02 to 2008-09 and determine the cost of construction per flat to be received by the assessee - in favour of assessee for statistical purposes.
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2012 (9) TMI 485
Addition u/s 43B - Conversion of interest payable in equity shares - interest was neither paid during the financial year nor within the due date - CIT(A) deleted the addition - Held that:- As decided in CIT v. Reinz Talbros Pvt. Ltd [2001 (3) TMI 26 - DELHI HIGH COURT] the liability was discharged by way of issuance of shares & when the assessee issues shares the assessee does not incur any expenditure as the assessee is not to make any payment legally towards shares issued. The shares cannot be equated with debentures, which is purely by way of loan and the same are required to be repaid on maturity. However, in respect of shares the company is under no obligation to make any payment in respect of such shares where share holders accept payment of pro rata dividend when such dividend is declared. Thus by issuance of shares the assessee cannot be said to have incurred any expenditure and hence issuance of shares in lieu of interest liability cannot be considered to have been payment towards expenditure. Accordingly the interest liability discharged is not an allowable expenditure. As liability can be discharged in a number of ways, it does emphasize the fundamental principle that unless 'actual payment' is made, the restriction placed in section 43B will hold good and deduction cannot be allowed. In view of these discussions, as also bearing in mind entirety of the case, the grievance of the Assessing Officer is upheld and restore the disallowance of ₹ 68,18,318/- - against assessee.
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2012 (9) TMI 484
Concealment of income - survey u/s 133A - assessee contested as error in exercise of jurisdiction by the Asstt. Commissioner of Income Tax, Circle-IV (1) Agra as the corporate office was shifted to Delhi - Held that:- The petitioner did not file income tax return at Agra for the assessment year 2000-2001. Without any intimation or getting the jurisdiction transferred to Delhi the assessee had filed return at Delhi for the assessment year 2002-03. The Assistant Commissioner of Income Tax-IV (1) Agra proceeded in accordance with the law requiring the petitioner to furnish return/information. The petitioner participated in the proceedings. It was only at the end of the assessment period that the petitioner company intimated with AO at Agra that his office has shifted from Agra to Delhi and that he has filed income tax return with ACIT, Range-I, Delhi. Earlier no information was given of this suo-moto change of place of filing of return at Delhi. A survey was conducted u/S 133-A on 24.4.2001 in which a large number of incriminating documents were found depicting serious defects in the books of accounts. Shri Ravindra Kumar Agrawal-the Director of the company had created large number of fictitious concerns, which were not doing any business. In the circumstances the AO completed the assessment on protective basis - As the Director of the company appeared and filed reply to the notice and clearly stated before the AO that his company was assessed to tax with Company Circle-1 (2) at Agra. The petitioner thus acquiesced to the jurisdiction which the AO at Agra already possessed and allowed him to complete the assessment proceedings for the assessment year 2001-02 in the circumstances no error in exercise of jurisdiction by the Asstt. Commissioner of Income Tax, Circle-IV (1) Agra is found - against assessee.
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2012 (9) TMI 483
Disallowance of deduction towards renovation of property - AO treated the transactions as bogus - ITAT allowed it - Held that:- The expenditure was incurred, according to the assessee, in anticipation of its entering into joint venture agreement with the Japanese collaborator & the premises in question over which the expenditures were made were leased to the assessee for a period of five years, the assessee further subleased the premises for the same period - it is not understandable as to why the original lease could not be cancelled when the original owner PHWA and sublessee i.e. PWH are under the same management - There is nothing mentioned in clear words in the said agreement as to why lease rental to be charged from PWH is as high as Rs. 461, 500/- per quarter as against Rs. 105, 000/-per quarter payable by assessee to PWHA, in fact in agreement dated 28-05-1996 even the basic facts would as to how assessee acquired the right to lease the premises to PW- H are not mentioned. As there is no reference of earlier agreement dated 05-04-1996 in agreement dated 28-05-1996 in spite of the fact that both agreements were signed by the same person these facts leads to the conclusion that the said arrangement of lease and sublease is not bona fide genuine - against assessee Disallowance of depreciation on renovation - ITAAT allowed it - Held that:- As the transaction of lease and sub lease was proved to be bogus no question of allowance of depreciation arises here - against assessee
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2012 (9) TMI 482
Gift from NRIs - Department queried about financial capacity of the donors to make the gift(s) - Held that:- As the ITAT has only stated that the two donors were assessed to tax at Singapore but not at all answered about the financial capacity of the donors this not answer the query raised by the Department. The burden is on the assessees to show that the amount received by purported gift(s) from the two donors was a "gift" in the legal sense who contended that no opportunity was given to prove their case - the impugned Orders of the High Court and the ITAT is set aside and ITAT is directed to re examine - open to the assessees to produce relevant evidence in the light of case of Commissioner of Income Tax vs. P. Mohanakala [2007 (5) TMI 192 - SUPREME COURT] transactions though apparent were held to be not real ones. May be the money came by way of bank cheques and was paid through the process of banking transaction but that itself is of no consequence - in favour of Revenue by way of remand.
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2012 (9) TMI 481
Claim of revenue expenditure u/s 37 - assessee had actually imported the "knowhow" - claim of the assessee for deduction of earlier years' expenditure pertaining to AY 1991-1992 cannot be allowed in AY 1992-1993 - Held that:- No view on the applicability of Section 35AB or Section 37 is required as during the pendency of this civil appeal, the assessee has got deduction u/s 37 as claimed, thus at this point of time, it would not be fair to ask the assessee, who has already got deduction under Section 37 to re-work and claim the benefit under Section 35AB on the basis of amortization of capital expenditure - against revenue.
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2012 (9) TMI 480
Texturing and twisting of polyester yarn - Denail of deduction u/s 80IA - Held that:- As decided in C.I.T., Mumbai Versus M/s. Emptee Poly-Yarn Pvt. Ltd. [2010 (1) TMI 18 - SUPREME COURT OF INDIA] if an operation/process renders a commodity or article fit for use for which it is otherwise not fit, the operation/process falls within the meaning of the word "manufacture - polyester yarn is a semi-finished product, it is a raw material/input. That raw material or input gets converted into a texturised yarn by reason of the thermo mechanical process held as amount to manufacture - in favour of assessee.
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2012 (9) TMI 479
Partial denial of deduction u/s 33AC - remanding the case back to the file of the Commissioner - Held that:- As decided in CIT Vs. Ganesh Builders [1977 (3) TMI 11 - BOMBAY HIGH COURT] in a case like where alternative arguments on facts are possible and varying findings can be given, it is desirable that the appellate authority gives all findings of fact and not dispose of the matter merely on a point of law. This would facilitate final disposal of the matter by the High Court, whose jurisdiction is limited merely to the question of law by the added Chap. XX-A. Here in this case the ITAT has dealt with the finding that ITAT which was hearing an appeal from the order of the Assistant Commissioner of the Income Tax has substantially dealt with the ground no.2 referred to in the first para of its order and while deciding the ground no.2 against the appellant has also set aside the finding on the aforesaid question in the appellant's favour without substantially considering the same - the order in appeal of the ITAT is hereby set aside and the matter is remanded back to the ITAT for a fresh consideration.
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2012 (9) TMI 478
Disallowance of interest paid on borrowed loans on a pro-rata basis - ITAT allowed it - Held that:- As decided in DEPUTY COMMISSIONER OF INCOME-TAX Versus CORE HEALTH CARE LTD. [2008 (2) TMI 8 - SUPREME COURT OF INDIA] interest paid on borrowed funds has to be allowed in terms of Section 36(1)(iii)which provides that deduction should be allowed in respect of payment of interest on amounts borrowed even in respect of capital used for the purposes of business or profession - As in the present facts, there could be no dispute that the respondent-assessee was in the business of running business centers and the borrowed capital on which interest was paid was utilized for the purpose of constructing/establishing further business centers - thus the interest paid has to be allowed as deduction u/s 36(1)(iii) as in existence during the assessment year 1999-2000 as a transaction of borrowing is not the same as a transaction of investment - in favour of assessee. Disallowance of repairs and maintenance charges - ITAT allowed it - Held that:- The appellant is in the business of running business centres which are required to be kept in proper condition with appropriate ambiance. Therefore, expenses on account of repairs and maintenance is an on going process for a business such as the one run by the respondent assessee. Further, the quantum of amount spent can never be a factor by itself to conclude that the expenses are of a capital nature and not expenses on revenue account. Thus the expenses are incurred not for bringing any new asset into existence and therefore the expenditure is incurred not on capital but revenue account - in favour of assessee.
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2012 (9) TMI 477
Addition on account of undisclosed gold ornaments - Held that:- Some of the jewellery was belonged to the assessee - The balance jewellery belonged to his wife and daughter and source of acquisition was explained - partly in favour of assessee. Undisclosed Investments in shares & securities to be from - Held that:- The assessee’s wife as well as his daughter had disclosed all the shares and securities in their respective returns which had been filed before the date of search. - Decided in favour of assessee. Addition on expenditure on furniture and renovation was made only statement recorded u/s 132(4). Thus, there is no basis of addition of ₹ 1,15,000/- and CIT(A) was not right in confirming the addition - in favour of assessee. Expenditure on Religious fuctions - Held that:- appellant had not explained the source of expenditure on religious function. - the addition of ₹ 30,000/- on account of religious function - against assessee. Addition on Expenditure on tour to Singapore & Goa - Held that:- The appellant had not filed any evidence regarding Singapore as well as Goa tour for explaining the source of expenditure. Therefore, CIT(A) was right in confirming the addition - against assessee. Addition on Household Expenses - Held that:- CIT(A) was right in holding the addition of ₹ 30,000/- on account of household expenditure - against assessee. Addition on account of stamp paper purchase - Held that:- Persuing the statement u/s 132(4) the assessee had hardly purchased stamps valued ₹ 710/- during the year under consideration and remaining stamps were either purchased by other parties or purchased by the assessee in different years. Thus, the CIT(A) was not justified in holding the addition of ₹ 13,650/- - in favour of the assessee. Addition on account of speculative trading - Held that:- It is evident from the documents seized that some of the dividends slips were in the name of assessee and his family members. - the estimate made by the A.O. appears to higher side further the assessee had disclosed shares and securities in the name of the family members in their return. Therefore the CIT(A) order is confirmed to the tune of ₹ 7,00,000/- instead of ₹ 15,00,000/- - partly in favour of assessee. Addition on account of payment made to Modern Engineering and Moulding Company - Held that:- It is undisputed that this transaction is in the name of Assessee’s daughter who was assessed to tax and had own source of income. The payments were made though drafts which were not pertained to year under consideration. Therefore, CIT(A) was not justified in confirming the addition - in favour of assessee. Estimation of professional income on the basis of general client ledger found at the time of search - Held that:- Except client general index register, nothing incriminating document was found whereas the appellant had admitted that he was not reflected full income in the regular books of account. - the addition made by the A.O. appears to higher side, therefore the addition under this head is confirmed to ₹ 2,00,000/- & remaining addition of ₹ 3,33,500/- is deleted - partly in favour of assessee.
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2012 (9) TMI 476
Addition to income on account of Indra Vikas Patra found from locker – AO issue notice u/s 148 on the basis of CBI raid - Held that:- Though assessee is also director in Company. The investment and income from IVPs has been duly reflected in the balance sheet & P&L of the company. As IVPs assessed in the hands of company then how these IVPs can assess in the hands of assessee. And there was nothing wrong to keep IVPs which are bearer in nature in the personal locker of directors. Appeal decides against department.
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2012 (9) TMI 475
Disallowance of commission expense - AO issue notice u/s 133 to service provider for examination in respect of commission income - Notice could not be severed due to change in name of payee’s companies at the address provided - AO directed assessee to produce service provider - Assessee unable to produce payee - Submit certificates along with replies from payee - Assessee submit details such as payment through cheque, TDS has been deducted & deposited, commission shown as income in ITR of recipient and confirmations along with agreements - Held that:- As assessee submit details such as payments were made by cheques and after deduction of TDS and the income was reflected in returns of income. If notice could not be served due to change in name of Company, then fresh notice needs to be issue with new name of recipient. Therefore, AO has to use his powers to issue notice u/s 133 of summon regarding examination of the payee.Case remand back to AO for fresh examination. Can genuine business expenditure disallow merely because of wrong nomenclature - Assessee receives fund to finance its project - Assessee paid him certain sum which is compensatory in nature for providing fund & shown as commission expense - TDS has been deducted & also shown as income in return of recipient - Held that:- As the recipient confirmed the receipt, on which TDS deducted & shown as income in his return. Therefore it is genuine business expenditure of the assessee though wrongly claimed by assessee as commission expenditure. Decided in favor of assessee.
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2012 (9) TMI 474
Addition on account of accommodation entries - Reopening of assessment u/s 147 - Weather notice u/s 148 can be issued on the basis of information which AO already have – AO issue notice u/s 143(2) and 142(1) – Assessee did not appear before the AO - AO re-assess income u/s 144 read with section 147 – Held that:- During assessment u/s 143(3) AO gets information about search from investment wing before completion of assessment u/s 143(3) - Assessing Officer did not get any chance to examine the depositors – Case remanded back to AO
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2012 (9) TMI 473
Disallowance of Provision for doubtful debt - Assessee is an NBFC – Assessee claim provision for doubtful debts as per RBI guidelines – Held that:- Following Special Bench decision of ITAT in the case of New India Industries Ltd. (2007 (10) TMI 325) and wherein it was held that RBI Act do not over-ride the provisions of the Income Tax Act, 1961 so far as compliance of Income tax provisions are concerned. Therefore, provisions for bad and doubtful debt though statutorily required under the RBI guidelines do not qualify for deduction as business expenditure. Appeal decides in favour of revenue Disallowance of expenses attributable to exempted income u/s 14A - Assessee had earned interest on bonds exempt u/s 10(23G) – Held that:- AO had to first give finding as to the fact that he is not satisfied with the correctness of the claim in respect of such expenditure. While rejecting the claim of assessee with regard to expenditure or no expenditure as the case may be in relation to exempt income, the AO would have to indicate cogent reasons for the same. Therefore case remand back to AO. Disallowance of excess depreciation being @ 40% on vehicles - Assessee had claimed depreciation on motor lorries/taxis and motor cars at higher rate of 40% in case of motor lorries/taxies instead of 20% - There was no fresh leasing transactions have been undertaken in the assessment year - 40% has been allowed by the Tribunal in previous assessment year – Held that:- As decided by Delhi High Court in case of MGF (2006 (7) TMI 125) that vehicles owned by a NBFC leased to third party are eligible for higher rate of depreciation @ 40%. Appeal decides in favour of assessee. Addition on account dividend income – Assessee claim exemption u/s 10(33) for the period 1999 to 2007 - AO made addition on the basis that dividend income during that year was not exempt as section not applicable to assessment year 2003-04 – Held that:- AO did not talk about sec. 10(34) or sec. 80M, as same was applicable for the respective year. Since the claim of assessee was not examined by the Assessing Officer u/s 80M. Case remand back to AO. Charging of interest u/s 234B & 234D and withdrawal of interest u/s 244A – Held that:- As charging of interest u/s 234D is not applicable to the said assessment year. As regards interest u/s 234B and 244A, These are of consequential nature and the determination of interest under these sections will depend upon the final outcome of the case. Appeal decides in favour of assessee.
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2012 (9) TMI 472
Addition on account of membership subscription from its members by society – Held that:- As the assessee meets all the three conditions which are that the assessee is a registered society, the members of which has come together for fulfillment of a common cause, secondly the appellant exists for the benefit of members only and thirdly there is prohibition on distribution of profit to any past or current members and on winding up, the surplus remains the properly of its members. Therefore assessee’s society is covered by the doctrine of mutuality and this amount was not taxable in view of judgment by Bombay High Court in case of Willingdon Sports Club (2008 (3) TMI 134). Decided in favour of Assessee. Addition on account of Grant received from Govt. of India – Capital Grant which is 50% of cost of project, received by society towards cost of setting up integrated waste management facility for all the members – Held that:- In the case of mutual concern, income received from the members is exempt and the income received from nonmembers is taxable. The amount is a capital receipt and is not liable to tax. Taxability depends upon whether it was received from members or nonmembers is not correct because as per the provisions of Income tax charging of tax comes into picture only when the nature of receipt is revenue and no capital receipts are taxed. Decision in favour of assessee. Addition on account of interest income – Assessee had claimed that it is following cash system of accounting - Booked income as and when it is received - Held that - In view of existence of concept of mutuality and in view of various judicial pronouncements relied upon by assessee, the interest income whether booked on cash basis or on receipt basis is exempt in the case of assessee is a society. Decision in favour of assessee.
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2012 (9) TMI 471
Validity of notice issued u/s 148 - Notice u/s 148 was issued by any other ITO on the basis of information from DIT(Investigation), who does not jurisdiction over assessee - Whether the reassessment framed by the AO, in pursuance to a notice u/s 148, issued by ITO, who did not have jurisdiction over the case of the assessee, is valid or invalid –- Held that:- The basic requirement u/s 147 is that the AO has reason to believe that any income chargeable to tax has escaped assessment. Reason to believe must be that of the concerned AO, having jurisdiction over the case, who has relevant returns and other material in his possession. Such belief can be of jurisdictional AO alone and not of any other AO or authority. Therefore, It is well-settled that if a notice u/s 148 of the Act has been issued without the jurisdictional foundation u/s 147 of the Act being available to the AO, the notice and the subsequent proceedings will be without jurisdiction and thus, liable to be struck down. Decision in favour of assessee
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2012 (9) TMI 470
Disallowance of expense on account of late deposit of TDS u/s 40(a)(ia) – Whether provision amended by finance act. 2010 in respect of Sec. 40(a)(ia) is applicable prospectively or retrospectively – Assessee has made the payment of TDS in the next F.Y in respect of payments made/credited before March – As per AO, assessee’s claim such expenses in the next year therefore made addition – Held that:- Following the decision of Hon’ble Calcutta High Court in case of VIRGIN CREATIONS (2011 (11) TMI 348), that amendment to the provisions of Sec.40(a)(ia) of the Act, by the Finance Act, 2010 is retrospective from 1.4.2005. Consequently, any payment of tax deducted at source during previous years relevant to and from AY 05-06 can be made to the Government on or before the due date for filing return of income u/s.139(1) of the Act. Decision in favour of assessee.
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2012 (9) TMI 469
Addition on account of unrealized gain from forward contract – Offered for tax by the assessee - Corresponding entry is also disclosed as ‘Unrealized Profit on Forward Exchange Contracts and Financial Instruments’ as “Loans and Advances” in Balance sheet – Held that:- As the assessee has already offered the impugned amount in its audited accounts therefore, again addition of the same will lead to double taxation. Decision in favour of assessee. Legal and professional charges, capital or revenue in nature – Fee paid to advocates for SLP filed before the Supreme Court, die modification charges and payment of court fees - Held that:- As the assessee had not obtained benefit of any enduring nature by way of this expenditure. These expenditures which are incurred in the ordinary course of business have to be allowed to the assessee and the same cannot be disallowed by treating the same as capital in nature. Decided in favour of assessee. Disallowance of depreciation u/s 32 – Rate of depreciation on computer accessories and peripherals - Held that:- Following the decision of Delhi High court in case of BSES Rajdhani Powers Ltd. (2010 (8) TMI 58), that computer accessories and peripherals such as, printers, scanners and server etc. form an integral part of the computer system as they cannot be used without the computer. Hence, same are the part of the computer system and entitled to depreciation at the higher rate of 60%. Decision in favour of assessee.
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2012 (9) TMI 468
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 467
Disallowance u/s 14A r/w Rule 8D - Do Rule 8D read with Section 14A apply retrospectively – Section 14A, as introduced by virtue of the Finance Act, 2001, was with retrospective effect from 01.04.1962. Rule 8D, which was introduced by virtue of the Notification No.45/2008 dated 24.03.2008. Held that:- Following the decision of Delhi High Court in case of Maxopp Investment Ltd. (2011 (11) TMI 267) & Bombay High Court in case of Godrej & Boyce Mfg. Co. Ltd. (2010 (8) TMI 15) that Rule 8D of the which was introduced by virtue of Notification No.45/2008 dated 24.3.2008 is prospective in operation and cannot be regarded as being retrospective. Therefore provisions of Rule 8D shall apply with effect from assessment year 2008-09 onwards. The Order of CIT (A) & AO is perverse and supported by misinterpretation of the provisions of the Act and rules made thereunder. Case remand back to AO.
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2012 (9) TMI 466
Whether the amounts (representing salary and benefits payable by GTE-OC to expatriate employees) reimbursed by the applicant to GTE Overseas Corporation, ('GTE-OC') is 'income' accruing to GTE-OC and, therefore, whether the same is liable to deduction of tax in accordance with the provisions of section 195 of the Income tax Act – Held that:- The question as to whether the receipt is really an income or reimbursement is a pure question of fact, which has to be arrived at based on the various clauses in the agreement between the parties. In the context of the discussion in paragraph 13 of the order of the Advance Rulings Authority, we have no hesitation in rejecting the plea of the assessee. - Decided against the assessee.
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2012 (9) TMI 465
Condonation of delay of 290/287 days in filing appeals - According to the applicant, Assessing Officer was directed to forward all relevant documents with his comments through the office of the Additional Commissioner which was received by him (Assessing Officer) on October 9, 2007 - Assessing Officer, meanwhile, got seriously preoccupied in the work for "completing 99 time barring assessments arising out of search and seizure cases by December 31, 2007". As the exercise was voluminous and complex in nature, there was a considerable delay in processing the same, the situation being compounded by acute shortage of staff in the office of the Assessing Officer – Held that:- As the situation was beyond his control, the Assessing Officer, eventually, dispatched the relevant documents for filing the appeals as contemplated to the office of the Commissioner, which was received by him on January 11, 2008 - thereafter, his office wrote to the standing counsel of the Department on the same date seeking his opinion regarding the advisability of filing an appeal under section 260A of the Act - delay of 290/287 days in preferring the accompanying appeals is hereby condoned
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Customs
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2012 (9) TMI 464
Provisional release of the goods - import of silk yarn - Held that:- As the value of the silk yarn imported by the petitioner, from Vietnam, had been fixed, as USD29.5 per kilogram the respondents are directed to release the goods in question on the petitioner paying the customs duty equivalent to 75% of the value of the goods, as fixed by the authorities concerned, at USD29.5 per kilogram. For the balance 25% of the customs duty payable by the petitioner, the petitioner shall furnish a personal bond to the satisfaction of the respondents.
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2012 (9) TMI 463
Import of goods – rejection of transaction value – goods were imported by the appellant from a trading company at Macau and the goods were found to be of Chinese origin - goods were described in the import invoice as ceiling lamp, wall lamp etc. 100% examination of the goods revealed that the ceiling lamp was fitted with bulb & CFL - Revenue entertained a view that the goods were mis-declared and there was an incomplete declaration. They also felt that on above account the invoice did not reflect the correct value – Held that:- There is virtually no evidence on record to reject the transaction value. Further there is neither any reference nor any evidence to the effect that the importer has paid any under hand consideration to the supplier of the goods - no reference to any contemporaneous goods - no justifiable reasons to reject the transaction value and to enhance the value of the goods in question - imposition of separate penalties on the proprietary firm as also on the Proprietor is against the settled principles of law
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2012 (9) TMI 462
Classification – import of goods - scrap of iron & steel/re-rollable as well as reusable - department alleged that the goods classified under the Chapter 73 were restricted items and per EXIM policy – Held that:- Goods were old and used cut pieces, and cuttings etc. of various articles of iron and steel. Hence the same were in fact melting steel scrap, which is classifiable under Chapter 72 - Revenue’s appeal rejected
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Corporate Laws
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2012 (9) TMI 461
Winding up proceedings - BIFR finally vide order dated 23rd February, 2000 recommended winding up of the company. - on initiation of winding up proceedings, the ex-directors of the company filed an application stating that they have taken steps to settle the matter with the creditors and workers. - winding up was stayed - Held that:- the company got a life line for the third time. The first one was before the BIFR; the second one was when they entered one time settlement with the PNB and the third when they entered into agreement with ACE Ltd. The company again defaulted. The scheme was propounded way back in 2005. The scheme original propounded was based on OTS payment for PNB. The said OTS payments were not made. Payments were ultimately made to PNB by ACE Ltd. in terms of the deed of assignment. It appears that Directors of the company are in occupation of the residential accommodation belonging to the company in Delhi measuring 3000 square yards. They are using and residing in the said residential property without making any payment. The workers in their application CA 117/2004 had made a claim of more than R.5.45 crores along with details. We do not think the scheme as propounded can be implemented and enforced today. - Company to be wound up.
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Service Tax
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2012 (9) TMI 491
Commission agent - service tax demand and equivalent amount of penalty imposed u/s 78 - Held that:- Considering the agreement entered between company and applicant it is concluded the applicant was appointed as a sole distributor for marketing the products in the state of Sikkim on behalf of them. From a conjoint reading of clause 11 and 12 along with clause 7 of the said agreement, prima facie, it would be difficult to appreciate that the relations between M/s.YBL and the applicant are that of a seller and purchaser as if the beer is sold at a price to the applicant and the applicant ultimately sales to retailers, then in that event, the applicant is eligible to a discount on the invoice itself or on some conditions subsequent to the event of sale. Besides, clause 12 indicates that the applicant is required to collect the sale proceeds from the retail sale of the goods and to deposit the same to company's Bank account Scrutinizing the balance sheet and ledger maintained by company wherein the amount had been paid to applicant was shown as commissions on sales and sales promotion expenses, a fact not controverted by the applicant. In these circumstances, the applicant could not able to make out a prima facie case for waiver of entire amount of duty and penalty - assessee not pleading on financial hardship direction to deposit 25% of the Service Tax involved in this case within a period of 8(eight) weeks from the date of communication of this order.
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2012 (9) TMI 490
Clearing & Forwarding Agent services - Stay filed for waiver of pre-deposit - Held that:- As decided in appellant's own case in Gudwin Logistics Versus Commissioner of Central Excise [2011 (12) TMI 262 - CESTAT, AHMEDABAD] for no liablity to pay service tax for the period 01.04.2009 to 31.03.2010 has held in favour of the assessee and hence the Stay Petition for waiver of pre-deposit of amounts involved is allowed and take up the appeal itself for disposal - in favour of assessee.
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2012 (9) TMI 489
Waiver of pre-deposit of service tax, penalty - services received by assessee from legal professionals, trade mark, consultants, advertisement charges and also for business auxiliary services, technical testing etc. – Held that:- as regards to legal professional charges there cannot be any demand on service tax on such services rendered prior to 7.9.2009. As regards the demand of service tax on advertisement charges, it needs to be considered as the issue is arguable one, and can be considered at the time of final disposal of the appeals. Applicants directed to deposit an amount of Rs.2 lakhs condition of the pre-deposit of the balance amounts involved is waived
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2012 (9) TMI 488
Penalty – Held that:- Education Cess is meant for specific purpose i.e. for welfare of the state, the appellant is not entitled to get credit of the same - Looking to the welfare aspect of the law, there should not be penalty on the appellant under Section 76 of the Finance Act, 1994 - appeal is partly allowed annulling penalty.
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Central Excise
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2012 (9) TMI 460
Imposition of equivalent penalty u/s 11AC - Held that:- As the adjudicating authority has imposed penalty of Rs.4 lakhs under various Rules read with Section 11AC of Central Excise Act, 1944 and this order of the adjudicating authority was not challenged by the Department before the first appellate authority, the Revenue cannot agitate the issue for imposition of penalty under Section 11AC - against revenue.
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2012 (9) TMI 459
Denial of cenvat credit of courier services - Held that:- The first appellate authority has considered the issue on a presumption that the appellants were dispatching the final products to their customers and it is on F.O.R. basis. It is the findings that the appellant also recovered the cost from the courier services for any damages on the way as there is no contract between the customer and courier company. Accordingly, in terms of Board's Circular No.97/8/2007-ST dated 23.08.97 they are eligible for Cenvat Credit of service tax paid on courier services. As the documents indicate that the appellant had utilized the services of courier for sending the samples to their overseas customers for approval to remit the matter back to the adjudicating authority only to verify the factual detail as to whether the credit availed by the appellant of the service tax paid on the courier services is in respect of dispatch of the sample or otherwise - in favour of assessee by way of remand.
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2012 (9) TMI 458
Whether Excise Tribunal right in holding that minimum penalty should have been 100% of the excise duty leviable – Held that:- Exercise of such power by way of subordinate legislation is not permissible when rule making authority for levying penalty is limited to default “with intent to evade duty” - Section 37, which is the rule making power, is clear that penalty can be imposed only when the assessee is guilty of intending to evade the payment of duty, the penalty cannot be imposed without such intention. Furthermore, even when intention may be there, the penalty must be reasonable and cannot, in all cases, be fixed at 100% of the excise leviable – against revenue Provisions of Section 96ZO permitting the minimum penalty for delay in payment without any discretion and without having regard to extent and circumstances for delay are held to be ultra vires of the Act
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2012 (9) TMI 457
Demand of duty and penalty - warehousing of Petroleum products - storage loss beyond the permissible limit of 0.5% - applicant neither paid any duty on it nor mentioned such losses in the monthly return which was beyond the permissible limit - applicant has contended the cumulative losses for the month may be calculated for all the storage tanks – Held that:- No set off of a gain or loss in a tank is permitted against the loss or gain in another tank - applicant has not furnished specific reasons for more losses in certain storage tank. Therefore there is no ground for condoning losses exceeding the permissible limit – demand and penalty confirmed
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2012 (9) TMI 456
Duty demand and penalty - demand has been confirmed on the ground that since the price for 2 nos. of ‘Demo Bikes’ was 50% lower than the price fixed for retail customer, the price was not the sale consideration for sale – Held that:- Assessees have not been able to demonstrate any difference between the ‘demo bikes’ and the ‘normal bikes’ sold to dealers - The demo bikes are put to test and usage as desired by prospective buyers and the assessees also permits such usage to enhance the marketability of their bikes to overcome their competitors in attracting customers - transaction value cannot be accepted and the value of normal bikes has correctly been adopted and differential duty charged thereon - appeal is partly allowed by upholding duty demand and interest but setting aside penalty.
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2012 (9) TMI 455
Demand of excess paid drawback – applicant initially filed claim for drawback as per brand rate fixed by the LTU, Bangalore, which was sanctioned by the original authority - Subsequently the LTU, Bangalore revised/refixed brand rate of drawback in case of the applicant – Held that:- Once the brand rate is revised by the proper authority; the original authority i.e. drawback sanctioning authority was required to take consequential action w.r.t. revision of brand rate. As such, the Drawback sanctioning authority was right in demanding excess paid drawback in terms of Rule 16 of Drawback Rules, 1998. Decision in M/s. Indian DyeStuff Industries Ltd. v. UOI (2002 (2) TMI 132 - HIGH COURT OF BOMBAY) followed.
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Indian Laws
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2012 (9) TMI 487
Motor Vehicles Tax Act, 1974 - Compensation to the plaintiffs - plaintiffs purchased a Truck Bearing No. 3386 in public auction held by defendant no. 4 on 3rd June, 1986 by paying full amount for which the plaintiffs had bidded - truck was seized by Customs Authorities on 30th August, 1982 on the ground that contraband was being carried in the said truck - Directorate of Transport had informed that the Customs Authorities have informed that the vehicle was seized by them on 30th August, 1982 and that transferee is liable to pay the outstanding taxes. It was also stated that the vehicle could not be transferred unless no objection certificate was produced from the Union Bank of India, Panaji since the vehicle was under hire purchase agreement with the bank – Held that:- Plaintiffs ought to have paid the taxes claimed by the Department under protest. In my considered opinion, in view of the admitted position that NOC from the financier was not obtained at the time of seeking transfer of the vehicle in the name of plaintiff no. 1, no fault can be found with respondent no. 2 in not transferring the vehicle in favour of plaintiff no. 1 - mere fact that defendant nos. 1 and 2 have not challenged that part of the decree by itself would not be sufficient to grant relief of compensation in favour of the plaintiffs solely on the ground that the relief of registration of vehicle in favour of the plaintiffs has been granted by the trial Court - as it rejected the prayer for compensation cannot be faulted - appeal stands dismissed
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