Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
September 26, 2012
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
Wealth tax
Indian Laws
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Income-tax (12th Amendment) Rules, 2012. - Insertion of Rule 21AB & Form Nos. 10FA & 10FB - Notification
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Amendment in Rule 17C of Income Tax Rules, 1962 - Notification
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Block assessment - no substance in the contention of the revenue that the assessee may require to prove the source of income all over again, even if no incriminating material has been found in the search - HC
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Diversion of income by overriding title - amount paid by the assessee to wife of deceased partner of the firm - deduction allowed - AT
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Whether sale of shops, duplex & bungalow developed on agriculture land by developer under agreement amount to business income under head PGBP or Capital Gain - AO to compute business income and capital gains - AT
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Deduction u/s 80IA - assembly of sharpeners - there is no merit in the argument of AO that it is a “simple manual process”, which does not qualify for the deduction. - AT
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Rejection of books of account u/s 145 - audit report mentioning fact that there was no requirement for deduction of TDS on hire charges paid which was below the prescribed limit, cannot be accepted in the absence of books of account - AT
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Provisions of sec. 40(a)(ia) are applicable only to the amounts of expenditure which are payable as on 31st March of every year and it cannot be invoked to disallow the expenditure which had been actually paid during the previous year without deduction of TDS - AT
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The findings that the three demand drafts were by way of accommodation entries of the unaccounted moneys of the assessee does not suffer from any error of law - HC
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Assessee was merely a labour contractor. - not entitled for benefit u/s 32A(2)(b) in respect of investment allowance. - SC
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Accrual of income is matter of fact to be decided separately for each case - The same cannot be stated as an accounting policy - AT
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Additional tax u/s 143(1)(a) - assessee claimed deduction, which were not permissible, and thereby not only tried to reduce the income to Nil, but also to carry forward the loss. - additional tax confirmed. - HC
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Receipt of compensation on termination of distributorship agreement is in the nature of revenue receipt - HC
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Weighted deduction u/s 35B - Mere obtaining of a packing credit loan or payment of interest thereon in India cannot be said to entail the performance of any service outside India. - not deductible - HC
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Deduction u/s. 80IB(11A) - assessee is simply handling and transporting the food grains and storing at the godowns of the FCI - no deduction - AT
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Block assessment - it was not clear as to what nature of the seized diaries were examined by the AO and how he satisfied himself that these diaries belong to the appellant firm. - additions made on protective basis need to deleted - HC
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There is no provisions in the Income Tax Act, 1961 which makes it mandatory for a person for maintaining the books of accounts at his residence or at his business premises - HC
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Addition on account of Same opening & closing balances of creditors in a FY - opening balances have been duly explained by the assessee. - no addition - AT
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Addition on account of difference in stock found during survey u/s 132 - As the discrepancy could not be reconciled and satisfactorily explained by assessee, addition upheld - AT
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An appeal against an order passed by an officer of the rank of Commissioner Income Tax under Section 271FA is maintainable before the Commissioner Appeals. - HC
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Non deduction of TDS on freight charges - as the assessee had not produced any material to establish the contention of the assessee, but from making a bald assertion, thus the disallowance was on facts - against assessee - HC
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As the income on account of the upfront appraisal fees was business income and as the respondents did not have a permanent establishment in India, the same could not be charged to tax in India under Article 7 of the DTAA - HC
Customs
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Purchase of goods under auction - recovery of customs duty from the purchaser is not valid since it was neither purchased from a bonded warehouse or nor been imported by the purchaser - HC
FEMA
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Foreign Exchange Management Act, 1999-Import of gold in any form including jewellery made of gold/precious metals or/and studded with diamonds/semi-precious/precious stones - clarification - Circular
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Know Your Customer (KYC) norms/Anti-Money Laundering (AML) standards/Combating the Financing of Terrorism (CFT) Obligation of Authorised Persons under Prevention of Money Laundering Act, (PMLA), 2002, as amended by Prevention of Money Laundering (Amendment) Act, 2009 – Money changing activities - Circular
Corporate Law
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Companies (Central Government's) General Rules and Forms (Fifth Amendment) Rules, 2012 - (Form 23AC & 23ACA) - Notification
Indian Laws
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CONSOLIDATED FDI POLICY (EFFECTIVE FROM 10-4-2012) updated upto 22-09-2012
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The establishment of Permanent Lok Adalats and conferring them jurisdiction upto a specific pecuniary limit in respect of one or more public utility services as defined in Section 22-A(b) before the dispute is brought before any court by any party to the dispute is not anathema to the rule of law. - SC
Wealth-tax
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Assets were forfeited on 8.6.1979 - forfeiture came to an end only on 24.6.1992 - when the subject assets did not legally belong to the assessee during the period under consideration, the same could not have been included while computing his net wealth. - HC
Service Tax
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There is no ruling of any Court or Tribunal or any circular of CBEC to the effect that a service provider can pay service tax or VAT at his option. - AT
Central Excise
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Assessable value - correct method to arrive at assessable value for the goods captively used by sister unit in manufacturing of final product is only CAS-4 - AT
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Cenvat Credit on capital goods - stored at administrative office before shifting to manufacturing premises - credit allowed - HC
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Return of rejected goods - credit taken on the basis own invoice - the assessee would not have any document issued by others but can take credit only on the basis of his own invoice - AT
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In respect of the goods manufactured during the period when the appellant was not registered, credit can be taken subsequently also. - AT
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Payment of Service tax was not made through challan instead the payment was made through debit entry in the Cenvat credit account - cenvat credit allowed on the basis of debit entry - AT
Case Laws:
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Income Tax
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2012 (9) TMI 701
Additions in the block assessment - ITAT deleted the addition as no addition on the basis of facts declared in the regular return of income filed prior to the date of search - Reopening of assessment - Held that:- The search was not conducted at the premises of the respondent-assessee, and no incriminating material was found in the search conducted in the premises of Shri Narendra Kumar Khanna on the basis of which notices were issued to the respondent-assessee. In the block assessment, the undisclosed income is required to be computed on the basis of evidence found during the search, or being directly relatable to the evidence found in the search. When nothing was found during the search, which may suggest that the books maintained by the assessee were unreliable or doubtful, the Assessing Officer cannot rely upon the material disclosed by the assessee in the return of the relevant year for the purpose of computation under Section 158BB - As decided in CIT v. Ravi Kant Jain [2001 (3) TMI 52 - DELHI HIGH COURT] Chapter XIV-B is intended to provide a mode of assessment of undisclosed income which has been detected as a result of search. It is not intended to be a substitute for regular assessment. Its scope and ambit is limited in that sense to materials unearthed during search. It is in addition to the regular assessment already done or to be done. The assessment for the block period can only be done on the basis of evidence found as a result of search or requisition of books of account or documents and such other materials or information as are available with the Assessing Officer. Evidence found as a result of search is clearly relatable to Sections 132 and 132A - no substance in the contention of the revenue, that those assessments, which were not subjected to scrutiny, can be reopened and that the assessee may require to prove the source of income all over again, even if no incriminating material has been found in the search - against revenue.
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2012 (9) TMI 700
Denial of claim of deduction under Section 80IB (10) - non-fulfillment of the condition of limitation for built up area - whether the amendment to Section 80IB(10)(d) having been made effective from 1.4.2005 is to be held retrospective or prospective - Held that:- Section 80IB(10) originally indicated 100% deduction on the profits derived from housing projects approved by local authority subject to certain conditions set out in the provision. By virtue of the amendment having come into effect from 1.4.2005, deduction is permissible to housing project having residential units with commercial units to the extent permitted therein. As is very apparent form the record, there was no criteria for making commercial construction prior to the amended Section and the plans are approved as housing projects by the local authority for both the projects of the appellant. Permission for construction of shops has been allowed by the local authority in accordance with rules and regulations, keeping in mind presumably the requirement of large townships. However, the projects essentially remained residential housing projects and that is also quite apparent from the certificates issued by the local authority and, therefore neither on the ground of absence of such provision of commercial shops nor on account of such commercial construction having exceeded the area contemplated in the prospective amendment can be made applicable to the appellant assessee whose plans are sanctioned as per the prevalent rules and regulations by the local authority for denying the benefit of deduction of profit derived in the previous year relevant to the assessment year as made available otherwise under the statue. The entire object of such deduction is to facilitate construction of residential housing project and while approving such project when initially there was no restriction and by amendment as stated permissible ratio for construction is 5% of the total built up area, reduction of this ratio to 3% of the total built up area has to be necessarily on prospective basis - Criteria to hold this amendment retrospective are are absent as there is no as explicit and specific wording expressing retrospectivity and even if it is assumed for the sake of arguments that the same is to be read by implication the same does not appear to be reasonable but, in fact emerges to be harsh and unreasonable when it comes to implementation and as as held in the case of Mysore Minerals Ltd. vs. Commission of Income- Taxreported in [1999 (9) TMI 1 - SUPREME COURT] with two possibilities of interpretation of a taxing statute, one which is favourable to the assessee should be always preferred - in favour of the assessee
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2012 (9) TMI 699
Delay in 251 days of filing appeal - addition on undisclosed income - Held that:- The counsel who had filed the appeal before the Tribunal having furnished his affidavit accepting the cause of delay and the explanation being plausible leads to the conclusion that there was sufficient cause for delay in filing the appeal. Once that was so, the application for condonation of delay ought to have been allowed. As the appeal order as given to the Councel by the party was inadvertently placed in some other file because during that time there was heavy rush filing the income tax returns for the assessment year 2010-11 & due to great efforts, the said order to the CIT(A)- II Ludhiana was traced from the office in the second week of June, 2011 and therefore, the appeal is now being filed - The substantial question of law is answered by holding that there was sufficient cause for condonation of delay in filing the appeal before the Tribunal - matter is remitted to the Tribunal to adjudicate the dispute on merits - in favour of assessee.
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2012 (9) TMI 698
Charge on receipts - Diversion of income by overriding title - whether the amount paid by the assessee to wife of deceased partner of the firm is first charge on receipts of the firm in terms of clause 13 of the partnership deed executed on 1.4.2003 - Held that:- As decided in P. Bhumi Sudhar Nigam Vs. Commissioner of Income-tax (2004 (12) TMI 17 - ALLAHABAD HIGH COURT) that the principles relating to diversion of income by overriding title are (i) if a third person becomes entitled to receive an amount under an obligation of an assessee even before he could claim to receive it as his income, there would be a diversion of income by overriding title but when after receipt of the income by the assessee, the same is passed on to a third person in discharge of the obligation of the assessee, it will be a case of application of income by the assessee and not of diversion of income by overriding title - As in the present case there being an absolute contractual obligation imposed on the continuing firm/partners in terms of clause 13 of the partnership deed executed on 1.4.2003, the assessee firm is required to pay the amount @ 2% of the gross receipts subject to maximum of 3 lacs pa to Mrs. Mehru Menoo Shroof, wife of deceased partner of the firm and this amount being the first charge on receipts of the continuing firm/partners ,apparently, there would be a diversion of income by overriding title. Indisputably, a similar claim has already been accepted by the AO in the AY 2004-05 & 2006-07 no alternative but to allow ground in the appeal - in favour of assessee. Disallowance of General Repairs & maintenance expenses - Held that:- As the assessee has merely submitted a copy of ledger account in respect of expenditure exceeding above Rs.20,000/- each amounting to Rs.12,05,946/- while the details of expenditure below Rs.20,000/- are not available . Neither the AR nor the DR could explain the basis for disallowing the amount on repairs nor the impugned order is speaking one. Even the nature of repairs is not brought out in the impugned order nor it is stated that these repairs were current or otherwise. - Thus the order passed by the CIT(A) is cryptic and grossly violative of facets of the rules of natural justice for not passing a reasoned order, which should reflect application of mind by the concerned authority to the issues/points raised before it - issue remitted back to CIT(A) to pass a speaking order, keeping in mind the mandate of provisions of sec. 250(6) bringing out clearly the nature of repairs ,whether current or otherwise - in favour of assessee by way of remand.
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2012 (9) TMI 697
Disallowance of frauds loss - assessee a Banking company - Held that:- As per the contract between the investors and the broker, the broker was required to deliver the securities to the investors contracted for. During the year out of 27 syndication deals 12 deals could not be completed and remained outstanding. In all these cases the contract notes were issued to the investors by the broker. The assessee had only acted as a facilitator between the investor and the broker. In all these cases the broking firm failed to deliver securities after taking funds from the investors. As the assessee is in the business of Merchant banking activities and the expenditure has been incurred during the course of business and also a fact that the assessee was not legally liable to make the payment and compensate the investors but the assessee had compensated the investors, in these circumstances it cannot be said that the expenditure is not relating to the assessee’s business only for the reason that it was legally not liable to pay. Thus it can be considered to have been made as a matter of business expediency. The payment was made by the assessee to keep up the reputation of the assessee bank, to avoid long protracted litigation, to continue the business relationship with the PSUs and their employees, to increase the business in the long run, promoting its business and in the interest of business the compensation payments were made. Thus it can be said that the amount of compensation of ₹ 15.62 crores is an expenditure has been incurred wholly and exclusively for the purpose of assessee’s business - As far as the payment of penalty of ₹ 5 lacs pursuant to the order of RBI is concerned, relying on the decision of Apex Court in the Maddi Vankataraman (1997 (12) TMI 3 - SUPREME COURT) held that expenditure incurred for evading the provisions of the Act and also the penalty levied for such evasion cannot be allowed as deduction u/s 37 and in view of the fact that the penalty was levied for violation of Banking Regulation Act, the same cannot be allowed as deduction - partly in favour of assessee. Deduction in respect of professional fees paid for implementation of Visa Module and FM support to base 24 switches & upgradation of ATMs - allowed depreciation at the applicable rates - Held that:- On perusing the Assessment order it has stated that the assessee is allowed depreciation at the applicable rates depending upon the date put to use. In view of these facts the AO is directed to verify the records and grant depreciation on the additions made, if not already allowed - in favour of assessee for statistical purposes. Disallowance u/s. 14A - Held that:- As during the year the assessee has earned interest of ₹ 17.45 crore on tax free bond and debentures as against which the assessee had suo moto disallowed ₹ 5.53 crore being the interest expenses u/s 14A as against which the AO has worked out the disallowance of ₹ 32.76 crore. After giving the credit of disallowance of ₹ 5.53 crore made by the Assessee, the AO disallowed ₹ 27.23 crore u/s 14A. As on 31st March 2003, the interest free funds available with the assessee was to the tune of ₹ 3404 crore (comprising of share capital of ₹ 230 crore, Reserves of ₹ 689 crores and interest free demand deposits of ₹ 2485 crores) as against which the tax free investments were to the tune of ₹ 589 crore. Thus the interest free funds were far in excess of the investments - as the assessee has suo moto disallowed ₹ 5.53 crore u/s 14A no further disallowance over and above than what has been disallowed by the Assessee is called for - in favour of assessee. Disallowance of deduction of bad and doubtful debts u/s. 36(1)(vii) - Held that:- As decided in assessee's own case that while working out the deduction u/s 36(1)(vii), the opening credit balance i.e balance brought forward as on 1st April of the relevant accounting period needs to be reduced - Since the issue in the present appeal is identical to that of AY 2001- 02 similar view is to be taken and accordingly direct the AO to examine the matter and allow the claim in accordance with the order of the tribunal - in favour of assessee for statistical purposes. Disallowance of Compensation for non occupation of the premises - Held that:- The assessee had contracted with landlord to take a premise on lease for opening its branch though no formal agreement with the landlord was entered into & before the construction was completed the assessee was of the view that the overbridge will cause hindrance to conduct the business and services accordingly it decided to terminate the understanding with the assessee compensated the landlord by making a payment of ₹ 6 lacs in full and final settlement of all its claims. Thus from the facts it is clear that the transaction in respect of which the compensation was paid arose during the course of business and was for the purpose of business. The expense has been incurred by the assessee to protect its interest and in lieu of the claims that could have been raised by the landlord - in favour of assessee. Disallowance of fees paid to KPMG and traveling expenses - no prior permission was received from RBI before incurring such expenses - Held that:- As the submissions and case laws relied by the assessee CIT (A) has given a finding that the expenses are of revenue nature and were incurred for the expansion of existing business and accordingly deleted the addition made by the AO and the Revenue has not controverted the findings of CIT(A) nor has brought on record any material to the contrary - in favour of assessee. Disallowance of computer cabling expenses - Held that:- CIT(A) has given a finding that the expenses on shifting of telephone line from one leased premise to another does not result into any new advantage to the assessee and the lease is liable to termination in case of default of assessee. No reason to interefere in the order of CIT(A) arises - in favour of assessee. Disallowance of professional services - Held that:- Considering the assessee's submission that that the payments are in the nature of annual subscription, service charges and for expenses similar to AMC charges & analyzing the vouchers of the expenses CIT(A) deleted the disallowance except of ₹ 34.35 lacs paid to FSSPL and as Revenue has neither been in a position to controvert the findings of CIT (A) nor has brought any material to the contrary - in favour of assessee.
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2012 (9) TMI 696
Capital introduced by the partners added u/s.68 - CIT(A) deleted it - Held that:- CIT (A) has given a finding that the capital was brought by cheques, both the partners were assessed to tax and the assessee has discharged the primary onus in respect of such amount shown in the capital account. The Revenue has not been in a position to controvert the findings of CIT (A) nor could it bring any material to the contrary on record. In view of these facts no interference is called to the order of CIT (A). Since the ground of addition of capital of Rs.9.5 lacs is deleted - in favour of assessee. Addition made on account of booking deposit u/s. 68 - CIT(A) deleted it - Held that:- As during the course of appellate proceedings before CIT (A) the copies of registered sale deeds were filed and the same were admitted as additional evidence. CIT (A) has given a finding that the A.O. has not brought any material on record to show that the assessee has siphoned off the booking deposits. A. O. had made addition for the sole reason that no confirmatory letters were filed and some booking deposits were received in cash. Before CIT (A) the copy of registered sale deed showing names, addresses, attested photographs, signatures etc., of the members were filed which proves the identity and genuineness of the depositors - in favour of assessee. Disallowance of non-agricultural use conversion Charges - payment maid after the year end and was paid by the Seller Trust - CIT(A) allowed it - Held that:- CIT (A) has given a finding that assessee maintains its books on mercantile basis which obliges it to make provision for all known liabilities, the expenses have been incurred wholly for the purpose of business and the full sale price has been offered to tax and as per the development agreement the assessee is entitled to deduction. These facts have not been controverted by the Revenue nor it has brought on record any material to the contrary - in favour of assessee. Disallowance of interest paid to partners - Held that:- Since the ground of addition of capital of Rs.9.5 lacs is deleted, the disallowance with respect to interest on the capital also does not survive - in favour of assessee. Disallowance on account of Puran expenses (land filling) - Held that:- These expenses were estimated @ Rs.150/- per sq. yd. CIT (A) has given a finding that the provision for puran expenses is ascertained liability estimated by assessee and has to be allowed as deduction prorata in respect of plots sold as the gross sale price has been credited and offered to tax. Considering all the facts, CIT (A) has upheld the addition of 15% i.e. of Rs.1,63,832/-. The Revenue could not bring any material to controvert the findings of CIT (A) - in favour of assessee.
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2012 (9) TMI 695
Disallowance of remuneration paid to the Director - Held that:- The director deemed to be receiving the remuneration here has done nothing substantive for the appellant so as to make it entitle for the remuneration to the extent of Rs.4.80 lacs as the total income shown by the assessee company is ‘nil’ in its return of income. The remuneration paid to director concerned is excessive and unreasonable but does not commensurate to the benefits derived by the appellant therefrom. As the disallowance of Rs.3,60,000/- made by the A.O. and confirmed by Ld. CIT(A) is excessive the disallowance to the extent of Rs.2 lacs is justified to meet the ends of justice - partly in favour of assessee. Disallowance of expenses incurred on electricity, telephone and salary - Held that:- The A.O. disallowed the expenses incurred on Krishna Kunj, Shahibaug of Rs.33,157/- on the ground that it is a residential property not being used for the purpose of business and the CIT(A) has confirmed this disallowance at Rs.17,000/- on account of expenses incurred for non business purposes, no infirmity in the order of Ld. CIT(A) as 50% of the expenses were incurred on electricity of Krishna Kunj - against assessee. Disallowance of traveling & entertainment expense - Held that:- As no justification to travel to Delhi has not been established before the A.O. that the same was for business purpose & likewise entertainment expenses was incurred by Mrs. Neena Parekh on self made vouchers for entertaining the guests in restaurants but before the A.O., the assessee could not establish business connection of these expenses no infirmity in the order of Ld. CIT(A) in disallowing the expenses - against assessee. Disallowance of set off of brought forward business losses and security transaction tax (STT) - Held that:- As on verification of CIT(A)’s order, both these grounds have not been found place in the appellate order and the same were left unadjudicated. Sr. DR has fairly conceded that these two grounds of appeal had been lapsed by Ld. CIT(A) unadjudicated. Therefore, Ld. CIT(A) is directed to consider both these grounds and give specific finding as per law - in favour of assessee for statistical purposes.
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2012 (9) TMI 694
Invoking jurisdiction u/s.263 by CIT(A)- disallow business expenses claimed against undisclosed income - order passed after scrutiny u/s.143(3) is erroneous - Held that:- The survey disclosure has been considered by the A.O. considering unpaid freight and liability and no addition was made on account of outstanding liability from unaccounted income u/s 69C whereas the CIT has passed the order u/s 263 on the basis of liability of Rs.1,03,24,530/- has been shown as unpaid freight as on 31.03.2006 and liability paid Rs.77,01,958/- during the F.Y. 05-06, which has been considered by the A.O. Thus the CIT has framed different opinion on similar facts considered by the A.O. in assessment order. Therefore, the CIT order u/s 263 is a change of opinion - set aside the order of CIT - in favour of assessee.
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2012 (9) TMI 693
Ascertaining the fair market value of a capital asset for determining capital gain - revenue appeal against CIT(A) not considering the applicability of the provisions of section 55A by referring the valuation to Valuation Officer - Held that:- The appellant had shown sale value as a result of transfer at Rs.14,00,000/- whereas stamp authority has taken this value at Rs.13,83,600/- it means that assessee had shown more sale consideration in sale deed, thus, this case cannot be referred u/s 50C (2) to the DVO. The capital gain can be calculated under chapter – IV of computation of income from capital gain. Section 48 empowered to AO to calculate the capital gain. For calculation of capital gain full value of the transaction received or accruing as a result of the transfer of the capital assets following amount is to be deducted (i) expenditure incurred wholly and exclusive in connection with such transfer (ii) the cost of acquisition of the assets and the cost of any improvement there on. Further, indexation on cost of acquisition and cost of improvement is to be allowed. The various High Courts have held that full value of consideration u/s 48 cannot be construed fair market value as per Section 55A of the IT Act, thus A.O. was not justified in substituting the fair market value in place of full value of consideration - against revenue. Wrong computation of LTCG by adopting incorrect indexation - assessee had constructed additional floor at different times - Held that:- As the appellant had admitted the fact during the course of assessment proceeding that A.O. computed the capital gain on the basis of indexation on construction in different years at the time of assessment which was not challenged by the appellant before the CIT(A) & CIT(A) also had not given any findings in his appeal order on cost of improvement and indexation there on. Thus, this ground of Revenue appeal is dismissed - against revenue.
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2012 (9) TMI 692
Penalty u/s 271(1)(c) - disallowances of repair expenses on building & 80 IB and 80 HHC - CIT(A) deleted the addition - Held that:- The A.O. had simply initiated the penalty proceedings u/s 271(1)(c) without mentioning whether the penalty was initiated for concealment of income or for furnishing inaccurate particulars of income. The building expenses claimed by the assessee were disallowed by the A.O., which were capitalized and depreciation was allowed by the A.O. Deduction u/s 80-IB and 80HHC were claimed in prescribed proforma on the basis of audit report in the return of income. The A.O. recalculated both the deductions according to him but particulars of income and/or concealment of income, has not been brought on record by the A.O., which is an essential ingredient to levy penalty u/s 271(1)(c). A s decided in CIT Versus RELIANCE PETROPRODUCTS FVT. LTD. [2010 (3) TMI 80 - SUPREME COURT] mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such a claim made in the return cannot amount to furnishing inaccurate particulars - deletion of penalty is thus warranted - in favour of revenue.
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2012 (9) TMI 691
Addition of amount reflected as amounts received towards job work and commission from M/s M as income from others on ground of it being accommodation entries - assessment reopened on ground that statement recorded during assessment proceedings of M/s M admits that M/s M was engaged in the business of giving bogus/accommodation entries - Held that:- AO as well as the CIT(A) have not provided the assessee with the statement recorded from director of M/s M in the assessment proceedings of another company i.e. M/s M. No opportunity of cross examination was also granted. Under the circumstances the assessee has not been confronted with the evidence gathered behind its back, hence, the statement cannot be the basis on which a conclusion can be drawn that the amounts received from these two companies are infact accommodation entries. In absence of any other evidence, addition made is directed to be deleted Dis-allowance of expenditure on surmise that sales may have been suppressed and the amounts were routed through these two companies - Held that:- If this is the case of the A.O, then the question of disallowance of expenditure on the ground that these are accommodation entries and hence do not have any expenditure does not arise. Expenditure incurred on manufacture and sales has to be allowed - Decided in favor of assessee
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2012 (9) TMI 690
Since the matters cannot be decided before order of Settlement Commission and issues or grounds taken in these appeals in hand can only be decided by the assessing officer in the light of the order of the Settlement Commission which is still awaited. Therefore, all these three appeals are disposed of and these are treated as allowed for statistical purposes.
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2012 (9) TMI 689
Disallowance of construction expense – Assessee is in business of civil construction – AO disallow expense on ground that - Assessee has shown work in progress on estimate basis, no proper bills, vouchers – Addition was made on the basis of specific inquiries establishing non-existent sub-contractors especially when the assessee could not produce such sub-contractors to prove their identity and genuineness – Labour contractors shown as creditor were not found at given address - CIT(A) restrict disallowance of 25% of disallowed amount in its order - Held that:- As books of accounts, cash books, ledger, vouchers for such expenses were produced and the same were test checked by AO. If the AO was not satisfied with such record, nothing prevented her either to ask the assessee to furnish more information or to bring on record any evidence controverting the claim of the assessee. Even otherwise, the inquiries were conducted by the A.O. nearly about after 2 ˝ years from the end of the relevant FY, therefore, the labour contractors cannot be expected to be available at the given address after lapse of such period because they keep on shifting as per the availability of the work. Upheld the order of CIT(A). Appeal decides in favour of assessee.
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2012 (9) TMI 688
Disallowance of Claim u/s 80IB(10) - The assessee is engaged in the business of construction and sale of residential house - Assessee constructed houses claiming deduction u/s 80IB(10) with built-up area of less than 1500 sq. ft. – One house measured by registered valuer found to be more than 1500 sq. ft. – Project has been completed but Municipal Corporation has not issued completion certificate - Held that:- As the local municipal authority has not issued the completion certificate till date which clearly shows that the required conditions were not fulfilled. It is worth mentioning here that as per certificate of the architect, a general letter “To Whom It May Concern” has been mentioned and it is not addressed to the Municipal authorities. Even otherwise, there is no signature/seal of the Municipal authorities evidencing that this letter was in fact filed before the Municipal authorities. Appeal decides in favour of assessee
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2012 (9) TMI 687
Assessee held agriculture land – Whether sale of shops, duplex & bungalow developed on agriculture land by developer under agreement amount to business income under head PGBP or Capital Gain - Assessee enter into agreement with 2 builders for construction of housing complex on such land and receive advance - In consideration of land, the builder has agreed to give 35% & 33% of constructed area – AO made addition on sale consideration as business income treat it as trading activity – Held that:- Since land was used for agricultural purpose hence capital asset. Once the assessee has entered into agreement with the builder for construction of housing complex on such lands, the same amounts to business, therefore, any gain arising out of sale of such building is business receipts liable to tax as business profit. The benefit of long term capital gain till the date of transfer of such capital assets into stock in trade i.e. year in which agreement with the builder is entered into. As per Sec. 45(2), such capital gain is liable to tax in the previous year in which such stock in trade is sold or otherwise transferred by the assessee. Issue remands back to AO for recompute capital gain and business income.
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2012 (9) TMI 686
Capital Gain - Assessee is a Dealer in shares - Whether the person is a Dealer in shares or an Investor - Whether the transaction of sale and purchase of shares is a trading transaction or whether it is in the nature of investment – Held that:- As it is not a case where the assessee is holding large number of shares or volume of transaction is high. Assessee is carrying on the sale and purchase of shares activity in an organized way to characterize it as a trading activity. Whereas holding period of the script pertains to major value in capital gain is eight months and there is not a repetitive transaction in the script. Therefore the profit thereon should be considered as short term capital gain. Decision in favour of assessee
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2012 (9) TMI 685
Addition on account profits from share transaction as trading activity - Whether profits out of share transactions, treat it as investment activity or trading activity – Shares sold without taking delivery, same has been shown as speculative gains - Where the part of delivery has been taken, the same has been shown as short term capital gains – Held that:- Following the test laid down by Hon’ble Gujarat HC in the case of Rewashanker A Kothari (2006 (1) TMI 80) that the most important test is volume, frequency, continuity and regularity of transactions of purchase and sale of goods concern, on the basis of which, an inference can be drawn whether the activity is in the nature of business or not. Assessee has ploughed back or rolled back the available capital almost 7 to 8 times in order to earn income out of purchase and sale of shares. Assessee sold 91.6% shares purchased during the year. 40% of overall transactions are those scripts in which the holding period was 30 days or less. 10% of overall transactions where the period of holding is more than 6 months. Therefore, shares transactions from which assessee has earned short term capital gains were in the nature of trading activity of the assessee. Decision in favour of revenue. Addition on adhoc basis treating share transaction as trading activity – CIT(A) upheld the 17% addition out of transaction in shares treated as investment – And balance as trading activity on basis of opening & closing stock, shares turnover – Held that:- As the part of the profit should be considered in the nature of short term capital gains but no reason has been given which could be set to fit in the principles laid down in judgement of various cases of Hon’ble Supreme Court as well as Hon’ble High Courts to support the said observation of ld CIT(A). Therefore, hold that the entire profits shown by the assessee on purchase and sale of shares has rightly been considered by AO as profit from business and not short term capital gains. Decision in favour of revenue
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2012 (9) TMI 684
Disallowance of expenditure on adhoc basis - AO disallow 12% of the entire expenditure claimed by the assessee under various heads – Held that:- As the disallowance of 10% out of the expenditure claimed as ‘Transportation Charges”, for which the assessee could not produce evidence - Disallowance of the expenditure claimed as “Petrol, Diesel and Oil Charges” which were made in cash - 10% of the cash payment in respect of the expenditure claimed as “Tyre Replacement Charges” - Expense claimed as “Vehicle Repair & Maintenance Charges” that the assessee furnished bills only 1/3rd of total amount and for the remaining he could not produce the bills, disallow the 10% of claimed expense - In respect of expenses on “wages and salaries”, no details have been produced and the entire payment has been made in cash and assessee has not been able to substantiate the claim of the said amount, therefore upheld the addition made by AO @ 12% - In respect of claim of petrol, telephone and other maintenance charges, sustain the addition @ 12 % by AO. Decision appeal is partly allowed in favour of assessee
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2012 (9) TMI 683
Maintainability of appeals filed before Tribunal u/s 253 – Department file appeals for six A.Y in respect to claim of deduction u/s 80IA & 80IB - Held that:- As per the instruction of CBDT 3/2011 dated 09-02-2011 read with instruction No. 5/2008 dated 15-05-2008, the tax effect has been less than Rs. 3 lacs in each of four A.Y. Therefore, appeals filed by the department for four A.Y are not maintainable, falling within the purview of the aforesaid instructions. And for another two A.Y, following the decision of Bombay HC in case of Patel Stationers Pvt. Ltd. decided in favour of assessee. Hence all the six common appeal decided in favour of assessee Deduction u/s 80IA – Whether the “assembly” of sharpeners would qualify for the deduction u/s 80IA - Assembling of sharpener is a totally manual process and no machinery is required for the same – Held that:- Following the decision in case of Chiranjjeevi Wind Energy (2011 (1) TMI 421 - MADRAS HIGH COURT), there is no merit in the argument of AO that it is a “simple manual process”, which does not qualify for the deduction. It is so, because a manufacturing process shall always remain a manufacturing process even if that “simple process” brings into existence a distinct marketable product, and once a distinct product comes into being, by way of name, character and use, it would definitely qualify to come under the definition of manufacture. Appeal decided in favour of assessee
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2012 (9) TMI 682
Capital Gain – AO compute sales consideration u/s 50C - Whether the AO was within his legal authority to import the figure of stamp duty valuation without actually referring to authority – Assessee enter into MOU regarding sale of property on 31/7/1998 – Registration of the property in year 2000 – AO applied the prevalent Stamp Duty rate though no such valuation was made by the local Stamp Duty authorities in respect of the said property - Assessee give possession of land after getting certification from CG u/s 269UL (3) – Held that:- As the AO transpires that the valuation as per stamp authority, which is prescribed Sec. 50C can be one of the parameters to arrive at the full value of the property that is to be transferred. The transfer of the land has to be considered on occurring in the year 2000, when the provisions of Sec. 50C were not in force. Decision in favour of assessee Capital Gain – Assessee has conveyed the property to buyer prior to 2001-02 along with 90% payment - Only the 10% final part payment which was made during the year along with the formal documentation – As per AO property was actually transferred in the instant year – Held that:- As the fact that the property in question was agreed to be sold and conveyance done even prior to F.Y 2001-02 is not disputed even in the assessment order. AO is using is the final payment and documentation and on that basis, the application of Sec. 50C. It is clear from the fact that except for the last installment everything was completed prior to 2001-02. Therefore, Sec. 50C were neither there nor could have been applied. Appeal decides in favour of assessee.
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2012 (9) TMI 681
Rejection of books of account u/s 145 - AO apply GP rate to calculate Net profit – Held that:- As the books was not produced before the AO nor before CIT(A) for verification and the audit report mentioning fact that there was no requirement for deduction of TDS on hire charges paid which was below the prescribed limit, cannot be accepted in the absence of books of account and payment vouchers. Therefore, the action of the AO for rejection of books of account was correct. Disallowance u/s 40(a)(ia) - Assessee is engaged in the business of transport contract - Takes transport contract and give contracts to truck operators for transporting the goods - The assessee did not file reply to the queries or documents asked for by the AO - The books of account and bills and vouchers were also not produced - AO rejected the books of account and estimated the net profit @ 8% of total receipts – Held that:- Once the books of account are rejected and profit is estimated, there is no reason to make further disallowance of any of the expenditure. Where profit is assessed on estimated basis by applying net profit rate, the expenses are deemed to be considered and no further deduction is to be allowed or disallowed. Appeal decides in favour of assessee
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2012 (9) TMI 680
Disallowance u/s 40(a)(ia) - Assessee took on vehicles on lease and paid lease money – By invoking Sec. 40(a)(ia), assessee have to deduct TDS from the lease money shown as payable - Held that:- Following the decision in case of Merilyn Shipping & Transport (2012 (4) TMI 290 - ITAT VISAKHAPATNAM) the provisions of sec. 40(a)(ia) are applicable only to the amounts of expenditure which are payable as on 31st March of every year and it cannot be invoked to disallow the expenditure which had been actually paid during the previous year without deduction of TDS. Therefore to recompute the amount of disallowance issue remand back to AO Capital Gain – AO compute capital gain u/s 50C adopting the stamp duty value as sales consideration – Original return was accepted u/s 143(1), therefore AO invoke Sec. 147 – Held that:- AO was well within his powers to compute the capital gain during the u/s 147 proceedings. Matter has not been controverted by the assessee by bringing any positive material on record. Therefore appeal decides in favour of revenue.
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2012 (9) TMI 665
Reopening of assessment - undisclosed benefit of accommodation entries - Held that:- The findings recorded by the AO, CIT (A) and ITAT in proceedings u/s 148 are findings of fact. The assessee could not satisfy the Income-tax authorities regarding the identity of Shri Trilok Chand Bansal, the Director of M/s Performance Trading and Investment Company Pvt Ltd and the genuineness of transactions. The story set up by the assessee, that Shri Trilok Chand Bansal executed the agreement paid three demand drafts totaling Rs. 15, 02, 700/- and thereafter did not claim either the property or the amount, and consequently the amount was forfeited, was not established and was not worthy of belief. The Income Tax Authorities did not commit any error in adding the amount to the income of the assessee as unaccounted undisclosed income. The findings recorded by the Income-tax authorities, that the three demand drafts were by way of accommodation entries of the unaccounted moneys of the assessee, thus, does not suffer from any error of law - aginst assessee.
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2012 (9) TMI 664
Whether the assessee was entitled to investment allowance under Section 32A(2)(b) - Held that:- The AO came to the conclusion that the assessee claimed to be in the business of mining & the only activity undertaken by it was removal of overburden/earth excavation work carried out for facilitating mining at lignite project site at Rajpardi and Pandhro and that the assessee was merely a labour contractor. These findings of fact have been upheld by the Income Tax Appellate Tribunal and they have not even been discussed in the impugned judgment of the High Court [2006 (8) TMI 144 - GUJARAT HIGH COURT] - against assessee.
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2012 (9) TMI 663
Dismissal of Appeal - non deciding the Department's appeal by treating it infructuous being duplicate - Held that:- Tribunal was not correct in observing that the department had filed duplicate appeals. The department had challenged two different orders one passed under Section 143 (1) (a) and other under Section 154 separately. The apparent mistake, which was sought to be corrected, before the Tribunal by an application dated 11.5.2000, Tribunal committed error in law in failing to take into consideration the application dated 11.5.2000, for correction of the mistake - The matter is remanded back to the Tribunal to consider the Appeal on merits after deciding the application dated 11.5.2000 for correction of the mistake - in favour of Revenue.
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2012 (9) TMI 662
Penalty u/s. 271(1)(c) - held that:- the assessee's was well aware of the amendment to section 80P - assessee files its tax return only at ₹ 20.16 lakhs, i.e., at less than 1/3rd the income for which it pays advance-tax. - Clearly, some adjustments were made (to the book profit) either at the time of calculating and depositing advance-tax or while finalizing and filing the tax return. - a person can not take the advantage of its own wrong - penalty to be confirmed. The return of income, as it appears, was prepared merely by adopting the figure of net profit as per the profit & loss account without any adjustments. Why, even the simple exercise of examining the details of various expenses, furnished before the Assessing Officer during the course of assessment proceedings, and which would exhibit it to bear sums which are clearly not allowable; rather, do not even qualify as expenditure, was not undertaken. It is rather, as we see it, a case of gross negligence and dereliction of duty – and by more than one person, and would thus qualify to be a conscious disregard of its obligations. - Benefit of section 273B not extended - penalty confirmed. Taxability of interest 'accruing' on the non-performing asset (NPA) - whether non-recognizing interest income on NPAs by the assessee-bank following RBI guidelines, as a matter of accounting policy, would by itself constitute a valid ground for not recognizing the said income on the basis of its non-accrual; the adopted method of accounting being admittedly mercantile? - held that:- even section 43D gives primacy to the bank's accounts, so that where interest stands credited to the profit and loss account for a particular year, the same is to be treated as its income for that year even where not received. - Decided against assessee. Accrual (or otherwise) of an income (or expenditure) is matter of fact, to be decided separately for each case, on the basis of the assessment of the obtaining facts and circumstances. The same cannot be stated as an accounting policy - which by its very nature is to be applied uniformly, except where it is stated in broad terms, bearing the necessary ingredients of the qualifying criterion, i.e., existence of a reasonable certainty as to ultimate realization at the time of raising the claim or even as at the end of the accounting period. The adopted accounting policy, i.e., recognizing income on NPA accounts only subject to realization, does not serve as a valid qualifying category as there could be other mitigating factors, making it reasonable to expect realization despite the account being a NPA. Where there is a difference in the provision (for bad and doubtful debts) in accounts and that allowable or allowed u/s. 36(1)(viia), the assessee shall tabulate a parallel provision statement u/s. 36(1)(viia), annexing it as a part of its computation of income with the return of income, each year, explaining the difference/s therein with reference to its accounts. The assessee's claim qua ₹ 19.23 lacs on the basis of non-receipt of interest income, thus, stands rightly rejected by the Revenue - against assessee. The assessee would only be entitled to a 'provision for bad and doubtful debts' u/s. 36(1)(viia) qua its total advances, including interest debited to the borrower's account and, therefore, forming part of its asset base - The A.O. shall, however, while giving effect to this order, verify and allow the assessee's claim u/s. 36(1)(viia) as eligible under law, seeking the relevant, primary details from the assessee as deemed fit by him.
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2012 (9) TMI 661
Additional tax u/s 143 (1) (a) on the difference of returned and assessed income - Denial of deduction u/s 80 IA for Unit I as assessee has taken benefit of Section 80IA on the gross total income by reducing the loss of Unit-II from Unit-I - SCN u/s 154 (1) (b) to assessee for rectifying the mistake - Held that:- The powers under Section 154 can be used to rectify the mistake. It is true that the mistake should not be such, which may allow debate or where two views are possible. In the present case there was no contentions issue or any legal issue on which two views are possible - The assessee had adopted a wrong method of calculation for the purposes of reducing income to 'Nil', and had also carrying the loss forward to next year. The computation was clearly impermissible and was against the provisions of Section 80A (2). The gross total income as defined under Section 80B (5) includes total income computed in accordance with the provisions of the Act, before making any deduction under the chapter. The assessee could not have made any deduction, from the gross total income for the purposes of claiming benefit to return the income as Nil, and carry forward the loss. The intention of Section 143 IA was to discourage the misuse by unscrupulous tax payer, who might return lesser income by making obvious examination, or by claiming obvious incorrect deduction and taking a chance that if the same is deducted by the department, they would have to pay correct taxes only. In such cases while correcting the return, additional tax was payable. In the present case the provisions of Section 143 (I) (a) are clearly attracted. The respondent assessee claimed deduction, which were not permissible, and thereby not only tried to reduce the income to Nil, but also to carry forward the loss. The respondent assessee took chance, in which it did not succeed, and thus the A.O. and CIT (A) rightly imposed additional tax on him - in favour of Revenue.
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2012 (9) TMI 660
Weighted deduction u/s 35B in respect of bank interest and bank charges - export packing credit facility from the State Bank of India - Held that:- As decided in M/s. KEC International Ltd. Versus CIT [2009 (1) TMI 5 - BOMBAY HIGH COURT] the very definition of the expression “packing credit” as advanced in the Export Credit (Interest Subsidy) Scheme, 1968, indicates that it is a loan or advance for the purpose of purchase processing and packing of goods. The Reserve Bank requires the lending bank to furnish it a declaration in writing that the loan was granted for pre-shipment activities. - That necessarily means that the activities for which the loan has been granted have to be carried out within India - Section 35B(1)(b)(viii) operates only when there is a performance of services outside India. Mere obtaining of a packing credit loan or payment of interest thereon in India cannot be said to entail the performance of any service outside India. The said expenditure would, therefore, not be deductible - against assessee. Professional fees paid in respect of its cement project - Capital expenditure or Revenue expenditure - Held that:- As decided in CIT Versus J. K. Chemicals Limited [1992 (10) TMI 18 - BOMBAY HIGH COURT] & Trade Wings Limited v. Commissioner of Income-tax [1989 (9) TMI 21 - BOMBAY HIGH COURT] order to decide whether to acquire some profit-making assets for the purposes of its business which would be of an enduring nature. The expenses incurred for the project report have, therefore, to be viewed as being capital in nature. Simply because the assessee had a running business of manufacturing it cannot be said that the expense for obtaining such a project report was a part of the expenses incurred by the assessee for running its business. It was clearly an expenditure incurred for ascertaining whether to acquire new assets of some durability for the purpose of earning profits - against assessee. Receipt from B.B.C. Limited, Switzerland under Memorandum of Settlement - Revenue receipt OR Capital receipt - Held that:- The termination of distributorship agreement and the compensation allegedly paid in respect thereof was only a part of the normal running of the business of the assessee - conclusion is based on the fact that the assessee has not established that the termination of the distributorship agreement has resulted in a loss of source of income or has affected its trading contract. This was not even the assessee's case before the authorities before whom it was contended that the receipt was in the nature of a gift or akin to a gift. The material on record, in fact, establishes that the distributorship agreement was but one of the many contracts that the assessee had entered into. - It was one of the many activities that the assessee had engaged in and that the assessee is not prevented in any manner whatsoever from continuing a similar line of business with other enterprises - Tribunal didn't erred in treating it as Revenue receipt - against assessee.
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2012 (9) TMI 659
Disallowance of deduction u/s. 80IB(11A) - assessee did not have any storage of his own and no storage was taken by the assessee on rent - CIT(A) allowed the claim - Held that:- Section 80-IB(11A) targets for relief for the business of processing preservation and packaging of fruits and vegetables as newly added from A.Y. 2005-06, while the relief has been available w.e.f. 1.4.2002 for all undertakings, which have begun to operate on or after 1st April, 2001 for any income from "the integrated business of handling, storage and transportation of food grains - Literal interpretation of words "integrated business of handling, storage and transportation of food grains" will not lead to any absurdity or produce any manifestly unjust result. The Legislative intent is not to encourage transportation or handling of food grains but the Legislative intent is to encourage construction of go-downs and warehouses with a view to providing storage of food grains. If we consider the entire combat of the scheme relating to the tax holiday provided by the Legislature, we find that the deductions are available under various provisions when the assessee has contributed something towards the infrastructure development of the country In the instant case, no find of any contribution towards the infrastructure by the assessee. The assessee is simply handling and transporting the food grains and storing at the godowns of the FCI which means that the assessee is using the existing infrastructure of the State whereas the main purpose of bringing this provision is construction of godowns specifically for stocking food grains for greater efficiency in the grain management system and minimize post harvest foodgrain losses. The assessee has not done anything towards these facilities - Even the tender participated by the assessee show that the assessee has been awarded the contract for handling and transportation of food grains to the places mentioned therein. The contention of the assessee that Sec. 80IB being a Benevolent provision liberal construction should be applied cannot be accepted because beneficial interpretation applies only where two views are reasonably possible whereas in the instant case no find of any other possible view on the facts of the matter where the law is clear and unambiguous, we cannot act contrary to it with a view to give benefit to the assessee - the conditions precedent for making assessee eligible for deduction u/s. 80IB(11A) is not satisfied - against assessee.
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2012 (9) TMI 658
Deduction in respect of profits retained for export business u/s 80HHC(3) - Whether excise duty and sales tax need to be included in the total turnover - Held that:- As decided in CIT Versus Lakshmi Machine Works [2007 (4) TMI 202 - SUPREME COURT] amendments to section 80HHC(3) indicate exclusion of book profits but reasoning in this judgment is confined to the workability of the formula in section 80HHC(3) as it stood at the material time - in favour of assessee.
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2012 (9) TMI 657
Block assessment order u/s 158BD r.w.s. 143 (3) - undisclosed net profit - search - addition was made in the hands of the assessee firm on protective basis - CIT(A) deleted the addition - Held that:- The order of the AO is need to be set aside as before initiating proceedings under Section 158BD, he was required to record a satisfaction note to be served along with the notice to the assessee - CIT(A) did not agree with the AO that the reasons were duly recorded but the same was not readily traceable due to transfer of records. The CIT (A) also considered the explanation of the AO, that the sentence written in the third para of the assessment order i.e. "considering the nature of seized diaries, therefore, a notice u/s 158BC r.w.s. 158BD was issued to the assessee" indicate that reasons were recorded, was not very convincing because it was not clear as to what nature of the seized diaries were examined by the AO and how he satisfied himself that these diaries belong to the appellant firm. As in the absence of satisfaction recorded by the AO, he did not have jurisdiction to proceed against the assessee under Section 158BC read with Section 158BD additions made on protective basis need to deleted - in favour of assessee.
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2012 (9) TMI 656
Addition on undisclosed income u/s 158BC - Assessee contended that it was wrong on the part of the A.O not to accept his computerized books accounts - Held that:- Considering explanation given by the assessee for the absence of books of accounts at the hospital as well as the delay in filing the accounts as book the books of accounts were taken by the Chartered Accountant for preparing and filing return such circumstances could not be treated as adverse as the assessee had disclosed the income more than the receipt as per the seized record. Revenue has not been able to point out any provisions in the Income Tax Act, 1961 which makes it mandatory for a person for maintaining the books of accounts at his residence or at his business premises & the AO was not justified in refusing to admit the books of accounts specially when the returned income was more than the receipts during the seizure - in favour of assessee.
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2012 (9) TMI 655
Assessee is an C&F agent - Incurred expenses on behalf of the company, which were claimed to be reimbursed by it – Addition made on account of non-disclosure of receipt – Held that:- On consideration of record and the assertion made by assessee, issue remand back to the file of AO to examine the correct nature of these expenses. Issue remand back to AO. Addition on account of Same opening & closing balances of creditors in a FY - Assessee firm was having opening balance of Rs. 13,15,955/- as on 31.3.2006 of sundry creditors including debtors and the entire list of 31 sundry creditors in Schedule-C in the balance sheet (as on 31.3.2007) is exactly the same as on 31.3.2006 - These sundry creditors were owing to the trading activities with the assessee firm, carried out until the end of the preceding year – Held that:- Assessee furnished the ledger accounts of the respective parties for the assessment year 2008- 09 wherein these were paid off. the opening balances have been duly explained by the assessee. These are not in agreement with the finding in the impugned order that new credits were introduced during the year which resulted into sustenance of addition. Appeal decides in favour of assessee. Addition on account of Cash Credit u/s 68 – In spite of opportunity given by the AO, no such confirmations was filed by the assessee - Confirmation was filed before CIT(A) - Held that:- Issue remand back to the file of the AO with a direction to examine the claim of the assessee.
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2012 (9) TMI 654
Addition on account of excess cash found in search u/s 132 - During Survey assessee made disclosure of Rs. 41 lacs comprising of excess cash of Rs 2 lac - In the profit and loss account the assessee had disclosed Rs. 41 lacs as “IT declared stock” and the same was offered for tax - AO had also made an addition on account of excess amount of cash of Rs. 2 lacs - Held that:- From the assessment order of the AO and the order of CIT(A) it is not clear as to whether the amount of Rs 41 lacs includes Rs 2 lac of excess cash found. In view of these facts, we are of the opinion that in the fairness of things and to meet the ends of justice this matter be remanded to the file of A.O for verification. Case remand back to AO. Addition on account of difference in stock found during survey u/s 132 - Assessee submit stock statement on the basis of purchases worked out on FIFO method inclusive of transportation and loading charges – AO made addition on basis of difference found in statement and stock shown in books of accounts – Held that:- As the discrepancy could not be reconciled and satisfactorily explained by assessee. The Assessee could not demonstrate before CIT(A) that the closing stock was without transportation charges and loading charges. The Ld. A.R. before us also could not demonstrate with any tangible evidence the correct working of stock. Therefore appeal decides in favour of revenue.
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2012 (9) TMI 653
Addition u/s 68 - alleged bogus accommodation entry based on information received from the Investigation Wing - rejection of additional evidence made under application under rule 46A - Held that:- Assessee contended that the said information was not before assessee and assessee had not opportunity to rebut the same. Hence, to meet ends of justice matter is remitted to the file of the AO to consider the issue afresh by giving a reasonable opportunity to the assessee of being heard - Decided in favor of assessee for statistical purposes.
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2012 (9) TMI 652
Penalty u/s 271 FA - non maintainable of appeal u/s 246A (1) (q) to the Commissioner Appeals against order passed u/s 271 FA by the Director Income Tax, who holds the rank of a Commissioner in the Income Tax Department - Held that:- Section 246A (1)(q) provides for appeals before the Commissioner Appeals against an order of penalty passed under Chapter 21 of the 1961 Act & Section 271 FA admittedly falls within Chapter 21 of the 1961 Act, therefore on a plain reading of the said provision an appeal against an order passed by an officer of the rank of Commissioner Income Tax under Section 271 FA is maintainable before the Commissioner Appeals. As against orders passed under Section 271 and 272A (also under Chapter XXI) before the ITAT, this court cannot on analogy hold that because the said orders passed by an officer of the rank of Commissioner of Income Tax are appealable before the ITAT under Section 253 of the 1961 Act, an order under Section 271 FA also passed by an officer of the rank of Commissioner Income Tax should also be appealable before the ITAT - it is an admitted fact that in the course of the demand notice under Section 156 following the order of penalty under Section 271 FA of the 1961 Act, the assessee was informed that the said order was appealable before the jurisdictional Commissioner (Appeals) - in the instant case Commissioner Appeals III Jaipur - in favour of assessee.
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2012 (9) TMI 651
Non deduction of TDS on freight charges - disallowance by invoking Section 40(a) (ia) - Held that:- The assessee had made the payment towards freight charges directly to the transporter and it was not a case where such payments were debited to the supplier's account - as the assessee had not produced any material to establish the contention of the assessee, but from making a bald assertion, thus the disallowance was on facts - against assessee Addition by Invoking Section 41(1) - Held that:- As with regard to the two sundry creditors where the assessee had not produced anything to show the subsisting liability towards the alleged creditors and there was no evidence placed with respect to the payments made and no consequent acknowledgment of such credits were proved by the assessee the said addition does not give rise to any question of law - against assessee Addition on cash credits - Held that:- As the assessee had contended the cash credits to be advances from customers who had made orders for specified goods but in the same breath contented that the details of the persons who made such advances were not known to them and the said advances were cash infused by the assessee into the business to make up the short fall in cash was found by the Tribunal to be a fact evident and emanating from the assessee's books of accounts - against assessee.
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2012 (9) TMI 650
Addition on account unexplained investment – Assessee introduced fresh capital in a firm – AO had given reasonable opportunity of being heard – Held that:- The assessee had not additional evidence in form of affidavits before the A.O. or before the CIT(A). Therefore, in the interest of justice and giving reasonable opportunity to the A.O. on fresh evidence. Case remand back to AO Disallowance of Interest expense u/s 57(iii) - The interest was paid for the purpose the earning of income - Assessee had filed PAN nos. of all the recipients of interest income & their ROI – Held that:- The assessee undisputedly borrowed the money which was utilized for the purpose of income from other source. The borrowings were made through bank account cheque. A.O. had not brought on record any evidence that these borrowings were used for personal purposes. Therefore, addition not justified. Decision in favour assessee.
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2012 (9) TMI 649
Penalty u/s 271(1)(c) - Assessee has taken advance against Deep Discount Bonds – Assessee claim interest expense in P&L without deducted TDS – During reassessment u/s 147, AO disallow the same – AO levy penalty u/s 271(1)(c) on concealment of income – Held that:- As the assessee is under bonafied belief of CBDT circular no. 4/2004 dated 13.5.2004, TDS was required to be deducted only at the time of redemption. The assessee has bonafied belief not to deduct the same during the intervening period. Therefore, mere non-deduction of tax on the interest will not amount to concealment of income by the assessee. Appeal decide in favour of assessee
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2012 (9) TMI 648
Addition on account of unexplained cash credit u/s 68 in bank account - Assessee has deposited huge cash in various bank accounts of his family members – The assessee claims that he was LIC agent, the cash was deposited out of the payment received from the respective LIC customers – Confirmation from these customers was not furnished before the AO - Held that:- As the onus lied on the assessee to explain the source of cash and, therefore, the confirmation from persons from whom cash was received was required to be furnished before the Revenue Authorities. The assessee also show before CIT(A) that the amount of cash so received and deposited in the personal bank account of assessee was ultimately utilized for issuing cheque in favour of LIC with respect to the payment due from such clients. Therefore issue remand back to AO for fresh consideration.
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2012 (9) TMI 647
Addition on up front appraisal fees - India-UK DTAA - Article 13(4)(c) v/s Article 7 - CIT(A) deleted the addition - Held that:- The entire appraisal process was to enable the respondent to take a decision as to whether the credit facilities ought to be advanced to the applicants or not. The respondent did not thereby or even while doing so, impart any technical or consultancy services to the applicants. Thus the upfront appraisal fee constitutes fees for technical services within the meaning of Article 13(4)(c) is unsustainable as said fees did not constitute payment in consideration of the respondent rendering any technical or consultancy services to the applicant/borrowers. Submission of the appellant that the upfront appraisal fees fall within the definition of "interest" under Section 2(28A) is not well founded as the fee is not payable in respect of any moneys borrowed or debt incurred. It is the debt itself. If any money was payable in respect thereof, it could have been held to be interest. However, admittedly, no amount was paid by the applicants in respect of the said fee. As the income on account of the upfront appraisal fees was business income and as the respondents did not have a permanent establishment in India, the same could not be charged to tax in India under Article 7 of the DTAA - against revenue.
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2012 (9) TMI 646
Deduction u/s 80HHC when loss is derived from the export of goods and merchandise - Held that:- Issue is no longer res integra. Supreme Court in IPCA Laboratories Ltd. vs. DCIT (2004 (3) TMI 9 - SUPREME COURT ) held that on an assessee suffering net loss in export business, the entitlement for deduction u/s 80HHC is not available - Decided in favor of Revenue
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2012 (9) TMI 645
Re-assessment proceedings u/s 148 - profit on sale of investment should be credited to P/L A/C for the purpose of computing the book profit u/s 115JA - Held that:- Power to reopen an assessment is not a power to review an assessment as held in CIT Vs. Kelvinator India Limited [2010 (1) TMI 11 - SUPREME COURT OF INDIA]. The power to reassess has to be exercised only on fulfilment of certain pre conditions such as tangible material to come to a conclusion that there has been escapement of income. In the present notice, it is an admitted position that facts had been disclosed and the AO passed his order of assessment on 28/3/2003 for the assessment year 2000-01, thus the issue on which the assessment is being sought to be reopened was considered by the AO and accepted by his order dated 28/3/2003. The present proceedings emanating from the notice dated 28/12/2004 under Section 147/148 is bad in law as the same is based on mere change of opinion - no failure to disclose fully and truly all material facts on the part of the assessee and due consideration of the same was done before passing the assessment order dated 28/3/2003 - against Revenue.
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Customs
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2012 (9) TMI 679
Suspension of CHA licence - interim order of suspension - violation of Regulations 13(a), 13(d) and 13(o) of Customs House Agent Licensing Regulations, 2004 - Held that:- As the offence report is yet to reach to the Commissioner of Customs under Regulation 22(1) and crucial date for counting limitation under Regulation 22 being receipt of offence report by the Commissioner of Customs under Regulation 22(1), that stage has not yet been arrived. Interim suspension order passed is purely an administrative disciplinary measure to prevent CHA to enter into Customs area. Therefore, any intervention to such order of suspension during pendency of investigation shall be detrimental to the process of investigation and shall defeat the object of fair, impartial and independent investigation. The interim order of suspension of the CHA licence by the Commissioner of Customs should be viewed in the light of the grave and serious allegation of misconduct of the CHA Appellant as appellant appears to have allowed its agent exporter to use its licence irresponsibly and thereby actively involved in the fraudulent act in connivance with the exporter. As a name lender to the exporter it caused prejudice to Revenue, making breach of trust and failed to discharge its responsibility under Regulation 13. Affecting the interest of the country was due to reckless and irresponsible behaviour of the Appellant in the course of acting as a CHA licensee. Accordingly interim order of suspension passed by the leaned Commissioner does not appear to be improper since principles of vicarious liability is applicable to the present case in hand - Thus as the Commissioner of Customs who is well placed to understand the role of the CHA in customs area is responsible for the happenings in that area and for the discipline to be maintained thereat and if he takes a decision necessary in accordance with law as an interim measure, Tribunal would ordinarily not interfere on the basis of its own notions of the difficulties likely to be faced by the CHA or their employees. Appropriate SCN be issued levelling charges if any, against the CHA within a period of twelve weeks from the date of receipt of this order, failing which the interim order of suspension shall stand revoked and in case of revocation it would be open to learned Commissioner of Customs to initiate appropriate proceeding and take appropriate steps against the Appellant in accordance with law - against assessee.
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2012 (9) TMI 678
Import of second hand knitting machine – goods imported under EPCG licence – alleged that appellant had not produced the installation certificate as required – Held that:- When the importer approached for discharge from obligations that he undertook at the time of import the concerned Superintendent has worked out the liability as per terms of Condition 4 - SCN just wants to ignore condition 4 for the reason that installation certificate was not produced and export obligation was not fully discharged. When the importer did not produce installation certificate prompt action should have been taken. If any penalty was required to be imposed it should have been done at least when the importer approached the department for de-bonding - At that time also no action was taken - it was not a violation serious enough to be acted upon - Appeal dismissed.
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2012 (9) TMI 677
Refund claim – unjust enrichment – Held that:- Appellant produced CA’s certificate that which certify that Company has neither debited the amount to Manufacturing, Trading and Profit & Loss Account nor recovered the above said amount from the Parties/Debtors - this is not a case where doctrine of unjust enrichment is applicable - appellant is entitled for the refund sanctioned
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2012 (9) TMI 644
Restriction on import of hazardous waste - Revenue appeal against Commissioner (Appeals)order that the goods have not been physically examined - Held that:- In the impugned order, the Commissioner (Appeals) has set aside the adjudication order therefore the ground taken by the Department that Commissioner (Appeals) has no power to remand the matter back to the adjudicating authority is not sustainable as Commissioner (Appeals) has not remanded the matter but set aside the adjudicating order. Further, as per the directions of the Hon ble High Court, the goods have already been released to the respondents, therefore, the appeals filed by the Revenue has become infructuous.
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2012 (9) TMI 643
Demand of duty – Confiscation - customs procedure – Held that:- Vessel has not been imported by the present petitioners but as aforesaid has been purchased by the petitioners in an auction - said vessel, having been confiscated under S. 126 of the Act therefore, the petitioners are not ‘importer’ consequently, the said vessel cannot be treated as imported goods and hence the petitioners ‘were not amenable to the provisions of the Act and were not required to follow the procedure as prescribed under Section 46 of the Act - vessel was not imported by the petitioners but was sold by respondent no. 5 as a property of the Central Government within the territory of India and, therefore, the respondent authority has wrongly come to the conclusion that the petitioners are required to observe the customs procedure as prescribed under law and file bill of entry as contemplated under Section 46 of the Act - vessel was purchased by the petitioners in an auction as aforesaid and it was neither purchased from a bonded warehouse or nor been imported - petition is allowed
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2012 (9) TMI 642
Import of 30 pieces of gold biscuits - foreign marked gold bars seized – Held that:- No reliable evidence has been led before us to conclude that the baggage receipt pertained to the goods under seizure - gold is a commodity whose value has appreciated substantially over the time period involved in this case and if any redemption is allowed at this juncture, it would lead to an anomalous situation wherein the appellant would make a windfall gain rather than facing penal consequences for their omissions and commissions - goods under seizure are “prohibited goods” as defined under Section 2(33) of the said Customs Act read Section 11 - order of the Commissioner absolutely confiscating 30 gold biscuits of foreign origin under Section 111(d) of the Customs Act, 1962 upheld Regarding confiscation of Indian Currency – Held that:- These were the sale proceeds of smuggled foreign marked gold biscuits supplied to Shri Ramdas Satpute. Therefore, they are also liable to confiscation under Section 121 of the Customs Act, 1962
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Corporate Laws
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2012 (9) TMI 641
Amendment of the company petition – alleged that equity shares held by International Commenter Limited have been unlawfully transferred to Star Light - amendment of the company petition, also on the ground that 44,800 equity shares held by P-14 in R-l have been transferred to R-2 without following the due procedure of law – Held that:- Amendment sought by Company Application is imperative for proper and effective adjudication of the company petition - It cannot be said that the application for amendment as also the application for impleadment of Star Light suffers from mala fides - proposed amendment does not change the nature and character of the company petition - amendment does not cause any prejudice to the respondents or to Star Light as they would have sufficient opportunity to contest the issues raised by the amendment
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Service Tax
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2012 (9) TMI 704
Application for waiver of pre-deposit dues - services of manpower and logistics, and repair and maintenance of dumpers - service tax paid on former and not on latter on ground that consideration received under the contract for maintenance and repair is towards cost of spare parts and VAT is paid on such charges - assessee contended that once they have paid VAT in respect of maintenance and repair charges which involved sale of goods, there cannot be any demand for service tax for the same amount - Held that:- There is no ruling of any Court or Tribunal or any circular of CBEC to the effect that a service provider can pay service tax or VAT at his option. The two levies are under separate provisions in the Constitution and tax due under one enactment cannot be discharged by paying tax under another enactment under a lower rate. Further, tax under a Central enactment cannot be discharged by paying tax under a State enactment. Impugned contract is for providing service and not for sale of goods. In the facts of the case the appellants have not paid service tax on the value received for service as per the existing provisions of section 67 of the Finance Act, 1994 read with provisions of notification 12/2003-ST. Therefore this is not a case for full waiver of pre-deposit of dues for admission of appeal. Pre-deposit of 50% ordered to be deposited within stipulated time – Decided against assessee
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2012 (9) TMI 703
Demand of service tax, interest and penalty - Service Tax demand of Rs. 10,83,975/-. During pendency of the appeal the appellant has already deposited Rs. 12,14,786 – Held that:- Once the appellate authority did not bring the questionable conduct of the appellant, amount deposited by the appellant shall be appropriated towards service tax, which remains undisputed all through and the balance shall be appropriated towards penalty to the extent of 25% of the service tax demand. Interest, if any, shall become payable. there shall be no levy of penalty under section 76 but penalty shall be payable under section 77 of the Finance Act, 1994. requirement of pre-deposit waived
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2012 (9) TMI 702
Refund of service tax amounts paid on services in relation to the exports under Notification l\lo.41/2007-ST – rejection of refund non-mention of the commission amounts in the shipping bill – Held that:- This is a mere procedural condition and the refund claims can be considered if there is documentary evidence regarding the amount of service tax paid on the actual amounts of commissions disbursed - refund allowed
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2012 (9) TMI 669
Services rendered for the common affluent treatment application which is erected and maintained by them for the industries in GIDC, Surat - liability confirmed on the ground that the appellant has provided the services of club or association services during the period April 2008 to March 2010 - Held that:- Issue is now covered by Tribunal decision in case of Vapi Waste and Affluent Management Company, (2012 (8) TMI 816 - CESTAT, AHMEDABAD) wherein it was held that consequent upon amendment made by Notification No.1/2012-S.T., club or association service provided by an association in relation to a common facility set up for treatment and recycling effluent or solid waste is exempted from the service tax. This notification has been given retrospective effect by Section 145 of Finance Act, 2012 from June, 2005. Therefore appellant is squarely covered by the exemption Notification and the activities undertaken by them is not liable to service tax - Decided in favor of assessee.
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2012 (9) TMI 668
Maintainability of appeal – limitation - appeal which was pending before the Commissioner (Appeals) was not an appeal filed by the assessee but an appeal wrongly filed by the department, at the relevant point of time there being no provision to file such an appeal – Held that:- since the original authority had passed an order on merits in favour of the appellant, he had no occasion to deal with the question of limitation. Question of limitation which has been raised by the appellant has not been dealt with by the jurisdictional Commissioner exercising revisionary power. matter remanded to the Commissioner for fresh decision
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2012 (9) TMI 667
CENVAT credit of the service tax paid by the appellant on a service imported from abroad. Prior to 18/04/2006, the date w.e.f. which Section 66A of the Finance Act, 1994 was enacted - held that:- When the assessee paid duty of excise on their excisable product, they utilized the above credit, which fact was also borne on the relevant returns filed with the Department. Thus the utilization of CENVAT credit was also known to the Department. - Demand is beyond normal period of limitation - Decided in favor of assessee. Revenue argued that availment of such irregular credit came to the knowledge of the department only during the course of audit of the accounts of assessees by the audit party. Had the audit of the accounts of the units not taken place, irregular availment of credit by assessees could not have been detected. - this allegation is clearly untenable.
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Central Excise
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2012 (9) TMI 676
SSI exemption - Specified goods - intermediate products i.e. sugar syrup manufactured by them, whether eligible for SSI exemption - Held that:- On perusal to the corrigendum issued by the Central Government to notification it does indicate that the products fall under the chapter 9 to 20 of the Central Excise Tariff Act, 1985 are included for the benefit of notification No.8/2006 - matter is remanded back to first appellate authority to reconsider the issue afresh.
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2012 (9) TMI 675
Ineligible cenvat credit - invalid invoices - address of appellant's other unit is mentioned - Held that:- Considering the submission of assessee in three files containing approximately 1500 documents, in farm of endorsed invoices, copy of GRN, copy of statutory records, copy of issue register, copy of party s ledger etc it can be concluded that these documents indicate, appellant could have received the inputs in the factory premises wherein they have availed the cenvat credit. As the adjudicating authority should have gone into detail of document the issue needs to be reconsidered by the adjudicating authority on this ground itself - remand the matter back to for reconsideration - in favour of assessee by way of remand.
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2012 (9) TMI 674
Extended period of limitation - Denial of Cenvat Credit – appellant contended that no objection to returns filed by the appellant, nor any discrepancy in its excise records were found – Held that:- Fake invoices were the medium to avail cenvat credit without actual goods being received by the appellant - bogus transport numbers were mentioned in the invoices and that remained un-rebutted - Section 17 of the Limitation Act, 1963 has embodied cardinal principle that fraud nullifies everything. The fraudulent act of the appellant has caused loss to Revenue - adjudication is not time barred.
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2012 (9) TMI 673
Assessable value - goods are cleared for captively use of their sister unit in the manufacturing of final product – Held that:- Board Circular No. 692/08/2003-CX is having retrospective effect and the correct method to arrive at assessable value for the goods captively used by sister unit in manufacturing of final product is only CAS-4, therefore, the circular is clarificatory in nature – against revenue
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2012 (9) TMI 672
Cenvat Credit on capital goods - stored at administrative office before shifting to manufacturing premises - Held that:- Since the construction of the factory was not completed, the appellant could not shift the goods within the factory premises but stored it at a place 15 k.m. away in its Administrative office. As soon as construction was about to-be over, under intimation to the Department, on or around 1-5-97, such machinery was shifted, in such a case can it be stated that the goods were not received in the factory? Department was not justified in denying 100% credit on the additional duty paid by the appellant on such capital goods merely on the ground that physically such goods were not shifted to the factory before 1-3-97 - in favour of assessee
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2012 (9) TMI 671
Denial of exemption – alleged that Certificate issued by the Project authority of Power Grid Corporation of India did not mention the appellant’s name as a sub-contractor/supplier and that even though by amendment dated 6-6-2008 to the certificate, the name of “M/s. Modern Industries Ltd.” was added – Held that:- Corrigendum has been issued vide letter dated 11-11-2010 mentioning that in the letter dated 6-6-2008, the name of “M/s. Modern Industries Ltd., Abu Road, Rajasthan” may be read as “M/s. Modern Insulators Ltd., - subsequent letter dated 6-6-2008 amended the certificate dated 20-9-2007 clearly mentioning that this amendment shall form integral part of the Certificate dated 20-9-2007 issued for the purpose of Notification No. 108/95-C.E. - no justification for denying the duty exemption under Notification No. 108/95-C.E. to the appellants - duty demand against them, interest and penalty of equal amount under Section 11AC is not sustainable.
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2012 (9) TMI 640
Valuation of physician samples - under the provisions of Rule 8 of the Rules r.w.s. 4 of the Central Excise Act, 1944 OR prorata value of the sales pack manufactured and cleared - Held that:- The issue is now squarely covered against the assessee as per Larger Bench decision in the case of Cadila Laboratories Ltd. (2008 (9) TMI 98 - CESTAT AHEMDABAD) that the appellant is liable to pay the differential duty that arose during the material period - the assesee has to pay the interest on differential amount. As there is no dispute to the fact that the appellant was discharging the duty liability on the physician samples under the provisions of Section 4 of the Central Excise Act, 1944 the issue being of interpretation, the penalty imposed under Section 11AC on the appellant seems to be unwarranted.
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2012 (9) TMI 639
Return of rejected goods - re-import after export - credit taken on the basis own invoice - Held that:- As observed from the copy of the Bill of Entry the goods were re-imported for reprocessing (Exported earlier) without payment of duty under bond and at the time of re-import the goods after verifying the geniuses of the condition allowed the same without payment of duty by the Customs Authority. It is also facts that the said re-imported goods after reprocess, exported the same on payments of duty. Therefore, the in terms of Rule 16, Appellants have availed the Cenvat Credit on the 700kgs of goods (duty paid vide own invoice no. R/140 dated 12.2.07 at the time of its initial export), the duty paid character thereof does not change, which was later returned for reprocessing, intimated to the department It is not necessary that in all cases an invoice is required to be issued in respect of the inputs. Where the inputs are the goods which are rejected under Rule 16, there can be circumstances where the goods come back because the purchaser may not be able to retrieve the documents from bank on payment. In such a case goods come back without being delivered to the purchaser and there cannot be any invoice. Thus in this case since the importer abroad has returned only a portion of the goods and naturally he would not raise an invoice for this purpose since goods are being returned, in such a situation if no customs duty had been paid at the time of re-importation, the assessee would not have any document issued by others but can take credit only on the basis of his own invoice - in favour of assessee.
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2012 (9) TMI 638
Eligibility of availment of Cenvat credit during the period 01.11.2008 to 07.10.2009, when the appellant was un-registered and exported the final goods manufactured by them – rejection of refund claim - Held that:- Tribunal in the appellant's own case in respect of very same amount, has clearly held that the appellant is eligible for refund of the amount of CENVAT Credit paid on the inputs which are consumed in the manufacture of finished goods which are exported on observation that appellants did have an intention to avail cenvat credit and it was only a clerical lapse due to which failure to obtain registration and make proper claims has arisen. Further, also noted that refunds were made only after obtaining registration. Matter was sent back only for limited question of verifying the documents and also finalizing the quantum of refund due to the appellant in the said refund claim. Therefore, impugned order dwelling on the eligibility of CENVAT Credit of the duty paid on the inputs is clearly beyond our order. In view of the foregoing, order rejecting refund is unsustainable and liable to be set aside – Decided in favor of assesse.
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2012 (9) TMI 637
Cenvat credit - assessee had purchased the goods in the year 2001 and they had availed the credit - In the year 2006, the appellants had sold those goods and discharged the duty liability based on its depreciated value - department’s contention is that since the goods have been removed as such in the year 2006, the entire credit is required to be reversed by them as the period of clearance of the goods is prior to amendment of Rule 3(5) – Held that:- Rule 3(5) refers to the situation which may arise not necessarily in relation to any processing or acting upon the capital goods for any purposes but even for the purpose of discarding the capital goods. Being so, the expression “as such” in Rule 3(5) cannot be understood in the same way as is to be understood in relation to the use thereof in Rule 4(5)(a) – In favor of assessee
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2012 (9) TMI 636
Duty paying document - cenvat credit of service tax in case of GTA service - Whether the credit can be allowed on the basis of debit entry in the Cenvat credit account – Held that:- Payment of Service tax was not made through challan instead the payment was made through debit entry in the Cenvat credit account and the debit entry in the Cenvat credit account was made on the basis of LR i.e. Lorry receipt received by the respondents from the transporter - LR has all the details showing the name of consignor and consignee, serial number and in the note below it is stated that the Service tax to be paid by the consignee. Therefore, the details mentioned in the LR provided all the required information - cenvat credit allowed
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2012 (9) TMI 635
Demand of duty – clandestine removal of goods – Held that:- Once it was established by the assessee that all four units were engaged in the manufacture of similar product accompanying with the specific defence that the entire raw material for the purpose was primarily received at Ghaziabad unit - merely because the evidence in the form of challans and transfer documents from Ghaziabad unit to other three units was not produced, that will not be sufficient to reject the contention sought to be raised on behalf of the appellants - in case of clandestine removal, the onus lies upon the Department to prove the same with cogent evidence - appellant not indulged in suppression of production and clandestine removal - appeals succeed
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Wealth tax
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2012 (9) TMI 670
Non inclusion of value of the silver bars in the wealth of the assessee - confiscation order under the Smugglers & Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 was subsequently set aside in appeal and the appeal was pending on the date of valuation - Held that:- In the present case, undisputedly, there was an order of forfeiture of the subject assets, which was in operation during the period between 8.6.1979 to 24.6.1992 till it was set aside by the Appellate Tribunal. Thus, during the said period, which encompasses the valuation dates corresponding to the assessment years under consideration, the subject assets stood vested in the Central Government free from all encumbrances. During such period, though the assessee had challenged the order of forfeiture before the Appellate Tribunal for Forfeited Property, the assessee could not claim to be the legal owner of the subject assets nor could it be stated that the goods belonged to him. As for the purpose of computing the net wealth of an assessee what is to be taken into consideration is the aggregate value of all the assets, wherever located, belonging to the assessee on the valuation date. Thus, for the purpose of computing the net wealth of an assessee, the assets have to belong to the assessee on the valuation date corresponding to the said assessment year. In the present case, on each valuation date in relation to the assessment years under consideration, admittedly the subject assets stood forfeited. The forfeiture came to an end only on 24.6.1992 when the order of competent authority came to be set aside by the Appellate Tribunal for Forfeited Property. However, till then, the same stood vested in the Central Government. Under the circumstances, when the subject assets did not legally belong to the assessee during the period under consideration, the same could not have been included while computing his net wealth. As during the relevant valuation dates, the order of forfeiture had been stayed by the higher forum. In support of such contention, the learned counsel had placed reliance upon a communication dated 6.11.1992 addressed by the assessee to the Assistant Commissioner of Wealth Tax where it is nowhere stated therein that the High Court had granted interim stay against the order passed by the competent authority under section 7 of the Act. From the facts as emerging from the record, it is apparent that against the order passed by the competent authority under the SAFEMA, the assessee had preferred an appeal before the Appellate Tribunal for Forfeited Property but no order staying the order passed by the competent authority appears to have been placed on record - in favour of assessee.
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Indian Laws
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2012 (9) TMI 666
Violation of Article 14 of the Constitution of India - provision of Section 22-C(8) of the Legal Services Authorities Act, 1987 provides that where the parties fail to reach at an agreement under sub-section (7), the Permanent Lok Adalat shall, if the dispute does not relate to any offence, decide the dispute - the words members of the Lok Adalats were substituted by the words members of the Lok Adalats or the persons constituting Permanent Lok Adalats - Held that:- The establishment of Permanent Lok Adalats and conferring them jurisdiction upto a specific pecuniary limit in respect of one or more public utility services as defined in Section 22-A(b) before the dispute is brought before any court by any party to the dispute is not anathema to the rule of law. Instead of ordinary civil courts, if other institutional mechanisms are set up or arrangements are made by the Parliament with an adjudicatory power, in our view, such institutional mechanisms or arrangements cannot be faulted on the ground of arbitrariness or irrationality - if at all a party to the dispute has a grievance against the award of Permanent Lok Adalat he can always approach the High Court under its supervisory and extraordinary jurisdiction under Articles 226 and 227 of the Constitution of India. There is no merit in the submission of the learned counsel for the petitioner that in that situation the burden of litigation would be brought back on the High Courts after the award is passed by the Permanent Lok Adalat on merits. There is no merit in the submission of the petitioner that the service provider may pre-empt the consideration of a dispute by a court or a forum under special statute by approaching the Permanent Lok Adalat established under Chapter VI-A of the 1987 Act and, thus, depriving the user or consumer of such public utility service of an opportunity to have the dispute adjudicated by a civil court or a forum created under special statute. In the first place, the jurisdiction of fora created under the Special Statutes has not been taken away in any manner whatsoever by the impugned provisions. The Permanent Lok Adalats are in addition to and not in derogation of fora provided under Special Statutes. Secondly, not a single instance has been cited where a provider of service of public utility in a dispute with its user has approached the Permanent Lok Adalat first. The submission is unfounded and misplaced. The whole idea of having non-judicial members in a tribunal like Permanent Lok Adalat is to make sure that the legal technicalities do not get paramountcy in conciliation or adjudicatory proceedings. The fact that a Permanent Lok Adalat established under Section 22-B comprises of one judicial officer and two other persons having adequate experience in public utility service does not show any abhorrence to the rule of law nor such composition becomes violative of principles of fairness and justice or is contrary to Articles 14 and 21 of the Constitution of India - It is true that the award made by the Permanent Lok Adalat under 1987 Act has to be by majority of the persons constituting the Permanent Lok Adalat. In a given case, it may be that the two non-judicial members disagree with the judicial member but that does not mean that such majority decision lacks in fairness or sense of justice It is against public policy and well defined principles of judicial discretion to entertain or hear petitions relating to same subject matter where the matter was heard and dismissed on an earlier occasion - Writ dismissed.
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