TMI Tax Updates - e-Newsletter
September 27, 2012

Case Laws in this Newsletter:

Income Tax Customs Service Tax Central Excise

Articles

1. SERVICE TAX : RECOVERY OF AMOUNT DUE TO CENTRAL GOVERNMENT

   By: Dr. Sanjiv Agarwal

2. Understanding consideration to determine service tax payable

   By: Meenu Garg

3. APPOINTMENT ON COMPASSIONATE GROUND IS NOT A RIGHT OF A PERSON.

   By: DR.MARIAPPAN GOVINDARAJAN

4. FAQs: Partial Reverse Charge Mechanism -Service Tax

   By: Bimal jain

News

1. MCA 21 Second Cycle to Benefit all the Companies and LLPS Registered in India . Dr. M.Veerappa Moily

2. India Malaysia to Achieve Trade Target of USD 15 Billion by 2013 Anand Sharma to Propose Upward Revision of the Target IDFC and Malaysian Soverign Fund Form SPV with Rs. 830 Crore Equity Base for Highway Projects

3. Invitation of Views on the draft National IPR Strategy as prepared by the Sectoral Innovation Council on IPR

4. Auction for Sale of Government Stocks

5. International Crude Oil Prices of Indian Basket Decreases on 24.9.2012 to US$ 108.42/BBL

6. Supreme Court has taken a serious view in cases of delay in filing appeals in the High Courts as also SLPs.

7. DA for Central Government Employees

8. Continuation of MCA21 Project - e-Governance, Computerization and Networking of Ministry of Corporate Affairs and its Field Offices (MCA21 v2)

9. Strengthening and Restructuring of Integrated Child Development Services Scheme

10. Financial Restructuring of State Distribution Companies

Notifications

Companies Law

1. [F.No.17/160/2012-CLV], - dated 21-9-2012 - Co. Law

Companies (Central Government's) General Rules and Forms (Fifth Amendment) Rules, 2012 - (Form 23AC & 23ACA)

Customs

2. 44/2012 - dated 25-9-2012 - ADD

Seeks to continue, up to and inclusive of 23rd September, 2013, the anti-dumping duty on imports of Presensitised Positive offset aluminium Plates/PS plates , originating in, or exported from, China PR.

3. 42/2012 - dated 19-9-2012 - ADD

Seeks to extend the validity of Notification No.99/2007-Customs, dated the 3rd September, 2007 by one more year i.e. up to and inclusive of 2nd September, 2013

4. 89/2012 - dated 26-9-2012 - Cus (NT)

Appointment of Common Adjudicating Authority

5. 88/2012 - dated 26-9-2012 - Cus (NT)

Appointment of Common Adjudicating Authority

6. 87/2012 - dated 26-9-2012 - Cus (NT)

Appointment of Common Adjudicating Authority

7. 86/2012 - dated 26-9-2012 - Cus (NT)

Appointment of Common Adjudicating Authority

8. 85/2012 - dated 26-9-2012 - Cus (NT)

Specifies Jurisdiction of Chief Commissioner of Customs and Commissioner of Customs (appeals)

Income Tax

9. 40/2012 - dated 20-9-2012 - IT

Amendment in Rule 17C of Income Tax Rules, 1962

10. 39/2012 - dated 17-9-2012 - IT

Income-tax (12th Amendment) Rules, 2012. - Insertion of Rule 21AB & Form Nos. 10FA & 10FB

Circulars / Instructions / Orders

Income Tax

1. LETTER NO. DIT(L&R)-I/DELAY IN SLP/2012-13, - dated 19-9-2012

Supreme Court has taken a serious view in cases of delay in filing appeals in the High Courts as also SLPs.

FEMA

2. 36 - dated 26-9-2012

Foreign Direct Investment (FDI) in India -Allotment of Shares to person resident outside India under Memorandum of Association (MoA) of an Indian company – Pricing guidelines

3. 37 - dated 26-9-2012

Deferred Payment Protocols dated April 30, 1981 and December 23, 1985 between Government of India and erstwhile USSR

4. 35 - dated 25-9-2012

Establishment of Liaison Offices (LO)/Branch Offices (BO)/Project Offices (PO) in India by Foreign Entities – Reporting requirement

5. 33 - dated 24-9-2012

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

6. 34 - dated 24-9-2012

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

Highlights / Catch Notes

Income Tax

• Assessee Company Not Liable for Additions under Deemed Dividend Rule Section 2(22)(e) Without Holding Shares.

  Case-Laws - AT : Deemed dividend u/s 2(22)(e) - assessee company is not holding a single share in company lending advance - no addition - AT
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• Interest on FDRs from Zero Coupon Convertible Bonds Taxable u/s 56 of the Income Tax Act.

  Case-Laws - AT : Interest on FDRs made out of zero coupon convertible bonds - chargeable under section 56 - AT
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• Tax Exemption u/s 54F Applies Even if New Home Construction Exceeds Three-Year Limit.

  Case-Laws - AT : When a house is completed after expiry of three years from the transfer of the original asset, the assessee is entitled to exemption under section 54F - AT
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• Court Rules in Favor of Accused in Accommodation Entry Case; No Extra Charges Imposed.

  Case-Laws - AT : Alleged accommodation entries - allegation of providing bills and entries and charging commission for his services @ 0.25% of the aggregate transactions - no addition - in favor of assessee - AT
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• Assessee's Lack of Charitable Activity in Past Three Years Doesn't Bar 80G Certificate Under Income Tax Act.

  Case-Laws - AT : Merely because the assessee has not carried out any charitable activity during the last 3 years does not mean that the assessee is not entitled to the certificate u/s 80G - AT
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• Excise duty and sales tax must be excluded from total turnover for Section 80HHE deductions under Income Tax Act.

  Case-Laws - AT : Excise duty & Sales Tax to be excluded from turnover for computing deduction u/s 80HHE - AT
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• Rule 21AB and Forms 10FA/10FB Update Tax Procedures for Compliance and Clarity Under Income-tax (12th Amendment) Rules, 2012.

  Notifications : Income-tax (12th Amendment) Rules, 2012. - Insertion of Rule 21AB & Form Nos. 10FA & 10FB - Notification
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• Amendment to Rule 17C of Income Tax Rules, 1962, aims to enhance compliance and streamline tax administration processes.

  Notifications : Amendment in Rule 17C of Income Tax Rules, 1962 - Notification
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• Court Rejects Revenue's Argument: Assessee Need Not Prove Income Source Again Without Incriminating Evidence in Search.

  Case-Laws - HC : 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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• Court Allows Income Deduction for Payments to Deceased Partner's Wife Under Overriding Title, Affirms Tax Eligibility.

  Case-Laws - AT : 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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• Assessing Officer Evaluates Sale of Properties on Agricultural Land for Business Income or Capital Gains Classification.

  Case-Laws - AT : 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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• Assembly of Sharpeners Qualifies for Deduction u/s 80IA, Rejecting AO's "Simple Manual Process" Argument.

  Case-Laws - AT : 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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• Court Upholds Rejection of Books u/s 145 Due to Lack of Documentation, Despite Audit Findings on TDS.

  Case-Laws - AT : 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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• Section 40(a)(ia) Applies Only to March 31 Payables; Cannot Disallow Prior Year Paid Expenses Without TDS Deduction.

  Case-Laws - AT : 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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Customs

• Extension Proposed for Notification No.99/2007-Customs Validity Until September 2, 2013.

  Notifications : Seeks to extend the validity of Notification No.99/2007-Customs, dated the 3rd September, 2007 by one more year i.e. up to and inclusive of 2nd September, 2013 - Notification
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• Anti-Dumping Duty on Chinese PS Plates Extended Until September 2013 to Protect Domestic Market.

  Notifications : Seeks to continue, up to and inclusive of 23rd September, 2013, the anti-dumping duty on imports of Presensitised Positive offset aluminium Plates/PS plates , originating in, or exported from, China PR. - Notification
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• Jurisdictional Roles Defined for Chief Commissioner of Customs and Commissioner (Appeals) in New Notifications on Customs Authority.

  Notifications : Specifies Jurisdiction of Chief Commissioner of Customs and Commissioner of Customs (appeals) - Notification
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• Goods Misdeclared, Liable for Confiscation; Fine u/s 125 Unjustified Due to Unavailability of Goods.

  Case-Laws - AT : Since misdeclaration of the value of the imported goods has been upheld, the goods are held liable for confiscation. - However, since the said goods are not available for confiscation, imposition of fine under Section 125 is not justified. - AT
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• Misdeclared imported goods confirmed; confiscation liability established, but fine u/s 125 unjustified due to goods' unavailability.

  Case-Laws - AT : Since misdeclaration of the value of the imported goods has been upheld, the goods are held liable for confiscation. - However, since the said goods are not available for confiscation, imposition of fine under Section 125 is not justified. - AT
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• High Court Authority Required for Interest on Returned Seized Currency or Sale Proceeds Under Customs Act.

  Case-Laws - AT : There is no provision in the Customs Act for payment of interest on return of the seized currency or return of the sale proceeds of any seized goods which are ordered to be released - the power is vested with the High Court - AT
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• Rebate Claim on DFIA Licence: No Restriction on Duty Rebate and Cenvat Credit Under Notification No. 40/2006-Cus.

  Case-Laws - CGOVT : Rebate claim - DFIA Licence - double benefit - No restriction in the Notification No. 40/2006-Cus., on claiming rebate of duty paid on exported goods and availment of Cenvat credit. - CGOVT
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FEMA

• Guidelines for Share Allotment to Non-Residents: FDI Pricing Rules and Tax Implications under FEMA Explained.

  Circulars : Foreign Direct Investment (FDI) in India -Allotment of Shares to person resident outside India under Memorandum of Association (MoA) of an Indian company – Pricing guidelines - Circular
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• FEMA 1999: New Clarifications on Import Regulations for Gold Jewelry and Precious Stone Items to Ensure Compliance.

  Circulars : 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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• Money Changers Must Follow KYC, AML, and CFT Norms under PMLA, 2002 for Secure Financial Transactions.

  Circulars : 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
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Corporate Law

• 2012 Amendments to Companies Law: Updates to Form 23AC and 23ACA for Improved Filing and Compliance.

  Notifications : Companies (Central Government's) General Rules and Forms (Fifth Amendment) Rules, 2012 - (Form 23AC & 23ACA) - Notification
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Indian Laws

• Public Consultation Open for Draft National IPR Strategy: Share Your Feedback to Shape Innovation and Protect Creators' Rights.

  News : Invitation of Views on the draft National IPR Strategy as prepared by the Sectoral Innovation Council on IPR
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Service Tax

• Refund Claim on Service Tax for Terminal Handling Charges Reviewed; Remanded to Allow Refund Benefit Within Limitation Period.

  Case-Laws - AT : Refund claim of service tax paid on terminal handling charges - period of limitation - matter remanded back to allow the benefit - AT
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• Commissioner Must Apply Laws Effective at Offense Time, Preventing Retroactive Rule Changes.

  Case-Laws - AT : Commissioner cannot go beyond the provisions applicable at the time of occurrence of offence - AT
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• Service Providers Cannot Choose Between Paying Service Tax or VAT; No Court Ruling or CBEC Circular Permits This.

  Case-Laws - AT : 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
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Central Excise

• Storage Tank Part of Main Machinery: Benefits Extend to Inputs Despite Land Embedding u/s X.

  Case-Laws - HC : The storage tank has been held to be a component to the main machinery namely, boiler and the benefit is extended to the inputs used in the construction of the storage tank though it is also embedded to the land. - HC
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• Job Worker Liable for Duty Payment in Principal-to-Principal Manufacturing Transactions.

  Case-Laws - AT : When a principal manufacturer gets his goods manufactured from a job worker on job work basis and the transaction between them are on principal to principal basis, it is the job worker who would be liable to pay duty. - AT
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• Court Rules Amendment on Education Cess Refunds for Exports is Retrospective, Allowing Refunds.

  Case-Laws - HC : Refund of education cess - export - rebate of duty - amendment is prospective or retrospective – held that amendment is retrospective in nature - refund of education cess allowed - HC
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• High Court Rules Section 11AC Penalties Require Evidence of Intent to Evade Duty Payments; Mere Non-Compliance Insufficient.

  Case-Laws - HC : Mandatory penalty u/s 11AC - if there is no intent to evade payment of duty, no penalty u/s 11AC - HC
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• CAS-4 Standard Required for Valuing Goods Used Internally by Sister Units in Manufacturing Final Products per Excise Rules.

  Case-Laws - AT : 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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• High Court Rules Cenvat Credit Valid for Capital Goods Temporarily Stored at Administrative Office Pre-Manufacturing.

  Case-Laws - HC : Cenvat Credit on capital goods - stored at administrative office before shifting to manufacturing premises - credit allowed - HC
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Case Laws:

• Income Tax

• 2012 (9) TMI 734
  Disallowance of transport and octroi charges u/s 40(a)(ia)r.w.s. 194C - A.Y. 2005-06 - Held that:- On perusing the records of assessee there is nothing on record to show that the assessee has paid the entire sum of transportation charges before 31st March,2005 and there is nothing payable as on 31st March, 2005 - As the allowability of deduction u/s. 40(a)(ia) has not been examined by the A.O. in the light of decision of Special Bench in the case of Merilyn Shipping (2012 (4) TMI 290 - ITAT VISAKHAPATNAM) the issue needs to be re examined, thus the matter should be remitted back to the file of A.O. for verification - in favour of remand by way of remand. Disallowance of wages - Held that:- As A.O. had not pin pointed any defect in wage register & has merely disallowed the payment for the reason that there were no signatures of the recipient on revenue stamp in the wage register and has further presumed that the assessee has inflated expenses on wages without pin pointing to any specific instance no disallowance on adhoc basis can be made - in favour of assessee. Addition in respect of valuation of closing stock - partial relief by CIT(A)- Held that:- As the assessee had not considered stock of work in process while valuing the closing stock and the assessee has submitted that it does the job of dyeing and printing on job work charges and while valuing the closing stock, the stock of WIP is already included based on that CIT (A) has granted partial relief - As assessee here has not pin-pointed the working of valuation of closing stock which would show that valuation of work in process is also included in it & has also not been in a position to demonstrate as to what was the break up of own material and that received for processing on job work basis no reason to interfere with the order of CIT (A) - against assessee. Non deduction of TDS - Disallowance of labour charges u/s 40(a)(ia)- A.Y. 2006-07 - Held that:- As decided in M/s. Alpha Projects Versus DCIT, Ci rcle-1(1) [2012 (4) TMI 466 - ITAT, AHMEDABAD] since the TDS has been paid to the account of Govt. before filing of return of income, no disallowance is called for - as in this case assessee has credited the amount on 31-3-2005 and tax was also deducted on that date. The TDS of RS.17,728/- was deposited in the Govt. account on 24-5-2005 i.e. before the date of filing of the return. (return was filed on 29-10-2005) no addition seems to be warranted - in favour of assessee. Addition on account of inflated purchases - Held that:- Difference of Rs.4,33,130/- was observed in the purchase register and the A.O. made addition on the basis of the difference and the statement of Accountant of assessee - As it is undisputed fact that the books of accounts of the assessee are audited by the auditors. CIT (A) had primarily agreed with the contention of the assessee and therefore directed the A.O. verify the reconciliation and delete the addition if the assessee’s contention was found correct. No infirmity in the directions of CIT (A) to the A.O. to verify and then delete if the assessee’s contention is found correct, thus no interference is called for in the order of the CIT (A) - in favour of assessee. Disallowance of transport and octroi charges u/s 40(a)(ia) - Held that:- The provisions of section 40(a)(ia) are applicable only to the amounts of expenditure which are payable as on the date 31st March of every year and it cannot be invoked to disallow which had been actually paid during the previous year, without deduction of TDS as in the present case, since there is no sum payable as on 31-3-2006, following the decision of Special Bench in the case of Merilyn Shipping (2012 (4) TMI 290 - ITAT VISAKHAPATNAM) we delete the addition made by A.O. - in favour of assessee.

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• 2012 (9) TMI 733
  Penalty u/s. 271(1)(c)- unaccounted money - A.Y. 2002-03 - Held that:- As initially addition of Rs.4,61,500/- was made u/s. 68 which has been finally made of Rs.1,27,500/ - as the addition on which the penalty u/s. 271(1)(c) has been levied has itself been reduced from Rs.4,61,500/- to Rs.1,27,500/- the present penalty cannot survive. However, since the addition of Rs.1,27,500/- u/s. 68 has been sustained issue of penalty on the addition be restored back to the file of A.O. for deciding it afresh - in favour of assessee for statistical purposes. Penalty u/s. 271(1) (c ) - gift as unexplained cash credit u/s.68 - A.Y. 2003-04 - Held that:- Merely because the assessee could not prove the credit-worthiness of the donors, it does not justify the imposition of the penalty under section 271(1) (c). The facts of the case may justify the additions of the gift amounts for taxation purpose in the assessment of the assessee, but are not sufficient to justify the imposition of the penalty under section 271(1) (c) - in favour of assessee.

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• 2012 (9) TMI 732
  Disallowance u/s. 14A - CIT(A) deleted the addition - Held that:- As decided in Maxopp Investment Ltd. & Others Versus Commissioner of Income Tax [2011 (11) TMI 267 - DELHI HIGH COURT] as under the expression “expenditure incurred” refers to actual expenditure and not to some imagined expenditure. The “actual” expenditure that is in contemplation u/s. 14A(1) of the Act is the “actual” expenditure in relation to or in connection with or pertaining to exempt income - as in the present case A.O. had made the disallowance for interest and other expenses pertaining to the investments on an estimate basis at 10% of the dividend income A.O. has not given any finding with respect to incurring of expenses for earning tax free income. Thus disallowance of expenses on adhoc basis @ 10% of dividend income without giving any finding of fact warrants to be deleted - in favour of assessee. Inclusion of amount of sales tax and excise duty while computing the total turnover for the purpose of deduction u/s. 80HHC - CIT (A) directed to reduce the addition - Held that:- As decided in CIT Versus Lakshmi Machine Works [2007 (4) TMI 202 - SUPREME COURT] excise duty and sales tax were includible in the "total turnover", which was the denominator in the formula contained in section 80HHC(3) as it stood in the material time whereas 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. Computation of deduction u/s 80HHC - 90% exclusion of net interest/rent or gross interest/rent - Held that:- As the facts in the year under appeal are identical to that of earlier year wherein the co-ordinate Bench has taken a view with respect to interest income and held that 90% of not the gross interest/rent but only the net interest/rent have to be reduced from business profits while computing deduction u/s. 80HHC. Further in the case of ACG Associates Capsules (P) Ltd. (2012 (2) TMI 101 - SUPREME COURT OF INDIA) the Hon’ble Apex Court has held that net interest needs to be reduced under Cl.(1) of Explanation(baa) to Sec. 80HHC for determining profits of business. Thus 90% of the net interest be reduced for determining profit for the purpose of deduction u/s. 80HHC. We therefore direct the A.O. to allow the deduction after verification - in favour of assessee. Computation of deduction u/s. 80HHC - receipt of insurance claim - Held that:- there is no profit element involved in insurance receipts, as the insurance claim is purely for the recovery of loss of material and asset of the company due to damage to the material and assets. We are of the view that the expenditure incurred by the assessee on material and assets lost due to damage is more than the insurance claim and there was no income to the assessee in the nature of insurance claim - the same will not be included either in the total turnover nor in the business profits of the assessee for the purpose of computation of deduction u/s. 80HHC of the Act - in favour of assessee. Computation of deduction u/s. 80HHC - brokerage of investment - Held that:- As this brokerage income in any way is not related to export earning but the expenditure relating to this brokerage income of any expenditure, the same will be reduced and only net income has to be excluded to the extent of 90% under clause (baa) while computing deduction u/s. 80HHC - partly in favour of assessee. Adhoc disallowance of 5% of Sales promotion - Held that:- The co-ordinate Bench on identical matter, in assessee’s own case, in earlier year has decided the matter by holding that the assessee has not vouched the expenses and the AO on scrutiny found that these expenses include the office expenses incurred at its branches at Madras, Bombay, Delhi and Kolkata and on scrutiny of these expenses finds that there are many expenses which have been incurred in providing tea, coffee, refreshments cold drinks, etc. to various visitors but nature of all these expenses reveals that these are many expenses which are not subject to verification and not properly vouched also - even now before that the assessee could not adduce anything to controvert that the expenses are vouched fully and there is no personal element in these expenditures accordingly the disallowance is confirmed - against assessee. Disallowance of Interest on loan - loan is for nonbusiness purpose - Held that:- That Revenue has not brought any nexus of borrowed funds being used for investments and the basis of the conclusion is on the basis of assumption. On the other hand the assessee has demonstrated with the help of details and its accounts that the investments have been made out of the sale of investments and out of free reserves. It has not utilized unsecured loans for the purpose of making investments - as Revenue has not been in a position to rebut the facts by bringing any material on record no disallowance can be warranted - in favour of assessee.

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• 2012 (9) TMI 731
  Non deduction of TDS on payment of transport charges - Disallowance u/s.40(a)(ia) - Held that:- Nothing has been brought on record the goods were transported in pursuance of any sub-contract so as to apply the provisions of Sec.194C(2), thus in the absence of transfer or pass-over of any contractual responsibility to transporters as a sub-contractor, the assessee being an individual was not responsible for the deduction of tax at source as prescribed u/s.194C(2). As the AO has recorded a finding that the impugned amount was paid to truck-owners. The AO has noted that when the payments were made to various truck-owners, no TDS was deducted. In this regard, the Respected Special Bench has taken a view in the case of Merilyn Shipping & Transports, Visakhapatnam vs. Addl.CIT (2012 (4) TMI 290 - ITAT VISAKHAPATNAM) that the word quote “ “payable” used in section 40(a)(ia) has to be given its natural meaning and, going by a strict interpretation, section 40(a)(ia) is applicable only to expenditure which is payable as on March 31 of every year and cannot be invoked to disallow the amounts which have already been paid during the previous year, without deducting tax at source.”. Thus,the provisions of section 40(a)(ia) are not applicable under this situation, hence the impugned disallowance is hereby deleted - in favour of assessee.

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• 2012 (9) TMI 730
  Disallowance of payment of incentive to the drivers - the liability was contingent in nature for the year under consideration - Held that:- As decided in Bharat Earth Movers Versus CIT [2000 (8) TMI 4 - SUPREME COURT] if an assessee is maintaining accounts on mercantile system and a liability accrued, though discharged at a future date, held to be an allowable deduction while working out the profit and gains. The Hon’ble Court has held that having regard to the accepted principle of commercial practice and accountancy such deduction is permissible, so the liability was held as not a contingent liability. Decision of the AO was nothing but simply following the past history of the disallowance. Meaning thereby, even after the extreme step of search was taken by the Revenue Department, but the genuineness of the payment of the incentive to the drivers was not doubted - the liability of payment of incentive had definitely arisen during the accounting period under consideration and that liability was undisputedly discharged at a future date. The incurring of the liability was ascertainable for the year under appeal, therefore it is to be satisfied that it was not a contingent liability. In the result the findings of the authorities are reversed and direct to allow the claim - in favour of assessee.

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• 2012 (9) TMI 729
  Addition on account of deemed dividend u/s 2(22)(e) - CIT(A) deleted the addition - Held that:- The deemed dividend can be assessed only in the hands of a person who is a shareholder of the lender company and not in the hands of a person other than a shareholder & the expression shareholder referred to in section 2(22)(e) refers to both a registered shareholder and beneficial shareholder. If a person is a registered shareholder but not the beneficial shareholder then the provisions of section 2(22)(e) will not apply - the similar issue in assessee’s sister concern for assessmentyear 2005-06, wherein clear finding is given in para- 14 that the assessee-company in which public is not substantially interest and one of the Director, Shri K.K. Bansal holds more than 20% share both in assessee- company and MMRML that assessee-company is not holding even a single share in MMRML and no shareholding is held by assesseecompany in MMRML - The perusal of the share holding indicates that the assessee company is not holding a single share in company lending advance, Accordingly, this issue is squarely covered in favour of the assessee. Addition on account of the payment made to GMB as plot development fees - CIT(A) deleted the addition - assessee is engaged in the business of Ship Breaking - Held that:- As the assessee-company possessed plot No.96 and on request made to GMB, permission sought was granted for plot No.V-5. The original plot No.96 was acquired by paying premium of Rs.9,11,250/- for 30 months. Since the same was used for 8 months the previous year relevant to assessment year 2003-04 the value written off is Rs.2.43 lakh - as in the year under consideration the total premium for the period from 01.10.2004 to 30.09.2005 was Rs.16.20 lakh and the assessee has claimed a sum of Rs.8.10 lakh for this period. The balance amount of Rs.8,74,200/- was claimed for the period from 01.12.2002 to 30.09.2004 and Rs.1,82,250/- for the period ending 30th September, 2004. In view of this face the assessee has rightly claim deduction of Rs.18,66,460/-, which was allowed by CIT(A)- in favour of the assessee.

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• 2012 (9) TMI 728
  Interest on FDRs made out of zero coupon convertible bonds - Business income OR income from other sources - Held that:- If accompany has not commenced business, there cannot be any question of assessment of its profits and gains of business. That does not mean that until and unless the company commences its business, its income from any other source will not be taxed. The company may keep the surplus funds in short term deposits in order to earn interest. Such interests will be chargeable under section 56. As the assessee made FDRs of the funds, therefore, making such FDRs was not at all related to the construction activity or any other capital installation, therefore, earning of interest on FDRs, before commencement of business, is income from other sources as decided in Commissioner Of Income-Tax Versus Modi Rubber Limited [1994 (3) TMI 70 - DELHI HIGH COURT] - against assessee.

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• 2012 (9) TMI 727
  Income form lease rent - business income OR income from other sources - Held that:- Considering the main objects of assessee it is to develop residential and commercial complexes for the public at large and the ground rent was charged from immovable properties which were either sold or given on lease to various persons. Such land on which such development or construction activities were done by the assessee were made available by the Government on lease basis and such properties were also either sold on lease basis or leased out on rent fixed by the Government, therefore, such lease rent is directly connected with the objectives of the assessee, consequently, the character of such lease rent is business income, therefore, it was not income from other sources. Income from rent/rental - CIT(A)'s direction to AO that the income from rent/rental is to be taxed as income from house property - Held that:- the amount of Rs. 41,04,721/- was received by the assessee from letting out of buildings of the assessee which was claimed as such earning of such rental income is not the regular business of the assessee. Our view is fortified by the ratio of the decision in the case of Potdar Cements Private Limited and others; 226 ITR 625 and CIT vs. Dhoompalam Commercial Complex Industry Pvt. Ltd [2003 (1) TMI 52 - KARNATAKA HIGH COURT] therefore, the learned CIT(A) rightly directed to treat such income as income from house property and not business income. Interest from deposits in the bank - Held that:- As the surplus money deposited with the bank in itself is not sufficient to give it the character of business income. This interest income is the additional source to the assessee and is not “directly linked” with the business of the assessee. Surplus funds were deposited, therefore, such interest income is income from other sources. Interest on delayed payment- Held that:- The interest on delayed payments is essentially connected with the main objects of the assessee which is obtained out of housing/commercial units/industrial units, as the case may be, and is not an independent source of income. It is also connected with the business activities of the assessee, therefore, the true character of such receipt is also part of business income.

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• 2012 (9) TMI 726
  Deduction u/s 54F - house was not constructed on the date of inspection by the Inspector - Held that:- As the assessee had invested the total sale consideration (net consideration) within three years after the transfer of the original asset. The words mentioned in section 54F are that the amount should be invested in the construction of a residential house. Therefore, once the assessee having been invested total sale consideration into construction of a residential house, then it is not necessary that the residential house should have been completed within three years of the transfer of the original asset. The residential house may be completed even after completion of three years of the transfer of the original asset. In such a situation, when a house is completed after expiry of three years from the transfer of the original asset, the assessee is entitled to exemption under section 54F as decided in CIT v. Sardarmal Kothari [2008 (6) TMI 15 - MADRAS HIGH COURT] The assessee had submitted application under Rule 46A admitting additional evidence which in fact, could not be submitted by the assessee before completion of the assessment but on having completed the house, after the expiry of three years from the transfer of the original asset along-with electricity bill which was not accepted by the CIT(A) as the same should have been accepted by the CIT(A) - in favour of assessee.

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• 2012 (9) TMI 725
  Denial of interest u/s. 244A - no interest on the refund of self assessment tax - rectification application u/s. 154 withdrawing interest granted u/s 244A - Held that:- As decided in CIT vs. Ashok Leyland Ltd. [2001 (10) TMI 71 - MADRAS HIGH COURT] it is trite of law that wherever the assessee is entitled to refund, there is a statutory liability on the Revenue to pay interest on general principles on general principles on sums wrongfully retained. As decided in CIT vs. Gujarat State Warehousing Corporation [2001 (8) TMI 24 - GUJARAT HIGH COURT] assessee is entitled to interest u/s. 244A (1A) payment of tax made u/s. 140A and as in the present case undisputedly, the refund is on account of self assessment tax made u/s. 140A ssessee is entitled to interest u/s. 244A - in favour of assessee.

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• 2012 (9) TMI 724
  Dis-allowance of commission expenses - alleged accommodation entries - survey u/s 133A undertaken at assessee's business premises on the basis of statement given by one Mr. Gupta alleging that the said Mr. Gupta was merely providing bills and entries and that he had been charging commission for his services @ 0.25% of the aggregate transactions - denial of cross examination of Mr Gupta - Held that:- In absence of any contrary material placed on record by the Revenue to show that the cross examination of Mr. K.K. Gupta was provided to the assessee, and keeping in view that the assessee had been showing profit ranging between 40 to 45% on the said purchases with Mr Gupta has not been uncontroverted by the Revenue even at this stage and also keeping in view the books of accounts have not been rejected, it is held that CIT(A) was not justified in sustaining the addition of commission and accordingly we delete the same. Dis-allowance of depreciation on certain P&M purchased from said Mr Gupta - Revenue contended such purchases of capital assets as fictitious - Held that:- It is not the case of the Revenue that the plant and machinery were not installed at the assessee’s business premises or the same were not used for the purpose of the business of the assessee or the rate of depreciation claimed by the assessee is not according to the Rules. Estimated disallowance of depreciation made by the A.O. is not sustainable in law and accordingly order of CIT(A) in deleting the same is upheld - Decided in favor of assessee.

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• 2012 (9) TMI 723
  Rejection of application for grant of certificate u/s 80G on ground that applicant trust has not carried out any charitable activities during the last three years and has not incurred any expenditure on the same - contravention of the benevolent provisions of section 80G - Held that:- It is not the case of the Revenue that assessee has not satisfied all the conditions laid down in Clauses (i) to (v) of sub-section (5) of section 80G. Merely because the assessee has not carried out any charitable activity during the last 3 years does not mean that the assessee is not entitled to the certificate u/s 80G if other conditions as laid down under Clauses (i) to (v) of sub-section (5) of section 80G read with Rule 11 AA of the Income Tax Rules, 1962 are fulfilled. In the absence of any material to show that the amount received by the assessee has been spent for any other purposes other than charitable purpose or not for construction of houses for poor and needy people as per object of the trust, DIT(E) has erred in not granting the approval u/s 80-G to the applicant trust. He is, therefore, directed to grant approval u/s. 80-G to the Trust - Decided in favor of assessee

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• 2012 (9) TMI 722
  Misc application filed against ex parte and non-speaking order passed by Tribunal for non-prosecution - Held that:- There is no dispute that the applicant had engaged a counsel and was, therefore, justified in presuming that the counsel would attend the case. However, due to certain mistake in noting the date of hearing in the diary maintained by the assessee’s counsel, he could not attend on the date of hearing. In the absence of any contrary material placed on record by the Revenue, we are of the view that the lapse on the part of the assessee’s counsel appears to be bonafide. It is also undisputed that Tribunal while dismissing the Misc. Application filed by the assessee has not passed any speaking order and has dismissed it on the ground for non-prosecution only. there was a reasonable cause, therefore, it is held that the mistake of the counsel was bonafide and the applicant cannot be made to suffer for the mistake of the assessee’s counsel and accordingly the ex parte order for non-prosecution passed by the Tribunal is recalled - Decided in favor of assessee

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• 2012 (9) TMI 721
  Dis-allowance of gift expenses, Chandla expenses, Diwali expenses, and business promotion expenses aggregating to Rs. 17,41,127 - partial relief provided by CIT(A) - assessee contending commercial expediency - Held that:- In the absence of any distinguishing features brought on record by the parties, respectfully following the order of the Tribunal in earlier year and keeping in view the rule of consistency, total disallowance sustained by the CIT(A) is reduced by 50% Dis-allowance of sundry expenses - Held that:- In absence of any distinguishing feature brought on record by the Revenue, we respectfully following the consistent view of the Tribunal, restrict the disallowance of expenses at 25% of the sundry expenses.

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• 2012 (9) TMI 720
  Validity of reassessment proceedings u/s 263 - deduction u/s 80P - cooperative society, not having primary object to provide loan or credit facilities to its members for operating agricultural activities - Held that:- An amendment was brought in by insertion of sub-section (4) of section 80P by Finance Act, 2006 w.e.f. AY 2007-08 which has specifically excluded certain cooperative societies from the purview of section 80P. This amendment was not considered by the AO while framing the assessment for the AY 2007-08. As per verdict of the Supreme Court in the case of Malabar Industries (2000 (2) TMI 10 - SUPREME COURT), incorrect application of relevant provisions of law will render the order of the AO as erroneous in so far as prejudicial to the interest of the Revenue. However, in present case, CIT has directed in the impugned order that the claimed deduction is not admissible to the assessee and at the same time set aside the matter to the file of the AO meaning thereby that the powers of the AO to examine the issue have been curtailed. Therefore, this direction of non-admissibility is modified and AO is directed to examine the assessee’s claim for eligibility in accordance with the amended provisions sub-section (4) of section 80P of the Act - Decided partly in favor of assessee for statistical purposes

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• 2012 (9) TMI 719
  Penalty u/s 271(1)(c) for concealment of income in relation to unexplained jewellery found at the time of search conducted on 10.11.2006 - assessee filed the return of income for the relevant year after search on 21.4.2008 in which the jewellery was declared as undisclosed income - penalty levied on ground that assessee had not declared undisclosed income on account of jewellery in the statement recorded under section 132(4) - benefit of clause 2 to Explanation 5 of section 271(1)(c) - Held that:- The present case is not a case in which the transactions relating to the undisclosed income have been recorded in the books of account on or before the date of search. It is an established fact that at the time of search unexplained jewellery had been found and had also been seized. Thus, the assessee at the time of search and at the time of making statement u/s 132(4) was aware that the jewellery was unexplained and despite this the assessee had not declared it as undisclosed income. Penalty u/s 271(1)(c) is leviable in relation to unexplained jewellery because the same had been declared by the assessee as undisclosed income after it was detected during search and the assessee was not entitled to the benefit of clause-2 of Explanation-5 of section 271(1)(c) - Decided against assessee

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• 2012 (9) TMI 718
  Income from purchase and sale of shares - Business Income as contended by Revenue or Short Term Capital Gains - Held that:- It is seen that the AO has primarily relied upon the finding of the AO in the immediately preceding AY i.e. AY 2005-06. Such a finding of the AO has been reversed by the CIT(A), wherein, it has been categorically held that the sale of shares and securities in the case of the assessee, amounts to short term capital gain and not business income. Against this order, no second appeal has been filed by the Department, and, hence, it has attained finality. This aspect of the matter has also been accepted by the AO in the subsequent year as evident from the copy of computation of income and the assessment order dated 8-12-2009 passed u/s 143(3). Hence, no infirmity found in order of CIT(A) treating the same as short term capital gains on ground that intention of buying of shares was solely for the purpose of investment which is evident from the investment made in the shares during the year 2005-2006, most of the investments in securities was by way of mutual fund which cannot to be traded in the ordinary course, and assessee has earned a huge dividend income - Decided against Revenue.

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• 2012 (9) TMI 717
  Dis-allowance u/s 40(a)(ia) - charter hire charges to sister concern SML - Revenue contended applicability of Section 194C and alternatively of Section 194I - period 01.04.2006 to 12.07.2006 - AY 07-08 - Held that:- Tribunal in assessment of AY 05-06 has held non-applicability of Section 194C on payment of charter hore charges. Same is followed in impugned AY and consequently no dis-allowance u/s 40(a)(ia) can be made on that account. As regards the applicability of section 194-I, it is observed provisions, was substituted by Taxation Laws (Amendment) Act, 2006 w.e.f. 13.07.2006 extending the scope of “rent” to any payment by whatever name called for the use inter alia of machinery or plant or equipment. Such amendment cannot be applied retrospectively from 01.04.2006. In that view of the matter the ground raised by the Revenue for extending the amount of dis-allowance u/s 40(a)(ia) to the amount paid during the period 01.04.2006 to 12.07.2006, is dismissed. Period 13.07.2006 to 02.11.2006 - assessee explained that no payment was made nor any amount was credited to the account of SML during the period 13.07.2006 to 02.11.2006 and certificate of tax exemption was granted u/s 197 by the competent tax authority permitting the deduction of tax at Nil rate in respect of charges credited after 03.11.2006 - Held that:- If there is neither the credit of income to the account of the payee nor payment thereof, the provisions of section 194-I cannot apply. Once the provisions of section 194-I are held to be not applicable, the question of disallowance u/s 40(a)(ia) is also ruled out. During the period 13.07.2006 to 02.11.2006, amount was neither credited to the account of SML nor were paid. Both the credit to the account as well as payment took place after 03.11.2006, being the date from which the assessee got certificate u/s 197 for deduction of tax at source at Nil rate. We, therefore, overturn the impugned order to the extent it sustained disallowance u/s 40(a)(ia) in respect of charter hire charges for the period 13.07.2006 to 02.11.2006 - Decided in favor of assessee

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• 2012 (9) TMI 716
  Dis-allowance u/s 40(a)(ia) - royalty paid to the Court Receiver deemed to be covered u/s 194J - Held that:- It is impermissible for the parties to reargue the same matter time and again before the tribunal in an attempt to unsettle the settled position. The view taken by the tribunal in a preceding year (2011 (4) TMI 508 - ITAT, MUMBAI) deserves utmost respect in so far as the subsequent years involving the similar point before the tribunal are concerned, unless there is some change in the factual or legal position. - We, therefore, uphold the impugned order on this issue by holding that the amount in question is in the nature of royalty payment covered u/s 194J and resultantly disallowance u/s 40(a)(ia) is called for - Decided against assessee Loan to relatives without Interest - held that:- As no nexus between the interest bearing loans and its utilization for the purpose of profession was shown, the A.O. disallowed proportionate interest attributable to interest free deposit of loan as being not wholly and exclusively for profession. - Decided in favor of revenue.

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• 2012 (9) TMI 715
  Relief u/s 90 & 91 – Assessee company paid income tax in Japan & New Zealand on income earned in respective countries - AO & CIT(A) not allowed relief u/s 90 be allowed in respect of taxes paid outside India – CIT (A) decide against the appeal of assessee on the basis of decision given by Tribunal in assessee’s own appeal for earlier year – Appeal decides without the considering DTAA with these countries – Held that:- While deciding the issue, DTAA should also be considered and hence, this matter should go back to the file of the CIT (A) for deciding afresh after considering the issue in the light of these two DTAA of India with New Zealand and Japan and hence order is set aside. Issue remand back to revenue. Disallowance of Income Tax paid outside India - Whether Tax paid outside India are deductible u/s 37(1) – Held that:- As the assessee’s appeal is squarely covered in favour of the revenue and against the assessee by the decision of the Tribunal in assessee’s own case for earlier AY. Therefore, taxes paid by the assessee outside India are not deductible u/s 37(1) r.w.s 40(a)(ii) and Sec. 2(43). Appeal decided in favour of revenue. Deduction u/s 80HHC – Whether turnover is to be compute on prorata basis despite of that assessee has maintain separate books of account in respect of that unit, while computing deduction u/s 80HHC - Assessee engage in export of electronic hardware from its unit in EHTP – Assessee compute deduction u/s 80HHC by taking only the total turnover of one unit – Whereas AO takes total turnover of the assessee company – Assessee maintain separate books of accounts in respect of this unit and were duly audited – Held that:- When separate books of account are maintained by the assessee in respect of the concerned unit and profit eligible for deduction u/s 80HHC can be worked out directly on the basis of such separate books of account, the same needs to be preferred than the formula given in sub-section 3 which works out such profit only on prorata basis in absence of separate book of accounts following the decision in case of Rathore Brothers (2001 (10) TMI 72 - MADRAS HIGH COURT). Decision in favour of assessee Exemption u/s 10A – Whether exemption can be claimed when the relevant statute was not there i.e. on the first day of the Financial Year -Assessee claimed exemption u/s 10A for a period of five years from AY 1991-92 to 1995-96 - Sec.10A were amended by Finance Act, 1998 w.e.f. 1.4.1999 extending the benefit of exemption u/s 10A for a period of ten consecutive A.Y. - Assessee claimed exemption u/s 10A for the year under consideration i.e. 1998-99 on the basis that it was ninth year from the AY in which it’s eligible undertaking began manufacture or production – AO contented that since exemption was not claimed by the assessee in the preceding two years i.e. AY 1996-97 and 1997-98 and also extended period of exemption up to ten years was applicable only to those undertakings which were currently enjoying the benefit of Sec. 10A - Held that:- Following the decision in the case of M/s. DSL Software Ltd (2011 (10) TMI 423 - KARNATAKA HIGH COURT), the assessment year involved is AY 1998-99 and since the provisions of section 10A as amended w.e.f. 1.4.1999 were not there in the statute on the first day of AY 1998-99. Therefore, denying the claim of the assessee for exemption u/s 10A. Decision in favour of revenue Deduction u/s 80HHE – Assessee computed the deduction u/s 80HHE by taking the relevant financial data only of the concerned unit which is related to export of software out of India - The AO and CIT (A) however adopted the relevant financial data of all the businesses of the assessee together to work out the profit eligible for deduction us/ 80HHE on prorata basis – Held that:- Following the decision in case of Rathore Brothers (2001 (10) TMI 72 - MADRAS HIGH COURT), allow the deduction to the assessee u/s 80HHE on the basis of separate books of account maintained in respect of the concerned undertaking / unit of the assessee. Decision in favour of assessee Disallowance of Provision for pension – AO contended that same cannot be said that it is based on a reasonable certainty - Number of years for which a particular person is going to receive pension is not known with any certainty – Held that:- Deduction should be allowed if a business liability has definitely arisen in the accounting year, although the liability may have to be quantified and discharged at a future date. It was also held that it should also be capable of being estimated with a reasonable certainty, although the actual quantification may not be possible. Since the valuation was done on the basis of actuarial valuation, it cannot be said that the liability was not determined with a reasonable certainty. Decision in favour of assessee Interest income taxable under head PGBP or Income from other sources – Held that:- On the basis of decision of Tribunal in assessee’s own case holding that interest income in the facts and circumstances of the assessee’s case was chargeable to tax under the head income from other sources. The Tribunal however accepted that only net interest income should be assessed under the head income from other sources after deducting expenses incurred for earning the said income. Therefore issue partly allowed. Exclusion of Excise duty & Sales Tax from turnover for computing deduction u/s 80HHE – Held that:- Following the decision in case of Sudarshan Chemicals Industries Ltd (2000 (8) TMI 73 - BOMBAY HIGH COURT), to exclude excise duty and sales tax from the “total turnover” for the purpose of computing deduction u/s 80HHE. Decision in favour of assessee

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• 2012 (9) TMI 713
  Addition on account of undisclosed purchase – Assessee engage in sandal wood business – During search u/s 132, AO found incriminating materials in respect of investment made in business – CIT(A) estimated profit @ 20% of business – Held that:- When the material found during the course of search operation, discloses the investment made by the assessee and the assessee has also accepted the statement found in the seized material then it must be used by CIT(A). CIT(A) made addition without referring the seized material. Therefore issue remand back to CIT(A) Undisclosed investment u/s 69B – During search AO founds that assessee made investment in shares which is more than amount shown in books – Held that:- Since both the parties have not filed the copies of the document before Tribunal. Therefore, Tribunal unable to verify the entries in the seized document. Therefore, orders of the lower authorities are set aide and the issue relating to investment is remitted back to the file of the AO Addition u/s 68 – AO made addition on account of unexplained creditors – Assessee submit the confirmation with CIT(A) – CIT(A) set aside the order of AO for reconsideration – Held that:- CIT(A) has no power to set aside the assessment for reconsideration. But the fact remains is that the assessee has filed the confirmation letters from the creditors which needs to be considered by the AO in accordance with law. Issue remand back to file of AO.

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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 Rs. 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 Rs. 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 Rs. 17.45 crore on tax free bond and debentures as against which the assessee had suo moto disallowed Rs. 5.53 crore being the interest expenses u/s 14A as against which the AO has worked out the disallowance of Rs. 32.76 crore. After giving the credit of disallowance of Rs. 5.53 crore made by the Assessee, the AO disallowed Rs. 27.23 crore u/s 14A. As on 31st March 2003, the interest free funds available with the assessee was to the tune of Rs. 3404 crore (comprising of share capital of Rs. 230 crore, Reserves of Rs. 689 crores and interest free demand deposits of Rs. 2485 crores) as against which the tax free investments were to the tune of Rs. 589 crore. Thus the interest free funds were far in excess of the investments - as the assessee has suo moto disallowed Rs. 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 Rs. 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 Rs. 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 ½ 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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• Customs

• 2012 (9) TMI 712
  Undervaluation of imported consignments - department seeking enhancement of penalty imposed u/s 114A equivalent to the duty demanded plus the corresponding interest accrued u/s 28AB - assessee contested against ADG DRI's power having no jurisdiction to issue the impugned show-cause notices - Held that:- The ADG DRI was competent to issue the impugned show-cause notices as ADG DRI has been appointed as Collector by Notification No. 19/90-Cus (NT) dated 26.4.90. We also note that the ADG DRI has been specifically empowered by the Board vide Circular No. 4/99-Cus dated 15.2.1999 to issue show-cause notices in respect of cases investigated by them. This circular has not been shown to have been rescinded. Further, subsequently, by Notification No 44/2011-Cus (NT) dated 6-7-2011 issued in exercise of powers conferred by Section 2(34), DRI officers including ADG DRI were appointed as proper officers for the purposes of Section 17 and Section 28. The appellants had entered into 3 contracts which all had bearing on the value of the goods imported by them. At the time of filing declaration for the purpose of claiming the benefit of project import regulation scheme, they had mentioned only about the supply Agreement and not about the other Agreements relating to Basic Engineering Design undertaken by the licensor and Extended Basic Engineering Design undertaken by FEC who were also the suppliers. It is not the case of the assessee that the department knew the fact of the appellant having made payments under the other two Agreements. There was no justification for the appellant to entertain a belief that the payments under the two Agreements with the Licensor and FEC were towards buyers assist. As already noted, the notice inviting tender was dated 25.6.97 and the specifications for procuring equipments must have been known before inviting tender. Even otherwise we have held that the amounts paid under these two agreements are too high to be considered as towards buyers assist. As all the Bills of Entry except three were provisionally assessed as required under Project Import Regulations and the same were finalized/directed to be finalized by the impugned order. In view of the above, it is to be held that the invocation of extended period of limitation and imposition of penalties on the assessee are justified. As the show-cause notices specifically indicated only amounts of duty proposed to be demanded but did not indicate the quantum of interest proposed to be demanded. Apparently, the duty demand itself was to be determined subject to the outer limit of amounts mentioned in the show-cause notices. The interest payable depends not only on the duty so determined but also the actual date of payment of the duty so determined. Only then, the actual interest payable will be ascertainable. Obviously, in the present cases, the Commissioner at the time of adjudication of the case could not have determined the actual amounts of interest to be included in penalties under Section 114A. Further Section 114A envisages penalty on the person who is liable to pay the duty or interest, as the case may be, as determined under sub-section 8 of Section 28 . The Commissioner was not in a position to determine the interest amount at the time of passing the impugned order. Therefore, his imposing penalties equal to the duty determined is in order. Since misdeclaration of the value of the imported goods has been upheld, the goods are held liable for confiscation. However, in view of the clear finding of the Commissioner that the said goods are not available for confiscation, imposition of fine under Section 125 is not justified.

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• 2012 (9) TMI 711
  Stay application - interest – seizure of sale proceeds of smuggled goods - Tribunal ordered release of the currency holding that the same is not liable for confiscation under Section 121 of the Customs Act - delay in payment of refund – Held that:- There is no provision in the Customs Act for payment of interest on return of the seized currency or return of the sale proceeds of any seized goods which are ordered to be released - there is absolutely no justification for more than 10 year’s delay in returning the seized currency and the conduct of the officers amounts to defying the Tribunal’s order, the Commissioner (Appeals)’s order sanctioning the interest on the seized currency for the delay in its return is not correct - It is only the High Court, which in exercise of their writ jurisdiction can order the payment of interest by the Department for period of delay in return of the currency - order ordering payment of interest is stayed and the Revenue’s stay application is allowed.

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• 2012 (9) TMI 710
  Rebate claim - manufacture of electrical goods, cables & MCCB - They exported finished goods - department observed that the appellants had taken DFIA Licence – alleged that they availed/claimed the said rebate of duty by availing the double benefit i.e. availment of Cenvat credit of duty paid on inputs – Held that:- No restriction in the Notification No. 40/2006-Cus., on claiming rebate of duty paid on exported goods and availment of Cenvat credit. Since the applicant has complied with all the provisions and procedure as laid down in Rule 18 of Central Excise Rules, 2002 and Notification No. 19/2004-C.E. (N.T.), dated 6-9-2004 - no dispute about the export of duty paid goods, the rebate claim is admissible to the respondent

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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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• Service Tax

• 2012 (9) TMI 737
  Refund claim of service tax paid on terminal handling charges - rejection on ground that terminal handling charges was not one of the services mentioned in Notification No.41/2007-ST - also rejected on the ground that it was filed beyond six months prescribed under notification No.41/2007 - Held that:- Tribunal in assessee's own case for earlier year has held that refund of service tax paid on terminal handling charges in case of exports is admissible. As regards limitation, since the department itself has taken the view that claim submitted after 07.07.09 have to be considered under Notification No.17/2009-ST, the submission of the assessee that authorities erred in considering the refund claim under notification No.41/2007 and when the benefit was available under notification No. 17/2009, the same should have been extended especially when it was claimed in reply to the SCN and before the Commissioner (Appeals) in appeal, is accepted. Matter remanded to the original adjudicating authority - Decided in favor of assessee.

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• 2012 (9) TMI 736
  Penalty - commissioner in review proceedings, penalty under Section 76 has been revised and confirmed @ Rs. 200/- per day or the default period or 2% of the service tax per month whichever is higher against the appellants. – Held that:- During the period April 2002 to September 2002, penalty under Section 76 of the Finance Act is leviable @ Rs.100 per day which may extend up to Rs. 200/- during that period - adjudicating authority has exercised his option and imposed the penalty @ Rs.100 per day - Commissioner cannot go beyond the provisions applicable at the time of occurrence of offence - appeal is allowed

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• 2012 (9) TMI 735
  Denial of cenvat credit of service tax - services are utilised by the appellant post removal of the goods for export – Held that:- Place of removal shall be Port and any service utilised by the assessee at that moment can be considered as input service and cenvat credit can be availed of such service tax by the service providers - appeal is allowed

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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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• Central Excise

• 2012 (9) TMI 709
  Disallownace of Cenvat credit - no storage tank included in the definition of capital goods - Held that:- Though in the definition of Rule 57-Q the storage tank was not included, it is clear from the afore-said definition that the tubes, pipes and fittings thereof used in the factory were included in the definition of capital goods. The storage tank has been held to be a component to the main machinery namely, boiler and the benefit is extended to the inputs used in the construction of the storage tank though it is also embedded to the land. On the same reasoning the assessing authority ought to have extended the benefit to the syrup and molasses storage tank also, as they are byproducts in the course of manufacturing activity which are also excisable at the time of selling the same to the assessee. As the assessing authority has himself extended the benefit to storage tank storing water as a component to main machinery namely, boiler, he ought to have extended the benefit to the storage tanks which are also part of the factory premises, in which the byproducts are stored and thereafter sold as a finished product. In that view of the matter,no justification to interfere with the orders passed by the appellate authority - No substantial question of law arises for consideration - in favour of assessee.

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• 2012 (9) TMI 708
  Job work - person liable to pay duty of excise - manufacturer - the imported gambier is not processed by M/s. IWPCL but is sent by them to their job worker, M/s. BCPL for processing on job work basis and while processing the imported gambier on job work basis for M/s. IWPCL, M/s. BCPL are not functioning under Notification no.214/86-CE - held that:- It is settled law that when a principal manufacturer gets his goods manufactured from a job worker on job work basis and the transaction between them are on principal to principal basis, it is the job worker who would be liable to pay duty not the principal manufacturer. - stay granted. Even if the duty is held as chargeable, if the cenvat credit is allowed, the net duty demand would be negligible and that too after assuming that the entire duty demand for the period from May, 03 to December, 07 is within time, which also appears to be doubtful. Thus, looking at from this angle also, there does not appear to be any duty liability against assessee - in favour of assessee.

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• 2012 (9) TMI 707
  Refund of education cess - export - rebate of duty - amendment is prospective or retrospective – notification no. 40/2001, 90/2004 and 28/2004 - Held that:- The custom authorities are not right in rejecting the claim of refund of education cess, by treating the explanatory notification to be prospective. - The explanatory notification being part of original notification therefore has to apply from the date of original notification and does not operate with prospective effect, as it does not give any substantive right independently. The Notification dated 6-9-2004 had included the definition of Excise Duty only in consonance with the meaning of Excise Duty as was existing on the date Notification was issued, even if Explanation would not have been there the term Duty of Excise in ordinary circumstance would have included the surcharge levied as Education Cess in terms of Section 93 of the Act of 2004. - writ petition allowed - refund of education to be allowed with retrospective effect.

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• 2012 (9) TMI 706
  Invocation of the provisions of Section 11AC of the Act and Rule 25 of the Rules – Held that:- Requirements of Section 11AC of the Act are required to be satisfied, namely that the default should be occasioned by reason of fraud, collusion or any wilful misstatement or suppression of facts, or the contravention of any of the provisions of the Act or Rules should be with the intent to evade payment of duty. Unless, the said basic ingredients are satisfied, the question of invoking either Section 11AC of the Act or Rule 25 of the Rules would not arise - in the absence of any such finding having been recorded by the adjudicating authority, the question of imposing penalty under Section 11AC of the Act and Rule 25 of the Rules would not arise

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• 2012 (9) TMI 705
  Condonation of delay - delay of 42 days - Tribunal refused to condone the delay - Held that:- Appellate Tribunal has taken a narrow view of the matter. An Appeal is a substantive right. The assessee should have a full opportunity to put forth his case and should be able to get relief, if any, in accordance with. - following the decision in Anantnag and Anr. v. Mst. Katiji and Ors. [1987 (2) TMI 61 - SUPREME COURT] delay condoned with cost of Rs. 5000/-

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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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