TMI Tax Updates - e-Newsletter
September 29, 2012

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws Service Tax Central Excise Indian Laws

Articles

1. RECENT ECONOMIC REFORMS AND EQUITY CULT

   By: Dr. Sanjiv Agarwal

2. PAYMENT OF ENHANCED GRATITUITY.

   By: DR.MARIAPPAN GOVINDARAJAN

3. ‘Damocles Sword’ in the form of ‘Reasonable steps’ in Cenvat Credit Rules is in the offing…!!

   By: JAMES PG

4. PROSECUTION IN SERVICE TAX

   By: Dr. Sanjiv Agarwal

News

1. Japan Commits Over Rs. 7800 Crore ODA Loan to India

2. REPORT OF THE COMMITTEE ON ROADMAP FOR FISCAL CONSOLIDATION

3. United States and India sign a Memorandum of Understanding on Antitrust Cooperation

4. Index of Eight Core Industries (Base: 2004-05=100) August 2012

5. Improving quality of scrutiny assessments - Central Action Plan ('CAP') for Financial Year 2012-13

6. Levy of Service Tax on Transportation of Goods by Rail from 1st October 2012

7. Levy of Service Tax on Railway Passengers Travelling in AC Class/First Class from 1st October 2012

8. International Crude Oil Prices of Indian Basket declines to US$ 108.03/bbl on 26.9.2012

Notifications

Customs

1. 45/2012 - dated 25-9-2012 - ADD

Extend the validity of Notification No. 17/2008-Customs dated 19th February, 2008 for a further period of one year - Import of phosphoric acid, technical grade or food grade including industrial grade. regarding

DGFT

2. 16/(RE-2012)/2009-2014 - dated 26-9-2012 - FTP

Amends Schedule – I (Imports) of the ITC (HS) - Import Licensing Note (4) at the end of Chapter 25 and Import Licensing Note at serial no. (2) of Chapter 68 - From India-Sri Lanka Free Trade Agreement (ISFTA) only through any EDI Port . Regarding

VAT - Delhi

3. No.F.7(433)/Policy-II/VAT/2012/676-686 - dated 28-9-2012 - DVAT

Submission of information in Form T-2 shall come into force w.e.f. 15-10-2012.

4. No.F.7(239)/P-I/05/VAT/2009/687-700 - dated 28-9-2012 - DVAT

Syndicate Bank added for e-tax payment.

Circulars / Instructions / Orders

Service Tax

1. Draft Circular - F. No.354 /146/2012 - TRU - dated 27-9-2012

Draft circular -- service tax -- transport of passengers by air -- regarding.

Income Tax

2. No DGIT(L&R)/HC Appeal/Quarterly Report/2012-12/603 - dated 26-9-2012

Monitioring of filling of appeal in the High Courts – Non-receipt of quarterly reports as per the CBDT Instruction No. 7 of 2011 – reg

3. F.No. 279/Mis./M-30A/2011-ITJ - dated 25-9-2012

Report in respect of cases involving COD (Committee on Disputes) clearance requisitioned vide letter no. F-279/M-30A/2011-ITJ due to be received since 31/12/2011-. regd.

Customs

4. 26/2012 - dated 10-9-2012

Grant of exemption from furnishing Security/Bank guarantee by Central/State Government Undertakings for storing sensitive goods in private bonded warehouses – regarding.

Highlights / Catch Notes

Income Tax

• EBay India and Motors Recognized as Dependent Agents but Not PEs under Indo-Swiss DTAA.

  Case-Laws - AT : Indo-Swiss DTAA - though eBay India and eBay Motors are dependent agents of the assessee, but do not constitute 'Dependent agent PEs' of the assessee - AT
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• Supreme Court Upholds DCIT's Recalculation of Tax Deductions in Section 154 Application, Affecting Unabsorbed Depreciation and Losses.

  Case-Laws - SC : Application u/s 154 moved by assessee to carry forward and set off unabsorbed depreciation and losse - DCIT recomputed and reduced the deduction u/s 80HHC - Action of DCIT is correct - SC
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• Supreme Court permits bad debt deductions u/s 36(1)(vii) of Income Tax Act for pre-April 1, 1989 period.

  Case-Laws - SC : Deduction u/s 36(1)(vii) - bad debts - period prior to 1st April, 1989 - applying the commercial test and business exigency test, both the conditions u/s 36(1)(vii) r.w.s. 36(2)(i)(b) are satisfied. Deduction allowed - SC
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• Company's Share Buyback Expense Considered Revenue, Eligible for Income Tax Deduction.

  Case-Laws - AT : Expenditure incurred by the assessee company on payment of premium for purchase of its own shares from warring group of shareholders - expenditure is revenue in nature - deduction allowed - AT
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• Tax Authorities Must Collect Only Legally Payable Amounts, Avoid Exploiting Assessee's Lack of Knowledge.

  Case-Laws - HC : Government is obliged to collect only that amount of tax which is legally payable by an assessee. Officers of the Department must not take advantage of ignorance of an assessee as to his rights. - HC
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• Blending and bottling of IMFL qualifies as 'manufacture' for tax deductions u/s 80IB, rules Supreme Court.

  Case-Laws - SC : Blending and bottling of IMFL would amount to ‘manufacture’ for the purpose of claiming deduction under Section 80IB - SC
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• Court Rules Hotel's Interior Decoration Costs as Revenue Expenditure, Enhancing Customer Comfort.

  Case-Laws - AT : Revenue expenditure vs. capital expenditure - assessee being in hotel industry, the expenditure incurred for interior decoration with a view to provide a comfortable stay to customers, the expenditure was nothing but revenue expenditure - AT
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• AO to Reopen Shareholder Cases u/s 68 to Verify Legitimacy of Share Application Money for Tax Compliance.

  Case-Laws - AT : Addition u/s 68 - Share application money – AO directed to reopen the individual cases of all shareholders as listed by AO - AT
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• Taxpayer Granted Deduction u/s 54EC Despite Late Investment Due to Delayed Sale Proceeds Receipt.

  Case-Laws - AT : Deduction u/s 54EC - investment after expiry of initial 6 months due to delayed receipt of sale proceeds - benefit of section 54EC allowed - AT
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• Cash Credit Addition u/s 68: Transaction Validity Confirmed as Amount Repaid Promptly Within Two Weeks.

  Case-Laws - AT : Addition u/s 68 - cash credit - genuineness of the transaction cannot be doubted as the amount has been re–paid on the same day or within a fortnight of receiving the same - AT
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• Capital Gains Tax: Indexed Cost Calculation Based on Property Possession Year 2001, Not 1998-99, for AY 2001-02.

  Case-Laws - AT : Capital Gain - Cost Inflation index - the assessee was actually put in possession of the subject property only in year 2001 and not in the FY 1998-99 - indexed cost to be taken for AY 2001-02 - AT
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• Income Tax Claims: Bogus Claims Disallowed, Legitimate Claims Fully Deductible, No Ad-Hoc Additions Allowed.

  Case-Laws - AT : Ad-hoc addition - If the claim is bogus, the entire amount has to be disallowed and if not bogus the whole amount should be allowed as deduction but no adhoc addition can be made on the basis of presumptions and surmises. - AT
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• Windmill Depreciation Claim Valid from Commissioning, Not Dependent on Energy Production, Rules Court.

  Case-Laws - AT : Depreciation on Windmill – AO contended that windmill did not generate a single unit of energy till the end of the FY - assessee is entitled for depreciation on commissioning itself. - AT
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• Taxpayer's Expertise Irrelevant in Inadvertent Error Penalty u/s 271(1)(c) of Income Tax Act.

  Case-Laws - SC : Penalty u/s 271(1)(c) - The calibre and expertise of the assessee has little or nothing to do with the inadvertent error. - SC
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• Entities Can Claim Deductions for Amortization of Premium on Government Securities per RBI Guidelines and Tax Laws.

  Case-Laws - AT : Amortization of premium on investment in government securities - Invest surplus fund in Government Securities as per RBI guidelines – assessee is entitled to claim this deduction. - AT
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• To qualify for LTCG exemption u/s 54, purchase property as an owner, not as a tenant.

  Case-Laws - AT : Exemption u/s 54 - LTCG - for application of provisions of section 54, the assessee has to buy a property as an owner and not as tenant. - AT
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• High Court Upholds Legitimate Tax Planning: Dividend Distribution Before Share Sale Not Deemed a Sham Transaction.

  Case-Laws - AT : Tax planning versus Tax Avoidance - distribution of dividend, prior to sale of its shares by the assessee, even though tax advantageous cannot be termed as a colourable device or sham transaction - HC
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• Assessments with complete, accurate details can't be reopened within four years for alleged escaped income.

  Case-Laws - HC : If an assessee has furnished full and true particulars at the time of original assessment with reference to income alleged to have escaped assessment, AO cannot reopen the assessment even within a period of 4 years. - HC
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• ITAT to Decide if Section 40A(9) Deduction Applies to Payments to Assessee's School or Other Institutions.

  Case-Laws - SC : The interpretation of Section 40A(9) clearly brings out a dichotomy between 'contribution' and 'reimbursement' - ITAT to find whether the claim for deduction is being made for payments to the school promoted by the assessee or to some other educational institutions/schools - SC
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• TDS on Bus Rentals to Be Deducted u/s 194C, Not 194I, Due to Ownership Retention by Bus Owners.

  Case-Laws - AT : TDS on Payments made for hiring of buses - The buses remained in the possession of the owners. - TDS to be deducted u/s 94C and not u/s 194I - AT
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• Agreement Can Corroborate Evidence in Cases; Absence Requires Assessment of Other Factors for Decisions.

  Case-Laws - AT : Availability of agreement is one corroborative factor which would eliminate the doubts, but in the absence of that agreement, the other circumstances ought to have been evaluated, which can goad the adjudicating authority towards a firm conclusion. - AT
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• Assessing Officer's Direct Application of Rule 3 Invalid; Assessee Not in Default u/s 192 of Income Tax Act.

  Case-Laws - AT : TDS u/s 192 - AO straightway applied Rule 3 without first establishing the case that the appellants have provided any concession in the shape of accommodation to its employees. - assessee cannot be treated as in default - AT
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• Revenue Can't Contest Company's Money Lending Activities as Non-Business After Accepting Interest as Business Income.

  Case-Laws - AT : Deemed Dividend - having accepted the interest income received by the company as business income, the Revenue cannot argue that lending and advancing of money is not the business of the company. - AT
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• No presumptive income assessment u/s 44AD for 2006-2007; income reported in 2007-2008 by builder/developer.

  Case-Laws - AT : Presumptive taxation on receipt of advance u/s 44AD - Builder/Developer - no income can be assessed on presumptive basis in the AY 2006-2007 as the assessee has already shown the income in the subsequent year 2007-2008 - AT
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• Section 68: Incomplete customer addresses don't justify additions to cooperative bank records; no obligation for detailed verification.

  Case-Laws - AT : Addition u/s 68 in the hands of co-operative bank - Society/Bank not required to go for detailed verification of address/whereabouts of the customers and therefore, addition u/s 68 cannot be made merely because the address of the customers are incomplete. - AT
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• Revenue Accepts UTI Purchase Without Name Registration; Section 94 Deemed Inapplicable for Claim Evaluation.

  Case-Laws - HC : Purchase of unis of UTI - non registration of the units in the actual holder's name. - If the Revenue had questioned the transaction as not legal, then Section 94 would not have come into play in considering the merits of the claim. - HC
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• Non-resident software payments deemed royalty, subject to TDS u/s 195 of Income Tax Act.

  Case-Laws - AT : TDS u/s 195 - import of software or supply of software - payment made by the assessee to non-resident companies would amount to royalty, liable to TDS - AT
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• Assessee Can Deduct Amortization of Premium Paid on Government Securities Over Their Lifespan.

  Case-Laws - AT : Amortization of premium paid on Government securities – the assessee is entitled to deduction on account of amortization of premium on Govt. securities over its life. - AT
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• No Reassessment for Agricultural Income Tax on Latex Before 2002-03 Under Central Act.

  Case-Laws - HC : Assessees who have paid agricultural income tax (state) on 100% of the income from centrifuged latex, will not be reassessed under the Central Act for any year prior to the assessment year 2002-03 - HC
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Customs

• Notification No. 17/2008-Customs on Phosphoric Acid Import Extended for One More Year.

  Notifications : Extend the validity of Notification No. 17/2008-Customs dated 19th February, 2008 for a further period of one year - Import of phosphoric acid, technical grade or food grade including industrial grade. regarding - Notification
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• Exemption Granted for Imported Goods Used in Leather Manufacturing Without End-Use Certificate Due to Sufficient Evidence Provided.

  Case-Laws - AT : Non production of end use certificate - As the contemporaneous evidences which have been shown by the appellant are enough to hold that the goods which were imported were consumed for the manufacture of leather goods - benefit of exemption allowed - AT
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• Heat Exchangers for Air-Conditioning Not Classified Under Heading 84.19; Meant for Domestic Use Only.

  Case-Laws - AT : Classification - Assemblies and evaporator assemblies - heat exchangers - goods can be classified under Heading 84.19 is not acceptable as the same are not for purposes other than air-conditioning machinery used for domestic purposes - AT
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DGFT

• India Updates Import Licensing Notes for Chapters 25 & 68: ISFTA Imports Now Require EDI Port Use Only.

  Notifications : Amends Schedule – I (Imports) of the ITC (HS) - Import Licensing Note (4) at the end of Chapter 25 and Import Licensing Note at serial no. (2) of Chapter 68 - From India-Sri Lanka Free Trade Agreement (ISFTA) only through any EDI Port . Regarding - Notification
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Corporate Law

• Winding Up Petition: Share Application Refund Request Isn't a Debt Under Company Law; No Automatic Repayment Obligation.

  Case-Laws - HC : Winding up Petition - share application money - Merely because a refund has been asked, neither is it a debt nor is the Company liable to pay the same. - HC
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Indian Laws

• Supreme Court Upholds Validity of Sections 12(5) & 15(5) in RTI Act; Requires Degree and Experience for Appointments.

  Case-Laws - SC : Right to Information Act - the provisions of Sections 12(5) and 15(5) of the Act of 2005 are held to be constitutionally valid, but with the rider that to hold and declare that the expression ‘knowledge and experience’ appearing in these provisions would mean and include a basic degree in the respective field and the experience gained thereafter. - SC
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• Court Rules Nature of Tenancy Irrelevant in Possession Recovery; Focus on Regaining Property, Not Its Use.

  Case-Laws - SC : Suit for recovery of possession from a tenant - Whether the tenancy was for residential or commercial use of the property is wholly immaterial for the grant of a decree for possession - SC
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Service Tax

• Tribunal Sets Aside Excess Penalty on Assessee for Timely Service Tax Payment Before Show Cause Notice Issued.

  Case-Laws - HC : Penalty - service tax with interest was deposited before issuance of SCN - the assessee has not committed any illegality in not depositing any penalty amount. Penalty levied against the assessee in excess of 25% u/s 76 and 78 of the Finance Act, 1994, has rightly been set aside by the Tribunal - HC
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• Appeal Denied as Limitation Period Expired; Tribunal Cannot Extend Time or Force Litigation.

  Case-Laws - AT : Rejection of appeal on ground of limitation - condonation of delay - Tribunal has no power to drag Revenue to litigation reviving a litigation which came to an end with the passage of time. - AT
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• Cenvat credit allowed for input services in motor vehicle centers and auxiliary services, excluding trading, ads, and hotels.

  Case-Laws - AT : Cenvat credit - input services utilized for authorized motor vehicles service center and business auxiliary services - trading activity - credit in respect of the services other than advertisement expenses and hotel expenses are allowed - AT
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• Court Appeal for Rs. 5,01,561/- Violates Circular Dated 17.08.2011, Should Not Have Been Filed by Department.

  Case-Laws - HC : Since in the instant appeal the amount involved is Rs. 5,01,561/- only, In view of the circular dated 17.08.2011, the appeal could not have been preferred by the department before this Court. - HC
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• Rule 6(3) Service Tax: Flexibility in Refund Methods for Excess Payments Should Be Maintained, Not Restricted.

  Case-Laws - AT : Adjustments of excess payment of service tax - Rule 6(3) of the ST Rules, 1994 - That rationale would be defeated if the condition of refund is insisted to be satisfied only in a particular manner. - AT
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• Load Port as Place of Removal for CENVAT Credit on F.O.B. Exports: Credit Deemed Admissible.

  Case-Laws - AT : CENVAT credit - As in the case of F.O.B. exports, load port has to be considered as place of removal and therefore credit is admissible - AT
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Central Excise

• Test Kits and IAS Columns Excluded from Manufactured Goods Valuation Under Central Excise Rules.

  Case-Laws - AT : Valuation - As the test kit and IAS column are traded item, the same cannot be considered as a part of the manufactured goods i.e marker. - AT
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• Court Upholds Refund Order for Unjust Enrichment; No Price Variation Detected Before and After Duty Payment Period.

  Case-Laws - HC : Refund – unjust enrichment - upheld the order of refund on the ground that there is no variation in the price of the product both before and after the period the duty was paid by the assessee - HC
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• Refund Claim for 1999 Credit Lapse Rejected Due to Time Bar; No Cash Refund Allowed for Expired Credit.

  Case-Laws - AT : Whether duty debited in RG 23A Part-II could be refunded in cash - refund claim filed in 2007 for this amount of credit which lapsed as early as on 1-4-1999 stands rightly rejected - AT
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• Notification Not an Absolute Exemption Due to Condition at Serial 10; Applicant Argues Exemption is Conditional.

  Case-Laws - AT : Absolute exemption notification - As the notification is subject to the condition provided at serial 10, therefore, prima facie merit in the contention of the applicant that the notification is not absolute exemption. - AT
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• Dispute Over Duty Calculation: Should Pan Masala Machines Be Taxed Monthly or Pro-Rata Based on Usage Days?

  Case-Laws - AT : Pan Masala Packing Machine - Whether duty would be payable only on pro-rata basis for the number of days in the month during which the machine had functioned or would be payable for the whole month - prima facie against assessee - AT
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• Cenvat Credit Denied: Photocopy or True Copy of Bill of Entry Not Accepted, Original Document Required.

  Case-Laws - AT : Whether cenvat credit cannot be taken on the basis of photocopy/true copy of the bill of entry – credit cannot be allowed on the basis of photocopy of bill of entry - AT
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• Court Upholds Duty Demand and Penalty for Lubricating Oil Shortage; Stresses Compliance with Central Excise Regulations.

  Case-Laws - CGOVT : Shortage of various grades of lubricating oils manufactured by assessee and packed in unit containers – demand of duty and penalty upheld - CGOVT
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VAT

• Syndicate Bank now an option for electronic VAT and sales tax payments, offering more flexibility for taxpayers.

  Notifications : Syndicate Bank added for e-tax payment. - Notification
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• Form T-2 Submission Requirement Effective October 15, 2012, for VAT and Sales Tax Compliance.

  Notifications : Submission of information in Form T-2 shall come into force w.e.f. 15-10-2012. - Notification
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Case Laws:

• Income Tax

• 2012 (9) TMI 807
  Indo-Swiss DTAA - assessee, a Swiss company, operated India specific websites providing an online platform for facilitating the purchase and sale of goods/services to users in India - entered into a Marketing Support Agreement with eBay India and eBay Motors which are eBay group companies in connection with its India specific websites - assessee contended that such revenue from the operations of its websites was not taxable as business profits as per Article 7 of the Indo-Swiss DTAA since it did not have a PE in India as per Article 5 – AO contended that assessee had connection in India as eBay India and eBay Motors were group companies rendering services to it and the entire income of Indian companies was derived from such services and accordingly held income to be taxable as 'Fee for Technical Services' – CIT(A) however, in the absence of the assessee furnishing any supporting evidence to prove the genuineness of the claim of expenses, invoked Rule-10 and held that 10% of the revenue to be taxed as business profits. The term 'managerial services' refers to managing certain affairs, a quid pro quo for which will be described as fees for technical services. Assessee becomes entitled to the user fee when there is a successful completion of sale between the buyer and seller through its website. The assessee's websites are analogous to a market place where the buyers and sellers assemble to transact. By providing a platform for doing business, the assessee can, by no standard, be considered as having rendered any managerial services either to the buyer or to the seller, for which it received fee from the seller, hence it is in nature of 'Business profits'. There is no dispute about the fact that eBay India and eBay Motors are providing their exclusive services to the assessee. It has been fairly admitted that these two entities have no other source of income except that from the assessee in lieu of the provision of service as set out above. In view of the fact that eBay India and eBay Motors are exclusively assisting the assessee in carrying on business in India, they definitely become dependent agents of the assessee. The next question, however, is whether or not these dependent agents constitute permanent establishments of the assessee as per conditions of Article 5(5). Clause (ii) of Article 5(5) has no application in this case because there is no requirement on the part of eBay India or assessee to maintain any stock of goods or merchandize on behalf of the sellers. Clause (iii) is also not applicable since eBay Motors is not required to manufacture or process the goods or merchandise on behalf of the assessee. As per Clause (i), it is to be seen whether eBay India and eBay Motors do or habitually exercise 'an authority to negotiate and enter into contracts for or on behalf of the assessee.' Simply by providing marketing services to the assessee or making collection from the customers and forwarding the same to the assessee, it cannot be said that eBay India entered into contracts on behalf of the assessee. Neither there is any mention in the assessment order nor the Revenue has specifically pointed out towards any contract entered into by eBay India or eBay Motors, during the discharge of their functions or otherwise, for or on behalf of the assessee. Thus the test laid down as per clause (i) of Article 5 (5) also fails in the present case. Therefore, though eBay India and eBay Motors are dependent agents of the assessee, but do not constitute 'Dependent agent PEs' of the assessee in terms of Article 5. Further, these concerns cannot be treated as the PEs of the assessee in terms of Article 5(2)(a) of the DTAA. Since the assessee has no PE as per Article 5, there can be no question of computing business profits of the assessee as per Article 7 in relation to the revenue generated from India – Decided in favor of assessee

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• 2012 (9) TMI 806
  Plea against rectification order passed u/s 154 - application u/s 154 moved by assessee to carry forward and set off unabsorbed depreciation and losses of earlier AYs - DCIT while determining the taxable income, reduced the deduction admissible u/s 80HHC allowed in the original assessment order by reducing the unabsorbed depreciation and brought forward losses for the earlier AYs from current year's business profits for determining "profits of the business" - assessee contesting the re-computation of deduction u/s 80HHC(3) Held that:- Section 154 finds place in Chapter XIV which deals with PROCEDURE FOR ASSESSMENT. If one examines the scheme of Chapter XIV, it becomes clear that the said Chapter not only deals with assessment and re-assessment, it also deals with re- computation. The object of re-computation is to assess (quantify) the correct taxable income. Such re-computation of a correct taxable income is a matter of procedure. In order to arrive at a correct amount of taxable income, DCIT had to compute deduction u/s 80HHC(3) which had to be deducted from the gross total income - Decided against assessee

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• 2012 (9) TMI 805
  Deduction u/s 36(1)(vii) - bad debts - period prior to 1st April, 1989 - Held that:- Deduction for bad debts required satisfaction of two conditions at the relevant time, namely, that (a) bad debt must be established to have become bad in that year; and (b) bad debt should have been written off in the books of account of that year. In present case, appellant satisfied both the conditions for claiming deduction for bad debt u/s 36(1)(vii) r.w.s.36(2)(i)(b). Firstly, the appellant is a State Public Sector Undertaking; and secondly, the appellant was the promoter of M/s. V Ltd. Assessee in the course of business of promoting industrial development in the State of Kerala, had promoted M/s. V Ltd. As a promoter, it was in a position to find out whether M/s. V Ltd was in a position to carry on business in future. Thirdly, M/s. V Ltd was a typical Public/Private partnership(PPP). None of these aspects have been considered by the Tribunal as well as by the High Court. Lastly, the Reference Application was made in February, 1988; declaration was made in February, 1988, by BIFR that M/s. V Ltd has become a sick Company. Till the end, the Company could not even be revived. It has been wound up. In the circumstances, applying the commercial test and business exigency test, we are of the view that both the conditions u/s 36(1)(vii) r.w.s. 36(2)(i)(b) are satisfied. Deduction thus allowed - Decided in favor of assessee

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• 2012 (9) TMI 804
  Addition made on account of alleged consideration in the form of constructed area as capital gain - assessee company, owner of two plots of land 256 & 257, sold development rights in respect of plot no 257 to a builder for total consideration of 16.11 crores and construction of 18000 sq.ft. of carpet area for the benefit of the assessee on plot No. 256 for the benefit of the assessee - capital gain arising from sale of plot No. 257 was offered to tax by taking into account the consideration of Rs.16.11 crores and constructed area of 18,000 sq.ft. was not taken into account - assessee contended that before said Builders could start the construction work, the entire property comprising of plot No. 256 and 257 was sold to a third party M/s F Ltd. by a tripartite conveyance deed for a total consideration of Rs.29.11 crores - assessee thus never received the constructed area of 18,000 sq.ft. and whatever was received as additional consideration of Rs.13 crores (29.11 crores - 16.11 crores) was offered to tax in AY 2008-09 as capital gain Held that:- Consideration in the form of constructed area of 18,000 sq.ft. as agreed in terms of the development agreement was not actually accrued to the assessee as a result of subsequent developments/events going by the doctrine of real income and the same, therefore, cannot be taken into account for the purpose of computation of capital gain arising from transfer of capital asset as pet the development agreement. It is also worthwhile to note here that the total consideration actually received by the assessee from transfer of its entire property comprising of plot No. 256 and 257 as per the tripartite conveyance deed was Rs.29.11 crores and the same having been entirely offered to tax in AYs 2007-08 and 2008-09, there is no loss to the Revenue on this count as rightly contended by assessee. Addition made is therefore deleted - Decided in favor of assessee. Expenditure incurred by the assessee company on payment of premium for purchase of its own shares from warring group of shareholders - revenue or capital expenditure - Held that:- Tribunal in case of Echjay Industries (P) Ltd (1987 (12) TMI 68 - ITAT BOMBAY-D) has held that even if it is assumed that an enduring benefit has been obtained, such enduring benefit is not relatable to fixed capital structure of the assessee company because it has neither increased the assessee's assets nor the assessee company could be said to have acquired any right of income yielding nature. Amount in question was paid to secure peace and harmony and smooth management of the company in the interest of business and the amount paid for this purpose was on revenue account. In view of aforesaid it is held that impugned expenditure is revenue in nature and the same being wholly and exclusively incurred for the purpose of its business, is allowable as deduction. Dis-allowance stands deleted - Decided in favor of assessee

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• 2012 (9) TMI 803
  Plea against failure of CIT to assume jurisdiction u/s 264 by dismissing the petitioner's revision application - petitioner on coming aware of the fact that exemption of dividend income and long term capital gains u/s 10(34) and 10(38) respectively were not claimed mistakenly at page 11 of the return of income where the computation of total income was worked out, moved the revision application on ground that it was an inadvertent error, obvious from the fact since in the return of income itself at page no. 24, the petitioner had claimed the dividend income and long term capital gains as being exempt, as income not to be included in total Income - Held that:- Government is obliged to collect only that amount of tax which is legally payable by an assessee. Officers of the Department must not take advantage of ignorance of an assessee as to his rights. It is clear that the CIT committed a fundamental error in proceeding on the basis that no deduction on account of dividend income and income form capital gains u/s 10 was claimed, when the same has been claimed at Page 24 of the ROI under head 'Details of exempt Income". Therefore there is an error on the face of the order dated 7.04.2011 and the same is not sustainable. Order of CIT(A) set aside. Since petitioner's application for rectification u/s 154 filed on 8.02.2010, has not yet been disposed of, A.O. is directed to dispose off the application - Decided in favor of assessee

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• 2012 (9) TMI 802
  Apex Court upheld the view taken by Tribunal (2007 (2) TMI 267 - ITAT MADRAS-C) and sustained by High Court(2007 (10) TMI 521 - MADRAS HIGH COURT) that that blending and bottling of IMFL would amount to ‘manufacture’ for the purpose of claiming deduction under Section 80IB - Civil appeal dismissed - Decided against Revenue

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• 2012 (9) TMI 801
  Disallowance of expenditure on repairs to furniture and fixture - CIT(A) allowed it - By examining the invoices and other details of the expenses, it can be noticed that no new asset was created. The labour was engaged for replacement of old wooden panel and repair of the damaged furniture. On the basis of these facts, it can be held that the assessee being in hotel industry, therefore the expenditure incurred for interior decoration with a view to provide a comfortable stay to customers, the expenditure was nothing but revenue in nature allowable u/s.37. By the study of the nature of expenditure, it can be ascertained whether the assessee has started a new line of revenue generation or started getting an altogether new advantage of enduring benefit. Therefore, it can be concluded that substantial repair may be advantageous for retaining an existing asset but such an enduring benefit may not lead to a conclusion that a capital asset has been created through which a new enduring advantage was created, thus expenditure in question was a business requirement as decided by the assessee to incur such huge expenditure on commercial consideration - in respect of hotel industry it was held that even the modernization of hotel building is allowable as revenue expenditure because such an expenditure was found to be incurred with a view to create a conducive and beautiful atmosphere for running hotel business - in favour of assessee.

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• 2012 (9) TMI 800
  Addition on account of deemed rent - property was deemed to have been let out. - Held that:- On perusal of the agreement of sale dated 19th day of Septebmer-2007, it is evident from the schedule of payment that the same was agreed to be paid on the basis of the stage-wise completion of the construction. Due to this reason, the respondent-assessee has shown an outstanding current liability of Rs.11 lacs of Rajyog Enterprises as on 31.03.2008. The assessee has placed on record a possession letter through which it has also been established that the same was delivered in the following years on 15.12.2010. Under the totality of the circumstances, it is to be concluded that the addition made by the AO was merely on presumption, hence deserves to be reversed - in favour of assessee. Addition on account of deemed rent of motor garage - Held that:- AO has presumed that the motor-car garage might have been let out by the assessee. In the absence of any evidence in his possession of letting out of the motor-car garage, thus AO has faulted in taxing an income merely on hypothesis - in favour of assessee. Deemed dividend by invoking the provisions of section 2(22)(e) - assessee happened to be a beneficial holder of 50% share in company imparting loan - Held that:- As it was a trade transaction as evident from the copy of accounts placed on record and there are certain correspondences way back dated 8.2.2006, placed in the compilation, stated therein that the said deposit of Rs.5,00,000/- was towards supply of material on regular basis and that deposit was required to be adjusted against the pending dues, if any, thus the nature of deposit was not a “loan deposit” but in the nature of a “trade deposit” and out of purview of section 2(22)(e) - in favour of assessee.

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• 2012 (9) TMI 799
  Addition on unaccounted purchase - Held that:- As it appears that the assessee has not disclosed these three items i.e. Fiberisor-25 units, Electric Spares-3 units and Nut Bolts-2 units in the closing stock and the CIT(A) has also confirmed this addition after giving detailed reasonings in his order. The appellant also furnished the inventory of closing stock for A.Y. 07-08 to 09-10. The appellant requested to set aside this issue to the CIT(A)is not acceptable as the issue is related to the closing stock and it requires verification by the A.O. Therefore, this order is set aside to the A.O. for de novo. The A.O. is also directed to give reasonable opportunity to the appellant - in favour of assessee for statistical purpose. Relief of undisclosed income on the basis of fabricated evidences and overlooking the fact that entertaining fresh evidences is in contravention of rule 46A - Held that:- As grounds of revenue appeal revolve around Rule 46A & as the assessee’s appeal as discussed above, has been set aside to the A.O. Therefore, Revenue’s grievance automatically has been redressed - Revenue’s appeal is allowed for statistical purpose.

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• 2012 (9) TMI 798
  Dis-allowance of selling and distribution expenses on the basis that samples and models for foreign buyers were sent by other party (M/s R) and not by the assesse – Held that:- CIT(A) deleted the dis-allowance on observation that these expenses are necessary for obtaining the export orders and have been incurred throughout the year. The samples to the prospective buyers abroad were sent through M/s R who in turn procure export orders for the assessee company. The assessee had also produced the details of foreign buyers to whom these samples and models were sent. Keeping all these material facts in mind, it is held that CIT(A) has rightly deleted the disallowance Dis-allowance of write off of irrecoverable advances to the fabricators, employees and suppliers during the year 1996-1999 – claim dis-allowed on the basis that the assessee could not furnish documentary evidence in support that the expenses were related to business – Held that:- Contention of the assessee remained that advances were irrecoverable on ground that employees had left their job and the business with the old fabricators, suppliers were also discontinued. We are of the view that maintenance of books of account in regular course of business is also a good evidence to be relied upon. The same cannot be ignored simply because it is not supported with documents thereto when the details of the persons to whom the advances in question were made, were made available. Thus, CIT(A) has rightly accepted the claimed written off irrecoverable advances – Decided against Revenue

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• 2012 (9) TMI 797
  Addition u/s 68 - Share application money – addition made on ground that though Share applicants are assessees but their level of income is not sufficient enough to make investments in the company, moreover they are first time assessee – Held that:- CIT(A) has deleted the addition on the basis that applicants are long time assessees and they might have taken some loans from family members for making investment into the company which does not seem to be correct as there is no evidence of old income tax return or statement of share applicants that they had taken loans from some family members for investment into the company. However in view of decision in case of CIT v. Lovely Exports Pvt. Ltd.(2008 (1) TMI 575 - SUPREME COURT OF INDIA ) wherein it was held that if the names & addresses and confirmation from shareholders has been provided by the company to the AO then the share application money cannot be added in the income of the company u/s 68 and instead the Department is free to reopen the assessment of such individual in accordance with law, we do not see any reason to interfere in the order of CIT(A). Yet, it is opined that the individual assessments of the alleged shareholders should be reopened and in view of that Department is directed to issue instructions to all jurisdictional AO to reopen the individual cases of all shareholders as listed by AO – Decided against Revenue

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• 2012 (9) TMI 796
  Deduction u/s 54EC - assessee entered into a development agreement in respect of jointly owned property with developer - sale proceeds arising out of the transfer of capital asset, was invested in specified bonds and exemption u/s 54EC was claimed - denial on ground that last payment of instalment received in pursuance of development agreement dated 21.9.2002, received on 28.3.2003 through cheque (returned back and redeposited on 16.4.2003) and the investment in the specified bond was made on 21.4.2003 and 26.4.2003, which falls beyond the period of six months, hence, not eligible for deduction u/s. 54EC - Held that:- Benefit of exemption intended in this section can only be given, unless and until the assessee receives the payment from transfer of a capital asset, otherwise it cannot be expected from an assessee to invest the same within the period prescribed. It will frustrate the entire purpose and spirit of the section itself. Looking to this hardship in a similar situation, the CBDT vide circular No.791 dated 26.2.2000 has clarified that such an investment can be made within the period of six months from the date of receiving of money from transfer of capital asset. Assessee’s claim for exemption u/s 54EC from capital gains, is allowed - Decided in favor of assessee.

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• 2012 (9) TMI 795
  Penalty u/s 271(1)(c) - assessee having income from commission/service charges from direct marketing/selling agency of ICICI Bank Ltd. on car loan sanctioned through it - dis-allowance of commission paid to sub brokers on ground of non-confirmation and encashment by assessee of cheques issued by ICICI in favor of sub-brokers - Held that:- Out of the payment of commission of Rs.35.65 lacs, only sum of Rs.1.73 lacs has been disallowed on the ground that addresses and confirmations could not be submitted. Assessee explained that it was only in some of the cases, where sub-brokers were reluctant to encash the bearer cheques, the assessee has assisted them in the bank at the time of encashment. Further, in most of the cases, it has been encashed by sub-brokers which are verifiable by the bank itself. Thus, the explanation of the assessee cannot be brushed aside as it carries some probability looking to the fact that huge amount of commission paid has already been accepted. Also, AO has not carried out any enquiry or has brought any material on record to show that payments were bogus. The explanations offered by the assessee have not been found to be false. Therefore, penalty for concealment of the income u/s 271(1)(c), cannot be levied and same is deleted - Decided in favor of assessee

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• 2012 (9) TMI 794
  Addition under the head “income from house property’ - assessee contended that shops were the commercial asset of the appellant, and since no rent was received, there was no question of determining the notional income and taxing the same under aforesaid head - Held that:- For determination of ALV u/s 23(1), AO has first to find out the reasonable expected rent which the property might fetch by letting out from year to year and then this reasonable expected rent has to be compared with the annual rent received or receivable. In the case in hand, when the property was never let out, than the AO has to consider all the relevant factors including the standard rent, if any as determined under the provisions of Rent Control Act or Municipal Rateable Value of the property for computing the Annual Letting Value. Since no such exercise was carried out, matter restored back Long term capital loss - computation at reduced figure in comparison to computation of assessee - AO denied the claim of expenditure incurred by the assessee on the improvement of the property - Held that:- Since it is not clear from the records that whether the assessee has capitalised the cost of improvement and shown in the balance sheet for the respective assessment years; therefore, in the interest of Justice, we remit this issue to the record of the AO for deciding the same afresh after considering the aspect of capitalisation of the expenditure incurred on the improvement, stamp duty and interest etc

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• 2012 (9) TMI 793
  Profit arising out of purchase and sale of shares as well as units of mutual fund through Portfolio Management Services - Business income or Capital Gains - AY 03-04 - assessee showed it as business income in return, however during the course of assessment proceedings, claimed it to be capital gains - whether head of income can be changed without filing of revised return - Held that:- Merely because assessee claimed an income under the head ‘business income’ but is to be assessed under the law under another head cannot be rejected only on the ground that no revised return has been filed. AO has to decide the assessability of income under correct head on the basis of the facts and as per provisions of I.T.Act. It is a legal ground and the same could be considered by CIT(A) on the basis of the facts and as per provisions of law. Non-filing of the revised return of income should not come in the way if all the relevant facts are available on record. On perusal of the contents of the agreement, it is observed that assessee has placed funds with PMS to make investment in shares/mutual funds and not with a view to do trade. Assessee also made direct investments in shares and there was short term capital gain and long term capital gain being accepted by department. Considering the scheme of Portfolio Management, it is observed that investments made by the assessee through PMS is meant for maximization of wealth and not with a view to do trade in purchase and sale of shares. Further, department has not disputed the fact that the Portfolio Manager have the sole and absolute discretion to make the investments for and on behalf of the assessee and the assessee has no role to play on the same. The assessee has not taken any borrowing for making investments for placing its funds with Portfolio Manager. Very nature of PMS is such that investments made by the assessee cannot be said to be scheme of trading of shares and stocks and, accordingly, the profit is to be assessed under the head ‘capital gains’ - Decided in favor of assessee

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• 2012 (9) TMI 792
  Addition on account of unexplained cash credit - deposit in bank - search and seizure operation conducted u/s 132(1) in the case of S.K.S. Ispat Group including the directors of different associates and sister concern as well as in assessee’s own case - assessee being supporting staff of one of the company was also registered as director in few concerns of the group - assessee contended that said amount was received on behalf of Samardhan Securities and the same has been given back to them - Held that:- It is observed that assessee has established the identity of the party by submitting the PAN, Election Card, I–Card, etc. Bank statement, confirmation of account and confirmation regarding receipt and payment of the aforesaid amount. Since said sum was given back also; and that too through banking channels, hence, the assessee has proved the genuineness of the transaction also. CIT(A) rightly deleted the addition on observation that genuineness of the transaction cannot be doubted as the amount has been re–paid on the same day or within a fortnight of receiving the same - Decided against Revenue.

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• 2012 (9) TMI 791
  Addition u/s 68 on account of cash deposited in banks - assessee engaged in the wedding card business had also purchased and sold shares - addition made on ground that gross receipts of the assessee from Wedding card business, consultancy charges, interest and dividend etc. were to the tune of Rs.7.17 lacs but there were deposit of Rs.46.81 lacs in the two bank accounts of the assessee which were not explained satisfactorily - Held that:- Explanation of assessee that source of funds is from sale of shares, out of which a sum of Rs 1.48 lacs was shown by assessee as short term capital gain and Rs.39.67 as long term capital gain was not accepted by AO on ground that assessee had not given details and evidence regarding date of purchase, purchase price etc. Case of the assessee is that assessee could not furnish details and evidence in relation to shares as documents were lost in the unprecedented floods on 26.7.2005. Contracts notes now produced are admitted as additional evidence to meet the ends of justice. The matter is thus restored to CIT(A). Matter in relation to addition on account of unexplained cash and addition on account of loans is also restored to file of CIT(A) - Appeal allowed for statistical purposes.

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• 2012 (9) TMI 790
  Disallowance u/s 14A – Assessee is a Bank – AO disallow 0.5% of average of investment yielding tax free income - Assessee contended that the same cannot exceed the proportionate expenditure incurred by the treasury department and amount relating to tax free income proportionately arrived at based on exempt income to total income amounts to Rs. 15,76,875 – Held that:- As the disallowance is to be made on a reasonable basis. Assessee have not shown any working on the disallowance, and how they arrived at figure of Rs. 15,76,875 and why 0.5% of average of investment yielding tax free income was excessive. Issue remand back to AO. Disallowance of Prior Period expense – The expenditure stated as relating to prior period consisted of rent, electricity charges, payment to R & T agents, repairs etc – Held that:- Following the decision in case of Union Bank of India (2012 (6) TMI 500 - ITAT MUMBAI), even though they are treated technically as prior period expenses, it relates to a continuous flow of expenditure. Therefore, there is no justification in disallowing the expenditure, otherwise normally eligible for deduction. Issue decided in favour of assessee Disallowance of Lease premium expenses – Assessee claim lease premium as revenue expenditure – Following the decision in case of Mukund Limited(2007 (2) TMI 358 - ITAT MUMBAI), the claim of expenses made by the assessee have been treated as capital in nature and hence cannot be allowed. Issue decide in favour of revenue Disallowance of claim of Bad debts – AO hold that the bad debt is allowable only if it is irrecoverable and is actually written off in the books of accounts – Held that:- Following the decision in case of Vijaya Bank(2010 (4) TMI 46 - SUPREME COURT) debiting the profit and loss account and creating a provision for bad and doubtful debt, the assessee has correspondingly/simultaneously obliterated the said provision from its accounts by reducing the corresponding amount from loans and advances/debtors on the assets side of the balance-sheet, and, consequently at the end of the year, the figure in the loans and advances or the debtors on the assets side of the balance-sheet is shown as net of the provision for “impugned bad debt”, the assessee will be entitled to the benefit of deduction under section 36(1)(vii), as there is an actual write off by the assessee in his books. Disallowance cannot be made on an apprehension that if the assessee failed to close each and every individual account of its debtor, it may result in the assessee claiming deduction twice over”, allowed the appeal of the assessee, allowing the claim of bad debts. Issue decides in favour of assessee Income from foreign branches – Assessee excluded the income from foreign branches as per provision of DTAA – AO denied the benefit of foreign except branches at Singapore and Japan – Held that:- In all the foreign countries the operation is carried out through its branches which is a PE situated outside India. Hence the income attributable to these branches cannot be taxed in India. Therefore, consistent with the earlier finding of the Tribunal in assessee’s own case for the earlier years case, we do not see any merit in the ground taken by the Revenue. Therefore issue decides in favour of assessee

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• 2012 (9) TMI 789
  Capital Gain - Cost Inflation index - while computing indexed cost of acquisition under head capital gain, Cost inflation index is used for which year FY of possession of property acquired or FY of registration of property - Assessee went on to claim that he was put in the possession of the property in the FY 1998-99 and the indexed cost of acquisition claimed by her effective from the FY 1998-99 – Whereas property was register in name of assessee in 2000-01 – Held that:- As the above sale deed makes it abundantly clear that the assessee was actually put in possession of the subject property only in year 2001 and not in the FY 1998-99 itself as claimed by the assessee. In essence, the subject property was transferred and the assessee was put in possession of the said asset only on in year 2001. Appeal decides in favour of revenue

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• 2012 (9) TMI 788
  Ad-hoc addition on account of variation in the yield and higher wastage in comparison to previous years – Assessee was engage in business of manufacturing and trading of Printed Circuit Boards – Products are manufactured as per specification of customers - Held that:- As the generation of wastage on cutting of large copper clad laminates into smaller pieces of PCBs which are of different sizes as per the requirements of the customers. The manufacturing process involves some wastage and no addition was made in the past on account of such low yield and also the addition has been made by AO on the basis of presumptions. Appeal decides in favour of assessee. Ad-hoc disallowance on account of carriage inward/outward – AO found that some of these expenses are not fully supported with proper evidences - Vouchers since certain vouchers are of self-made – Held that:- Since neither the details in respect of carriage inward/outward was submitted nor any evidence was produced or claim made about the genuinuity of self-made vouchers questioned by the Assessing Officer could not be controverted by the assessee. Restrict the disallowance upto 50% of disallowed amount. Addition on account of Bad debts – AO disallow the same on the basis of that the assessee had not taken any steps to recover the bad debts – Held that:- As the assessee submitted that these are really not bad debts but various outstandings on account of sales which should have been reversed. Issue remand back to AO. Disallowance on account of stipend to trainees - Training was given at the factory premises by the Senior Member of the factory - AO noted that no statistical data, no dates of training, no agenda of the training, no venue of the training are submitted – Held that:- As concluded from the facts of the case addition made by the AO on the ground that such huge expenditure under the head “stipend” does not look justified. Merely because the disallowance is a small percentage of the total expenditure cannot be a ground for sustaining the addition. If the claim is bogus, the entire amount has to be disallowed and if not bogus the whole amount should be allowed as deduction but no adhoc addition can be made on the basis of presumptions and surmises. Therefore disallowance of stipend is not justified. Decision in favour of assessee

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• 2012 (9) TMI 787
  Taxability of profit on sale of shares as capital gain or business income – AO contended that there were several purchases and sale transactions of shares during the year and treat profit derived as business income – Held that:- As the assessee had shown the shares as investment in the balance sheet and in some cases the shares have been held fairly for a longer period. The AO in the past has accepted the profit on sale of shares as capital gain. And during the impugned AY a part of the profit on sale of shares has been accepted as LTCG. Rule of consistency will be applicable to the facts of the present case and the profit on sale of shares in our opinion should be treated as “Short term capital gain”. Appeal decides in favour of assessee

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• 2012 (9) TMI 786
  Deduction under section 80HHC – AO compute turnover on pro-rata basis. The assessee has two separate business divisions - For both the divisions separate books of accounts are being maintained – Held that:- The assessee had rightly claimed deduction u/s 80HHC only in respect of business profits of export division. Where the assessee had maintained separate accounts and maintained trading receipts and profit and loss account separately for export sales and domestic sales and had produced sufficient material in support of the claim there is no warrant for disallowing any portion of export earnings pro rata by invoking the provisions of Sec. 80HHC(3)(b). Therefore assessee is entitled to deduction u/s 80HHC on the income of export division only. Appeal decides in favour of assessee Depreciation on P&M - Windmill was ready to use as the same was commissioned on 30.03.2004 - TNEB issued a certificate on 30.03.2004 certifying the commissioning and connection of the windmill – AO contended that the said windmill did not generate a single unit of energy till the end of the FY i.e. 31.03.2004 - Held that:- Following the decision in case of Orchid Chemicals (2012 (3) TMI 551 - ITAT CHENNAI), it is beyond any dispute that it has been officially recognized by the competent authority that the commissioning of the generators was completed in the impugned assessment year itself. This is the condition which is to be satisfied to claim depreciation on the windmill. Once the said condition is satisfied, the question of actual generation of electricity, perhaps in the next previous year, does not defeat the claim of the assesse, as the assessee is entitled for depreciation on commissioning itself. Therefore, assessee is entitled for depreciation. Appeal decides in favour of assessee.

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• 2012 (9) TMI 775
  Penalty u/s 271(1)(c) - assessee providing multi-disciplinary management consultancy services and having worldwide reputation - claimed deduction of provision towards payment of gratuity in its return of income, when the same was not allowable as provision towards payment of gratuity was not allowable as per Statement of Particulars filed by the assessee in Form 3CD - assessee contended it to be genuine mistake - Held that:- Contents of the Tax Audit Report suggest that there is no question of the assessee concealing its income. There is also no question of the assessee furnishing any inaccurate particulars. It appears that all that has happened in the present case is that through a bona fide and inadvertent error, the assessee while submitting its return, failed to add the provision for gratuity to its total income. This can only be described as a human error which we are all prone to make. The calibre and expertise of the assessee has little or nothing to do with the inadvertent error. Absence of due care, in a case such as the present does not mean that the assessed is guilty of either furnishing inaccurate particulars or attempting to conceal its income. Imposition of penalty on the assessee is not justified - Decided in favor of assessee

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• 2012 (9) TMI 774
  Disallowance of amortization of premium on investment in government securities - Invest surplus fund in Government Securities as per RBI guidelines – Though purchase made from open market at premium – Premium was written off as depreciation of value of securities – Held that:- Following the decision in case of Catholic Syrian Bank Ltd (2009 (8) TMI 858 - ITAT COCHIN), taking into account the totality of the facts and materials, assessee is entitled to claim this deduction. Decision in favour of assessee Disallowance the claim of bad debts – AO disallow the amount of claim for doubtful debts in excess of provision for doubtful debts provided in P&L – Held that:- As the provision for bad and doubtful debts equal to the amount mentioned in the section is a must for claiming such deduction. An amount of Rs. 36 lakhs is debited to the P&L account under the head "Provision for bad and doubtful debts" and however, the assessee had claimed deduction of Rs. 42,52,319- while computing the taxable income. Therefore appeal decides in favour of revenue

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• 2012 (9) TMI 769
  Exemption u/s 54 - capital gain earned from sale of house property - assessee's contention that that tenancy right was perpetual and assessee was therefore deemed owner of the property - Held that:- Under the provisions of section 54 exemption of capital gain is available in respect of transfer of residential house owned by the assessee. The purpose of the section is to grant exemption in case the assessee acquires a new residential house by investing the capital gain as an owner. It is because of this reason, the words used in section 54 are "purchase" or "construction" of a new residential house. The requirement of section is not that assessee may acquire a new residential house by any other mode. As decided in CIT v. T.N. Arvinda Reddy [1979 (10) TMI 1 - SUPREME COURT] the word "purchase" appearing in section 54(1) has to be given its common meaning i.e. buy for a price or equivalent of price by payment in kind or adjustment towards a debt or for other monetary consideration. Thus, for application of provisions of section 54, the assessee has to buy a property as an owner and not as tenant. In case of doubt or ambiguity, benefit of it must go to the State. Thus following the said judgment, therefore, even if there is some ambiguity in the provision, the same has to be interpreted in favour of the revenue because it is an exemption provision. In the present case, there is no ambiguity. The provision refers to purchase or construction of a new residential house and it is quite obvious that the same should be as an owner and not as perpetual tenant - against assessee.

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• 2012 (9) TMI 768
  Computation of long term capital gains - dubious method of declaration and payment of dividend to avoid payment of tax on LTCG by the assessee - Held that:- It is important to bear in mind uncontroverted claim of the assessee that there were sufficient reserves and surplus, which were eligible for distribution as 'dividend', and the NIPL had sufficient cash balances as well. The nature of amounts distributed as dividend has not been altered as a result of, what the revenue authorities describe as, colourable device to evade taxes. As decided in Azadi Bachao Andolan's case(2003 (10) TMI 5 - SUPREME COURT) "nowhere said that every action or inaction on the part of the taxpayer which results in reduction of tax liability to which he may be subjected in future, is to be viewed with suspicion and be treated as a device for avoidance of tax irrespective of legitimacy or genuineness of the act". - Undoubtedly, the course adopted by the assessee was tax advantageous inasmuch as if NIPL, assessee's wholly owned subsidiary, was not to distribute dividend and sell the shares without this exercise, the tax outgo would have been Rs. 94 lakhs more than under the present arrangement, but then every tax advantageous action or inaction cannot be treated as a colourable device unless such an action or inaction is not bonafide, it conceals the true nature of transaction or is an exercise without any commercial justification. Thus distribution of dividend by NIPL, prior to sale of its shares by the assessee, even though tax advantageous cannot be termed as a colourable device or sham transaction and the receipt of these dividends cannot be recharacterized as sale consideration of shares in the hands of the assessee - in favour of assessee.

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• 2012 (9) TMI 767
  Change of opinion - Whether assessment proceedings can be validly reopened under Section 147 of the Act, even within four year, if an assessee has furnished full and true particulars at the time of original assessment with reference to income alleged to have escaped assessment - Held that:- As decided in CIT Versus Kelvinator Of India Limited [2002 (4) TMI 37 - DELHI HIGH COURT] an assessment order passed under section 143(3) must be presumed to be one passed after full scrutiny and formation of opinion on the points raised in the return and in the course of the assessment proceedings. It has been observed that section 114(e) of the Evidence Act comes into operation and it must be presumed that the AO had performed his duty in the manner expected of him, that is, after examining and forming an opinion on all aspects of the return, though he has not been articulate about it in the assessment order. It has also been held that if such a presumption is not drawn, that would amount to putting a premium on a perfunctory discharge of duties by the assessing authority and permitting him to take advantage of his own wrong. The first proviso to section 147 can be resorted to only if the assessee has not discharged the duty. Where the assessee has discharged his duty and the assessment completed under section 143 (3) is reopened within the period of 4 years from the end of the assessment year, the assessing officer has to either show that the disclosure is not full and true or he has come into possession of some "tangible material", to borrow with respect the expression used by the Supreme Court in Kelvinator (supra), to come to the conclusion that there is escapement of income. The material must have a live link with the formation of the belief regarding escapement of income. When there is no failure on the part of the assessee to furnish full and true particulars and there is no tangible material on the basis of which the assessing officer can allege escapement of income, the only consequence would be that the assessing officer was exercising the power of review on the very same materials which he is presumed to have examined. This would amount to abuse of the power to re-assess and has to be checked. When the assessing officer fails to examine a subject matter, entry, claim or deduction, he forms no opinion, notwithstanding that the assessee had made a full and true disclosure and notwithstanding that the assessment was completed under section 143 (3) and to further hold that it would be a case of "no opinion", would be to fly in the teeth of the two rulings. It is not even open to the revenue to urge such a proposition - Thus the assessment proceedings cannot be validly reopened under section 147 even within four years, if an assessee has furnished full and true particulars at the time of original assessment with reference to the income alleged to have escaped assessment, if the original assessment was made u/s 143(3), thus the issue is concluded by the judgment of the Full Bench of this court in Kelvinator (supra). So long as the assessee has furnished full and true particulars at the time of original assessment and so long as the assessment order is framed under section 143(3) it matters little that the assessing officer did not ask any question or query with respect to one entry or note but had raised queries and questions on other aspects. Again the answer to this question stands concluded by the judgment of the Full Bench of this court in Kelvinator (supra). It is that section 114(e) of the Evidence Act can be applied to an assessment order framed under section 143(3) provided that there has been a full and true disclosure of all material and primary facts at the time of original assessment. In such a case if the assessment is reopened in respect of a matter covered by the disclosure, it would amount to change of opinion.

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• 2012 (9) TMI 766
  Transfer pricing ('TP') adjustment u/s 92CA(3) - as assessee performs the functions of a risk bearing agent and therefore, cost plus PLI adopted by the assessee for ALP determination is not the most appropriate - Held that:- No supporting material has been brought on record that assessee GIS India has borne any business risks arising from its activities with GAP USA. There are no adverse facts, material or evidence on the basis whereof Ld. TPO has made arrived at such a conclusion. The TPO has not given any examples or comparables whatsoever to demonstrate which major business risks much less any risk are borne by GIS India and how. In a sweeping manner it has been held that as functions follow risks, and since, in his wisdom GIS India undertakes key functions, therefore it must also be bearing the consequent risks. The observation is flawed as from the handbook and guidelines it clearly emerges that assessee had no wisdom or discretion in these terms. As it is common trend in garment that goods are generally supplied on credit based which the suppliers have to extend to GAP, USA entities and assessee bears no risk. The assessee' role, functions and activities are limited to scrupulously follow the handbook and other instructions provided by the parent group. These facts and circumstances indicate lack of authority or discretion with assessee in deviating or changing from the policies and procedures prescribed by the parent company. Therefore, it is unable to be agreed with the view that assessee incurred any significant risk in its functions. Development of substantial human resources intangibles by assessee - Held that:- There is no supporting material available on record to hold it against assessee. Except generalized assertions nothing reliable is placed on record to support these observations - Assessee had 230 employees on its payroll engaged in execution of preordained support nature activities as per the guidelines. Department has failed to demonstrate that any or few of employees were any acclaimed personalities or indispensable in garment procurement trade so as to constitute any human intangibles as alleged. With no decision making or entrepreneurial role embedded in their work profiles, it is not clear how the TPO or DRP can arrive at such a conclusion that these routine activities led to creation/development of any valuable supply chain or human asset. TPO has theoretically relied on a Hindustan Times news paper report published in 2008 in respect of cost of procurement services in various countries which is not acceptable as this news paper report by itself cannot partake the character of a comparable data - Location savings to developing economy arise to the industry as a whole, there is nothing on record that assessee on standalone basis was sole beneficiary - The intent of sourcing from low cost countries for a manufacturer/retailer is to survive in stiff competition by providing a lower cost to its end-customers the advantage of location savings is passed onto the end-customer via a competitive sales strategy. The arm's length principle requires benchmarking to be done with comparables in the jurisdiction of tested party and the location savings, if any, would be reflected in the profitability earned by comparables which are used for benchmarking the international transactions. Thus no separate/additional allocation is called for on account of location savings. Transactional Net Margin method ('TNMM') - use of Net Profit/Total Cost OR percentage of FOB value of goods procured by parent as PLI - Held that:- All the significant directions relating to procurement of goods from third party vendors in India, namely – (a) designs & trends of apparel (b) quality parameters of materials (c) terms & conditions for dealing with vendors, etc, are all provided by GAP US to the appellant through the voluminous vendor handbook & other correspondences which are placed on record and have not been controverted by the department. It emerges that assessee follows and executes them as a service provider. For such preordained support services, the assessee cannot be held to be entitled to remuneration in terms of Li & Fung case [2011 (9) TMI 204 - ITAT, NEW DELHI] on FOB value of goods procured by GAP US from third party vendors in India. In the case of Li & Fung India, assessee actually carried out significantly value added functions in India, which is not the case - thus the appropriate PLI will be net profit/total cost and not the % of FOB value of goods sourced by AE Looking at the sweeping observations of the TPO and DRP which are neither based on any cogent reasoning nor factual reliability, the assessments as framed give an impression of being work of adversarial approach in tax liability determination - No hesitation to accept a candid proposal given by the assessee and hold that assessee TP adjustments be made by adopting the 32% cost plus mark up of the assessee for AY 2006-07 and 2007-08. The mark-up proposal of assessee is higher than mark-up over total cost earned by all comparables placed on record. The assessments should be framed accordingly. Depreciation on computer peripherals, printers and UPS @ 15% instead of 60% as allowable under the Income Tax Rules - Held that:- Rate of depreciation it is by now settled that the computer peripherals are eligible for 60% depreciation which should be allowed to the assessee.

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• 2012 (9) TMI 765
  Deduction u/s 37(1) - welfare expenses towards providing education to its employees' children & Payments to other educational institutions where the children of its employees were studying- Held that:- From the assessment order for AY 1985-1986 and from the Order of CIT (A) that the assessee has made payments to schools other than Sandur Residential School and Sandur Education Society, which fact has not been discussed either in the Order of ITAT or in the Order of the High Court. The interpretation of Section 40A(9) clearly brings out a dichotomy between 'contribution' and 'reimbursement' - Section 40A(9) was inserted as a measure for combating tax avoidance - In the present case how the ITAT and the High Court have come to the conclusion that these payments made by the assessee constituted reimbursement. As for the AY 1985-1986, the AO records that an amount of Rs. 11,40,641/- has been incurred by payments to other educational institutions and not by way of payments made to school or the society promoted by the assessee. For each assessment year, therefore, the ITAT will have to record a separate finding as to whether the claim for deduction is being made for payments to the school promoted by the assessee or to some other educational institutions/schools and thereafter apply Section 40A(9) which has not been done in the present case - in favour of assessee.

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• 2012 (9) TMI 764
  Interest paid on optionally convertible debenture - CIT(A) deleted the disallowance - Held that:- There was no contingency involved in the accrual of liability with reference to the interest on the debentures. CIT (A) has rightly observed that debentures, whether fully or partly or optionally convertible, are nothing but debt till the date of conversion and any interest paid on these debentures is allowable as normal business expenditure. The only uncertainty in the optionally convertible debentures issued by the assessee is whether the debenture holder will go for conversion into shares or will continue to hold them as debentures. CIT (A) has rightly held that this uncertainty in no way impacts the assessee company's liability to pay interest till the date of conversion - in favour of assessee.

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• 2012 (9) TMI 763
  Payments made for hiring of buses - applicability of Section 194C or 194I - assessee contended it to be payment for contract of service whereas Revenue contended it to be rent for hiring a plant - Held that:- It is observed that assessee has not taken the buses simplicitor on lease as a plant and machinery rather it entered into a work permit whereby buses were taken for transportation of the passengers. The bus owner is responsible for upkeep as well as operation of the bus. He kept his own driver and helper. The buses remained in the possession of the owners. Hence, CIT(A) has rightly held that it was a service contract and hence applicability of Section 194C - Decided against Revenue.

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• 2012 (9) TMI 762
  Dis-allowance of professional charges claimed against professional receipts in absence of any agreement between the parties - assessee contended that due to unavoidable circumstances, it was not in a position to complete the work and it has assigned the work to M/s Dayal - Held that:- When the explanation of an assessee is based on number of facts supported by evidence and circumstances required considerations, whether the explanation is sound or not must be determined, not by considering the weight to be attached to each single fact in isolation but by assessing the cumulative effect of all the fact in their setting as a whole. Availability of agreement is one corroborative factor which would eliminate the doubts, but in the absence of that agreement, the other circumstances ought to have been evaluated, which can goad the adjudicating authority towards a firm conclusion. CIT(A) order of deleting dis-allowance upheld Notional interest on Interest free advances - addition - Held that:- CIT(A) rightly deleted the addition on observation that assessee has not claimed any interest expenditure in the P/L A/c, therefore, no interest bearing funds were given to the parties without charging any interest. Dis-allowance of payments made for delay in filing the various statutory returns with ROC on ground of it being penal - Held that:- Payments made by assessee on account of delay in submitting certain statutory returns are compensatory in nature and not on account of fraction of any law. These are not penal in nature. Therefore, CIT(A) has rightly deleted the addition - Decided in favor of assessee

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• 2012 (9) TMI 761
  Assessee in default u/s 201 and 201 (1A) – accommodation provided by university to its employees against license fees – Revenue contended deduction of TDS on the value of perquisite of the rent free accommodation as per the procedure provided in Rule 3 of the Income-tax Rules, 1962 - Held that:- On reading the findings of the ITAT in the case of Financial Officer, Maharishi Dayanand University, Rohtak (2007 (12) TMI 247 - ITAT DELHI-I), which covers issue in favor of assesse, along with the finding of the AO in the light of the law propounded by the Supreme Court in case of Arun Kumar Vs. Union of India(2006 (9) TMI 115 - SUPREME COURT ) upholding validity of the Rule 3, it gets revealed that AO has nowhere held in the impugned order that any concession was given by the employer to its employees and they have provided the accommodation on a concessional rates. AO straightway applied Rule 3 without first establishing the case that the appellants have provided any concession in the shape of accommodation to its employees. Assessees cannot be treated in default without factually establishing that they have extended any concession to their employees. Revenue authorities have also not looked into the dispute with this angle. In view of the above discussion, it is held that assesse is not in default u/s 201(1) and 201(1A) - Decided in favor of assessee

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• 2012 (9) TMI 760
  Denial of registration u/s 12AA - original trust deed was modified - Held that:- CIT has held that those supplementary trust deed submitted by assessee are not in accordance with the provisions of Indian Trust Act 1882 and judicial decision but has not pointed out any provision of the Indian Trust Act 1882 or any judicial decision which shows as to how the supplementary trust deeds dated 5.9.2008 and 22.9.2008 are not in accordance with law. As both the supplementary trust deeds are duly registered by the Sub-registrar, Faridabad and there is no reason to doubt the explanation of the appellant that modifications were made in the original trust deed to make the objects of the trust more clear. It is not the case of the revenue that in the supplementary trust deed some non-charitable objects have been introduced. In absence of such observation by the revenue no reason to doubt the validity of the supplementary trust deed executed on 22nd Sep. 2008 which is the finally amended trust deed. The Ld. CIT has not specified as to how the supplementary trust deed dated 22.9.2008 is not in accordance with law. The finding of Ld. CIT in this regard is thus not justified - no substance in the contention of the DR that while making alteration in the trust deed the appellant has violated the provisions laid down in clause 17 of the original deed which provides the manner of making, altering or rescinding Rules and Regulations - direction to grant registration u/s 12A - in favour of assessee. Refusal in granting approval u/s 80 G - Held that:- As grant of registration u/s 12A has been allowed application for exemption u/s 80 G too need to be allowed - in favour of assessee.

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• 2012 (9) TMI 759
  Deemed Dividend - receiving of loan from company in which assessee hold more than 10% of the shares - assessee contesting the order on ground that company had advanced the loan to the assessee in ordinary course of business of granting loans and advances - Held that:- There is no dispute that lending and advancing of money is one of the objects of the company. The said company had been receiving interest from loans and advances given which had been offered as business income and it was also being accepted by the department u/s 143(1). Therefore, having accepted the interest income received by the company as business income, the Revenue cannot argue that lending and advancing of money is not the business of the company. Therefore, amount was received as loan from the company in the ordinary course of business of the company and hence cannot be assessed as deemed dividend - Decided in favor of assessee Addition u/s 68 of Rs 16.50 lacs being cash deposited in the bank account of the assessee on the ground that source had not been explained satisfactorily - Held that:- Assessee had explained the source as sale proceeds of land at Madurai, in which the share of assessee was Rs. 14,63,459 and income had been offered as capital gains. There is no dispute about sale of land. Cash received on account of sale was duly reflected in the balance sheet for AYs 2005–06 and 2006–07. Further, assessee had shown cash in hand of Rs. 16,46,701, as on 31st March 2006 in the balance sheet for that year which has been carried forward to the current year in which the cash was deposited in the bank. In view of aforesaid facts, AO was not justified in rejecting the explanation of the assessee only on the ground that cash had been held for a long time. There is no legal ban for keeping the money in cash. Order of Commissioner (Appeals) in deleting the addition is upheld - Decided in favor of assessee.

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• 2012 (9) TMI 758
  Presumptive taxation - Builder/Developer - assessee following the ‘project completion method’ for recognising income from such projects - Revenue estimated business income at the rate of 8% on booking advance collected by the assessee during the year on the basis of Revised AS 7(Construction Contracts) issued by ICAI - AY 06-07 - Held that:- It is noted that the project of the assessee had commenced on 9-1-2005 by execution of development agreement and the project was approved on 17-2-2005. It is also admitted that the project was mostly completed in the FY 2006-2007 (i.e. AY 2007-08), and income was shown in AY 07-08. Tribunal in case of Unique Enterprises has held that assessees, who are following ‘project completion method’ and have offered income-tax in the year in which substantial work has been completed, the same should be accepted. In view of aforesaid it is held that no income can be assessed on presumptive basis in the AY 2006-2007 as the assessee has already shown the income in the subsequent year 2007-2008 as per the regular accounting method of project completion employed by the assessee. Addition confirmed by the CIT(A) stands deleted - Decided in favor of assessee

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• 2012 (9) TMI 757
  Dis-allowance of expenditure on adhoc basis on ground of it being excessive - Pharmaceutical Sales Representative (PSR) expenses and PSR salary - assessee company engaged in the business of trading of pharmaceutical products - Held that:- It is observed that AO though doubted higher percentages of expenditure claimed by the assessee; however, no enquiry or investigation has been made to find out the genuineness of the claim of the assessee. Nature of business is such expenditure on marketing of pharmaceutical products is bound to happen, which is not disputed by Department. Without giving a finding that the claim of the assessee is bogus, the same cannot be disallowed merely on the ground that the claim of the assessee is excessive. In the facts and circumstances of the case when the actual expenditure incurred by the assessee has not been doubted and the payment has been made to the various Medical Representatives, who are not related parties of the assessee, than no adhoc disallowance is called for on account of excess PSR expenses and PSR salary. Dis-allowance deleted – Decided in favor of assessee

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• 2012 (9) TMI 756
  Addition u/s 68 in respect of deposit accepted by the assessee - Revenue contended that assessee not produced the details namely, address of the depositor or any particulars of the depositor - co-operative society carrying on banking business for its members - Held that:- In the present case, assessee is a Society carrying on the Banking business to its own members and the business is carried on with certain set of guidelines and procedures. It is operating through 23 branches and each of the branches is headed by a Branch Manager and other staff. Deposits were accepted by staff along with the application at the counters. To the extent of the maintenance of the records is concerned, it is already seen that a systematic record was maintained by the assessee with regard to the transactions by the Bank. It has accepted all the documents as required under KYC norms. From the above facts it is proved that the assesses has proved the identity of the depositor. When the Society is having members of 63,000, one cannot come to a conclusion that the bank does not have furnished identity and proof of depositor by verifying few numbers. Being so, amounts in the accounts maintained by the assessee are deposits of the customers and/or not under the control of the assessee, and therefore, provisions of S. 68 are not applicable to the Bank. Further, Society/Bank not required to go for detailed verification of address/whereabouts of the customers and therefore, addition u/s 68 cannot be made merely because the address of the customers are incomplete. CIT(A) rightly deleted the addition - Decided in favor of assessee Deduction u/s 80P(2)(a)(i) - denial - Held that:- It is the fact that certain activities carried on by the assessee not complying with the requirements of the principles of Cooperative Society, more so, the assessee also engaged in the activity of bill discounting, providing accommodation cheques by taking cash from the member, being so, for the AY 2006-07 the claim of the assessee u/s 80P(2)(a)(i) cannot be allowed. For AY 2007-08 & 2008-09, it is observed that Society is carrying on the Banking business and for all practical purpose it acts like a co-op bank. It is governed by the Banking Regulations Act. Therefore the Society being a co-op bank providing banking facilities to members is not eligible to claim the deduction u/s 80P(2)(i)(a) after the introduction of sub-section (4) to section 80P, hence entitled for deduction u/s 80P(2)(a)(i) for AY 2007-08 & 2008-09 - Decided in favor of Revenue. Dis-allowance of advertisement expenditure u/s 40a(i)(a) for no deduction of TDS - Held that:- Section 40(a)(ia) of the Act is applicable only to the expenditure which is payable on 31st March of every year and cannot be invoked to disallow the amounts which are already been paid during the previous year, without deducting tax at sources. see Merilyn Shipping & Transports (2012 (4) TMI 290 - ITAT VISAKHAPATNAM). Accordingly, this issue set aside to the file of the assessing officer for reconsideration. Interest on account of interest receivable on the loans advanced which are pending recovery for more than 6 months - assessee contesting direction of CIT(A) to AO for verification of claim - Held that:- CIT(A) was justified in issuing directions to verify the nature of interest whether it is on non performing assets or not and decide thereupon, since Supreme Court in the case of UCO Bank v. CIT [1999 (5) TMI 3 - SUPREME COURT ] held that interest credited to the suspense account and NPAs is to be excluded from the income - Appeal of assessee dismissed

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• 2012 (9) TMI 755
  Whether loss arising from purchase and sale of units is not allowable as the transaction is a colourable device to avoid tax despite the fact that the actual purchase and sale has taken place and the assessee has actually incurred the loss - Assessee had purchased units of the UTI from Bank of America – Sold back the same units to Bank of America on very next day – Assessee receive dividend and incurred a STCL, set off with LTCG and carried forward the balance STCL – AO point was that the units sold by them on 31.5.1991 were in the name of the assessee - Bank had purchased these units from the assessee earlier in two lots in 1990’s remained in the name the assessee – UTI confirmed that the transfers were registered in the name of the assessee from 31.5.1990 till 14.5.1994 and assessee received dividends till 1994 - Held that:- As the revenue does not dispute that the transactions in fact had taken place between the assessee and the Bank of America. Revenue’s only point is that there was no registration of the units in the actual holder's name. If the Revenue had questioned the transaction as not legal, and not based on the amendment to Section 94, which came into existence only with effect from 1.4.2002, then Section 94 would not have come into play in considering the merits of the claim. Thus, on principle, when the Revenue had accepted the transfer, the sole ground on which the transaction was held to be a colourable one could not be sustained. Appeal decides in favour of assessee

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• 2012 (9) TMI 754
  Disallowance of interest expense in relation to advance given to sister concern - Assessee has not charged any interest on its advance to a 100% subsidiary and to a group company – Assessee contended that such amount was given in the ordinary course of the business – Subsidiary company have no other business and only having land on which construction is not permissible – No increase in share capital & reserves but secured loan has been raised - Held that:- As concluded from the facts of case the interest free funds available with the assessee are far more than the interest free advances. Interest free advance granted by the assessee to the subsidiary company was less than cash profit generated by the assessee. Therefore, it should be presumed that the subsidiaries were paid out of the profit of the assessee which is far in excess of the amount paid to the subsidiaries. Decision in favour of assessee Disallowance of employees' contribution to P.F – Assessee contended that these payments have been made within the due date of filing of return u/s. 139(1) – Held that:- As the dates provided by assessee are not available in either of the orders of the authorities below. Therefore for verification issue remand back to AO. Disallowance of prior period expenses – Assessee argued that said expenditure related to the electricity charge – Held that:- Only expenditure which is related to the accounting year under consideration has to be allowed against the declared receipts except the expenditure which was not crystallized in earlier accounting years. Further assessee has failed to prove that the expenditure in question was crystallized only in the accounting year. Appeal decides in favour of revenue Depreciation on Hotel building – Assessee claim depreciation on hotel building claimed by assessee at 15% - AO allow 10% - Held that:- As decided in earlier years by CIT(A)that depreciation for hotel building will be allowable only @ 10%. Appeal decided in favour of revenue Ad-hoc disallowance of interest expenses against dividend income u/s 14A – Held that:- The AO must adopt reasonable basis for effecting the apportionment with reasonable opportunity of being heard provide to assessee. Disallowance should be restricted to 1% of dividend income. Therefore, earning exempt dividend income should be restricted to 1% of dividend income. Decision in favour of assessee

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• 2012 (9) TMI 753
  Addition on account of valuation of investment portfolio – Assessee is a Bank treating the investments as stock-in-trade – Bank showing opening and closing stock securities valued at cost or market value whichever is lower as prescribed by RBI for the purpose of books of accounts – AO observe that assessee has followed RBI guidelines for the purpose of books of account, but not for computation of income for the purpose of income tax purposes – Held that:- Following the decision in case of United Commercial Bank (1999 (9) TMI 4 - SUPREME COURT) assessee Bank is entitled to value all the investment at cost prices or market value whichever is lower by treating such investment as stock-in-trade. Decision in favour of assessee

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• 2012 (9) TMI 752
  TDS u/s 195 - Whether the payment made for import of software or supply of software by the non-resident companies was royalty or not - Assessee imported certain software products from UK for onward distribution – Held that:- Following the order in case of Samsung Electronics Co. Ltd.(2012 (8) TMI 112 - ITAT BANGALORE) payment made by the assessee to non-resident companies would amount to royalty within the meaning of Article 12 of the DTAA with the respective countries and there was obligation on the part of the assessee to deduct tax at source u/s. 195 of the I.T. Act. Appeal decided in favour of revenue

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• 2012 (9) TMI 751
  Monetary limit for appeal in Tax related matters before ITAT – Appeal filed with Tribunal prior to the instruction regarding the minimum monetary limit stipulated by the Board – Revenue contended that the amount in appeal is above the minimum prescribed limit as per previous instruction – Held that:- Following the decision in case of Seedi Builders (2011 (11) TMI 402 - KARNATAKA HIGH COURT) it is clear that the instructions issued in the Circulars by CBDT are applicable for pending cases also. Appeal decides in favour of revenue

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• 2012 (9) TMI 750
  Disallowance of provision made for leave encashment - Assessee in the relevant period had made a provision for encashment of privilege leave on the basis of actuarial valuation - AO holding that it is contingent liability which had not crystallized and therefore not allowable as a deduction - Held that:- Following the decision in case of BEML(2000 (8) TMI 4 - SUPREME COURT) and Exide Industries Ltd.(2007 (6) TMI 175 - CALCUTTA High Court ) struck down the provisions of section 43B(F), that the assessee’s claim for deduction of the provision for privilege leave encashment is not a contingent liability and is to be allowed. Issue decided in favour of assessee Amortization of premium paid on Government securities – Following the decision in case of Sir M. Vishveswaraya Co-operative Bank Ltd. (2012 (9) TMI 774 - ITAT, BANGALORE) hold that the assessee is entitled to deduction on account of amortization of premium on Govt. securities over its life. Decision in favour of assessee

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• 2012 (9) TMI 749
  Disallowance of interest – AO made disallowance of interest on borrowed funds because the same were utilized in making interest free advances to two of its subsidiary companies – Held that:- As concluded from the facts the amounts advanced by assessee to the above mentioned five concerns are out of internal accruals or out of profits earned by assessee by way of sale of shares or by way of consideration received on account of sale of shares. Therefore, assessee is entitled for allowance of interest on borrowed capital which is used for the purpose of business. Appeal decides in favour of assessee

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• 2012 (9) TMI 748
  Agricultural income - plantation company engaged in rubber cultivation - assessee is also buying latex from small planters convert into centrifuged latex and sell the same - assessee returned 100% of income from their plantation obtained on sale after conversion of field latex into centrifuged latex for assessment under the Kerala Agricultural Income Tax Act and no part was offered for assessment under the Central Income Tax Act – Held that:- Circular No.5 of 2003 dated 22/05/2003 prohibiting reopening of assessment under Section 147 as well as under Section 263 of the Income Tax Act for any assessment year prior to the assessment year 2002-03 - Assessees who have paid agricultural income tax on 100% of the income from centrifuged latex, will not be reassessed under the Central Act for any year prior to the assessment year 2002-03 - assessee's case is covered by the circular and the assessee cannot be called upon to pay tax again under the Central Income Tax Act on that part of the income assessed under Rule 7 over which also tax was paid under AIT Act Charging provision of assessment of part of the income from the sale of items of rubber covered by Rule 7A should be deemed to have come into force only when Rule 7A was introduced i.e. with effect from 01/04/2002 - from the assessment year 2002-03 onwards, income from centrifuged latex could be assessed under Rule 7A of the Rules.

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• Customs

• 2012 (9) TMI 785
  Non production of end use certificate from the concerned jurisdictional Central Excise authority - demand of differential duty - stay filed for waiver of pre-deposit - Held that:- That the appellant imported Midsole Insole material availing the benefit of Notification No.224/85-Cus, dt.9.7.85 which grants benefit of concessional rate of duty subject to the condition that the goods are used in the leather industry and the said notification does not have any condition of giving the end use certificate from the Central Excise authorities. It can also been seen that the said notification also does not include any condition of executing a bond by the importer of the goods. As the contemporaneous evidences which have been shown by the appellant are enough to hold that the goods which were imported were consumed for the manufacture of leather goods which were finally exported and that the Chartered Accountant's certificate coupled with the affidavit of the partner (who is now deceased) is considered as enough evidence to hold that the appellant had consumed the goods imported in the manufacture of leather goods - thus benefit of notification is to be given to assessee which does not have any condition of giving the end use certificate from the Central Excise authorities - in favour of assessee.

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• 2012 (9) TMI 784
  Second-hand goods - Enhancement of value of goods - Revenue wants to enhance the value of the monitors from US$ 13 to US$ 20 as suggested by the dock staff – Held that:- There is no data or evidence produced by the Revenue regarding the price of comparable goods - in case of second-hand goods there cannot be a price for comparable goods - appeal is dismissed

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• 2012 (9) TMI 783
  Classification - Assemblies and evaporator assemblies - heat exchangers - classification claimed by the appellants in respect of these items under Heading 8419.50 - under the sub-heading 84.19 only those machinery which are other than machinery or plant of a kind used for domestic purposes are included - heat exchanger unit covered under sub-heading 8419.50 can only include a heat exchanger unit which is not used for domestic purposes - goods can be classified under Heading 84.19 is not acceptable as the same are not for purposes other than air-conditioning machinery used for domestic purposes - appellants have described the goods differently as heat exchangers to claim assessment under Heading 8419.50 at a lower rate which is not permissible – appeal rejected

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• 2012 (9) TMI 746
  Writ petition - For restraining the respondent-authorities to auction the confiscated items under the provision of Customs Act - to destroy the aforementioned betel nut – alleged that smuggling of betel nuts in collusion with Patna Custom Authorities - petitioner further submitted that in these circumstances the Central Government through Chief Commissioner, Customs (Preventive), directed the Central Board of Excise & Customs not to sell such confiscated items in public auction as they were sensitive commodities prone to smuggling and to offer it to Kendriya Bhandar and NCCF only – Held that:- There is no Kendriya Bhandar in Patna and hence earlier such betel nuts were provided to NCCF for selling it in retail to Co-operative Societies under the authorities, but subsequently started selling it to big concerns like the Kanpur Manufacturers, which were preparing hazardous and harmful items like Paan Masala and Gutka etc. - petitioner has been unable to substantiate and validly show from the statements made in the writ petition that his interest had suffered or any right has been taken away or he had been affected in any manner whatsoever by the impugned action of the respondent-authorities. He has also failed to prove by any valid material that he had ever been purchaser of betel nuts from Kendriya Bhandar or NCCF - writ petition dismissed.

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• 2012 (9) TMI 745
  Penalty - misdeclaration – alleged that misdeclaration of age of machinery so as to get import benefit in the Bills of entry – Held that:- Import of machinery after obtaining the requisite permission and observing the formalities - approval given by the Government of India, the certificate issued by the Chartered Engineer and what is mentioned in the bill of entry are all identical. At the time the machinery was removed from Mysore to Bangalore, the said Mr. Vinaya Chandra was not in office - Under these circumstances, holding him liable for misdescription on the statement of the co-noticee and the officials of the department, was not proper – penalty set aside

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• Corporate Laws

• 2012 (9) TMI 782
  Winding up petition u/s 433 r.w.s. 434 of the Companies Act, 1956 - non-payment of creditor - respondent contended that goods were defective and coupled with the fact that the Commission Agent has filed his affidavit supporting the stand of the respondent that the defective goods had been promised to be lifted by the petitioner clearly shows that a dispute has arisen on facts which cannot be cannot be entertained in a winding up petition - Held that:- Admittedly there is no communication on record to show that the defect which the respondent had allegedly noticed in the goods supplied by the petitioner had ever been communicated to the petitioner. It is also relevant to note that in the first affidavit the Commission Agent has not mentioned any date when the petitioner would lift the so called defective material but in the later affidavit, he has made a substantial improvement that the petitioner had agreed to lift the defective material in March, 2009 and that is how the 'C' Form came to be issued on 17.03.2009. The defence of the respondent largely based on these affidavits clearly appears to be suspect. Considering all the aforenoted aspects, this Court is satisfied that the respondent owes a debt to the petitioner; despite service of the statutory notice by the petitioner to the respondent, it has failed to liquidate the demand of the petitioner. Petition is accordingly admitted. Respondent directed to make the payment with interest within stipulated time - Decided in favor of petitioner

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• 2012 (9) TMI 744
  Winding Up Petition filed u/s 433(e) and (f) along with section 439 of the Companies Act, 1956 - share application money and unsecured loans provided by petitioner is pending - Held that:- It is not the case here that the share application was not refunded or shares were not allotted. The shares were allotted on 20.9.2010. The present petition has been filed on 29th September, 2010 much after the issuance of the shares. The case of the petitioner is that he demanded the return of the share application money with a request not to allot the shares and it therefore amounts to a debt. It is held that return has to be in terms of the procedure contemplated u/s 100 to 104 of the Companies Act and on an approval by this Court. Merely because a refund has been asked, neither is it a debt nor is the Company liable to pay the same. Unsecured loans - respondent has admitted debt and stated that the said amount is not due for payment immediately - Held that:- It is not a debt at present. It may be a debt in future. Therefore, even though the liability has been admitted, the petitioner cannot coerce the company to make the said payment especially in view of the fact that the payments are not immediately due. For the aforesaid reasons, the petitioner has failed to make out a case. The petition being devoid of merits is dismissed.

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• Service Tax

• 2012 (9) TMI 813
  Whether CESTAT was right in invoking the provisions of Section 73(1A) and setting aside the penalty levied in excess of 25% - Revenue contended that once show cause notice has been issued then the assessee is required to make payment of penalty, even if before the issuance of show cause notice, service tax and interest has been deposited - Held that:- Board's Circular No.137/167/2006-CX dated dated 03.10.2007 has considered the proviso to section 73 that where a person has paid service tax in full together with interest and penalty under sub-section (1A), the proceedings in respect of such person to whom notices are served under sub-section (1) shall be deemed to be concluded. In the instant case was not contesting the Service Tax liability and had deposited the entire service tax and interest much before the issuance of show cause notice and discharged 25% of the amount of service tax liability, and at that time, neither any penalty was levied by the appellant nor any quantum of penalty was fixed. Therefore, the assessee has not committed any illegality in not depositing any penalty amount. Penalty levied against the assessee in excess of 25% u/s 76 and 78 of the Finance Act, 1994, has rightly been set aside by the Tribunal

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• 2012 (9) TMI 812
  Rejection of appeal on ground of limitation - condonation of delay - OIO received on 30.12.2009, appeal filed with Office of the Commissioner of Service Tax, Chennai inadvertently on 12.3.2010 without filing the same before the Commissioner (Appeals) - appeal came before Commissioner (Appeals) on 2.1.2012 - delay of more than 2 years - Held that:- According to section 85 of the Finance Act, 1994, learned first appellate authority has no power to condone delay beyond the statutory period of three months plus the discretionary period of another three months under the proviso to sub-section 3(3) of section 85 of Finance Act, 1994. Accordingly, any appeal coming to his record beyond prescribed period of limitation fails to be maintainable being barred by limitation. Therefore, Commissioner (Appeals) was right to confine his jurisdiction to section 85(3) of the Finance Act, 1994 to dismiss the appeal of the appellant. Tribunal has no power to drag Revenue to litigation reviving a litigation which came to an end with the passage of time. There is nothing on record to show bona fide of appellant's averments when record of Commissioner of Service Tax does not contain the appeal papers said to have been filed in his office under an acknowledgement. Appellate authority also has no power to take shelter of section 5 of the Limitation Act at all. Accordingly, appeal is liable to be dismissed - Decided against assessee

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• 2012 (9) TMI 811
  Cenvat credit - input services utilized for authorized motor vehicles service center and business auxiliary services - trading activity - appellant had taken CENVAT credit on several services, which according to the revenue related to the sale of motor vehicles and not to the services provided by them – Held that:- Revenue denied cenvat credit on various input services such as transportation charges, pre-delivery inspection charges, warehousing charges, advertisement charges and hotel expenses. The credit in respect of the services other than advertisement expenses and hotel expenses are allowed and with regard to services relating to hotel expenses and advertisement expenses, the demand within the normal period of limitation is upheld.

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• 2012 (9) TMI 773
  Appeal u/s 35G with High Court – Assistant Commissioner disallow the Cenvat Credit of Rs. 5,01,561 – Commissioner Appeal upheld the same – CESTAT set aside the order of commissioner appeal – Now department file appeal with High court u/s 35G – Held that:- Since in the instant appeal the amount involved is Rs. 5,01,561/- only, In view of the circular dated 17.08.2011, the appeal could not have been preferred by the department before this Court. Therefore, authorizing the Department to file appeals where the amount is less than Rs. 10 lacs. It cannot be gainsaid that the Department is bound by its own circulars. Appeal decide against revenue

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• 2012 (9) TMI 772
  Adjustments of excess payment of service tax - Rule 6(3) of the Service Tax Rules, 1994 - General Insurance business - demand raised on ground that there was absence of clear material evidence to prove the fact that the service tax has been paid on total premium received inclusive of amounts refunded and that the amounts refunded have actually been received by the clients of the appellants - Held that:- The whole rationale behind Rule 6 (3) is that where the service tax has been paid on amounts received for providing particular service and that service for some reason has not been provided by an assessee, he can make adjustment of the excess tax paid in the succeeding period. That rationale would be defeated if the condition of refund is insisted to be satisfied only in a particular manner. The Rule itself does not provide for particular manner of refund and if it is a common industry practice to give refund by way of credits for any particular industry, there would be no harm in allowing refund by adopting such widely accepted industry practice. What is required to be verified is that either by credit or by cheque the appellants have refunded the amounts, for which they should make available their books of account/computerized records or statements as may be required by the adjudicating Commissioner. There should be co-operation between the department and the assessee to come to a fair conclusion as to whether the provision of Rule 6(3) has been satisfied. Matter remanded to the adjudicating Commissioner for fresh decision.

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• 2012 (9) TMI 771
  Speaking order – works contract service – Held that:- Authority has failed to examine incidence of tax in respect of each contract of the adjudication order - authority simply discussed law in the impugned order for arriving at this conclusion without testing the facts of the case of the appellant relating to each contract - law does not approve an abrupt conclusion simply stating the provisions of the law in the adjudication order. The law applicable should be clearly brought out to test the material facts governing the issue and the appellant should be exposed for rebuttal in the course of fresh adjudication - matter is remanded to Adjudicating Authority

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• 2012 (9) TMI 747
  CENVAT credit - Custom House Agent services and terminal handling charges - Held that:- As in the case of F.O.B. exports, load port has to be considered as place of removal and therefore credit is admissible -the place of removal has to be considered as the port where the goods are put on board the ship or the aircraft as the case may be - in favour of assessee.

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• Central Excise

• 2012 (9) TMI 781
  Whether penal provisions can survive against the assessee when demands are dropped on any account - demand dropped on ground that CENVAT Credit cannot be denied on account of incorrect depreciation claimed initially and later rectified, however penal action sustained on ground that admitted mistake by assessee cannot escape penal action - Held that:- It is settled law that once the demands are dropped, then in such a situation, the question of imposing the penalty does not arise - Decided in favor of assessee.

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• 2012 (9) TMI 780
  Application for waiver of pre-deposit – demand - addition of value of the IAS column and kits to the value of the marker for the purpose of Central excise duty – assessee contended non-inclusion on ground of same being traded items – Held that:- In the present case, the marker is used for mixing in the kerosene by the Petroleum companies and the ‘test kit' and ‘IAS column' are used for checking the adulteration in other petroleum product such as petrol and diesel. As the test kit and IAS column are traded item, the same cannot be considered as a part of the manufactured goods i.e marker. Therefore, applicant had made out a strong case for waiver of pre-deposit of dues. Stay petition is allowed – Decided in favor of assessee

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• 2012 (9) TMI 778
  Maintainability of appeal - whether they have taken a decision forming a Committee, while law requires that the Committee of the Commissioners should decide maintainability of the appeal disclosing reasons why order of appeal is neither legal nor proper – Held that:- Appeals were dismissed vide order dated 2-2-2009 (A.4). In any case once the fundamental element of formation of opinion of filing the appeal is missing then no appeal is deemed to be instituted in the eyes of law - Revenue’s appeal is dismissed.

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• 2012 (9) TMI 777
  Refund - unjust enrichment – Held that:- No variation in the price of the product both before and after the period the duty was paid by the assessee; and the respondent-assessee had produced a detailed Chartered Accountant’s Certificate before adjudicating the authority; and in view of the fact that the Revenue failed to marshal any countervailing evidence to counteract the material produced by the assessee to disclose the passing of the duty liability to the consumer, the respondent-assessee is liable for refund

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• 2012 (9) TMI 776
  Whether duty debited in RG 23A Part-II could be refunded in cash - duty claimed as refund by the assessee was an amount of duty debited in RG 23A Part-II – Held that:- Claim of refund by the appellant was of an amount in RG 23A Part-II which remained unutilized and eventually lapsed on 1-4-1999 by reason of switch-over to SSI Exemption Scheme - appellant has not been able to substantiate their claim for refund of the balance amount of credit which was part of the credit which lapsed on 1-4-1999 - refund claim filed in 2007 for this amount of credit which lapsed as early as on 1-4-1999 stands rightly rejected - appeal is dismissed

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• 2012 (9) TMI 743
  Wrong claim of Notification no. 4/2006-CE dated 01.03.2006 as amended by notification no. 4/2008 - goods manufactured by the applicant are craft paper board - Application for waiver of pre-deposit of duty, interest and penalty - Held that:- The contention of the applicant that the notification is a conditional notification and it is not absolute exemption, therefore, the demand is not sustainable is acceptable as that there exists conditions attached to the exemption provided at serial no. 90 of the Notification. As the notification is subject to the condition provided at serial 10, therefore, prima facie merit in the contention of the applicant that the notification is not absolute exemption. Hence pre-deposit of the dues and stay recovery is waiwed - stay granted - in favour of assessee.

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• 2012 (9) TMI 742
  Pre-deposit,penalty, interest under rule Pan Masala Packing Machine - Assessee is a manufacturer of Pan Masala containing tobacco – Paying duty u/s 3A CEA, 1944 and Rules thereunder on the basis packing machine - During some period, certain number of machines not been operated for the whole month – Certain had been operated only for part of the month, therefore assessee not pay duty for that period – AO issue SCN u/s 11 for demand of duty, interest and penalty - Whether in respect of such machines the duty would be payable only on pro-rata basis for the number of days in the month during which the machine had functioned or would be payable for the whole month without giving abatement for the period for which the machine was sealed – Assessee file stay application - Held that:- As the appellant have not been able to establish prima-facie case in their favour and hence this is not a case for total waiver from the provisions of u/s 35F. On deposit of the duty amount within the stipulated period, the requirement of pre-deposit of interest and penalty shall stand waived and recovery thereof stayed till the disposal of the appeal. Decision in favour of revenue.

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• 2012 (9) TMI 741
  Demand and penalty - cenvat credit - whether credit cannot be taken on the basis of photocopy/true copy of the bill of entry – Held that:- Goods were received in factory in 2005 and the original bill of entry admittedly was available till 14-4-06 and thereafter only it got misplaced according to the respondents - bill of entry was available till the credit was taken i.e. for more than a year. How it disappeared thereafter is something for which no explanation whatsoever has been putforth by the respondents - credit cannot be allowed on the basis of photocopy of bill of entry – In favor of Revenue

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• 2012 (9) TMI 740
  Cenvat credit – manufacture of both dutiable and exempted products - Sodium citrate was a common input used in the manufacture of both the dutiable and exempted products - only 25 kgs. of the chemical was received by them and credit of Rs. 252/- taken thereon - Out of the said quantity of sodium citrate, only 146 grams were used in the manufacture of exempted product, which involved MODVAT/CENVAT credit of Rs. 1.50 - entire credit of Rs. 252/- on sodium citrate was also reversed - original authority, in adjudication of the relevant show-cause notice, directed them to pay 8% of the value of the exempted product cleared from their factory during the said period, amounting to over Rs. 30.5 lakhs - action of the original authority amused the first appellate authority which, however, set aside - appeal dismissed

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• 2012 (9) TMI 739
  Demand of duty and penalty – shortage of various grades of lubricating oils manufactured by assessee and packed in unit containers – Held that:- Argument that the conversion loss was noticed only at the time of annual stock taking is a fallacy and therefore it cannot be accepted. The applicants did not produce any scientific literature or authentic evidence from authorized agency to prove that vagaries of weather or viscosity can induce/cause loss or shortages on lubricating oil - assessable value which is based on the packing quantities of each grades varies for packing quantities of different grades and even varies for different packing quantities under the same grade and as such the shortages found in packed lubricating oil of different grades and packing quantities cannot be adjusted with the excess found in another set of different grades and packed quantities especially when all these were packed goods which were entered in the statutory daily stock register as manufactured excisable goods, on which duty is chargeable – demand of duty and penalty upheld

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• 2012 (9) TMI 738
  Demand, interest and penalty - for appropriation of interest and penalty assessees paid Demand, interest and penalty out of the credit amount - Held that:- interest and penalty amounts cannot be so appropriated - it should be paid in cash – in favor of Revenue

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• Indian Laws

• 2012 (9) TMI 810
  Condonation of delay - Held that:- The High Court was justified in condoning the delay in filing the appeal by the Defendant and further directing the Defendant to deposit certain amounts - while disposing of the appeal the Plaintiff to withdraw a sum of Rs.2,50,000/- deposited by the Defendant before this Court. However, he is restrained from withdrawing any amount deposited by the Defendant before the Trial Court.

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• 2012 (9) TMI 809
  Right to Information Act - eligibility criteria for appointment to the posts of Chief Information Commissioners and Information Commissioners, both at the Central and the State levels - petitioner challenged to the constitutionality of Section 12(5) and (6) and Section 15(5) and (6) of the Act of 2005 stating that the eligibility criteria given therein is vague, does not specify any qualification, and the stated ‘experience’ has no nexus to the object of the Act - Held that:- The Chief Information Commissioner and members of the Commission are required to possess wide knowledge and experience in the respective fields. They are expected to be well versed with the procedure that they are to adopt while performing the adjudicatory and quasi judicial functions in accordance with the statutory provisions and the scheme of the Act of 2005. They are to examine whether the information required by an applicant falls under any of the exemptions stated under Section 8 or the Second Schedule of the Act of 2005 particularly, sub-sections (e), (g) and (j) have been very widely worded by the Legislature keeping in mind the need to afford due protection to privacy, national security and the larger public interest. All these functions may be performed by a legally trained mind more efficaciously. The most significant function which may often be required to be performed by these authorities is to strike a balance between the application of the freedom guaranteed under Article 19(1)(a) and the rights protected under Article 21 of the Constitution. In terms of sub-Section (5), besides being a person of eminence in public life, the necessary qualification required for appointment as Chief Information Commissioner or Information Commissioner is that the person should have wide knowledge and experience in law and other specified fields. The term ‘experience in law’ is an expression of wide connotation. It pre-supposes that a person should have the requisite qualification in law as well as experience in the field of law. However, it is worthwhile to note that having a qualification in law is not equivalent to having experience in law and vice-versa. ‘Experience in law’, thus, is an expression of composite content and would take within its ambit both the requisite qualification in law as well as experience in the field of law. Thus the provisions of Sections 12(5) and 15(5) of the Act of 2005 are held to be constitutionally valid, but with the rider that to hold and declare that the expression ‘knowledge and experience’ appearing in these provisions would mean and include a basic degree in the respective field and the experience gained thereafter. As opposed to declaring the provisions of Section 12(6) and 15(6) unconstitutional it would be preferred to read these provisions as having effect ‘post-appointment’. In other words, cessation/termination of holding of office of profit, pursuing any profession or carrying any business is a condition precedent to the appointment of a person as Chief Information Commissioner or Information Commissioner at the Centre or State levels. The Information Commissions at the respective levels shall henceforth work in Benches of two members each. One of them being a ‘judicial member’, while the other an ‘expert member’. The judicial member should be a person possessing a degree in law, having a judicially trained mind and experience in performing judicial functions. A law officer or a lawyer may also be eligible provided he is a person who has practiced law at least for a period of twenty years as on the date of the advertisement. Such lawyer should also have experience in social work.- Chief Information Commissioner at the Centre or State level shall only be a person who is or has been a Chief Justice of the High Court or a Judge of the Supreme Court of India & the appointment of the judicial members to any of these posts shall be made ‘in consultation’ with the Chief Justice of India and Chief Justices of the High Courts of the respective States. Under the scheme of the Act of 2005, it is clear that the orders of the Commissions are subject to judicial review before the High Court and then before the Supreme Court of India. In terms of Article 141 of the Constitution, the judgments of the Supreme Court are law of the land and are binding on all courts and tribunals. Thus, it is abundantly clear that the Information Commission is bound by the law of precedence, i.e., judgments of the High Court and the Supreme Court of India. In order to maintain judicial discipline and consistency in the functioning of the Commission, we direct that the Commission shall give appropriate attention to the doctrine of precedence and shall not overlook the judgments of the courts dealing with the subject and principles applicable, in a given case - Writ partly allowed.

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• 2012 (9) TMI 808
  Appeals against the order of High Court wherein Court has refused to interdict the proceedings pending in the Court of District Judge filed by the respondents herein on ground that provisions of Order II Rule 2 of the CPC would be applicable only when the first suit is disposed of - agreement to sale of land and superstructures thereon between plaintiff and respondent - plaintiff seeking a decree on 29.05.07 against the defendant for execution and registration of the sale deeds in respect of the same property and for delivery of possession thereof to the plaintiff in respect of the which plaintiff had earlier filed on 27.07.2005 seeking the relief of permanent injunction. Held that:- In the present case second set of suits were filed during the pendency of the earlier suits. High Court following the judicial discpline, held that the provisions of Order II, Rule 2(3) will not be attracted. However, we are unable to agree with the same in view of the object behind the enactment of the provisions of Order II Rule 2 of the CPC, namely, that Order II Rule 2 of the CPC seeks to avoid multiplicity of litigations on same cause of action. If that is the true object of the law, the same would not stand fully subserved by holding that the provisions of Order II Rule 2 of the CPC will apply only if the first suit is disposed of and not in a situation where the second suit has been filed during the pendency of the first suit. Rather, Order II, Rule 2 of the CPC will apply to both the aforesaid situations. In view of aforesaid, present appeals deserve to be allowed. Accordingly order of High Court is set aside. Consequently, we strike off the plaint in O.S.Nos.202 and 203 of 2007 on the file of District Judge, Thiruvallur.

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• 2012 (9) TMI 770
  Suit for recovery of possession from a tenant - Held that:- In a suit for recovery of possession from a tenant whose tenancy is not protected under the provisions of the Rent Control Act, all that is required to be established by the plaintiff-landlord is the existence of the jural relationship of landlord and tenant between the parties and the termination of the tenancy either by lapse of time or by notice served by the landlord under Section 106 of the Transfer of Property Act. So long as these two aspects are not in dispute the Court can pass a decree in terms of Order XII Rule 6 of the CPC Considering the averments made in the plaint and the written statement clearly spell out an admission by the defendant that lease agreement dated 10th October 2001 was indeed executed between the parties. It is also evident that the monthly rent was settled at Rs.50,000/- which fact too is clearly admitted by the defendant although according to the defendant, the said amount represented rent for commercial use of the premises and not residential purposes as alleged by the plaintiff. Suffice it to say that the averments made in the written statement clearly accept the existence of the jural relationship of landlord and tenant between the parties no matter the lease agreement was not duly registered. Whether the tenancy was for residential or commercial use of the property is wholly immaterial for the grant of a decree for possession - Thus as the premises in question is being used by the tenant for commercial purposes, thus the defendant is granted time till 31st December, 2012 to vacate the same on furnishing an undertaking in usual terms before this Court within four weeks from date of this Order.

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