TMI Tax Updates - e-Newsletter
September 3, 2012

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws Service Tax Central Excise CST, VAT & Sales Tax

Articles

1. ALTERNATIVE INVESTMENT FUNDS – PART II.

   By: DR.MARIAPPAN GOVINDARAJAN

2. EXEMPIONS TO SERVICES PROVIDED TO UNITS IN SPECIAL ECONOMIC ZONES OR DEVELOPERS OF SPECIAL ECONOMIC ZONES FOR AUTHORISED OPERATIONS.

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. FIFTY- NINTH REPORT - STANDING COMMITTEE ON FINANCE (2011-12) CURRENT ECONOMIC SITUATION AND POLICY OPTIONS

2. Scope of the Terms of Reference of the Expert Committee Headed by Dr. Parthasarathi Shome on Gaar Expanded to Include all Non-Resident Tax Payers Instead of Only FIIs

3. The Expert Committee Headed by Dr. Parthasarathi Shome on Gaar Submits the Draft Report; Comments from Stakeholders and General Public Invited by 15th September, 2012

4. Ministry of Finance Notifies Advance Price Agreement (APA) Scheme

5. India Asean Pledge to Conclude Services Agreement Negotiations by December Anand Sharma Tasks Negotiators to Include Product-Specific Rules of Origin in FTA.

6. Index of Eight Core Industries (Base: 2004-05=100), July 2012.

7. Good Corporate Governance is Essentially about Effective & Responsible Leadership -Dr. M.Veerappa Moily.

8. Change in Tariff Value of Palmolein-RBD, Brass Scrap, Gold & Silver Notified.

9. FM’S Statement Regarding GDP Numbers for First Quarter for 2012-13; Emphasizes Once Again the Need to take Quick Decisions to Accelerate Investments and Removing all Bottlenecks to Investments.

10. Deepak S. Parekh, Gurcharan Das & Ms. Rama Bijapurkar nominated to the EPAG of Competition Commission of India.

11. Restriction on SMSs Removed.

12. Anand Sharma Meets Japanese Counterpart Asean Plus FTA Partners Discuss Roadmap for Regional Comprehensive Economic Partnership.

Notifications

Customs

1. 79/2012 - dated 31-8-2012 - Cus (NT)

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

Income Tax

2. 36/2012 - dated 30-8-2012 - IT

Income-tax (Tenth Amendment) rules, 2012 - Insertion of Rules 10F, 10G, 10H, 10-I, 10-J, 10K, 10L, 10M, 10N, 10-O, 10P, 10Q, 10R, 10S, 10T & 44GA

3. 35/2012 - dated 28-8-2012 - IT

Double Taxation Agreement - Multilateral Convention on Mutual Administrative Assistance on tax matters with oecd member countries

4. 34/2012 - dated 28-8-2012 - IT

IT (Ninth Amendment) Rules, 2012 - Substitution of Rule 40BA And Form No. 29C

VAT - Delhi

5. F. 5(54)/Policy-II/VAT/ 2011-12/555-567 - dated 30-8-2012 - DVAT

Amendment in Sixth Schedule -- Regarding grant facilities for exemption/refund of VAT

6. F.7(466)/Policy/VAT/2012/ 532-542 - dated 27-8-2012 - DVAT

Obtain the Declaration Forms or Certificate electronically through website for the year 2012-13

7. F.7(239)/P-I/VAT/ 2009/507-519 - dated 24-8-2012 - DVAT

Notification regarding notify of Kotak Mahindra Bank for deposit of all Value Added Tax dues in relation to a dealer.

Circulars / Instructions / Orders

VAT - Delhi

1. 16 - dated 28-8-2012

Online issue of Central Declaration Forms

Service Tax

2. 10/2012, - dated 13-7-2012

Service Tax collected from any person to be deposited with Central Government.

3. Office Memorandum No. Coord/13-6/H/A/cs/Vol.VII/86, - dated 2-7-2012

New Accounting Code for the purpose of Accounting of collection of Service Tax

Income Tax

4. 8/FT&TR/2012 - dated 28-8-2012

Dispute Resolution Panel - Reference to - Reconstitution of DRP at Mumbai - 1

5. Office Memo - [F.No. 279/M-61/2012-ITJ], - dated 28-8-2012

Institutional Mechanism for Forming Departmental View on Contentious Legal Issues

6. [F.No. 500/15/2011-FT&TR-I], - dated 28-8-2012

Corrigendum to Order No. 6/FT&TR/2012, dated 10-7-2012 and Order No. 7/FT&TR/2012, dated 31-7-2012 constituting DRPs and alternate DRP at various places

FEMA

7. 21 - dated 31-8-2012

Foreign investment by Qualified Foreign Investors (QFIs) – Hedging facilities

8. 22 - dated 31-8-2012

Exim Bank's Line of Credit of USD 20 million to the Government of the Central African Republic

9. 23 - dated 31-8-2012

Exim Bank's Line of Credit of USD 39.69 million to the Government of the Central African Republic

Companies Law

10. 27/2012 - dated 29-8-2012

Constitution of a Committee for Reforming the Regulatory Environment for doing Business in India.

Highlights / Catch Notes

Income Tax

• Misinterpretation of Section 10(10C) Exemptions: Officers Urged to Evaluate Cases on Legal Merits, Not Just Circulars.

  Case-Laws - HC : Rejection of exemption u/s 10(10C) - It appears that some officers have wrongly considered themselves bound by the circular to the extent of their being required to reject the application under Section 10(10C) merely on the basis thereof and without considering whether in law the assessees are entitled to exemption in view of their having opted for the scheme. - HC
  Visit to Get Source

  ---

• Partnership Firm, Not Individual Partners, Liable for Capital Gains Tax on Dissolution u/s 45(4) of Income Tax Act.

  Case-Laws - HC : Partnership firm - in the case of dissolution of a firm, only the firm is taxable on capital gains on dissolution under Section 45(4) of the Income Tax Act, 1961 and not the partner - HC
  Visit to Get Source

  ---

• Case on Electron Gun Valuation and Miscellaneous Income Dismissed Pending Related Supreme Court Appeals Outcome.

  Case-Laws - HC : Valuation of Electron Guns and Electron Gun Heaters and calculation of Miscellaneous income - dismissed due to the insignificant tax effect involved in these appeals but subject to the result of the appeals before the Supreme Court - HC
  Visit to Get Source

  ---

• IT Rules Amended: Rule 40BA and Form 29C Updated for Enhanced Compliance with Current Tax Laws and Practices.

  Notifications : IT (Ninth Amendment) Rules, 2012 - Substitution of Rule 40BA And Form No. 29C - Notification
  Visit to Get Source

  ---

• Income Tax Department Sets Up Mechanism for Consistent Legal Issue Resolution to Enhance Compliance and Reduce Disputes.

  Circulars : Institutional Mechanism for Forming Departmental View on Contentious Legal Issues - Order-Instruction
  Visit to Get Source

  ---

• Corrigendum Amends Orders on Dispute Resolution Panels Setup and Functioning for Tax Disputes, Orders 6/FT&TR/2012 & 7/FT&TR/2012.

  Circulars : Corrigendum to Order No. 6/FT&TR/2012, dated 10-7-2012 and Order No. 7/FT&TR/2012, dated 31-7-2012 constituting DRPs and alternate DRP at various places - Order-Instruction
  Visit to Get Source

  ---

• Mumbai's Dispute Resolution Panel Reconstituted to Streamline Income Tax Dispute Handling: Key Updates and Highlights.

  Circulars : Dispute Resolution Panel - Reference to - Reconstitution of DRP at Mumbai - 1 - Order-Instruction
  Visit to Get Source

  ---

• OECD Nations Implement Double Taxation Agreement to Enhance International Tax Cooperation and Compliance Under Multilateral Convention.

  Notifications : Double Taxation Agreement - Multilateral Convention on Mutual Administrative Assistance on tax matters with oecd member countries - Notification
  Visit to Get Source

  ---

• Income-tax (Tenth Amendment) Rules, 2012: New Rules 10F to 10T and 44GA Introduced for Better Tax Compliance.

  Notifications : Income-tax (Tenth Amendment) rules, 2012 - Insertion of Rules 10F, 10G, 10H, 10-I, 10-J, 10K, 10L, 10M, 10N, 10-O, 10P, 10Q, 10R, 10S, 10T & 44GA - Notification
  Visit to Get Source

  ---

• High Court Rules No Need to Classify Cases Under Explanation 5 of Section 271(1)(c) for Additional Income Disclosure.

  Case-Laws - HC : Penalty imposed u/s 271(1)(c) - additional income disclosed in response to the notice u/s 153C - There was absolutely no need to try and bring the cases under Explanation 5 of section 271(1)(c). - HC
  Visit to Get Source

  ---

• High Court Rules Share Subdivision Costs as Revenue Expenditure, Not Capital; Part of Regular Operational Expenses.

  Case-Laws - HC : Expenditure for subdivision of shares of the company - Revenue OR Capital expenditure - held as revenue in nature - HC
  Visit to Get Source

  ---

• Court Upholds Assessee's Section 80IA Relief Claim: Dyes and Materials for Job Workers Qualify for Criteria.

  Case-Laws - HC : Deduction u/s 80IA - Given the fact that the dyes and the materials were given by the assessee to the job workers, who had merely bestowed their labours, no hesitation in accepting the case of the assessee that it qualify for relief under Section 80IA - HC
  Visit to Get Source

  ---

• Section 50C(1) Terms "Adopted," "Assessed," and "Assessable" Refer to "Value," Not "Transfer"; Assessment Deadline Critical.

  Case-Laws - AT : The words "adopted" or "assessed" (as also "assessable") in s. 50C(1) qualify the word "value" preceding it, and not the word "transfer" - there being no assessment by it by the end of the relevant year, i.e., 31-03-2006 cannot be accepted - AT
  Visit to Get Source

  ---

• Court Rules Revenue Can't Challenge Share Sale Price or Dispute Taxpayer's Reported Loss as Not Genuine.

  Case-Laws - HC : Capital Loss - As long as the Revenue could not doubt the sale price of the shares, it would not be open for the Revenue to contend that the assessee had shown loss which it did not really suffer - HC
  Visit to Get Source

  ---

• Section 80IB Deduction Valid Even if Product Used as Raw Material by Sister Concern.

  Case-Laws - AT : Deduction u/s 80IB - sister concern - Deduction cannot be disallowed only on the ground that the product by the assessee has been used as a raw material by the sister concern. - AT
  Visit to Get Source

  ---

• Interest-Free Loan Notional Interest Not Taxable Income Under Current Tax Law.

  Case-Laws - AT : Notional interest on provision of interest free loan - notional income is not taxable under the Act - AT
  Visit to Get Source

  ---

• Interest Payments to Trustees Allowed: Trustees Not AOP Members u/s 40(ba) of Income Tax Act.

  Case-Laws - AT : Dis-allowance u/s 40(ba) - interest paid to directors/trustees - The trustees of the assessee trust cannot be described as members of the AOP. - AT
  Visit to Get Source

  ---

• Income Must Be Reported by Earner in Their Own Tax Return, Even if Declared by Another Person.

  Case-Laws - AT : Merely because an income was offered by another person in its return of income will not exonerate the assessee from inclusion of such income in its return which was earned and received by it - AT
  Visit to Get Source

  ---

• Assessing Officer Validly Rejects Defective Accounts, Estimates Profit u/s 145(3) of Income Tax Act.

  Case-Laws - AT : Estimation of profit - rejection of books of accounts - keeping in view such glaring defects in the books of account and the statement of the appellant during the course of survey A.O. has rightly applied provisions of section 145(3). - AT
  Visit to Get Source

  ---

• Understanding Capital vs. Revenue Expenditure in Tax: Commercial Rights and Enduring Benefits Analyzed with Case Laws.

  Case-Laws - AT : Capital expenditure vs Revenue expenditure - development of components - payments resulted in creation of a commercial right - benefit was of an enduring nature. - capital in nature - AT
  Visit to Get Source

  ---

• Monument preservation for war heroes is a charitable purpose under amended Income Tax Act, section 2(15), granting tax benefits.

  Case-Laws - AT : Monuments in the memory of war heroes - preservation of monument would be charitable purpose entitling the assessee to fall within the amended definition enshrined in section 2(15) - AT
  Visit to Get Source

  ---

• Court's Role in Reopening Assessment: Determine Prima Facie Material, Not Sufficiency or Correctness of Evidence.

  Case-Laws - HC : Reopening of assessment – court is only required to see whether there was prima facie some material on the basis of which the assessment could be reopened. The sufficiency or the correctness of the material cannot be considered at this stage. - HC
  Visit to Get Source

  ---

Customs

• Restricted Digital Printers Can Be Released by Paying Customs Duty and Meeting Legal Requirements.

  Case-Laws - HC : Digital Multifunction Print and Copying machines - restricted category - Such goods may be directed to be released, on payment of the appropriate customs duty and on the fulfillment of the conditions prescribed by law - HC
  Visit to Get Source

  ---

• Customs Notification No. 36/2001 Amended: Streamlining Processes and Ensuring Compliance with Updated Guidelines.

  Notifications : Amends Notification No. 36/2001-Customs (N. T.) dated the 3rd August, 2001 - Notification
  Visit to Get Source

  ---

• Advance License Holders Can Use Job Workers for Processing Raw Materials, Revenue Cannot Object.

  Case-Laws - HC : Advance licence - when according to the licensing authorities a manufacturer exporter can get the raw materials converted through a jobworker / supporting manufacturer, it would not be open to the Revenue to contend that the manufacturer / exporter cannot take assistance of a supporting manufacturer - HC
  Visit to Get Source

  ---

FEMA

• Exim Bank grants USD 39.69M credit to Central African Republic for development projects, boosting economic growth and cooperation.

  Circulars : Exim Bank's Line of Credit of USD 39.69 million to the Government of the Central African Republic - Circular
  Visit to Get Source

  ---

• Exim Bank Grants $20M Credit to Central African Republic for Development Projects, Boosting Economic Growth and Infrastructure.

  Circulars : Exim Bank's Line of Credit of USD 20 million to the Government of the Central African Republic - Circular
  Visit to Get Source

  ---

• New Circular Updates Hedging Facilities for Qualified Foreign Investors Under FEMA for Better Currency Risk Management.

  Circulars : Foreign investment by Qualified Foreign Investors (QFIs) – Hedging facilities - Circular
  Visit to Get Source

  ---

Corporate Law

• Provisional Liquidator Appointed to Protect Assets of Financially Distressed Company from Risk of Transfer or Alienation.

  Case-Laws - HC : Financial ill-health of the company - there is danger of the properties of the respondent-company being transferred/alienated. It would thus be expedient to appoint a provisional liquidator to protect the assets of the company which appear to be in a jeopardy - HC
  Visit to Get Source

  ---

• India Forms Committee to Simplify Business Regulations, Boost Economic Growth, and Attract Investments by Easing Compliance Processes.

  Circulars : Constitution of a Committee for Reforming the Regulatory Environment for doing Business in India. - Circular
  Visit to Get Source

  ---

Indian Laws

• Standing Committee Report Analyzes Economic Challenges, Recommends Fiscal Policies and Tax Reforms for Sustainable Growth and Stability.

  News : FIFTY- NINTH REPORT - STANDING COMMITTEE ON FINANCE (2011-12) CURRENT ECONOMIC SITUATION AND POLICY OPTIONS
  Visit to Get Source

  ---

Service Tax

• Beneficiation or washing of raw coal exempt from service tax before June 1, 2007.

  Case-Laws - AT : Activity of benefication/washing of raw coal - 6 no service tax was leviable on above activity prior to 01.06.07 - AT
  Visit to Get Source

  ---

• Court Rules in Favor of Service Provider Over Warehouse Lease Due to Limitation Period and Other Grounds.

  Case-Laws - AT : Clearing & Forwarding Service – giving of godown on hire to client for keeping of the goods for which they were acting as clearing and forwarding agent - Decided the issue in favour of assessee on the ground of period of limitation and other grounds - AT
  Visit to Get Source

  ---

• Trade fair and exhibition services conducted abroad not taxable in India as domestic services under tax rules.

  Case-Laws - AT : Trade fair and exhibitions service held outside India - Since, this service has not been performed in India - same cannot be treated as received in India by the appellants - AT
  Visit to Get Source

  ---

• New Accounting Code Introduced for Service Tax Collection to Streamline Process and Enhance Compliance, as per Trade Notice.

  Circulars : New Accounting Code for the purpose of Accounting of collection of Service Tax - Trade Notice
  Visit to Get Source

  ---

• Service Tax Collected Must Be Deposited with Central Government to Ensure Compliance and Avoid Legal Consequences.

  Circulars : Service Tax collected from any person to be deposited with Central Government. - Trade Notice
  Visit to Get Source

  ---

• Second Photocopy of Order Doesn't Reset Appeal Limitation Period; Only Initial Receipt Counts for Timeline.

  Case-Laws - AT : Delay in filing an appeal - As such the service of the photocopy of the adjudication order for the second time cannot be taken as relevant date of receipt of the order for the purposes of limitation - AT
  Visit to Get Source

  ---

• Association Services for Effluent or Solid Waste Treatment Facilities Exempt from Service Tax Under Relevant Provisions.

  Case-Laws - AT : Club or association service provided by an association in relation to a common facility set up for treatment and recycling effluent or solid waste is exempted from the service tax. - AT
  Visit to Get Source

  ---

• Pre-deposit met by debiting Cenvat Credit Account deemed sufficient for appellants' action under compliance rules.

  Case-Laws - AT : Pre-deposit made by the appellants by way of debiting in Cenvat Credit Account is sufficient for the purposes of fulfilment of requirement of pre-deposit - AT
  Visit to Get Source

  ---

• Real Estate Developers Not Providing a Taxable Service Before July 1, 2010, for Service Tax Purposes.

  Case-Laws - AT : Service tax - business of real estate development and construction residential houses - for the period prior to 1-7-2010, the appellant’s activity cannot be treated as service provided by them to their customers - AT
  Visit to Get Source

  ---

Central Excise

• Assessee Complies with Rule 6 of Cenvat Credit Rules, Pre-Deposit Requirement Waived on Confirmed Demand Deposit.

  Case-Laws - AT : Since assessee has discharged its obligation under Rule 6 of the Cenvat Credit Rules by reversing proportionate credit in respect of usage for manufacture of exempted goods, hence pre-deposit of same is waived subject to deposit of demand confirmed aforesaid - AT
  Visit to Get Source

  ---

• Denial of Benefits Contested u/r 34, Standards of Weight and Measures Rules 1977 Due to Lack of Evidence.

  Case-Laws - AT : Denial of benefit of Rule 34 of Standards of Weight and Measures Rules, 1977 – it was necessary for the department to produce some evidence on record to show that the goods in question were either sold or meant for retail sale or for sale to the customers other than industrial units. - AT
  Visit to Get Source

  ---

• Department Given Three-Month Window to Appeal Starting from Communication Date in Central Excise Cases.

  Case-Laws - AT : Period of Limitation for filing an appeal – department had three months time to file the appeal from communication date - AT
  Visit to Get Source

  ---

• Authority Uses Best Judgment Method for Central Excise Valuation, Relies on Cost Accountant Report, Decision Favors Revenue.

  Case-Laws - SC : Valuation under central excise - since the assessing authority could not do the valuation with the help of the other rules, has resorted to best judgment method and while doing so, has taken the assistance of the report of the 'Cost Accountant' - in favour of revenue. - SC
  Visit to Get Source

  ---

• Online platforms selling goods aren't manufacturing activities but must pay service tax, says Authority for Advance Rulings.

  Case-Laws - AAR : Online platform to facilitate the sale of goods by various merchants - not a manufacturing activity but liable to service tax - AAR
  Visit to Get Source

  ---

• High Court Dismisses Appeal After Committee of Commissioners Highlights Need for Detailed Note Sheet Documentation.

  Case-Laws - HC : Maintainability of appeal – opinion by the Committee of Commissioners - there should be a meaningful consideration which should be reflected on the note sheets - appeal dismissed - HC
  Visit to Get Source

  ---

• Supreme Court Highlights Lack of Provision Empowering Board to Direct Authorities in Central Excise Disputes Resolution.

  Case-Laws - SC : Whether no provision in the Act empowering the Board to issue directions to the Assessing Authorities or the Appellate Authorities in the matter of deciding disputes - SC
  Visit to Get Source

  ---

VAT

• New Circular Introduces Online Issuance of Central Declaration Forms to Enhance Efficiency in VAT and Sales Tax Processes.

  Circulars : Online issue of Central Declaration Forms - Circular
  Visit to Get Source

  ---

• Kotak Mahindra Bank Designated for Dealer's VAT Payments; All Dues to Be Processed Through This Bank.

  Notifications : Notification regarding notify of Kotak Mahindra Bank for deposit of all Value Added Tax dues in relation to a dealer. - Notification
  Visit to Get Source

  ---

• Taxpayers can now access Declaration Forms or Certificates online for fiscal year 2012-13 to simplify tax processes.

  Notifications : Obtain the Declaration Forms or Certificate electronically through website for the year 2012-13 - Notification
  Visit to Get Source

  ---

• Amendment to Sixth Schedule Streamlines VAT Exemption and Refund Process for Eligible Entities in Latest Tax Update.

  Notifications : Amendment in Sixth Schedule -- Regarding grant facilities for exemption/refund of VAT - Notification
  Visit to Get Source

  ---

• Court Rules Coal in Sponge Iron Production as Raw Material, Not Fuel, Affecting Tax Set-Off Eligibility.

  Case-Laws - HC : Claim of 100% set off for tax paid on the coal purchased - Merely because heat is generated in the process it cannot be a ground to hold that Noncooking coal so used was used as fuel. The above observations clearly shows that the coal used in the process of manufacturing of sponge iron is used as a raw material and not as a fuel - HC
  Visit to Get Source

  ---

Case Laws:

• Income Tax

• 2012 (9) TMI 20
  Rejection of tax appeal against penalty levied u/s 271(1)(c) - total cumulative tax effect involved in the appeals was less than Rs. 4 Lacs - Held that:- CBDT Instruction No. 5 of 2008 dated 15th May, 2008 states that monetary limit was increased and appeals were to be filed under Section 260A, thereafter, only in cases where the tax effect exceeded Rs. 4 Lacs applicable to appeals filed on or after 15th May, 2008. It was further provided that in cases, where appeals were filed before 15th May, 2008, they would be governed by the instructions on this subject which were operative at the time when such appeals were filed - For this purpose, "tax effect" means the difference between the tax on the total income assessed and the tax that would have been chargeable had such total income been reduced by the amount of income in respect of the issues against which appeal is intended to be filed. One fails to understand how the Revenue, on the face of the above clear instructions of the CBDT, can contend that the circular dt. 15th May, 2008 issued by the CBDT is applicable to the cases filed after 15th May, 2008 and in compliance thereof, they do not file appeals, if the tax effect is less than Rs. 4 Lakhs, but the said circular is not applicable to the cases filed prior to 15th May, 2008 i.e. to the old pending appeals, even if the tax effect is less than Rs. 4 Lakhs. Thus there is no logic behind this belief entertained by the Revenue - Since in this Appeal the tax effect on the quantum of penalty deleted by the ITAT is Rs.5,21,530/-, which is less than Rs.10 lakhs fixed under Instruction No.3 of 2011 as operative at the time when such appeals were filed, therefore, this Tax Appeal filed under section 260A is dismissed as not maintainable on the ground of monetary limit, without expressing any opinion on merits of the case.

  ---

• 2012 (9) TMI 19
  Rejection of exemption u/s 10(10C) - assessee retire under the Voluntary Retirement Scheme (VRS) of the SBI - circular dated 6th October, 2009 offering Exit Option Schemes to employees clearly lay out ineligible for deduction under section 10(10C) - Held that:- The said circular merely contains instructions to the authorities to decide the question of eligibility under Section 10(10C) in accordance with law namely the provisions of the Act, the rules made thereunder and all other legal principles including the doctrine of precedent and does not prohibit the authorities from discharging their functions under the Act. It appears that some officers have wrongly considered themselves bound by the circular to the extent of their being required to reject the application under Section 10(10C) merely on the basis thereof and without considering whether in law the assessees are entitled to exemption in view of their having opted for the scheme. This it is clear therefore, that the CIT(A) did not consider the matter on merits. He did not consider the provisions of the Act and the Rules. He merely considered himself bound by the circular and construed the circular as directing him to hold the assessee ineligible for exemption under Section 10(10C) - thus the authorities shall decide the question of exemption under Section 10(10C) without being influenced by the impugned circular dated 6th October, 2009 in any manner whatsoever - in favour of assessee.

  ---

• 2012 (9) TMI 18
  Reopening of assessment - reopening of assessment previously framed after scrutiny within a period of four years - the assessee have charged 24% interest on the overdue payments from its sister concern - Held that:- As the assessee had sold certain goods to its sister concern during the year under consideration who on delayed payments of such goods paid interest at the rate of 24% which was much higher than the prevailing market rate of interest which varies between 15% to 18%. By adopting such modality, the assessee had reduced the taxable profit of sister concern and at the same time increased the profit of Silvasa unit of the assessee company which was eligible for deduction under section 80-IA. These facts were not clear from the working out of deductions under section 80IA along with the return of income It is an admitted position that in the return filed, the assessee did not indicate whether the entire interest or part thereof was received from the sister concern. Further, there is no indication that from the sister concern, the assessee had received interest at the rate of 24% on the outstanding amounts. Disclosure in the tax audit report by the assessee that the assessee is closely associated with M/s.Aditya Medisales Ltd., its sister concern would not be a sufficient disclosure. From the facts on record, it was not possible for the Assessing Officer to ascertain that the petitioner received interest from sister concern which was higher than the normal rate of interest, thus such interest was charged at the rate of 24% per annum, were not discernible from the record at all - notice for reopening was valid - in favour of Revenue.

  ---

• 2012 (9) TMI 17
  Disallowance of claim of Section 80HHC(3)(b) - inclusion of rent and interest in the computation of the profits - Held that:- As decided in P. R. Prabhakar Vs. Commissioner of Income Tax (2006 (7) TMI 121 - SUPREME COURT) that the amendment made to clause (baa) of the Explanation to Section 80HHC which defines “profits of the business” in such a manner as to exclude receipts like interest, commission etc. which did not have an element of turnover, was introduced prospectively by the Finance (No.2) Act, 1991 w.e.f. the assessment year 1992-93 and did not operate retrospectively - as assessment year in question was 1991-92 it was therefore held that it would not be permissible to exclude interest receipts even if the business from which interest arose did not have an element of turnover. As it is not permissible to exclude the domestic profits from the profits of the business in order to arrive at the export profits and that even if the domestic business (the money lending activity in the present case) was not capable of having any “turnover”, the deduction under Section 80HHC cannot be denied and it had to be computed proportionately from the formula prescribed by the sub-section (3) of Section 80HHC, which was : Export Profits = Profits of Business x (Export Turnover ÷ Total Turnover) - in favour of assessee.

  ---

• 2012 (9) TMI 16
  Challenge against reopening of assessment - reasons were not recorded before issuance of notice - Held that:- It cannot be stated that the AO had not recorded reasons before issuance of the notice. Firstly, the reasons recorded are found on the file immediately after the original notice u/s 148. Though such reasons are not dated, the note-sheet maintained by the AO concerned recorded that the notice is issued after recording reasons. The power u/s 147 cannot be exercised to circumvent the proceedings under section 143(3) - Held that:- On recalling that the return filed by the petitioner was not taken in scrutiny. No assessment, thus, took place. The AO without any assessment, merely issued an intimation under section 143(1) accepting such return. In that view of the matter, it cannot be stated that the AO formed any opinion with respect to any of the aspects arising in such return. In such a case, scope for reopening such assessment u/s 147 as compared to an assessment which was previously framed u/s 143(3), whether beyond or within four years from the end of the relevant assessment year, is substantially wider. The intimation under section 143(1)(a) was deemed to be a notice of demand under section 156, for the apparent purpose of making machinery provisions relating to recovery of tax applicable. By such application only recovery indicated to be payable in the intimation became permissible. And nothing more can be inferred from the deeming provision. Therefore, there being no assessment under section 143(1)(a), the question of change of opinion, as contended, does not arise. Central as well as the State Sales Tax and other income in the net profit would not qualify for deduction under section 80HHC and debit entry for warranty expenses out of which only an amount of Rs.1,05,48,633/- was incurred during the financial year under consideration - such reason would permit the AO to reopen the assessment - not find that the notice for reopening is invalid or lacks jurisdiction - against assessee.

  ---

• 2012 (9) TMI 14
  Re opining of assessment - non fulfillment of condition for claiming entitlement of profits on sale of DEPB u/s 80 HHC - Held that:- Considering the retrospective amendment to Section 80HHC brought in the year 2005, every assessee having turnover exceeding Rs.10 crores, for claiming entitlement of profits on sale of DEPB under Section 80 HHC has to satisfy two conditions regarding availability of an option to choose either duty drawback or DEPB scheme and also that the duty drawback credit was higher than that available under DEPB - the reopening under Section 147 was done based on the retrospective amendment, which is new material, and was within the prescribed time limit and hence is valid. The validity of a provision cannot be considered or adjudicated upon by the Tribunal constituted under the Act. Section 260A provides for an appeal from every order passed by the Appellate Tribunal; if it involves a substantial question of law. Such question of law should arise from the order of the Tribunal. If the Tribunal cannot consider the validity of a retrospective amendment, no doubt such question does not arise from its order and the jurisdiction conferred on the High Court under Section 260A cannot also enable the High Court to consider such validity or otherwise - against assessee

  ---

• 2012 (9) TMI 13
  Reopening of assessment u/s 147 - disallowance of the claim under Section 80HHC on inclusion of sale of DEPB licence - Held that:- On determining the constitutional validity of the amendment of 2005 under Section 80HHC every assessee having turnover exceeding Rs.10 crores, for claiming entitlement of profits on sale of DEPB under Section 80 HHC, has to satisfy two conditions regarding availability of an option to choose either duty drawback or DEPB scheme and also that the duty drawback credit was higher than that available under DEPB. Exporters of cashew having no such option and the assessee having failed to produce any evidence, the claim made by the assessee was disallowed - against assessee.

  ---

• 2012 (9) TMI 12
  Non admission of capital gain on transfer of right and title - Settlement of accounts - dissolution of partnership firm - reopening of assessment - Held that:- As decided in Additional C.I.T. Vs. Mohanbhai Pamabhai [1987 (2) TMI 59 - SUPREME COURT] when a partner retires from a partnership firm taking his share of partnership interest, no element of transfer of interest in the partnership asset by the retiring partner to the continuing partner was involved. As in the present case when the appellant was paid Rs.15.00 lakhs by Y.Kalyana Sundaram in full and final settlement towards his 50% share on the dissolution of the firm, there was no "transfer" as understood in law and consequently there cannot be tax on alleged capital gain - It is a recognized method of making up the accounts of the dissolved firm and the receipt of money by him is nothing but a receipt of his share in the distributed asset of the firm. The appellant received the money value of his share in the assets of the firm. He did not agree to sell, exchange or transfer his share in the assets of the firm. Payment of the amount agreed to be paid to the appellant under the compromise was not in consequence of any share, exchange or transfer of assets to Y.Kalyana Sundaram. As up to the assessment year 1987-1988, Section 47 (ii) excluded these transactions and from assessment year 1988-89, in the case of dissolution of a firm, only the firm is taxable on capital gains on dissolution under Section 45 (4) of the Income Tax Act, 1961 and not the partner - in favour of assessee.

  ---

• 2012 (9) TMI 11
  Valuation of Electron Guns and Electron Gun Heaters and calculation of Miscellaneous income - Revenue contested against the Tribunal's valuation - Held that:- The order of the Tribunal is not very satisfactory, particularly on the questions as to whether the method of valuation of stocks and as contended by the assessee can be the proper way, as the assessee has adopted the method of valuing some part of its stock on market value and some part of its stock on cost of a production which is not a choice given to the assessee, but the choice being to value the stock as a whole, either on market value basis or at the cost of production. Quantification of the profits eligible for benefit under section 80HHC - Held that:- On looking calculation sheet of tax effect on disputed amount to maintain judicial decorum and judicial propriety and more so because the revenue is already in appeal before the Supreme Court for the resolution of this very question, we do not propose to decide these appeals on merits, but dismiss them only due to the insignificant tax effect involved in these appeals but subject to the result of the appeals before the Supreme Court, preferred by the revenue on the question of maintainability of such appeals.

  ---

• 2012 (9) TMI 9
  Penalty u/s 271(1)(c) – dis-allowance of expenditure on replacement of Air conditioners and stabilizers under buyback scheme as revenue expenditure – Held that:- Essentially the expenditure on replacement being not for renewal or restoration but for preserving or maintaining the existing asset is not a current repairs. However at relevant time when the claim was made in present case, the deduction of such claim as revenue expenditure was debatable and the jurisdictional High Court also in quantum appeal has admitted the substantial question of law in the backdrop of fact of the opinion entertained by certain courts that it is a revenue expenditure. This by itself goes to show that two views were possible on the issue. Thus, if two views were possible, the explanation offered by it could not said to be false. In any event, none of the authorities below have recorded a finding that the assessee in its return has furnished particulars which are found to be incorrect or erroneous or false. It, therefore, cannot be a claim of furnishing of inaccurate particulars nor can it be said that the explanation tendered by the assessee is false. Since two views are possible, penalty is not exigible u/s 271(1)(c) – Decided in favor of assessee

  ---

• 2012 (9) TMI 8
  Addition on account of unexplained sundry creditors – credit balance shown in name of Mr P whose ledger account could not be furnished by assessee - assessee, running a hotel in Bangalore contended that said Mr P was actually managing/conducting the hotel business and had brought certain fixed assets, such as, furniture, kitchen equipments etc. at his cost in the hotel business - cost of such assets was credited to his account – Held that:- It is undisputed that no balance sheet was filed along with the return of income for the AY 2005-06. Copy of the ledger account of Mr P clearly indicate that many of the expenses incurred, relates to various items like, computer, electrification, UPS, furniture and fittings, kitchen equipments, kitchen utensils and other plant & equipment which figures in the balance sheet for the AY 2006-07, which according to the assessee, was acquired in the earlier year. On perusal of the ledger account, many of the items of expenses are on the revenue front and some of the items are on the capital account. For want of supporting credible evidence/confirmation for the amount of expenditure incurred by Mr P and in interest of justice, matter remitted back to file of AO.

  ---

• 2012 (8) TMI 813
  Addition on undisclosed income - Penalty u/s 271(i)(c) - ITAT deleted the addition - Held that:- On issuing summons to the share applicants only 9 could be served and on examining bank accounts of the share applicants from which the share application amounts were subscribed it was noticed a regularity, a pattern, in the methodology of infusing cash into the accounts, and within a short while afterwards, withdrawing sums to pay for the shares. The PAN/GIR numbers of the share applicants furnished by the assessee were not found to be correct, upon verification from the concerned Income Tax officers of the ward(s) in question. The assessee was given opportunity to produce the share applicants’ principal officers, but did not do so. The share applicants’ addresses too were incorrect - thus additions are warranted to be made on account of share application moneys not found to be genuine - against assessee.

  ---

• 2012 (8) TMI 812
  Penalty imposed u/s 271(1)(c) - additional income disclosed in response to the notice u/s 153 C - assessee contested that levy of penalty to be under Explanation 5 of Section 271(1)(c) - Held that:- It was totally unnecessary on the facts of these cases to invoke Explanation 5 to Section 271(1)(c) as income not disclosed in the return u/s 139 but detected subsequently and established to be assessee's income and assessed accordingly is concealed and fully covered by Section 271(1)(c). There was absolutely no need to try and bring the cases under Explanation 5 of section 271(1)(c). The proposition that assessee has an obligation to show correct income under Section139 and if it is not done, Revenue is entitled to invoke provision to Section 271(1)(c) notwithstanding that correct income is shown in response to notice under Section 148 of the IT Act or in some other proceedings is well established and is beyond doubt. For the purpose of present proceeding, there is no material difference whether the returns were filed in response to notice under Section 148 or under Section 153C of the IT Act. As in the present case the assessee did not disclose the income or the assets any time in the returns filed by them. Furthermore, the search conducted was not in their premises, as it was in the premises of someone else. Having regard to the restricted nature of the phrase “books of account” the particulars found in the premises of someone else could not be said to have been “in the course of search”, because the present assessee's premises were not searched. Nor did they make any disclosure or statement, or surrender their income, during the course of search. They filed a return, which for the first time, disclosed the hitherto concealed income. Their explanations were not of the kind which therefore, fell within the exception to Explanation 5 of Section 271 (1) (c) - against assessee.

  ---

• 2012 (8) TMI 811
  Deduction for expenses incurred to earn amounts which are exempted from tax - Held that:- As Kolkata High Court on the interpretation of Section 14A said that no substantial question of law arises in this case as there is no judgment of the Kolkata High Court on the interpretation, thus as Section 14A has been introduced in the Act to say that expenses incurred to earn the amount, which is exempted from tax, would not be entitled to a deduction he matter is remitted to the High Court for de-novo consideration in accordance with law.

  ---

• 2012 (8) TMI 810
  Expenditure for subdivision of shares of the company - Revenue OR Capital expenditure - Held that:- The expenditure admittedly was made for the purpose of sub-division of the shares. It is not even the case of the Department that by such arrangement, share capital of the assessee company in any manner increased. Such sub-division was made only for the purpose of easy trading of the shares in the market. Such arrangement, therefore, may result into some benefit for the shareholders of the company, nevertheless it is unable to see how the revenue can argue that such division of shares resulted into any enduring benefit for the company - as in case of sub-division of the shares also, there is no increase in the share capital of the company and , the company gains enduring benefit is without any support from the record - in favour of assessee.

  ---

• 2012 (8) TMI 809
  Ineligibility for deduction u/s 80IA - the assessee is not engaged in any industrial activity of its own except assembling on job work basis - ITAT allowed the claim - Held that:- The assessee procured raw materials and components and were handed over to the job contractors to make use of the same in the manufacture of grinder parts. The assessee exercised supervision and control in the manufacturing of the parts done by the job workers on the materials supplied in according to the specification in the dyes supplied by the assessee. They were subjected to quality control too. Thus even though the assessee had not employed its own employees, yet, the fact is that at every stage the assessee had extracted control over the job work as though they were employees of the assessee. Given the fact that the dyes and the materials were given by the assessee to the job workers, who had merely bestowed their labours, no hesitation in accepting the case of the assessee that it qualify for relief under Section 80IA - in favour of assessee.

  ---

• 2012 (8) TMI 808
  Acceptance of fresh evidence by CIT(A)- Revenue appeal on violation of Rule 46A of the I.T. Rules, 1962 - Held that:- The copy of the assessees's letter to the AO exhibits that one copy each of the two deeds dated 15-01-1998 and 26-05-2006, i.e., the two dates on which the entire bunch of 15 deeds were executed, were filed as specimen copies before the AO, the other deeds being identical in all other respects. Had the AO wanted, he averred, the assessee could have supplied the copies of all the other deeds as well which was confirmed by DR as forming part of the assessment record - could not demonstrate any wrong assumption of fact/s by the AO - against revenue. Addition in the sale value consideration for computing long term capital gain u/s 50C - difference in value as per the valuation of stamp duty authority and as declared by assessee - Held that:- Section 50C stands co-opted on the statute by Finance Act, 2002, with effect from 01-04-2003 and would apply in respect of capital gains arising on the transfer of any capital asset, being land or building or both, chargeable u/s. 45 of the Act for A.Y. 2003-04 or any subsequent year. As such, the impugned capital gains, being chargeable u/s. 45 for the current year, i.e., AY 2006-07, section 50C would be per se applicable - The words "adopted" or "assessed" (as also "assessable") in s. 50C(1) qualify the word "value" preceding it, and not the word "transfer", thus the assessee's case that the assessment of the fair market value of the property (land) by the SVA was done only on 27-11-2007 and, therefore, there being no assessment by it by the end of the relevant year, i.e., 31-03-2006 cannot be accepted - in favour of revenue.

  ---

• 2012 (8) TMI 807
  Disallowance of deferred revenue expenses written off - CIT(A) deleted the addition - assessee distributed the advertisement expenses towards brand building over a period of four years - Held that:- As decided in ACIT vs. Ashima Syntex Ltd. [2008 (10) TMI 298 - ITAT AHMEDABAD-B] the concept of deferred revenue expenditure is essentially an accounting concept and alien to the Act - deferred revenue expenditure denotes expenditure for which a payment has been made or a liability incurred, which is essentially revenue in nature but which for various reasons like quantum and period of expected future benefit etc., is written off over a period of time e.g., expenditure on advertisement, sales promotion etc. - thus advertisement expenses towards brand building are revenue in nature nor any material has been placed before us by the Revenue, suggesting that any tangible or intangible asset has been created by the assessee - in favour of assessee. Disallowance of bad debts written off - CIT(A) deleted the addition - Held that:- As decided in T.R.F. LTD. Versus COMMISSIONER OF INCOME-TAX [2010 (2) TMI 211 - SUPREME COURT] it is a well-settled law that after 1st April, 1989 it is not necessary for the assessee to establish that the debt, in fact, has become irrecoverable. It is enough if the bad debt is written off as irrecoverable in the accounts of the assessee - in favour of assessee.

  ---

• 2012 (8) TMI 806
  Re-opening of assessment - Held that:- As that power to reopen an assessment is not a power to review an assessment the power to reassess has to be exercised only on fulfilment of certain pre conditions such as tangible material to come to a conclusion that there has been escapement of income - As in the present notice, it is an admitted position that facts had been disclosed and the AO passed his order of assessment on 28/3/2003 for the assessment year 2000-01. Further, the issue on which the assessment is being sought to be reopened was considered by the AO and accepted by his order dated 28/3/2003 and the present proceedings emanating from the notice dated 28/12/2004 under Section 147/148 is bad in law as the same is based on mere change of opinion - in favour of assessee.

  ---

• 2012 (8) TMI 805
  Disallowance of Capital Loss on Transfer of shares - invalid transfer of the shares which were pledged with the IDBI Bank - Held that:- The assessee did transfer whatever rights it had in the shares to the purchaser company. If such transfer is not recognized by the IDBI and there are other legal implications of breach of undertaking given to IDBI, such issue would have to be thrashed out between the concerned parties but insofar as income tax proceedings are concerned, that by virtue of section 2(47), the assessee was entitled to claim that upon transfer of shares or interest thereon, it had suffered long term capital loss which it was entitled to set off against the capital gain on sale of shares during the same previous year. In the present case, of course, there is a further angle of the shares in question being pledged to IDBI and therefore it would not be possible for the assessee to deliver the original share certificates to its purchaser along with the duly signed transfer forms. As already noted, such special angle in the present proceedings is not concerned by this court with such internal possible dispute between the assessee and the said financial institution. This, however, by itself would not establish that the sale of shares was only a paper transaction and a device contrived by the assessee to claim loss which it did not suffer and thereby seek set off against the capital gain received by it during the year under consideration as there is no provision in the Act which would prevent the assessee from selling loss making shares. Simply because such shares were sold during the previous year when the assessee had also sold some shares at profit by itself would not mean that this is a case of colourable device or that there is a case of tax avoidance - As long as the Revenue could not doubt the sale price of the shares, it would not be open for the Revenue to contend that the assessee had shown loss which it did not really suffer - in favour of assessee.

  ---

• 2012 (8) TMI 804
  Entitlement to carry forward losses from the previous year 2001-02 and 2002-03 u/s 79 - whether the company-investors came within the description of those owning “not less than 51% of the voting power” beneficially through the two individual shareholders - Held that:- As at the time of original incorporation (within the assessment year 2000-01) on 16.8.2000, the arrangement between the shareholders and real owner i.e. foreign investor companies, was always that the former were to facilitate the process awaiting approval. While such conclusion is permissible in law, lack of any discussion in the present case by the lower authorities should have led the Tribunal to either examine or remand the matter for reconsideration. As appears from a reading of the Tribunal’s order and FEMA order, at the time of incorporation, the share capital was Rs. 2,000/- and the foreign investors infused Rs.49.90 lakhs during the subsequent assessment year which was treated as share application money and later appropriated as share capital after allotment of shares to the foreign investors, thus this disclosed arrangement is not forthcoming from the record , thus the matter has to be remitted to the AO for reconsideration of the entire record and returning findings with specific reference to the arrangement, if any, which existed between original shareholders of the company and the foreign investors - in favour of assessee by way of remand.

  ---

• 2012 (8) TMI 803
  Whether the deduction u/s 80IB can be allowed in relation to the profit earned by the assessee from job work activity done on behalf of the sister concern - whether the job work activity can be considered as manufacturing activity - Held that:- There is no provision in section 80IB as in the case of section 80IA that deduction cannot be allowed in case of contract work and therefore, the deduction has to be allowed in case the assessee had manufactured the goods on behalf of the assessee on job work basis. What constitutes “manufacture” is well settled that it is only when the change or a series of changes, take the commodity to the point where commercially it can no longer be regarded as original commodity but is recognized as a new distinct article, manufacturing can be said to have taken place. Deduction u/s 80IB cannot be disallowed only on the ground that the product by the assessee has been used as a raw material by the sister concern. In case the product is a distinct commercial product different from the raw materials used by the assessee, the claim has to be disallowed. We, therefore, set aside the order of the CIT(A) and restore back the matter to the AO for limited purpose to verify whether emulsifier produced by the assessee on behalf of the sister concern is a new commercial product difference from the raw materials used and recognized as such in the market.

  ---

• 2012 (8) TMI 802
  Addition u/s 69A - search - alleged unexplained advances and unexplained investment in pawned silver articles on ground of shortage of funds noticed in Girvi register and pawned silver articles found from the searched premises - assessee contended that there was no shortage of fund for making advances as the opening capital and incomes generated during the A.Y. under consideration was sufficient enough to explain this shortage, and appellant was engaged in money lending business for which silver articles were pawned with the appellant group by borrowers of money - Held that:- There is uncontroverted finding in the impugned order that capital was available with the assessee before the search. Even as per the appraisal report, prepared by the department, the opening capital from Girvi register was arrived at Rs.1,12,85,080/- and the assessee group claimed that it was doing money lending business for the last 40 years. In view of this uncontroverted claim, we are of the view that the AO misdirected himself ignoring both the opening capital and repayment receipt, while making the additions. Notional interest on provision of interest free loan - assessee contended that it was personal loan given to the family friend to facilitate him to purchase the land and the property was merely mortgaged as a security and was to be returned back after return of money - Held that:- Addition was made by the AO on the plea that full details of the transactions were not furnished by the assessee and he drew adverse inference. In the absence of any positive material brought by the Revenue, addition is deleted since notional income is not taxable under the Act - Decided in favor of assessee

  ---

• 2012 (8) TMI 801
  Dis-allowance u/s 40(ba) - interest paid to directors/trustees - assessee, a registered trust, being assessed as AOP - Held that:- Whether or not the assessee is assessed in the status of AOP or individual, it does not matter. The dis-allowance u/s 40(ba), can be made only with regard to the interest paid to the members of the AOP. The trustees of the assessee trust cannot be described as members of the AOP. See Shardaben Bhagubhai Mafatlal Public Charitable Trust (2000 (9) TMI 45 - BOMBAY HIGH COURT ). CIT(A) was justified in deleting the said dis-allowance - Decided in favor of assessee Dis-allowance made u/s 40A(2)(b) - interest paid on unsecured loans @ 18% - AO applying rate of 15% based on the lending rate of banks - Held that:- It is pointed out that the banks lend money after accepting security and the trustees had given unsecured loans to the trust. Also, Tribunal in various cases has held that interest paid at 24% p.a. cannot be said to be unreasonable. In view of aforesaid, matter restored to file of AO to consider de novo, and contention of the assessee with regard to the fact that the payment of interest at 18% p.a.is not excessive and unreasonable

  ---

• 2012 (8) TMI 800
  Addition u/s 68 - unsecured loans - assessee contended the same to share application money received during the last year and not during the year under consideration and transferred to the head “unsecured loan” by passing necessary journal entries during the year - Held that:- It is found that complete details of these share applicants such as name, address and ledger account showing receipt of application money through Banking channels were submitted before the AO to show the identity and genuineness of the transaction. Also, in subsequent AY 2008-09, assessee company has duly issued share certificate to all these share applicants. Confirmations of share applicants and share certificates also furnished. In view of aforesaid and as no new loans were taken during the year, the AO was not justified in making addition u/s 68 - Decided in favor of assessee

  ---

• 2012 (8) TMI 799
  Addition on account of undisclosed brokerage income received on sale of land not offered for tax – assessee contended that income was earned by sister concern of the assessee M/s. SPL, however records reveal that SPL as not engaged in brokerage business and did not had requisite manpower – Held that:- It is found from record that brokerage income was received by the assessee in respect of services rendered by it for sale of land. All the work relating to brokerage income was undertaken by the assessee company, but this income was not offered in the return of income. Mere entering of MOU between the assessee and its sister concern SPL will not allow the assessee to divert its income to the sister concern. Since the rendering of services for which income was not only accrued but also received by the assessee, we do not see any reason for not offering the same in assessee’s hands. It was actual income of the assessee, therefore, the AO was justified in making addition of income actually earned and received by the assessee during the year under consideration. Merely because this income was offered by SPL in its return of income will not exonerate the assessee from inclusion of such income in its return which was earned and received by it – Decided against assessee

  ---

• 2012 (8) TMI 798
  Addition u/s 68 - unexplained loan credit from M/s C and M/s A - part of transaction with M/s C held genuine and addition made deleted, other part sustained - confirmation with identity was not presumed sufficient compliance - Held that:- In respect of amount of Rs.2 lacs from M/s A, it is found that confirmation was available with signatures of the partners and PAN. In DCIT v. Rohini Builders (2001 (3) TMI 9 - GUJARAT HIGH COURT), it has been held that identity of creditor could be proved from PAN. As far as loan from M/s C was concerned, the Tribunal has rightly observed that Rs.1,50,000/- was part of the same total amount which was considered for deleting the addition u/s 68. When two amounts belonged to the same transaction, and in respect of one part, the confirmation was available from PAN and the statement of account filed by the very party, the creditworthiness and genuineness of the whole transaction could have been considered from those documents. Appeal of revenue dismissed.

  ---

• 2012 (8) TMI 797
  Estimation of profit at 10%, based on the statement recorded during course of survey after considering the incriminating documents found at assessee’s business premises - books of accounts rejected in view of the admission of assessee of estimation of profit - subsequent retraction of statement - Held that:- During the survey operations, on the basis of incriminating documents the appellant himself admitted that the accounts of contract business were maintained in a rough manner. Appellant also admitted illegal payments. Assessee had not only accepted 10% net profit but also computed profit thereon and surrendered income and also agreed to pay tax thereon. Therefore, keeping in view such glaring defects in the books of account and the statement of the appellant during the course of survey A.O. has rightly applied provisions of section 145(3). When the profit is accepted by the assessee at 10 %, all the expenditure/deductions allowable under the provisions of Section 30 to 38 are deemed to be allowed. Accordingly, we confirm the action of the lower authorities for dis-allowance of claim of depreciation. It is not merely question of rejection of books of account, but the issue of application of 10% profit rate as accepted by the assessee himself is based on the incriminating documents found during survey and the non-maintenance of basic records to indicate true and correct profit, therefore, plea of the assessee to the effect that the rate of profit decided by the AO in cases of other civil contractors should be applied, is of no substance where facts are materially different - Decided against assessee

  ---

• 2012 (8) TMI 796
  Capital expenditure vs Revenue expenditure - development fee paid to manufacturer (foreign company) based on an agreement, which required manufacturer to supply the required quantities of the items(developed as per its specification) to the assessee for a period of five years - development fee developing Liquid Crystal Display Units – assessee contending the same to be revenue in nature - Held that:- It is undisputed that payments were made for customized products. Also, if the components so developed were sold to any other persons by M/s.Fujitsu, then royalty was payable to assessee. Hence, it led to the creation of a type of asset, which could give rise to royalty income to the assessee in future. Therefore, payments resulted in creation of a commercial right to the assessee over such developed components. Further, benefit was of an enduring nature. Same has been rightly held as intangible asset eligible for depreciation. Moreover, assessee himself has treated it as a capital out go and claim of it being revenue in nature was never made by filing a revised return. In the original return, assessee had itself claimed only depreciation – Decided against assessee

  ---

• 2012 (8) TMI 795
  Application for registration filed u/s 12A – rejection on ground of non-charitable purposes – assessee-institution formed with primary object of setting-up suitable memorials to perpetuate the memory of National War heroes – Held that:- The Finance No. 2 Act, 2009 with retrospective effect from 1.4.2009 had inserted 'the preservation of environment or preservation of monuments or places of objects of artistic or historic interest' as part of the definition of 'charitable purpose' within the meaning of section 2(15). Admittedly, assessee is desirous of constructing monuments in the memory of war heroes and once such monument is constructed, the preservation of the said monument would be charitable purpose entitling the assessee to fall within the amended definition enshrined in section 2(15). The assessee has not constructed any such war memorials till date. However, perusal of other objects of assessee like setting up educational institutions, arranging seminars, and further to inculcate moral, spiritual, physical and patriotic spirit in the public in general, reflect the nature of advancement of other objects of general public utility. Consequently, the assessee is entitled to the benefit of registration u/s 12AA – Decided in favor of assessee

  ---

• 2012 (8) TMI 794
  Reopening of assessment – after a period of about six years - petitioner contended that the fact regarding the show-cause notice issued by the customs authorities as well as the report in the newspaper and the electricity theft were well within the knowledge of the Assessing Officer while framing the original assessment – Held that:- If the Income-tax Officer had considered and formed an opinion on the said material in the original assessment itself, then he would be powerless to start the proceedings for reassessment - Income-tax Officer had not considered the material and subsequently came by the material from the record itself, then such a case would fall within the scope of section 147(b) of the Act. In the circumstances, the said contention also does not merit acceptance - pre-requisite conditions necessary for assumption of jurisdiction under section 147 of the Act after the expiry of a period of four years from the end of the relevant assessment year, having been satisfied - Reopening of assessment upheld Though various contentions have been advanced by the learned advocate for the petitioner contending that the electricity was being used only by the contractors and that the petitioner was not utilising the electricity for production and that the machinery on which depreciation had been claimed by the petitioner was leased out to the contractors and as such, the petitioner did not have any unaccounted production on account of theft of electricity ; all those contentions relate to the sufficiency of the reasons recorded by the Assessing Officer. It is well settled legal position that while examining the validity of proceedings under section 147 of the Act, the court is only required to see whether there was prima facie some material on the basis of which the assessment could be reopened. The sufficiency or the correctness of the material cannot be considered at this stage.

  ---

• Customs

• 2012 (9) TMI 10
  Maintenance of call book - Revenue is relying upon the Board Circular No. 162/73/95-CX - contention of Revenue is that the Commissioner (Appeals) has not followed the instructions contained in the circular – Held that:- Circular is by way of administrative instructions and the administrative instructions having no statutory forces -Commissioner (Appeals) has not decided the issue involved in the appeal and simply adjourned the case to await the decision of Hon’ble High Court where the appeal is pending against the decision of the Tribunal which is arising out of the same cause of action - Commissioner (Appeals) has not decided the appeal on merits and simply adjourned the appeal – appeal of revenue is dismissed

  ---

• 2012 (9) TMI 7
  Digital Multifunction Print and Copying machines - assessee pleaded for release as not of restricted category - Held that:- In respect of cases relating to which the authorised chartered engineers had not inspected the goods in question, the customs authorities concerned shall direct the inspection of such goods before they are released. Such goods may be directed to be released, on payment of the appropriate customs duty and on the fulfillment of the conditions prescribed by law - the assessee may plead for for the waiver of the detention and demurrage charges, if any - in favour of assessee.

  ---

• 2012 (9) TMI 6
  Condonation of delay of 1548 days – Held that:- Appeals are filed after a delay of 1548 days i.e. after more than four years, we find no ground to condone the same - COD of applicants are dismissed

  ---

• 2012 (9) TMI 4
  Denial of grant of licences to to act as Customs House Agent - change in procedures - Held that:- As the 1984 Regulations postulated grant of temporary licence holding of which is a condition of eligibility for appearing in the examination conducted for grant of regular licence whereas the 2004 Regulations do not envisage grant of temporary licence for participating in the process of grant of licence but the applicant is required to clear the written as well as oral examinations to be held in terms of Clause 8 of the regulations. At the same time, the language of the opening paragraph of proviso to Clause 8(1)of 2004 Regulations make it clear that those who have already passed the examination are not required to appear in any further examination - thus the 2004 Regulations would operate prospectively and would not in any manner effect the eligibility and entitlement of those who had qualified the examination held under the 1984 Regulations for grant of licences to act as Custom House Agents - against department.

  ---

• 2012 (8) TMI 793
  Advance licence - job work - assessee has transferred the imported billets to MSRM thereby violating the condition (vii) of Notification No.51 of 2000 dated 27th April 2000 - Held that:- The argument of the Revenue is unacceptable as construing similar provisions contained in customs notification No.32 of 2005 dated 8th April 2005 issued under the Target Plus Scheme, the Directorate General of Foreign Trade has issued a public notice on 15th February 2008 stating therein that the beneficiary status holder whether a manufacturer exporter or merchant exporter can get the imported goods converted through a jobworker, thus prima facie it appears that sending the billets to a jobworker for conversion into angles by the manufacturer/exporters cannot be construed as transfer of billets especially when there is no bar for the manufacturer – exporter to get the raw materials imported under the advance licences get converted through a jobworker - the assessee has sold the goods after its conversion and not before its conversion. As DGFT has in the past admittedly granted advance licenses to assessee as a manufacturer exporter with the assessee as a supporting manufacturer for duty free imports under notification No.51 of 2000 dated 27th April 2000. Therefore, when according to the licensing authorities a manufacturer exporter can get the raw materials converted through a jobworker / supporting manufacturer, it would not be open to the Revenue to contend that the manufacturer / exporter cannot take assistance of a supporting manufacturer - it is a fit case for entertaining the appeal without any predeposit - in favour of assessee.

  ---

• Corporate Laws

• 2012 (9) TMI 5
  Application seeking appointment of a provisional liquidator - Held that:- As in the instant case, the respondent company has admitted its liability to the petitioner in the statement of account for the year ending 31.03.2002 in the sum of Rs. 8,00,04,000/ first being admitted in the balance-sheet for the year ending 31.03.2001 and thereafter reaffirmed in the balance-sheet for the year ending 31.03.2002 - The performance review of the company as is evident from the Directors' Report dated 21.06.2002 also shows that during the year under review i.e. for the year ending 31.03.2002, the company had incurred a loss of Rs. 5,039 lacs as against a loss of Rs. 7,579 lacs. This is also reflected in the balance-sheet of the company for the year ending 31.03.2002. These admissions are of the year 2002, a decade has passed, even the admittedly liability by the respondent has not been liquidated. Reply filed by the respondent has merely averred that the financial ill-health of the company is not by itself a sufficient ground to order the appointment of a provisional liquidator, he has qualified this submission by stating that the health of the company is changing day to day, however, this reply is totally silent as to how the health of the company has improved over this period of 10 years, there is not a whisper in this reply that the financial condition of the company has either improved or is improving, no document i.e. no balance-sheet/statement of account of any year after 2002 has been filed to substantiate an argument which is now being pitched that the company has in fact gained a momentum, this submission is wholly un - substantiated - In this factual scenario submission of the petitioner that there is every possibility that the assets of the company will frittered away and the same may be alienated/transferred which will affect not only the interest of the petitioner creditor but the interest of the other creditors at large is also a submission not without force, thus this Court is of the opinion that there is danger of the properties of the respondent-company being transferred/alienated. It would thus be expedient to appoint a provisional liquidator to protect the assets of the company which appear to be in a jeopardy - direction to the respondent company, its directors, officers, employers, authorised representatives restrained from selling, transferring, alienating, encumbering and parting with the possession of any movable and immovable assets and funds - in favour of petitioner creditor.

  ---

• 2012 (8) TMI 792
  Appeal against dismissal of company petition by CLB on a preliminary issue of non-maintainability of the petition - petitioner did not qualify for relief either u/s 111 or for an order u/s 402 on the premises as available u/s 397 or 398 - petitioner did not fulfil the requisite qualification of holding a minimum of 10% of the shareholding of the company in terms of Section 399 - name of petitioner company not mentioned in shareholder Register - Held that:- It is observed that suit had been filed by petitioner for recovery of the funds, and petitioner had in fact at one point of time made an offer to the other shareholders of the company to take back his shares. Impugned Petition did not make much headway before the Company Law Board for want of company petitioner having commensurate qualification and that being the factual position and not much in dispute, we do not find any occasion to interfere with the order of the Company Law Board dismissing the company petition on preliminary issue.

  ---

• Service Tax

• 2012 (9) TMI 24
  Activity of benefication/washing of raw coal - demand of service tax under Business auxiliary services - Held that:- As decided in ARYAN ENERGY (P) LTD. Versus COMMR. OF CUS. & C. EX., HYDERABAD-I (2008 (5) TMI 248 - CESTAT BANGLORE) the benefication/washing of raw coal is the activity of mining which was introduced for the purpose of service tax w.e.f. 01.06.07 with no retrospective effect - The period involved in the present appeal is upto 31.03.06 no service tax was leviable on above activity prior to 01.06.07 - in favour of assessee. 'cargo handling services' - Held that:- The appellants have accepted their tax liability in respect of 'cargo handling service' and have deposited the entire tax liability - against assessee. Penalty on non-payment of tax on 'cargo handling services' - Held that:- As said services were being provided by the appellants as an excelsior to the impugned services of benefication of coal there could be a doubt on the part of the appellants that service tax is not payable on the same - benefit of Section 80 can be extended to set aside the penalty imposed on the appellants - in favour of assessee.

  ---

• 2012 (9) TMI 23
  Clearing & Forwarding Service – giving of godown on hire to client for keeping of the goods for which they were acting as clearing and forwarding agent – demand initially issued holding the same to fall under category storage & warehousing service, subsequently dropped – under review order, revenue contended cost of storage space forming integral part of the value of C&F service provided - assessee contended it to be reimbursement of expenses – extended period of limitation – Held that:- There is a legal infirmity that tax is demanded under a category of service different from the one for which demand was initially issued. There is also the issue that Clearing and Forwarding Service could be rendered using a godown made available by the service recipient. In this case the service recipient has taken godown on rent from the service provider itself. This has to be seen as a case of tax planning rather than tax evasion. Hence, extended period of time could not have been invoked. Therefore, notice dated 13.9.2006 is held to be time barred – Decided in favor of assessee

  ---

• 2012 (9) TMI 22
  Demand of service tax - service providers are in abroad and this service has been performed in Vietnam in connection with the appellant’s participation in the trade fair and exhibitions in that country – Held that:- Service classifiable under Section 65(105)(zzo) provided from outside India shall be treated as received in India only if such services have been performed in India. Since, this service has not been performed in India - same cannot be treated as received in India by the appellants and, hence, service tax in respect of the same cannot be charged from the appellant by invoking the provisions of Section 66A

  ---

• 2012 (9) TMI 21
  Taxability of service receiver prior to 18-4-2006 – Held that:- Provision to tax for the services rendered under the Act did not apply to a person, who was outside the country - amendment was brought in, to tax the service receiver, in case the service provider is outside the country. Therefore prior to 18-4-2006, service receiver should not have been taxed for the services provided by an NRI - in favour of the assessee

  ---

• 2012 (8) TMI 817
  Plea against dismissal of appeal by Commissioner(Appeals) on the point of limitation by observing that the same stands filed after normal period of limitation as also after the condonable period of 30 days - Held that:- Issue is well settled that Commissioner(Appeals) has no jurisdiction to condone any delay beyond the condonable period of 30 days. On assessee contention that order dated 18.06.08 was served to him on 30.10.10 it is held that it is found that Revenue has placed documentary evidences showing receipt of adjudication order by Shri Virendra Yadav at appellant's residence. As per para 47(2) of Adjudication Manual, the service of orders through local range offices is an approved mode of service. Also, Asstt. Commissioner in his reply dated 26.10.10 to assessee's letter dated 25.09.10 has clearly mentioned that adjudication order was served on 18.06.08. It is only the photocopy of the adjudication order which again stands supplied to the appellant. As such the service of the photocopy of the adjudication order for the second time cannot be taken as relevant date of receipt of the order for the purposes of limitation - Decided against assessee

  ---

• 2012 (8) TMI 816
  Club or association services - company incorporated, consequent upon the order of High Court for the purpose of treating the effluent discharged by the industries located in the GIDC area, Vapi - demand of service tax confirmed on the ground that the appellant is an association of industrial units in Vapi formed for the purpose of setting up and running common facility for treatment and recycling of effluent and solid waste discharged by the units who are required to become a member compulsorily and pay one time fee as well as monthly subscription - Held that:- Notification No. 1/2012 - S.T. dated 17.03.2012, the words "of dyeing units" was omitted. Consequent upon amendment made by Notification No.1/2012-S.T., club or association service provided by an association in relation to a common facility set up for treatment and recycling effluent or solid waste is exempted from the service tax. This notification has been given retrospective effect by Section 145 of Finance Act, 2012 from June, 2005. Therefore appellant is squarely covered by the exemption Notification and the activities undertaken by them is not liable to service tax - Decided in favor of assessee

  ---

• 2012 (8) TMI 815
  Whether debit in the Cenvat Credit Account cannot be considered as pre-deposit - held that:- Pre-deposit made by the appellants by way of debiting in Cenvat Credit Account is sufficient for the purposes of fulfilment of requirement of pre-deposit ordered by the ld. Commissioner - Commissioner (Appeals) is directed to hear this matter without insisting on any further deposit

  ---

• 2012 (8) TMI 814
  Demand of service tax - business of real estate development and construction residential houses - appellant in terms of their agreement with their customers for construction of residential units on a plot of land owned by them construct the duplex type houses for their customers – Held that:- It is only w.e.f. 1-7-2010, that explanation was added to Section 65(zzzh) of the Finance Act, 1994 providing that for the purpose of this sub-clause - for the period prior to 1-7-2010, the appellant’s activity cannot be treated as service provided by them to their customers

  ---

• Central Excise

• 2012 (9) TMI 25
  Denial of benefit of Notification No. 67/95-CE in respect of naphtha manufactured in the factory and used in generation of electricity which is further used in the manufacture of exempted goods and used for certain allied facilities such as refinery road lighting, canteen and administrative building etc - assessee contended reversal of proportionate credit in respect of usage for manufacture of exempted goods - retrospective amendment to Rule 6 of the Cenvat Credit Rules by Finance Act, 2010 - Held that:- Benefit of the notification is not available in respect of naphtha used for generation of electricity therefore demand confirmed in respect of naphtha used for generation of electricity, used for the said allied facilities. Since assessee has discharged its obligation under Rule 6 of the Cenvat Credit Rules by reversing proportionate credit in respect of usage for manufacture of exempted goods, hence pre-deposit of same is waived subject to deposit of demand confirmed aforesaid

  ---

• 2012 (9) TMI 3
  Denial of CENVAT credit - non production of original bill of entry - Held that:- As the appellant is justifying in grounds of appeal the availability of bills of entry but as has not filed any reply to the show cause notice and not appeared before the adjudicating authority to defend his case - the issue needs to be appreciated by the first appellate authority as regards the availability of original bills of entry and other issues.

  ---

• 2012 (9) TMI 2
  Denial of benefit of Rule 34 of Standards of Weight and Measures Rules, 1977 – Held that:- Goods in question are sold directly to the industrial consumer as well as sold through a network of the dealers and products are packed in unit size with detail description of the product and with specific mention on the packing that the packed material is meant for exclusive use of the industries as raw material - In order to deny the benefit of the said provision of law comprised under Rule 34 of the said rules, it was necessary for the department to produce some evidence on record to show that the goods in question were either sold or meant for retail sale or for sale to the customers other than industrial units. In the absence of such evidence on record, no fault can be found with the findings arrived at by the Commissioner (Appeals) regarding entitlement of benefit to the respondent in relation to the provision of law comprised under Rule 34 of the said rules

  ---

• 2012 (9) TMI 1
  Limitation – alleged that assessment memorandum by the Adjudicating Authority was dated 24th September 2002 and date on which order under sub-section (2) of Section 35E of the Central Excise Act, 1944 was passed on 14th November 2003 which was beyond the period of one year prescribed under Section 35E(3) – Held that:- Appeal has been filed in terms of the provisions of law comprised under Section 35E(2) read with sub-section (4) thereof he failed to take note of the fact that the date of 14th November 2003 was not the date of order of review but it was the date of communication of the order of review and that the department had three months time to file the appeal from such date - order cannot be sustained and is liable to be set aside while holding that the appeal was filed within the period of limitation - matter is remanded to the Commissioner (Appeals)

  ---

• 2012 (8) TMI 791
  Valuation - the wholesale price declared by the assessees is much less than the cost of production - what will be the "normal price" for the purpose of excise duty in terms of Section 4(1)(a) of the Act ? - Held that:- To attract Section 4(1)(a) what is required is to determine the 'normal price' of an excisable article which price will be the price at which it is ordinarily sold to a buyer in the course of wholesale trade and in the context of Section 4(1)(a) the word 'ordinarily' does not mean majority of the sales but that price should not be exceptional and by no stretch of imagination, can include extra-ordinary or unusual. In the instant cases as the assessees sell their cars in the market continuously for a period of five years at a loss price and claims that it had to do only to compete with the other manufacturers of cars and also to penetrate the market and if such sales are taken as sales made in the ordinary course, it would be anathema for the expression 'ordinarily sold'. Thus since the price charged for the sale of cars is exceptional,it cannot be accepted to give a meaning which fit into the meaning of the expression 'ordinarily sold'. In other words, in the transaction under consideration, the goods are sold below the manufacturing cost and manufacturing profit. Therefore, such sales may be disregarded as not being done in the ordinary course of sale or trade. Thus as the assessees are not fulfilling the conditions enumerated in Section 4(1)(a) of the Act and therefore, the valuation has to be done in accordance with Section 4(1)(b). Under Section 4(1)(b) of the Act, 1944, any goods which do not fall within the ambit of Section 4(1)(a) i.e. if the 'normal price' cannot be ascertained because the goods are not sold or for any other reason, the 'normal price' would have to be determined in the prescribed manner i.e. prior to 1st day of July, 2000, in accordance with Rules, 1975 and after 1st day of July 2000, in accordance with Rules, 2000. A bare reading of the rules does not give any indication that the adjudging authority while computing the assessable value of the excisable goods, he had to follow the rules sequentially. The rules only provides for arriving at the assessable value under different contingencies. Again, Rule 7 of the Valuation Rules which provides for the best judgment assessment gives an indication that the assessing authority while quantifying the assessable value under the said Rules, may take the assistance of the methods provided under Rules 4, 5 or 6 of the Valuation Rules. Therefore, contention of the Assessee that the assessing authority before invoking Rule 7 of the 1975 Valuation Rules, ought to have invoked Rules 4, 5 and 6 of the said Rules cannot be accepted - thus since the assessing authority could not do the valuation with the help of the other rules, has resorted to best judgment method and while doing so, has taken the assistance of the report of the 'Cost Accountant' who was asked to conduct special audit to ascertain the correct price that requires to be adopted during the relevant period. Therefore, exception of the assessable value cannot be taken of the excisable goods quantified by the assessing authority - against assessee.

  ---

• 2012 (8) TMI 790
  Online platform to facilitate the sale of goods by various merchants - Whether activities proposes to undertake warehouse amount to manufacture ? - Held that:- None of the assessee's activities alter the primary packing or the original labeling affixed by the merchant under applicable regulations. Also no change is made in the MRP/RSP of any item received in the warehouse. All the labeling requirements are required to be fulfilled by merchants themselves and the goods as received in the applicant's warehouse would have the MRP/RSP already pre-affixed or pre-printed - As the applicant carries all their activities to protect the merchant's goods, facilitate inventory management and the logistics of storage, retrieval, shipment and transportation of goods, thus, the different types of stickering done by them cannot come within the meaning of the expression labeling or relabeling for the purposes of the Act and would not amount to manufacture As the goods as received would be in retail packages with all required labeling and marking has not been disputed. As that the applicant's facility is only one of the channels for distribution available to the merchants who use it. The products that they list on the applicant s website would also, in the vast majority of cases, get distributed and sold through other conventional channels of retail trade and in the very form in which they are received in the applicant s warehouse. Hence the conclusion that inexorably follows is that they are already marketable. Thus, as the applicant is providing an online retail distribution channel and the associated logistical services His role therefore does come across clearly as one of service provider as the activities described in the application do not amount to manufacture within the meaning of S. 2(f) of the Central Excise Act, 1944.

  ---

• 2012 (8) TMI 789
  Maintainability of appeal – Held that:- No opinion is formed by the Committee of Commissioners about the illegality of the order as required under Section 35B of the Central Excise Act - There was no authorization by the Committee of Commissioners to file appeal on its behalf - record also does not disclose that these two officers applied their mind to the issue and recorded any opinion, as per the requirement of Section 35B of the Central Excise Act that the order of the Commissioner (A) was not legal or proper and warranted to be challenged by filing an appeal - there should be a meaningful consideration which should be reflected on the note sheets in order to comply with the requirement of Section 35(2) of the Act - file does not show any such satisfaction or opinion having been recorded by the Committee of Commissioners – appeal dismissed

  ---

• 2012 (8) TMI 788
  Whether no provision in the Act empowering the Board to issue directions to the Assessing Authorities or the Appellate Authorities in the matter of deciding disputes between the persons who are called upon to pay duty and the department – Held that:- Such orders are required to be passed by exercising independent mind and without impartiality and while doing so, such Authorities are required to consider various evidences made available to them - Circulars issued by the Department which are in the nature of guidance to such Authorities and, therefore the contents of such circulars could also be considered as evidence available before them - Assessing Authority has come to an independent finding on its own and therefore – matter remanded to Assessing Authority to consider the matters afresh

  ---

• CST, VAT & Sales Tax

• 2012 (8) TMI 818
  Claim of 100% set off for tax paid on the coal purchased - whether the coal used in the process by the assessee was used as a raw material or as fuel ? - Held that:- Considering the Report of Head of the Department Metallurgical and Materials Engineering Visvesvaraya National Institute of Technology, Nagpur indicates that to convert iron ore into sponge iron the noncoking coal is used. It must be mentioned that the orders passed by the authorities did not use the specific word “Non-coking coal” - The report specifically mentions that inside the bed the Non-cooking coal plays the role of a reductant and that non-coking coal provides the gas carbon mono-oxide for satisfying the heat requirements of the process. On account of this, the author of the report has observed “It indirectly plays a role of fuel in the rotary kiln process”. It is seen that chemical qualities of Noncooking coal to generate heat are used. Merely because heat is generated in the process it cannot be a ground to hold that Noncooking coal so used was used as fuel. The above observations clearly shows that the coal used in the process of manufacturing of sponge iron is used as a raw material and not as a fuel - in favour of assessee. Entitlement to claim set off as regards purchase of HSD Oil - Held that:- Considering the provisions of Rule 54(b), it is clear that the use of HSD Oil i.e. motor spirit as a fuel does not fall within the aforesaid provisions for the purpose of claiming set off. On account of this specific provision which permits claiming of set-off under peculiar circumstances mentioned in Rule 54(b) of said Rules, the provisions of Rule 52 and Rule 53 cannot applied in favour of the assessee - The Assessing Officer as well as the Appellate Authority has rightly declined to grant set off to the respondent in regard to the HSD Oil - against assessee.

  ---