TMI Tax Updates - e-Newsletter
September 5, 2013

Case Laws in this Newsletter:

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

Articles

1. FRAUD AND COLLUSION VITIATE EVEN MOST SOLEMN PROCEEDINGS IN ANY CIVILZED SYSTEM OF JURISPRUDENCE

   By: DR.MARIAPPAN GOVINDARAJAN

2. Central Excise Audits – Practical Perspective for Assessees

   By: CA.Ankit Gulgulia

News

1. RBI to open a Swap Window to attract FCNR(B) Dollar Funds

2. RBI Reference Rate for US $ and Euro

3. Issue of Rs. 100 Banknotes with inset letter “S”

4. Statement by Dr. Raghuram Rajan on taking office on September 4, 2013

Notifications

Customs

1. 95/2013 - dated 5-9-2013 - Cus (NT)

Rate of exchange of conversion of each of the foreign currency with effect from September 06, 2013

Income Tax

2. 67/2013 - dated 2-9-2013 - IT

Income-tax (14th Amendment) Rules, 2013 - Furnishing of information by the person responsible for making any payment including any interest or salary or any other sum chargeable to tax, to a non-resident, not being a company, or to a foreign company

Circulars / Instructions / Orders

FEMA

1. 37 - dated 5-9-2013

Issue of Bank Guarantee on behalf of person resident outside India for FDI transactions

2. 36 - dated 4-9-2013

Risk Management and Inter Bank Dealings

DGFT

3. 24(RE-2013)/2009-14 - dated 5-9-2013

Permission for export of Finished Leather, Wet Blue and EI Tanned Leather through Air ports.

Customs

4. 36/2013 - dated 5-9-2013

Classification of “Bluetooth Wireless Headset for mobile phones / cell phones” under harmonised Customs Tariff - regarding.

Companies Law

5. 14/2013 - dated 3-9-2013

Relaxation of last date and additional fee in filing of e-Form 23C for Appointment of Cost Auditor.

Highlights / Catch Notes

Income Tax

• Indian Taxpayer Must Include Oman & Qatar P.E. Income, Capital Gains; Tax Credit Available Under DTAA Provisions.

  Case-Laws - AT : DTAA - PE - The business income from P.E. in Oman and Qatar and also the capital gain from sale of assets in these countries will be included in the total income of the assessee in India and Credit of taxes paid there will be given as per the relevant Article of the DTAA. - AT
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• Uncertain LTCG Taxation u/s 45: Challenges in Claiming Exemptions Due to Payment Date Ambiguity.

  Case-Laws - AT : LTCG u/s 45 - taxability on accrual basis - date of receipt of money is not certain - difficulty in claiming exemption u/s 54 or 54EC - some genuine cases the difficulties may arise but it was for the Parliament or the Government to provide remedy in such cases and judicial forums cannot do anything. - AT
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• Taxation of Long-Term Capital Gains: Section 45 and Transfer of Property in Joint Development Agreements Analyzed.

  Case-Laws - AT : Long Term Capital Gain u/s 45 - transfer u/s 2(47) - scope of the terms, accrual or arise - vacant land - the Society has entered into JDA on behalf of the Members under GPA - capital gain is taxable in the hands of members - AT
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• Penalty Imposed for Non-Compliance with Tax Notices u/s 271(1)(b); No Criminal Intent Required.

  Case-Laws - AT : Penalty u/s 271(1)(b) - Default by assessee - mens rea is not an essential element for imposing penalty for non compliance of notices issued by AO - penalty confirmed - AT
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• Cash Payments Over Rs. 20,000 Disallowed u/s 40A(3); No Emergency Exception for Marble, Aluminum Purchases.

  Case-Laws - HC : Disallowance u/s 40A(3) - Payment in cash in excess of Rs. 20,0000 - exception under rule 6DD - purchase of marble chips and alluminium product cannot be said to be an emergency purchase justifying payment in cash. - HC
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• Court Upholds Section 148 Notice: Five Companies Failed to Fully Disclose Transaction Details, Disclosure Deemed Incomplete and Inaccurate.

  Case-Laws - HC : Notice u/s 148 - Merely furnishing details or disclosing that the five companies had entered into some transactions itself would not meet the requirement of full and true disclosure. - the disclosure was neither full nor true. - HC
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• AO Must Document Satisfaction in Searched Person's File Before Transferring to Others u/s 153C of Income Tax Act.

  Case-Laws - AT : Assessment after search u/s 153C - Even if the AO of the person searched and the AO of such other person is the same, he has to first record the satisfaction in the file of the person searched and thereafter, such note alongwith the seized document/books of account is to be placed in the file of such other person - AT
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• Section 194J: Tax Implications for Professional Fees in Hospital Bills Clarified by Assessing Officer's Payment Segregation.

  Case-Laws - AT : Applicability of section 194J on the professional fee part of the composite bill paid to the hospitals - AO directed to bifurcate the payments to the hospitals into various elements and confine the demand raised in terms of s. 201(1), only to the payments which assume the nature of fee for professional services - AT
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• Sale of Cow Milk for Goshala is Charitable, Qualifies for Registration u/ss 12A and 12AA of Income Tax Act.

  Case-Laws - AT : Charitable purpose u/s 2(15) - livestock - whether selling of milk of cows for maintenance of goshala satisfies the condition of charitable purpose - Held yes - CIT directed to grant registration u/s 12A / 12AA - AT
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• Transfer Pricing Adjustments: Consistency Principle Inapplicable When TPO's Current Year Material Differs Significantly from Previous Year.

  Case-Laws - AT : Principle of consistency in Transfer Pricing adjustment - The material available with the TPO in the current year is vastly different to the material available with the TPO in the earlier year. In such circumstances, the principle of consistency does not hold water - AT
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• Service Tax Disallowance u/s 43B: Liability Arises Only on Receipt Basis, No Disallowance Applicable.

  Case-Laws - AT : Disallowance of service tax u/s 43B - as per the law prevailing during the previous year, the liability to pay the same arises only on receipt basis - since the liability to pay service tax does not exist - the service tax cannot be said to be 'payable' - No disallowance u/s 43B - AT
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• Court Permits Deduction of Partners' Salaries from Undisclosed Income, Clarifying Tax Treatment for Partnerships.

  Case-Laws - AT : Disallowance of partners’ salary from undisclosed income - deduction allowed - AT
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• US-India DTAA: Payments for Software Classified as Royalty, Not Taxable to Avoid Double Taxation on Assessee.

  Case-Laws - AT : DTAA between US & India - Royalty or sale of copyrighted articles / softwares - though the amount constitute royalty, but the same is not assessable in the hands of the present assessee. - such royalty cannot be assessed in the hands of the assessee as it will tantamount to assess the same income which has been assessed in the hands of Gracemac - AT
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• Section 80IB: Allow deductions for profits from constructing smaller units under 1,000 sq ft, despite varying unit sizes.

  Case-Laws - AT : Deduction u/s 80IB - provisions should be interpreted liberally - even if the units constructed are both smaller and larger units with reference to the stipulated area, the profit derived from the construction of the smaller units i.e., within the stipulated area of 1,000 sq.ft. built-up area ought to be allowed as deduction u/s 80IB(10)- deduction on pro-rata basis allowed - AT
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• Website Development Costs Classified as Revenue, Affecting Income Tax Treatment for Broader Reach Functions Similar to Brochures.

  Case-Laws - AT : Website development charges, a capital expenditure or revenue - Websites enable companies to do what the printed brochures did but, in a much more efficient manner as well as in a much shorter period of time and covering a much large set of people worldwide - Held as revenue in nature - AT
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Customs

• Detention under COFEPOSA: Fair Representation Rights Challenged, Natural Justice Argument Deemed Afterthought in Customs Law Case.

  Case-Laws - HC : Detention under COFEPOSA - Fair Chance of Representation - The issue of breach of natural justice was an after thought particularly so in views of the fact that the appellant took up this stand only after passing of the final order - HC
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• Tribunal Rules Appeal on Provisional Release of Goods Not Maintainable; Awaits Final Decision by Adjudicating Authority.

  Case-Laws - AT : Appeal of order - The order in respect of provisional release of the goods was an interim order pending order of the adjudicating authority and the appeal was not maintainable before the Tribunal - AT
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Corporate Law

• Arbitration Clause Void if Original Contract is Disputed as Void Ab Initio; Superseding Agreement Takes Precedence.

  Case-Laws - SC : Arbitration clause - that if the contract was superseded by another, the arbitration clause, being a component part of the earlier contract, falls with it - But where the dispute was whether such contract was void ab intio, the arbitration clause cannot operate on those disputes, for its operative force depends upon the existence of the contract and its validity - SC
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Wealth-tax

• Commissioner of Wealth Tax Can Reduce or Waive Penalties u/s 18B Based on Specific Criteria.

  Case-Laws - HC : Section 18B empowered the Commissioner of Wealth Tax to entertain an application for reducing/waiver of penalty in accordance with factors detailed in Section 18B and required the Commissioner to pass a speaking order recording whether the facts pleaded fall within the factors enumerated in Section 18B - HC
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Service Tax

• Jurisdictional High Court's Decision Prevails in Coal Handling Services Cases Amidst High Court Interpretation Conflicts.

  Case-Laws - AT : Cargo Handling services - coal handling system - here a conflict of decisions among High Courts does not relate to interpretation of statutory provisions or a notification (and not vires thereof) the decision of the jurisdictional High Court which has jurisdiction in respect of the authority which adjudicated the matter initially and of the assessee and has taken a particular view of interpretation or proposition of law, must be followed in cases falling within that jurisdiction - Decided in favor of assessee - AT
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• Appellant Granted Refund on Courier Invoices Despite Missing Importer Exporter Code Requirement.

  Case-Laws - AT : Refund on Invoices issued - Whether the appellant is eligible for the refund when invoices issued by Courier do not show IEC No. of service receiver which is a requirement in the notification - refund to be allowed - AT
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• Service Provider Granted Stay on Service Tax Demand for Event Management to International Organization.

  Case-Laws - AT : Event Management services - Service was provided to Unicef has led to a bona fide belief on the part of the assessee to entertain a view that no further service tax is required to be paid by them. - stay granted - AT
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Central Excise

• Doctrine of Merger: Appeal Dismissal on Part of Order Doesn't Bar Challenge on Remaining Unfavorable Parts.

  Case-Laws - HC : Appeal Barred or Not – Doctrine of Merger - Where an OIO may be partly in favour and partly against the party in which event the part that goes in favour of the party can be separately assailed by them in appeal filed before the Appellate Court or authority, but dismissal on merits or otherwise of any such appeal against a part only of the order cannot foreclose the right of the party who was aggrieved by the other part of the order. - HC
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• Compensation Included in Sale Price Calculation Under Central Excise Act, 1944: Implications for Taxation via Section 4.

  Case-Laws - AT : Determinant of Sale Price - Inclusion of compensation in the Gross value - Prima facie it appeared that the receipt in the garbs of compensation forms part of transaction value in terms of Section 4 of the Central Excise Act, 1944 - AT
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• Purchasing and delivering items under one invoice for vehicle alignment isn't manufacturing, court rules.

  Case-Laws - AT : Whether buying of five different items, dispatching the same to the customer’s premises under the cover of one invoice and the use of the same in the customer’s premises for checking the alignment of a vehicle would amount to manufacturing activities on the part of the appellant or not - Held No - AT
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• Assortment Packs Not Raw Materials: Clarification on MRP-Based Duty for Job Workers Under Central Excise Rules.

  Case-Laws - AT : MRP based duty - clearance of chocolates to Job worker - Clearance of one type of retail pack for repacking into another type of retail pack - “assortment pack” cannot be said to be for - “use of any industry as a raw material or for the purpose of servicing any industry, mine or quarry” - AT
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VAT

• High Court Identifies Error in Tax Board's Classification of Sales Transactions, Confirms Inter-State Nature Affecting VAT Rules.

  Case-Laws - HC : Inter-State OR Intra-State Purchases - genuineness of the bills from the dealers of Gujarat - purchase of gwar - The Tax Board had committed a manifest error of law in concluding that the sale transactions were intra-State and not inter-State - HC
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Case Laws:

• Income Tax

• 2013 (9) TMI 129
  Notice u/s 148 - Notice based on information from investigation wing - full and true disclosure of all material facts - whether a chart giving details during earlier re-assessment proceedings would amount to disclosure of all material facts - Held that:- The reasons are fairly detailed and refer to comprehensive investigation carried out by the Investigating Wing for identification of entry operators engaged in money laundering - the information regarding these transactions were not the subject matter of the earlier re-assessment proceedings and details provided fresh material for the Assessing Officer to initiate second reassessment proceedings. Neither are we inclined to accept the argument that there was no due application of mind by the Assessing Officer or that the reasons to believe do not constitute live link with the formation to believe that the income has escaped assessment. In view of the position explained above, these contentions are baseless. Merely furnishing details or disclosing that the five companies had entered into some transactions itself would not meet the requirement of full and true disclosure. As noted above, the disclosure was neither full nor true. Full and true disclosures cannot be garbled or hidden behind the cervices of the documentary material. The assesse must act with candor and there cannot be suppression of facts. The disclosure must be truthful and fair in all respects and assessee who seeks the benefit of the proviso to Section 147 must make a full and true disclosure of all primary facts.

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• 2013 (9) TMI 128
  Disallowance u/s 40A(3) - Payment in cash in excess of Rs. 20,0000 - exception under rule 6DD - emergency purchase - Held that:- A perusal of findings recorded by the Assessing Officer as well as the CIT(Appeals) reveals that cash payment to M/s Munak International Private Limited was sought to be justified on the ground that it was an emergency purchase. The explanation was concurrently rejected by the Assessing Officer and the CIT(Appeals) by holding that such purchases cannot be held to be emergency purchases and even otherwise Mr. R.K.Garg, Managing Director of the assessee is a Promtoer/Director of M/s Munak International Private Limited and the office of these companies is housed in the same building. The Income Tax Appellate Tribunal has not reversed findings that purchase of “marble chips and alluminium” are not emergency purchases by merely recorded a sentence that the fact that one of the Directors of the company was the same, does not mean that parties were known to the assessee. We do not propose to delve into this reason but as the Tribunal has not referred to or reversed the finding recorded by the Assessing Officer, that purchase of marble chips and alluminium product cannot be said to be an emergency purchase justifying payment in cash. The order passed by the Tribunal suffers from an error of jurisdiction, as it has reversed a pure finding of fact without reversing the reasons assigned by the Assessing Officer and the CIT(Appeals), for rejecting the assessee's explanation - Decided against the assessee.

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• 2013 (9) TMI 127
  Penalty u/s 271(1)(b) - Default by assessee - Held that:- There is no dispute to the fact that the notices issued by the AO to the assessee u/s 142(1)/143(2) were received by assessee and the assessee repeatedly avoided the compliance thereof - on behalf of the assessee adjournment application was filed, but the AO indicated to the concern persons who filed the adjournment application, to file authority letter - it is not one occasion, but there are three occasions, no authority letter was filed by concern person who sought adjournments in respect of which the AO indicated to file the authority letter - there is deliberate defiance on the part of the assessee to comply with the statutory notices and to furnish requisite details. The contention of the assessee before the authorities below that there is no mens rea on the part of the assessee, we agree with the ld. CIT(A) that there is nothing in section 271(1)(b) of the Act which requires that mens rea must be proved before the penalty can be levied. Hence, mens rea is not an essential element for imposing penalty for non compliance of notices issued by AO. Considering the repetitive failure and the lackadaisical approach of the assessee, we hold that ld. CIT(A) has rightly held that it cannot be said to be a reasonable cause for failure to comply with the notices issued by AO u/s 143(2)/142(1) of the Act - It cannot be said that if no fine is levied on account of committing the offence by one person, the other person should also not be fined for committing the same offence - Penalty confirmed - Decided against assessee.

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• 2013 (9) TMI 126
  Expenditure incurred on bidding for exploration - Capital expenditure or revenue expenditure - Exploration and production of oil and gases as revenue expenditure -the assessee were not in the nature of an independent business, but it was part of the existing business carried on by it under the control and supervision of the same management - The activities were inter-connected and there was no inter-lacing of funds and resources - The activities were carried out as inseparable from the existing line of business - Therefore, in the light of the decisions of the Supreme Court in the cases of Produce Exchange Corporation Ltd. v. CIT [1970 (4) TMI 18 - SUPREME Court], these expenses need to be allowed as revenue in nature - the impugned expenditure incurred during the previous year for setting up refinery - Following decision of Deputy Commissioner of Income-tax 5(1) Versus Essar Oil Ltd. [2011 (8) TMI 428 - ITAT MUMBAI] - Decided in favour of assessee. DTAA - Tax liability - Residential status - There is no dispute that the assessee is having a permanent establishment in Oman and is clearly liable to tax under the provisions of Income-tax law in Oman - the provisions of DTAA override the provisions of the Income-tax Act - In the light of the ratio of the decision laid down by Hon'ble Supreme Court in CIT v. P.V.A.L. Kulandagan Chettiar [2004 (5) TMI 8 - SUPREME Court], the income earned by the assessee from its Oman Branch cannot be added as income for computing the taxable income in India - Do not find any infirmity in the order of learned CIT(A) - Held that the income from business carried on at Oman and Qatar cannot be subjected to tax in India. Interpretation of provisions of DTAA - The expression used in Article 7 of the DTAA between India and Oman is "may be taxed", while the words used in Article 7 of India Qatar DTAA is "may also be taxed". Could there be different consequences because of the above difference in the language of the DTAA? - it cannot be said that the expression "may also be taxed" used in the DTAA gave option to the other Contracting States to tax such income. As laid down in the decision in the case of Pooja Bhatt [2008 (10) TMI 251 - ITAT BOMBAY-L] contextual meaning has to be given to such expression. - the contention of the revenue that the expression "may also be taxed in other State" giving the option to the other State and the State of residence is not precluded from taxing such income cannot be accepted. The phrase "may be taxed" is not appearing in the statute, but it is appearing in the agreement and therefore, the interpretation as understood and intended by the negotiating parties should be adopted. Here one of the parties i.e., Government of India has clearly specified the intent and the object of this phrase. If phrase is used in a statute, then any interpretation given by the High Court or the Supreme Court is binding on all the subordinate Courts and has to be reckoned as law of the land. However, the meaning assigned by Government of India for a phrase or term used in the agreement through notification will prevail at least from the assessment year 2004-05. Because, while interpreting the treaty, the intention of the parties to the agreement has to be given primacy and has to be understood in that manner only. Therefore, the notification is not contrary to the provisions of the Act. Consequently, the earlier judgments rendered in assessee's case prior to assessment year 2004-05, will not have binding precedence in this year or subsequent years The business income from P.E. in Oman and Qatar and also the capital gain from sale of assets in these countries will be included in the total income of the assessee in India and Credit of taxes paid there will be given as per the relevant Article of the DTAA. Interest under section 36(1)(iii) - It is not in dispute that the assessee company had been using the jetty purchased for the purpose of the marketing business and that income earned there from was also offered for tax - The CIT(A) has found that there was no evidence of use of own funds for purchase of jetty - The revenue has itself allowed depreciation on jetty in the past -deduction on account of interest allowed. Disallowance of interest from escrow account - Held that:- The basic condition for grant of loan was that the assessee has to make deposits in the escrow account and based on these deposits, the assessee was to receive funds for setting-up of its refinery project. It can be very well be held that the said deposits were directly linked with the purpose of the assessee's business - The findings recorded by the learned Commissioner (Appeals) that deposit in the escrow account was essentially a security to the bank in order to effect the financing the refinery project and is akin to margin money that banks ordinarily required for granting of loans is absolutely correct and, therefore, any interest earned thereon is also directly related to the business - Following decision of CIT v/s Bokaro Steels Ltd. [1998 (12) TMI 4 - SUPREME Court] - Decided in favour of assessee. Once the dispute has been settled between the parties and the balance has not been received by the assessee, it definitely has become bad in this year only. All the other conditions laid down in section 36(1)(vii) and 36(2) has been fulfilled and the claim of bad debt has to be allowed. There is no reason to deviate from the legal and factual findings given by the learned Commissioner (Appeals) and accordingly the same is affirmed. Nature of advance given to various employees is not clear. Once it has been accepted that the conditions laid down in section 36(2) are not fulfilled, then it has to be examined from the angle, whether it is a business expenditure or business loss. Once it is not in dispute that these advances were made during the course of carrying on the business, the non-recoverability of such amounts have to be allowed as business loss. Since the facts are not clear before us, therefore, we are of the considered opinion that this issue needs to be restored to the file of the Assessing Officer for examination afresh - Decided in favour of assessee.

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• 2013 (9) TMI 125
  Long Term Capital Gain u/s 45 - transfer u/s 2(47) - scope of the terms, accrual or arise - vacant land - Possession given by the society to the developer under joint development agreement (JDA) - Advance Received or Actual Sales – Held that:- As per Section 45 of IT Act, income-tax was to be charged under the head "capital gain" on transfer of a capital asset and shall be deemed to be the income of the previous year in which transfer took place - The year of transfer was the crucial year and not the time of the receipt - 'Accrue' means 'to arise or spring as a natural growth or result', to come by way of increase' - 'Arising' means 'coming into existence or notice or presenting itself' – both the words were used in contradistinction to the word 'receive' and indicate a right to receive - They represent a stage anterior to the point of time when the income becomes receivable and connote a character of the income, which was more or less inchoate and which was something less than a receipt - An unenforceable claim to receive an undetermined or undefined sum does not give rise to accrual. It was not only the money which has been received by the assessee which was required to be taxed but the consideration which had accrued to the assessee was also required to be taxed. Deemed transfer of property u/s 2(47) – Part performance - section 2(47)(v) r.w. section 45 indicates that capital gains was taxable in the year in which such transactions were entered into even if the transfer of immovable property was not effective or complete under the general law – Held that:- Charging an item of income under the head 'Capital gains" require that there should be some profit, Such profit must be arising on account of transfer and there should be capital asset which has been transferred - There was no dispute that a capital asset was involved and there was some profit also – Capital gain would be computed by considering the full value of consideration whether received or accruing as a result of the transfer - relying upon Mysore Minerals Ltd. v. CIT [1999 (9) TMI 1 - SUPREME Court] it was not only the consideration received which was relevant but the consideration which had accrued was also relevant - irrevocable general power of attorney which leads to over all control of the property in the hands of the Developer, even if that means no exclusive possession by the Developer would constitute transfer - It can be said that it had to be construed as 'possession' u/s 2(47). Thus, it is clear that non registration of agreement cannot lead to the conclusion that provision of section 2(47) (v) is not applicable. Non performance of the contract - Held that:- The careful reading of the said clause of the JDA would show this payment was required to be made within a period of six months from the date of execution of this agreement or within two months from the date of approval of plan / sanction and drawing grant of final license to develop where upon the construction can commence, whichever is later. Thus, this installment was dependent on two contingencies first the expiration of a period of six months from the date of agreement or alternatively on the expiration of a period of two months from the date of approval of plans / designs drawing etc. leading to grant of final licenses which can lead to commencement of construction, whichever is later. The matter was taken up by way of PIL by certain citizens and Administration of the Union Territory before the Hon'ble High Court which initially stayed the sanction of such plan etc. This led to situation where construction could not be commenced and hence payment was not required to be made in view of the pending litigation. The clauses of force majeure came into operation and therefore, it cannot be said that the developer is not willing to perform its part of the contract. In any case there is no default on the part of the developer as payment was not yet due as per clause 4(i)(iv) of JDA. - in view of clause 4.1(iv) read with clause 26(v) of the JDA, HASH Builder were not required to make the payment and it cannot be said that they were not willing to perform their part of the contract on this aspect. Therefore, this contention is rejected. Concept of real income - Taxability of pro-rata receipt - Receipt of consideration and registration of property relevant or not - the contention was that if consideration which has not been received was to be taxed then the assessee would be deprived for claiming exemption u/s 54 and 54EC. - Held that:- Section 54 deals with deduction in case the assessee being an individual or HUF, transfers the residential house - the assessee had transferred the plot – thus it cannot be said that deduction u/s 54F and 54 was same - no ground had been raised for deduction u/s 54F. - in some genuine cases the difficulties may arise but it was for the Parliament or the Government to provide remedy in such cases and judicial forums cannot do anything. Ownership of the plot - society or members - When the plots remain unallotted and obviously legal ownership and beneficial ownership belonged to the society. - Held that:- the Society has entered into JDA on behalf of the Members. It is the members who are owning the plots and the Society was only a facilitator. It becomes clear from the JDA that payment for consideration was to be made to an individual plot holder and in fact consideration was mentioned in terms of per Member. - Decided against the assessee.

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• 2013 (9) TMI 124
  Transfer pricing adjustments - receipt of reimbursement of Advertising and Marketing Promotion (‘AMP’) expenses from the Associated Enterprises (‘AEs’) - Intervention - Intervention in L.G’ Electronics’ case [2013 (6) TMI 217 - ITAT DELHI] - Held that:- assessee was not an intervener in the proceedings before the Special Bench in the case of L.G. Electronics as its name does not find a mention in the list of interveners and the affidavit dated 14.02.2013 of the Ld. AR Sh. Rahul Mitra addresses the background as to how after seeking permission to be impleaded as an intervener, the permission to withdraw was moved - it does not necessarily follow that the ruling of the Special Bench would not apply to the assessee wherever facts and law so demand. As such, the departmental stand that the said ruling is binding has to be upheld with the caveat to the extent facts and law support it Adjustment of transfer pricing - Reimbursement of Advertising and Marketing Promotion expenses - Comparison to other comparable companies - Service rendered to AE - Held that:- on a consideration of the market conditions and the terms of the contract entered into in the Importation Agreement by the assessee with the AE, it necessarily leads us to the conclusion that the assessee has performed the function of sales promotion and advertisement in order to make a dent in the market while performing the functions of a distributor with greater intensity as opposed to a routine distributor - assessee has performed greater intensity of service than a normal distributor and has incurred expenditure for advertising marketing and promoting the brand of its AE. Whether on account of rendering of non-routine service was the assessee entitled to receive compensation with a mark-up from its AE - Held that:- in the facts of the present case there was no occasion for the AE to further compensate the assessee for the services rendered towards building the brand of the AE as the same already stood factored in the pricing adjustment of the contract goods. As such the occasion to consider the applicability of mark-up does not arise. - Decided partly in favour of assessee.

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• 2013 (9) TMI 123
  Search an seizure - assessment of other person - section 153C – Satisfaction of the Assessing officer that books of accounts found in the search belonged to the assessee – Held that:- If the Assessing Officer is assessing the person searched as well as other person whose assets, books of account or documents were found at the time of search, then also, first while making the assessment in the case of the person searched, he has to record the satisfaction that the money, bullion, jewellery or other valuable article or thing or books of account or documents belong to the person other than the person searched. Then, the copy of this satisfaction note is to be placed in the file of such other person and the relevant document should also be transferred from the file of person searched to the file of such other person. Thereafter, in the capacity of the Assessing Officer of such other person, he has to issue the notice under Section 153A read with Section 153C. The Assessing Officer of the person searched and such other person may be the same but these are two different assessees and, therefore, the Assessing Officer has to carry out the dual exercise, first as the Assessing Officer of the person searched in which he has to record the satisfaction, during the course of assessment proceedings of the person searched. After recording such satisfaction note in the file of the person searched, the same is to be placed in the file of such other person. In the present case, this exercise of recording the satisfaction during the assessment proceedings of the person searched has not been carried out - The Assessing Officer recorded the satisfaction in the case of such other person which does not satisfy the condition of assuming jurisdiction under Section 153C. Moreover, no original satisfaction note is available on record - The photocopy of the satisfaction note does not bear name of any assessee, name of the Assessing Officer or any seal of the Assessing Officer - satisfaction note cannot be said to be a valid satisfaction note within the meaning of Section 153C – Decided in favor of Assessee. Period of limitation - Held that:- since the Assessing Officer of the person searched and the Assessing Officer of such other person was the same, no handing over or taking over of the document was required. That Section 153C(1) and its proviso have to be read together in a harmonious manner. - the Assessing Officer of the person searched and the Assessing Officer of such other person is the same Since in this case satisfaction is recorded on 21st June, 2010 and notice under Section 153C is also issued on the same date, then only conclusion that can be drawn is that the Assessing Officer of such other person has taken over the possession of seized document on 21st June, 2010. Accordingly, as per Section 153(1), the Assessing Officer can issue the notice for the previous year in which search is conducted (for the purpose of Section 153C the document is handed over) and six assessment years preceding such assessment year. Now, in this case, the previous year in which the document is handed over is 1st April, 2010 to 31st March, 2011. The Assessing Officer has issued notice under Section 153C for AY 2004-05 which is clearly barred by limitation. Therefore, issue of notice under Section 153C issued by the Revenue cannot be sustained on both the above counts, i.e., it is legally not valid as conditions laid down under Section 153C has not been fulfilled and it is barred by limitation.

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• 2013 (9) TMI 122
  Applicability of section 194J of the Income Tax Act - The assessee, a Private Limited Company, is engaged in the business of providing third party administration services (TPA) on health insurance issued by the Insurance Companies and is governed by the Insurance Regulatory and Development Authority (IRDA) - Assessee was not deducting TDS on the payments made to the hospitals Assessee contended that he was not obliged to make TDS in respect of the payments made to the hospitals as such payments do not fall within the ambit of s. 194J of the Act Held that:- Relying upon the judgment of the Bombay High Court in the case of Dedicated Health Care Services TPA (India) Pvt. Ltd Others v. ACIT Others [2010 (5) TMI 98 - BOMBAY HIGH COURT], it was held that the assessee was required to deduct tax at source under the provisions of s. 194J of the Act for the payments made to the hospitals. Applicability of section 194J on the professional fee part of the composite bill paid to the hospitals Held that:- Reliance has been placed upon the judgment in the case of Arogya Sri Health Care Trust v. ITO [2012 (4) TMI 400 - ITAT HYDERABAD ], wherein it has been held that it is only the element of fee for professional services comprise in each of the payment made by assessee trust to the hospitals which falls which falls within the scope of s. 194J of the Act. Elements of payment towards bed charges, medicines, follow up services, out-patient services, transportation charges, implants, expenditure incurred for conducting camps at village levels, do not strictly fall within the scope of fee for professional services which alone can be considered as falling within the scope of the provisions of s. 194J of the Act. Direct the assessing officer to bifurcate the payments made by the assessee trust to the hospitals into various elements as noted above and confine the demand raised in terms of s. 201(1) of the Act, only to the payments which assume the nature of fee for professional services In the present case, the matter restored to the file of A.O. so that he can file the list of payments made by it to the hospitals duly bifurcated into various elements. Period upto which interest is chargeable u/s 201(1A) of the Income tax act in the instant case - Interest chargeable under section 201(1A) of the Act has been calculated up-to the due date of filing of return(s) instead of calculating the same till the date of payment of taxes by the deductees Held that:- Relying upon the decision in the case of Solar Automobiles India (P) Ltd v. Deputy Commissioner of Income-tax reported in [2011 (9) TMI 637 - KARNATAKA HIGH COURT], it has been held that AO has to find out whether the creditors (hospitals) have filed their returns and paid the taxes. If they have filed the returns and paid the taxes, the liability of the asessee ceases from the day they have paid the taxes.

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• 2013 (9) TMI 121
  Charitable purpose u/s 2(15) - livestock - whether livestock does not come under the definition of charitable purpose. - refusal to grant registration u/s 12AA - Violation u/s 11 - Commissioner of Income-tax considered the application under the provisions of section 2(15) - when he sought to correlate the income generated whether was from business activities or from charitable activities and came to conclude that maintenance of livestock does not come under the definition of "charitable purpose" and also does not come within the meaning of any other objectives of general public utility as regular business of selling of milk for maintenance of "goshala" is being carried on by the assessee-trust, and holding so he again denied to give registration to the assessee under section 12A Held that:- charitable activities may have bent up profit making activities but is incidental to the activities carried out in so far as it has also been held that a cow renders income to the trust which Goshala is maintained by the trust. It is immaterial that the trust has been formed on the basis of transferring of the assets of the proprietorship concern which as per the trust deed has been given free of cost to the trust as part of the charity by the trustees themselves. A corpus therefore was formed on the basis of the assets rendered to the trust by the sole proprietorship which has to be assessed in accordance with the provisions of the Income-tax Act by the Assessing Officer and in no way interfered with the granting of registration to the assessee-trust by the learned Commissioner of Income-tax. Even the learned Departmental representative has not been able to establish that a violation of section 11, which was not the issue for consideration by the learned Commissioner of Income-tax for granting registration under section 12AA has been made. - registration u/s 12AA to be allowed - decided in favor of assessee.

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• 2013 (9) TMI 120
  Basis of selection of comparables in Transfer Pricing – Held that:- There is no legal binding precedence on the issue of selection of most appropriate method, selection of comparable companies, selection of comparables transactions for benchmarking etc. as these are fact based and vary from company to company - Law and the rules be applied first, arguments be based on them and broad proposition relied upon when situations warrant – For choosing comparables, time should be devoted to the nature of the companies’ business operations, nature of transactions, FAR analysis - The logic or reasons behind selection of comparables for benchmarking and supporting the T.P. Study should be based on the Act and Rules rather than picking up orders of different benches on the ground that they are precedent, that too without reference to the facts and nature of transactions. Capping of adjustment in Transfer Pricing Transaction - Transfer pricing adjustment cannot exceed the total profits earned by the group – Held that:- Neither the Act nor the Rules provide for such capping of an adjustment. Such an exercise is not permissible under the Transfer Pricing provisions but also, it is not practical as the profits of the entire group are not subject to scrutiny of the Indian authorities. Multinationals have innumerous types of business and have multiple locations with multiple AEs and to lay down such a proposition would make the transfer pricing provisions unworkable. Under the Indian law, the T.P.O. is given a mechanism to determine ALP and make an adjustment. Such power is not subject to the acts of the assessee or it’s A.E. in different jurisdiction. No Transfer pricing adjustment required as the assessee’s income is liable to deduction u/s 10A – Held that:- Relying upon the judgment in the case of Aztec Softwar [2007 (7) TMI 50 - ITAT BANGALORE], the contention of the assessee is rejected – Transfer Pricing adjustment to apply. Adjustment in Transfer Pricing due to risk factor involved - Assessee has come out with this claim of being a captive service provider and hence an adjustment has to be given – Held that:- Any claim for adjustment, on the basis of risk or any other factors, has to be based on proper data and sound calculation. Ad hoc adjustments should not be granted as it becomes discretionary. The adjustment cannot be used to leverage the desired results, so as to prove or disprove the assessee’s claim that its transactions with the AE are at arm’s length – Rejected the claim of the assessee on the ground that the same is not supported by proper data and material – Decided against the Assessee. Principle of consistency in Transfer Pricing adjustment - TPO has not made any adjustment in the earlier years and on the principle of consistency no adjustment should be made in the current year – Held that:- Transfer Pricing Officer in the A.Y.2005-06 has not exercised his mind in the lines and in the manner in which the TPO has done in this year - The material available with the TPO in the current year is vastly different to the material available with the TPO in the earlier year. In such circumstances, the principle of consistency does not hold water – Decided against the Assessee. Comparables for Transfer Pricing to be internal of external comparables only - Whether internal comparables has to be taken and if not as to whether the selection of comparables, when external comparables are taken, is correct or not – For application of internal comparables, the assessee argued that under the rules the margin of the single transaction has to be compared to the margin of another transaction, or at best the group of similar transactions and under those circumstances, the volume is not criteria for rejecting the internal comparables. Reliance was placed on Rule 10B(1)(e) - The Revenue relies on Rule 10B(2)(d) – Held that:- Requirement of transaction margins being compared at a transaction level or at the level of a class of similar transactions, does not warrant comparing miniscule transactions with large transaction for the purpose of benchmarking. Benchmarking of transactions at the transaction level does not warrant ignoring the principle or concept of materiality. The facts and circumstances of each case has to be seen. At the same time reliance placed by the learned DR on Rule 10B(2)(d) is not correct as the same does not apply to the factual situation. This Rule refers to external conditions and not to the miniscule nature of the comparable uncontrolled transactions. Rule 10B(1)(e) relied upon by the assessee also does not come to its rescue as the Rule does not lay down as to which transaction can be taken as a comparable uncontrolled transaction for the purpose of benchmarking the net profit margin with the controlled transaction. Thus the reasoning of both the parties on the issue does not fit into the facts of this case and has to be rejected. In the present case, in the assessment year 2007-08, the assessee has uncontrolled comparable transactions with third parties in export segment to the tune of 15% of total turnover - It has uncontrolled transactions with the third parties in the domestic sector to the tune of 10% of the total turnover. Thus the uncontrolled transactions are significant part of total turnover of the assessee. The argument of the TPO for both the years is that the comparable is miniscule in nature and fails on the comparability of volumes or scale of operation. This argument and finding of the TPO is factually incorrect for the A.Y. 2007-08. 15% of the total turnover is sufficient sample which can be used for the purpose of benchmarking, provided the transactions are functionally comparable. Even domestic uncontrolled transactions are about 10%. In case domestic transactions are functionally comparable these transactions can be used for benchmarking – Internal comparables can be taken for the purpose of computation of Transfer Pricing adjustments, provided the nature of transactions and the functions in these transactions has been examined.

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• 2013 (9) TMI 119
  Disallowance u/s 14A - Held that:- The Assessing Officer while making the disallowance under section 14A has worked out the disallowance as per rule 8D of the Income-tax Rules, 1962 which according to the decision in the case of Godrej and Boyce Mfg. Co. Ltd. [2010 (8) TMI 77 - BOMBAY HIGH COURT] is not applicable for the assessment year 2007-08. However, before the learned Commissioner of Income-tax (Appeals) the assessee has filed working of disallowance under section 14A amounting to Rs. 31,69,778. The learned Commissioner of Income-tax (Appeals) in violation to rule 46A of the Income-tax Rules, 1962 and without giving any finding on the examination of the working given by the assessee has accepted the working submitted by the assessee. Therefore, in the interest of justice, it is fair and reasonable that the matter should go back to the file of the Assessing Officer and accordingly we set aside the order passed by the Revenue authorities on this account and restore the same to the file of the Assessing Officer to examine the same afresh - Decided in favour of assessee. Disallowance of service tax under section 43B of the Act. - Held that:- as per the law prevailing during the previous year, the liability to pay the same arises only on receipt by the assessee. Since the liability to pay service tax does not exist in the present case, the service tax cannot be said to be 'payable' and therefore provisions of section 43B of the Act could not also be invoked - Following the decision in Chowringhee Sales Bureau P. Ltd. v. CIT [1974 (6) TMI 5 - CALCUTTA High Court], Asst. CIT v. Real Image Media Technologies P. Ltd. [2007 (12) TMI 263 - ITAT MADRAS-C] decided in favor of assessee. Capital expenditure or revenue expenditure - Held that:- In the absence of any contrary material placed on record by the Revenue against the above factual matrix, we are of the view that the Assessing Officer was not justified in treating the maintenance of software expenses as capital expenditure and the learned Commissioner of Income- tax (Appeals) has rightly deleted same. However, it has been agreed by learned counsel for the assessee that if the said expenditure is treated as revenue expenditure, the depreciation is not allowable and he agreed for the disallowance of the same and accordingly to this extent the order passed by the learned Commissioner of Income-tax (Appeals) is modified.

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• 2013 (9) TMI 118
  Disallowance of partners’ salary from undisclosed income - AO disallowed an amount of Rs.23,98,795/- by holding that the amount of Rs.65,00,000/- disclosed during the course of the survey to be treated separately as ‘deemed income’ and the allowable salary to be worked out on the balance profit in accordance with the partnership deed and provisions of 40(b) of the Act – Held that:- once the amount has been assessed as business income, remuneration admissible to partners in terms of the partnership deed has to be allowed in accordance with and within the limits stipulated under the provisions of sec. 40(b) of the Act. In the present case, relying upon the above decision it was decided to grant the deduction in respect of salary worked out as per the provisions of Section 40(b) of the Act and in accordance with the partnership deed from the undisclosed income disclosed during the course of survey considering the same as business income – Decided against the Revenue.

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• 2013 (9) TMI 117
  DTAA between US & India - Royalty or sale of copyrighted articles / softwares - assessing officer assessed the entire payments in the hands of MRSC as royalty income on the ground that payments have been received towards licensing of Microsoft software products which amounts to grant of right in Intellectual property Rights (IPRs) - whether the sale of “off the shelf software product” by US based non-resident companies to independent Indian distributors is taxable in the hands of such non-resident companies as royalties within the meaning of Explanation 2 to section 9(1)(vi) of the Act as well as under Article 12 of Double Taxation Avoidance Agreement between India and US - During the course of assessment proceedings the assessing officer noted that on 1/01/1999 Microsoft Corporation granted M/s. Gracemac Corporation, the assessee, a hundred per cent subsidiary of Microsoft Corporation, licence to manufacture and distribute all MS retail software products - It clearly provides that product is protected by copyright and the other intellectual property laws and treaties, and that Microsoft (or its suppliers of software code, if any) own the title, copyright and other intellectual property rights in the product - user is paying for getting a copy of the software and not certain limited rights in software, which rests with the copyright owner of the software programme - There is nothing either in the Income tax Act or Indo-US DTAA that once a case falls in one of the clauses of Explanation 2 of section 9(1)(vi) it cannot be considered in any other clause. Held that:- though the amount constitute royalty, but the same is not assessable in the hands of the present assessee. - such royalty cannot be assessed in the hands of the assessee as it will tantamount to assess the same income which has been assessed in the hands of Gracemac and it has been held by the Tribunal that the aforementioned amount of royalty cannot be assessed in the hands of the assessee as the same is taxable in the hands of the Gracemac - Following decision of Gracemac Corporation Versus Assistant Director of Income-tax, International Tax Division, Circle 2(1), New Delhi [2010 (10) TMI 583 - ITAT, DELHI] - Decided partly in favour of assessee.

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• 2013 (9) TMI 116
  Disallowance and adding back of losses of 10A units while computing income - Held that:- AO has considered the correspondence and documents of assessee with STPI and also information sought by AO from Director STPI and has held that both these units are merely an expansion of existing unit and not independent undertakings. Therefore, we consider it prudent to set aside the orders of authorities below and restore the matter to file of AO for the limited purpose to re-examine as to whether Unit Nos. II & III set up by assessee are independent units to the existing undertaking or merely an expansion of the existing undertaking in the light of principles laid down by Co-ordinate Bench decision in the case of Patni Computer Systems Ltd. Versus Deputy Commissioner of Income-tax, Circle-4 [2011 (6) TMI 500 - ITAT PUNE] and also in the light of letters including letter dt. 10.12.2008 issued by Director STPI and also on the basis of such evidences as may be filed by assessee after giving due opportunity of hearing. With these directions, the matter stands restored to AO - Decided in favour of assessee. Transfer pricing adjustment - Held that:- net profit margin is to be considered qua the comparable uncontrolled transaction or number of such uncontrolled transactions. Uncontrolled transaction has been defined in Rule 10A(a) to mean “a transaction between enterprises other than associate enterprises, whether resident or non-resident”. Rule 10B(1)(e) in juxtaposition to Rule 10A(a). The position which emerges is that in applying the TNMM, net profit margin realized from a comparable uncontrolled transaction is to be taken into consideration. The conditions thus envisaged for making a case as comparable for this purpose, should not only be comparable but also have uncontrolled transaction. These twin conditions need to be cumulatively satisfied. If such other case is only comparable but has controlled transaction or vice-versa, it shall fall outside the ambit of list of comparable cases - TPO suggested to make adjustment only by comparing the rate of commission paid to AE on First Notice and no case has been brought on record that commission paid by assessee to AE @ 15% is excessive. Further we observe that Ld. CIT(A) has held that similar issue was also considered in the preceding assessment year 2004-05 and similar adjustment made were not agreed to and it was held that assessee’s transaction with AE in respect of commission was at Arm’s Length - Decided in favour of assessee.

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• 2013 (9) TMI 115
  Deduction u/s 80IB - Deduction allowed on pro-rata basis - Held that:- The appellant’s claim is supported by the decision of Hon’ble Mumbai ITAT in case of M/s. Saroj Sales Organisation [2008 (1) TMI 420 - ITAT BOMBAY-E], wherein on identical facts the Hon’ble ITAT following the Hon'ble Supreme Court decision in the case of Bajaj Tempo Ltd. reported in [1992 (4) TMI 4 - SUPREME Court] has observed that the provisions should be interpreted liberally. even if the units constructed are both smaller and larger units with reference to the stipulated area, the profit derived from the construction of the smaller units i.e., within the stipulated area of 1,000 sq.ft. built-up area ought to be allowed as deduction under section 80IB(10) of the Act. The theory of pro-rata deduction is approved and held the deduction under section 80IB on pro-rata basis meets the objectives of the provisions of section 80IB. The Hon’ble ITAT Bangalore Bench in the case of DCIT v/s Brigade Enterprises Pvt. Ltd. [2008 (8) TMI 453 - ITAT BANGALORE-A] has held that the disallowance if any will have to be restricted to the extent of noncompliance of the provisions. This rule of proportionately is well founded in the income tax law and is recognized under various provisions of the Act. The Hon’ble ITAT Chennai in the case of Arun Excello Foundation Pvt. Ltd. v/s ACIT (2007 (2) TMI 264 - ITAT MADRAS-A) has also upheld the pro-rata deduction on eligible residential units. Thus, respectfully following the above judgments of the various ITAT and Courts and particularly the jurisdictional ITAT in the case of Saroj Sales Organisation (supra), Assessee is entitled for deduction under section 80IB on pro-rata basis. The A.O. is therefore, directed to allow the deduction under section 80IB(10) on pro-rata basis as discussed above - Decided against Revenue.

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• 2013 (9) TMI 114
  Disallowance made out of the interest claimed under section. 36(1)(iii), being the differential amount of interest paid on the borrowings and that charged on the advances to associate concerns - decline in the rate of interest charged from sister concerns - Held that:- in the absence of direct nexus between the funds borrowed and advances made, no disallowance can be made - Decided in favor of assessee. Addition u/s 40A(2) - difference in interest charged from the sister concern and interest paid to bank - Held that:- Assessing Officer has not challenged the genuineness of business expenditure but made the above addition of differential interest on the ground of reasonableness or because the transaction is adversely interpreted by him. Similar Interest has been paid in the preceding assessment years but no addition was made. As per facts the interest has been paid wholly and exclusively for the purposes of the business, hence, the reasonableness can not be doubted and the same can not be disallowed partly. Nature of transaction of purchase and sale of units - application of section 94(7) - held that:- section 94(7) applies to any person that buys or acquires any securities or unit within a period of 3 months prior to the record date; if such person sells or transfers such securities or units within a period of 3 months after such date. - s regards the amendment w.e.f. 1-4-2005 by which the period of sale or transfer of the unit has been extended from 3 months to 9 months, it is observed that the amendment is clearly prospective and in no way can be said to be clarificatory in nature so that it can apply to Assessment Year 2004-05. The language used in the amended section 94(7) is plain and unambiguous. - Decided in favor of assessee. Receipt of dividend subsequent to the purchase of units, - As regards the observation made by the Assessing Officer that the units have been transacted in a way that the appellant had indulged in this device of dividend stripping with a view to reducing the tax liability, it is observed that the Assessing Officer has simply accused the appellant without bringing any material on record to substantiate such accusation. It is pertinent to note that the concerned mutual fund is a SEBI approved and recognized one. It is not the Assessing Officer’s case that SEBI is a party to such colorable device. - Decided in favor of assessee. Disallowance of interest and other expenditure by invoking section 14A of the Income Tax Act as the funds were utilized in investments for earning exempt income - Learned Commissioner of Income Tax (Appeals) deleted the disallowance on the ground that the disallowance was made by the Learned Assessing Officer without any correlation or nexus having been established between such expenditure and dividend income. According to the Learned Commissioner of Income Tax (Appeals) it was a notional disallowance which cannot be upheld – Held that:- Disallowance of interest and other expenditure was also made in earlier years on earning of exempt dividend income – Matter remanded to the A.O. for disallowance of interest and other expenditure in the light of the decision of Hon’ble Bombay High Court in the case of Godrej and Boyce Mfg. Co. Ltd. v. Deputy Commissioner of Income-tax [2010 (8) TMI 77 - BOMBAY HIGH COURT] – Decided in favor of Revenue.

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• 2013 (9) TMI 113
  Software expenditure, a revenue in nature of capital in nature – Held that:- Considering the nature of licences purchased by the assessee, being software of MS Office and Marketing Data Management System which facilitated the operations of the company and has no enduring benefit, the expenditure can only be considered as revenue in nature - Having regard to the fact that software becomes obsolete with technological innovation and advancement and life of the software being less than two years, the expenditure is rightly treated as revenue expenditure – Also, reliance has been placed upon the judgment Amway Enterprises [2008 (2) TMI 454 - ITAT DELHI-C], wherein it has been held that for ascertaining as to whether the expenditure on computer software gives an enduring benefit to an assessee, the duration of time for which the assessee acquires right to use the software becomes relevant. Website development charges, a capital expenditure or revenue – Held that:- Reliance has been placed upon the judgment in the case of CIT vs. Indian Visit.com P. Ltd [2008 (9) TMI 8 - DELHI HIGH COURT], wherein it has been held that just because a particular expenditure may result in an enduring benefit would not make such an expenditure of a capital nature. What is to be seen is what is the real intent and purpose of the expenditure and as to whether there is any accretion to the fixed capital of the assessee. In the case of expenditure on a website, there is no change in the fixed capital of the assessee. Although the website may provide an enduring benefit to an assessee, the intent and purpose behind development of a website is not to create an asset but only to provide a means for disseminating the information about the assessee. The same could very well have been achieved and, indeed, in the past, it was achieved by printing travel brochures and other published materials and pamphlets. The advance of technology and the wide spread use of the internet has provided a very powerful medium to companies to publicize their activities to a larger spectrum of people at a much lower cost. Websites enable companies to do what the printed brochures did but, in a much more efficient manner as well as in a much shorter period of time and covering a much large set of people worldwide – Relying upon the above judgement it has been held in the present case that the expenditure in website development be a revenue expenditure – Decided in favor of Assessee.

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• Customs

• 2013 (9) TMI 142
  Detention under COFEPOSA - Fair Chance of Representation - Whether if a person was detained under COFEPOSA and due to which he could neither file proper reply nor appear for personal hearing granted to appellant, can it be said that Shri. Niranjan Puthran was given a fair chance of representing the case for appellants since at the material time, Shri. Niranjan Purthan was the only person who was conversant with the facts of the whole case and his presence was absolutely necessary at the time of inquiry of the notice - Held that:- There was no reason to entertain the proposed question of law as the present proceedings were against the appellant and not against Mr. Niranjan Puthran - In the circumstances he had no independent right to be heard before passing of any order against the appellant which was a private limited company having five more Directors - It was pertinent to note that none of the other Directors have at any time even suggested that the appellant company was prejudiced in the enquiry due to the absence of Mr. Niranjan Puthran - Further, neither had the appellant pointed out how the absence of Mr. Niranjan Puthran during the enquiry proceeding has occasioned failure of justice. The CHA licence which had been revoked belongs to the appellant - The appellant appeared before the Enquiry Officer through an advocate - in the absence of its Director Mr. Niranjan Puthran (being in Jail) it was not possible for it to properly represent its case and the same resulted in prejudice to the appellant - The appellant sought cross examination of all persons save and except Mr. Niranjan Puthran - the statement of Mr. Niranjan Puthran which in the case was against the appellant was accepted by the appellant as the same was never challenged by the appellant. The issue of breach of natural justice was an after thought particularly so in views of the fact that the appellant took up this stand only after passing of the final order - It was not the case of the appellant that it was not given proper notice or that it could not appear during the proceeding leading to miscarriage of justice - Moreover, it must be pointed out that even before us the appellant has not indicated how the availability of Mr. Niranjan Puthran would have resulted into the charges against the appellant being dropped. In case parties are allowed to raise fresh plea after conclusion of original and first appellate proceeding, no dispute would even come to an end - Decided against Petitioner.

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• 2013 (9) TMI 141
  Seizure of goods - Gold coins of foreign origin seized on the belief of being smuggled into India - Held that:- Gold with foreign markings when recovered from the possession of a person and the person from whose possession it was recovered - failed to explain reasonably about the licit procurement of such gold to the officers - the same was liable for seizure and confiscation - as gold was a notified goods u/s 123 - the burden lies on the Appellant to satisfy the authorities that the gold biscuits that were seized from their possession, not only procured legally by them from the NRIS as claimed by them - but also the gold were licitly brought into India - on which appropriate Customs duty had been discharged – the sale letters issued by the respective vendors were no doubt relevant and might carry some evidentiary value - but would definitely require corroboration in the form of documentary evidence of licit import of the gold by the respective NRI vendors. Confiscation of goods u/s 111(d) - whether the description of the gold as mentioned in the seizure list tallies with the description shown in the baggage receipts - in the case of 05 pieces of gold biscuits seized claimed to be covered under baggage receipt No.16891 - the description in the baggage receipt more or less tallies with the description mentioned in the seizure list – Thus absolute confiscation of 05 pcs. of gold biscuits seized cannot be sustained - the other one piece of gold biscuit the description mentioned in the seizure list as 'Swiss Bank Corporation', does not at all conform to the description shown in the baggage receipt no.16891 - the absolute confiscation of the other one piece of gold biscuit was upheld. Penalty u/s 112 – as confiscation of five gold coins were set aside – thus the penalty was also reduced accordingly – decided partly in favour of assessee.

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• 2013 (9) TMI 140
  Validity of order – stay application - whether the CESTAT order should be accepted or an appeal should be filed – Held that:- the act of the revenue clearly shows that the departmental officers had no respect to the orders of the Tribunal as well as the orders of the Hon'ble High Court of Bombay - the concerned officer was directed to comply with the order of the Hon'ble High Court of Bombay within 2 days – failing which show-cause notice will be issued to the concerned officer - Tribunal dismissed stay application and also dismissed the appeal filed by the revenue - revenue was bound by the undertaking given by the Revenue to comply the order – decided against the revenue.

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• 2013 (9) TMI 139
  Condonation of delay in filing appeal - Appeal had been dismissed on the ground of being beyond the period prescribed u/s 128 - Held that:- Assesses were found to had been bona fide pursuing in a wrong forum for a remedy - the time taken by the assesse in litigation before the Hon’ble Bombay High Court was to be excluded for calculating the time for filing the appeal before the Commissioner (Appeals) - the time taken by the appellant in litigation before the Hon’ble Bombay High Court was excluded then the appeal filed before the Commissioner (Appeals) was within the time - Section 14(2) was applicable to the facts and circumstances of the case - following the judgement of Vijay Brothers & Others v. UOI [1988 (8) TMI 112 - HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH] - order set aside - directing the respondent to take the appeal on file and to dispose of the same on merits – order set aside - matter remanded back to the Commissioner (Appeals) to consider the issue involved in the matter on merit and thereafter pass an appropriate order after giving a reasonable opportunity to the assesse – Decided in favor of assesse.

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• 2013 (9) TMI 138
  Appeal of order - Whether an order passed by the Commissioner of Customs u/s 110A can be appealed against before the Tribunal - Held that:- appeal was not maintainable before the Tribunal against the order u/s 110A of provisional release of goods pending the order of adjudication – relying upon Shanti Alloys Pvt. Ltd. v. CC, Bangalore [1999 (8) TMI 467 - CEGAT, MADRAS] - The order in respect of provisional release of the goods was an interim order pending order of the adjudicating authority and the appeal was not maintainable before the Tribunal - The judicial proprietary demands that the decisions of the Divisional Bench was to be followed in preference over the decision of the Single Member which was passed without taking into consideration the earlier decision passed by the Division Bench. Any goods, documents or things seized under Section 110, may, pending the order of the adjudicating authority, be released to the owner on taking a bond from him in the proper form with such security and conditions as the adjudicating authority may require - the adjudicating authority can release the goods seized u/s 110A on taking a bond from him in the proper form with such security and conditions - Decided against assesse.

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• Corporate Laws

• 2013 (9) TMI 137
  Maintainability of Petition - Arbitration clause - Permanent Injunction - Petition was made to the High Court of Delhi for a Permanent Injunction restraining infringement of a registered trademark, infringement of copyright, passing off of damages, rendition of accounts of profits u/s 8 r.w Section 5 of the Arbitration and Conciliation Act - High Court Rejected the Application holding that that earlier agreements which contained arbitration clause stood superseded by a new contract arrived at between the parties by mutual consent - Held that:- Parties had entered into a fresh contract contained in the Exit paper which does not even indicated any disputes arising under the original contract or about the settlement thereof, it was nothing but a pure and simple novation of the original contract by mutual consent - Exit paper clearly indicated that it was a mutually agreed document containing comprehensive terms and conditions which -admittedly does not contain an arbitration clause. The High Court was right in taking the view that it was not a case involving assertion by the respondent of accord a satisfaction in respect of the earlier contracts - If that be so, it could have referred to arbitrator in terms of those two agreements Following Union of India v. Kishorilal Gupta and Bros. [1959 (5) TMI 37 - SUPREME COURT] - The principle laid down was that if the contract was superseded by another, the arbitration clause, being a component part of the earlier contract, falls with it - But where the dispute was whether such contract was void ab intio, the arbitration clause cannot operate on those disputes, for its operative force depends upon the existence of the contract and its validity.

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• Service Tax

• 2013 (9) TMI 146
  Cargo Handling services - Appellant/assessee entered into an agreement with Kota Thermal Power Station, Kota Rajasthan, inter alia for execution of works for smooth operation of coal handling system including clearing under coal handling operation circle for meeting coal consumption requirements of KTPS units stage (I) to (IV) by unloading of coal wagons at WT No. 1 to 5 and others specified operations in relation thereto – Demand made from assessee regarding coal handling service to KTPS involving service tax liability – Held that:- As per the judgement of High Court of Rajasthan in S.B. Construction Company Vs. Union of India [2006 (8) TMI 28 - HIGH COURT OF JUDICATURE FOR RAJASTHAN (JODHPUR)], High Court ruled that since coal is handled/moved from railway wagons to the site of Thermal Power Station with the aid of the wagon tipping system, to be fed in boiler bunkers through a conveyor system; handling of the coal was through mechanical devices and no motor vehicle was involved in the said handling, it was not a case of Cargo Handling Service The Court further held that the Circular dated 1.8.2002 (earlier referred to in this judgement) also supports the assessee’s claim to immunity to service tax under the category of cargo handling agency service. The Rajasthan High Court proceeded to hold that in the case before it the service provided by the appellant under the contract is a distinct activity of transporting coal from wagons to the site of Thermal Power Station by conveyor belt and not by means of any transportation and the service rendered is not cargo handling service, liable to service tax. Further, Full bench of the Hon’ble Tribunal in Madura Coats Vs. CCE [1995 (10) TMI 128 - CEGAT, MADRAS] clarified that where a conflict of decisions among High Courts does not relate to interpretation of statutory provisions or a notification (and not vires thereof) the decision of the jurisdictional High Court which has jurisdiction in respect of the authority which adjudicated the matter initially and of the assessee and has taken a particular view of interpretation or proposition of law, must be followed in cases falling within that jurisdiction - Decision of Orissa High Court in Coal Carriers Vs. CCE - [2011 (2) TMI 1140 - ORISSA HIGH COURT] which is in favor of revenue is not applicable in this case - Since the Rajathan High Court in S.B. Construction has interpreted Section 65(23) of the Act, in favour of the assessee the assessee must succeed Extended period of limitation – Held that:- Supreme Court in Uniworth Textiles Ltd. Vs. CCE [2013 (1) TMI 616 - SUPREME COURT], analysed the scope of Section 28 of the Customs Act, 1962 and having considered several earlier judgements on the appropriateness of invoking the extended period of limitation in the said provision of Customs Act, concluded that the expression ‘willful’ which precedes the phrase ‘mis-statement or suppression of facts’ clearly indicates that there must be an intention on the part of the assessee to evade duty; that mere failure to declare does not amount to wilful suppression of fact nor mere contravention of any provision would be sufficient to legitimise invocation of the extended period of limitation. Held that:- In the facts and circumstances of this case that the assessee was persuaded by the ambiguity of Board’s circular dated 1.8.2002 to assume that it was immune to the liability to service tax, since its contractual activity did not involve onward transportation of the coal unloaded from wagons within the premises of the Kota Thermal Power Plant. In the facts and circumstances of the case, we do not consider it appropriate or necessary to pursue an analysis of whether the petitioner was at all involved in the activity of unloading coal from the rail/wagons as part it is contractual obligation - Appeal must succeed and is accordingly allowed – Decided in favor of Assessee.

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• 2013 (9) TMI 145
  Refund claim under Rule 5 of CENVAT Credit Rules, 2004 read with Notification No.5/2005-CE dated 14.03.2006 - Denied refund of the credit under Rule 5 of the CENVAT Credit Rules to the Appellant on the ground that service tax paid under Section 66A(1) of the Finance Act, 1994 was not listed under Rule 3(1) of the CENVAT Credit Rules and hence, no CENVAT Credit could be allowed on the said amount of service tax paid and accordingly, no refund was admissible under Rule 5 of the CENVAT Credit Rules – Held that:- The payment of service tax under Section 66A(1) had been subsequently inserted as clause (ixa) in Rule 3(1) of the CENVAT Credit Rules, 2004 by amending the said Rule and giving retrospective effect to the said amendment from 18.04.2006. Hence, the refund of CENVAT Credit on the said input service is admissible under Rule 5 of the CENVAT Credit Rules. Accordingly, the Appeal is allowed to this extent. Regarding Appeal No.E/A/295/11, amount of refund claim was rejected on the ground that the said amount pertained to the earlier quarter and hence, cannot be admissible as refund for the quarter in which the goods were exported – Held that:- Central Government’s Circular No.120/01/2010-ST dated 19.01.2010 issued from F.No.345/268/2009-TRU by the Government of India, Ministry of Finance, Department of Revenue (Tax Research Unit), is very clear in this respect. Hence, the refund claim is admissible to the Appellant. Accordingly, the Appeal is allowed to that extent. Regarding few other amount, ld – Held that:- Chartered Accountant has conceded that the respective bills do not relate to the Appellant and hence, refund of the same not admissible to them. Regarding rest of the amount – Held that:- Both sides agreed that the same are required to be examined and verified afresh, by the Adjudicating Authority and the matter should be remitted to the Adjudicating Authority for a fresh decision.

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• 2013 (9) TMI 144
  Refund on Invoices issued - Whether the appellant is eligible for the refund when invoices issued by Courier do not show IEC No. of service receiver which is a requirement in the notification –Appellant relying on RAMDEV FOOD PRODUCTS PVT. LTD. V/s CCE, AHMEDABAD (2011 (3) TMI 1256 - CESTAT, AHMEDABAD (Tri.-Kolkatta) – Held that:- appellant is eligible for the refund - on the date of filling claims, the requirement of notification is satisfied. Refund on exports - Whether the appellant is eligible for the refund in respect of exports made prior to the date on which service was included in the notification or not –Held that:- This is a rectifiable defect and the matter was remanded - appellant should have been given another opportunity - both the orders and appeals are set aside – appeal decided in the favor of assessee.

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• 2013 (9) TMI 143
  Event Management services - appellant entered into an agreement with Unicef for providing services – appellant contended that services provided to Unicef are exempted in terms of notification no.16/2002-ST – Revenue contended that the benefit of the said notification cannot be extended to the appellant on the ground that the services does not stand provided by them directly but they have provided the services to some other party, who had further provided the said services to Unicef – Held that:- Service was provided to Unicef has led to a bona fide belief on the part of the assessee to entertain a view that no further service tax is required to be paid by them. Limitation period – limitation invoked by the department rejected by the court – services on the Even Management Services being provided by them and ST-3 returns were being filed - lower authorities have not produced any evidence on record to show that the appellant was not including the value of the disputed services in their ST-3 Returns with any malafide intent – stay application allowed in the favour of the appellant.

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• Central Excise

• 2013 (9) TMI 136
  Assessable value under Rule 10A of Central Excise Valuation Rules – Supply to chassis - stay - whether body builders are job-workers - Interpretation of Provisions - Held that:- Prima facie the present issue cannot be said to be akin to the case of clandestine removal of goods - The applicants had been paying excise duty on the basis of assessable value determined by them by taking into consideration the cost of chassis, cost of own raw material & convention charges, whereas the department proposed to determine the assessable value under Rule 10A of Central Excise Valuation Rules, 2000. While deciding the issue in AUDI AUTOMOBILES Versus COMMISSIONER OF CENTRAL EXCISE, INDORE [2009 (5) TMI 426 - CESTAT, NEW DELHI], the Tribunal has not imposed any penalty observing that it is an interpretation of law. In these circumstances, as the department could not place any contrary evidence to rebut the claim of the Applicants that the total liability in all these cases, would come down to Rupees Seven & Crores and Fifty Lakhs, if the price at which the goods sold by M/s. TML, is considered as a cum-duty price. There was no convincing reply from the department in response to the affidavit filed by the Applicant as to why the price at which the good were sold were not to be treated as cum-duty price in view of the explanation to section 4 - It was the contention of the Revenue that the short payment of duty was similar to the circumstances of clandestine removal of goods. Stay Application - 2 crores were ordered to be submitted as Pre-deposit – stay granted partly.

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• 2013 (9) TMI 135
  Appeal Barred or Not – Doctrine of Merger - Whether once the Commissioner rejects assessee’s appeal against penalty, the revenue’s appeal for enhancement would be barred since the order of adjudicating authority would have merged in the order of the Commissioner rejecting appeal of the assessee – Held that:- The questions raised in the present appeals were answered in favour of the revenue and against the asssessee and it was held that on dismissal of the appeal preferred by the assessee raising the issue with respect to the liability of the assessee for penal action - the appeal preferred by the revenue for enhancement of the penalty against the order passed by the adjudicating authority would not be barred on the ground of merger and consequently would be maintainable, meaning thereby the revenue cannot be said to be debarred from challenging the order passed by the adjudicating authority with respect to the quantum of penalty which was neither the subject matter of appeal before the Appellate Commissioner nor there was any lis between the parties in the said appeal preferred by the assessee nor the Appellate Commissioner had any occasion to consider the issue with respect to quantum of appeal. The doctrine of merger would come into play in a case where in an earlier appeal, the Appellate Authority had considered the issue on merits and/or there was a lis between the parties with respect to a particular issue - Where an OIO may be partly in favour and partly against the party in which event the part that goes in favour of the party can be separately assailed by them in appeal filed before the Appellate Court or authority, but dismissal on merits or otherwise of any such appeal against a part only of the order cannot foreclose the right of the party who was aggrieved by the other part of the order. As the issue with respect to quantum of appeal was not at large before the Commissioner (Appeals) and the appeal preferred by the assessee came to be dismissed with respect to another issue raised, by dismissing the appeal preferred by the assessee answering the issue raised in the appeal i.e. with respect to the liability of the assessee to pay the penalty, it cannot be said that with respect to the quantum of penalty also the order passed by the adjudicating authority was merged into the order of Appellate Commissioner - Question of merger would be applicable only when the issue raised subsequently was already answered directly by the higher appellate authority/revisional authority and/or there was a lis between the parties with respect to the said issue which is sought to be raised subsequently. Commissioner of Central Excise, Delhi Versus M/s Pearl Drinks Ltd. [2010 (7) TMI 10 - SUPREME COURT OF INDIA] - the Hon’ble Supreme Court has considered the doctrine of merger in detail and in extenso - In the said decision the Hon’ble Supreme Court has also considered its earlier decision in the case of Amritlal Bhogilal & Co. (Supra), which has been relied upon by the learned counsel appearing on behalf of the assessee - It was held that as the appeal preferred by the assessee was only against disallowance of the deduction under the two heads and the said appeal being dismissed on merit with respect to the aforesaid two heads only, the subsequent appeal filed by the revenue against the order of adjudicating authority in respect of remaining six heads, was maintainable - It was held that the order of adjudicating authority did not merge with the order in appeal preferred by the assessee as there was finality only with regard to the issues adjudicated in appeal. Whether the assessee was liable for penal action under erstwhile Rule 96ZP(3) of the Rules or not – Held that:- The question posed for consideration in these appeals was required to be held in favour of the revenue and against the assessee by holding that in aforesaid situation, the subsequent appeal and/or the appeal preferred by the Revenue for enhancement of the penalty cannot be said to be barred on the ground of merger - The revenue cannot be precluded from preferring the appeal for enhancement of penalty on the ground that the appeal preferred by the assessee with respect to altogether another issue i.e. with respect to the liability of the assessee for penal action being dismissed. Enhancement of Penalty - The contention on behalf of the assessee that it was open for the CIT(A) to suo moto enhance the amount of penalty while exercising the power u/s 35A of the Act and therefore, when such power was not exercised by the Appellate Commissioner and the appeal preferred by the assessee against the order passed by the adjudicating authority imposing the penalty was dismissed - the appeal preferred by the revenue on enhancement of the penalty would be barred on the ground of merger was concerned - the same cannot be accepted - Merely because such powers were vested with the Appellate Commissioner, the appeal by the revenue for enhancement of the penalty cannot be said to be barred.

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• 2013 (9) TMI 134
  Waiver of pre-deposit – Stay application - Duty free material transferred from one unit to 100% EOU unit – Held that:- The duty demands of Rs.37,17,905/- and Rs.24,68,098/- are in respect of transfer of duty free materials from AOPL, Bhiwadi to AOPL, Noida, which is a 100% EOU. Even if the inputs involving duty of Rs.37,17,905/- have been unauthorisedly transferred from AOPL, Bhiwadi to AOPL, Noida, a 100% EOU the fact remains that AOPL, Noida being a 100% EOU was entitled to procure duty free inputs against CT-3 certificate. Duty evasion by AOPL, Bhiwadi by illicitly diverting the duty free inputs to DTA – Held that:- Allegation is based on concrete evidence on record – Evidence being the documents i.e. entries in the raw material issue register of AOPL, Statements of Partner of DTA unit, statements of managers of AOPL (appellant) etc. Held that:- AOPL, Bhiwadi had not been able to establish prima facie case in respect of duty demand of Rs.1,67,82,443/- and as such, this is not the case for waiver from the requirement of pre-deposit - AOPL, Bhiwadi, are directed to deposit Rs.60,00,000/- (Rupees Sixty Lakh only) within a period of 12 weeks.

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• 2013 (9) TMI 133
  Brand name in SSI exemption – Held that:- the proprietor of the appellant firm has admitted that they have used TECON brand also in addition to their brand. In these circumstances, decision of the lower authority not to allow cross examination cannot be found fault with. According to the definition of brand name or trade name in the notification extending exemption benefit to the SSI unit, brand name or trade name need not have been registered. What is required is that it should have been used by the owner and regularly being used. In this case, there is no dispute that brand name TECON was being used by the owner and there is also no dispute that Techdrive Engineering is the owner - View that TECON that it is not a brand name is not accepted. - assessee is not the owner - Decided against the assessee. Limitation period - Demand is time barred in respect of Sr.No.1 to the Annexure of show-cause notice dated 28/05/2004 - Five years have to be counted from this date and show-cause notice was issued on 08/07/2009 which is more than five years – Held that - Statement was recorded only in the year 2009 and, therefore, it cannot be said that investigation did not complete earlier – As per Hon’ble High Court of Gujarat decision in Neminath[2010 (4) TMI 631 - GUJARAT HIGH COURT] clearly provides that once suppression/misdeclaration is proved, extended period can be invoked. Cum duty price – Held that:- If duty is charged later the amount recovered as per invoice has to be treated as cum duty – Appeal rejected - Matter is remanded to the original adjudicating authority for the limited purpose of working out cum duty realization, amount of duty to be demanded and penalty to be imposed – Decided against the Assessee.

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• 2013 (9) TMI 132
  Determinant of Sale Price - Inclusion of compensation in the Gross value - It was on the basis of certain contractual terms agreed by the parties - For deviation to fulfil contractual terms, the compensation attributable to that influences price - Held that:- Prima facie it appeared that the receipt in the garbs of compensation forms part of transaction value in terms of Section 4 of the Central Excise Act, 1944 - The adjudication finding and the agreement throws light that equity price linked measure adopted by both sides for their defence was moot point shall be looked into elaborately in the cause for regular hearing. Stay Application – Waiver of Pre-deposit - Assesse had not been able to make out a prima-facie case in their favor – 40 lakhs were ordered to be submitted as pre-deposit – relying upon RAVI GUPTA Versus COMMISSIONER OF SALES TAX, DELHI [2009 (3) TMI 200 - SUPREME COURT OF INDIA - Assesse’s submission was that calling for 10% of the duty demand towards deposit shall serve the purpose of exercise of the right of appeal - But Revenue shall be prejudiced, if such meagre amount when our dissatisfaction expressed above come out from the reading of record itself including show cause notice – Stay Granted partly. Member (Technical) was also of the same opinion but the reasoning derived by them was different – therefore he recorded the separate order.

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• 2013 (9) TMI 131
  Manufacturing Activity or trading activity - Sale of Computerized Wheel Aligner - whether buying of five different items, dispatching the same to the customer’s premises under the cover of one invoice and the use of the same in the customer’s premises for checking the alignment of a vehicle would amount to manufacturing activities on the part of the appellant or not - Held that:- The appellants were also helping the customers in digging the pit and connecting all the parts at site for the wheel aligner. It is also on record in the shape of a Chartered Engineer certificate that such connections are temporary and after the job is done, they are taken out and kept individually in the corner of the workshop. The same are again reconnected at the time of the second job. Merely because the appellants were responsible for warranty and after sale services, by itself cannot be held to be a reason for holding the activities of the appellants as amounting to manufacture. No manufacturing activities takes place at the appellant’s end, the confirmation of demand of duty on them was not the legal - No process was being undertaken by the appellant either at their godown or at their factory - It was a case of simpliciter providing of all the components of the wheel aligner to the workshop and to assist the workshop people to use the same by digging a pit and connecting the various items in their premises - The goods were only cleared under one invoice - the goods were not even brought to the factory and were cleared from the godown itself or sometimes directly from the vendor’s premises - The duty was accordingly, set aside along with setting aside of confirmation of interest and penalty imposed upon them. NARNE TULAMAN MANUFACTURERS PVT. LTD. Versus COLLECTOR OF C.E. [1988 (9) TMI 51 - SUPREME COURT OF INDIA] - no new and commercially different commodity, having different name character and use emerges, so as to hold the activity as amounting to manufacture and liable to duty - by making a distinction between manufacturing and packing, it was held that activity undertaken by the appellant was one of packing and not manufacturing. Extended Period - The demand was also hit by bar of limitation - The demand stands confirmed by invoking the longer period of limitation - The appellants were clearing the goods under the cover of their commercial invoices and also reflecting the same in their sales tax returns - If that be so, it cannot be held that the activities being undertaken by the appellants were with any mala fide on their parts - Merely because the appellant did not inform the department, by itself cannot be made a ground to attribute them with any mala fide or deliberate suppression with an intent to avoid payment of duty - When the said trading activities being reflected in the statutory records and in the returns filed with the sales tax authorities, it cannot be held that there was any intent to evade payment of duty, on the part of appellants – Order set aside – Decided in favour of Assessee.

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• 2013 (9) TMI 130
  MRP based duty - clearance of chocolates to Job worker - In the premises of job worker, the “5 Star” and “Dairy Milk Gold” were repacked into assortment packs called “Celebrations”, which were cleared on payment of duty on the value determined under Section 4A i.e. MRP declared on “Celebrations” pack minus abatement. The dispute in this case is about the duty payable on the clearances of “Dairy Milk Gold” and “5 Star” chocolates in cardboard boxes by the appellant to their job worker. - Revenue was of the view that the duty on their clearances would be chargeable on the value determined under Section 4A. Held that:- It had not been shown as to how the 44 gms. “Cadbury Gold” and 20 gms. “Cadbury” “5 Star” chocolate packs were exempt from the requirement of printing MRP under SWM (PC) Rules - Clearance of one type of retail pack for repacking into another type of retail pack - “assortment pack” cannot be said to be for - “use of any industry as a raw material or for the purpose of servicing any industry, mine or quarry” - Moreover under Rule 34(a) of SWM (PC) Rules, for exemption from the requirement of printing MRP - “the marking on the package must unambiguously indicated that it had been specifically packed for the exclusive use of any industry as a raw material or for the purpose of servicing any industry, mine or quarry”. - The provisions of Section 4A were attracted to the case and duty was payable on the value determined u/s 4A Jayanti Food Processing Pvt. Ltd. & Others v. Commissioner of Central Excise, Rajasthan & Others [2007 (8) TMI 3 - Supreme Court] - The plain language of Section 4A(1) unambiguously declared that for its application there had to be the requirement under the SWM Act or the Rules made thereunder or any other law to declare the MRP on the package - If there was no such requirement under the Act on the Rules, there would be no question of application of Section 4A - Thus if the appellant was successful in showing that there was no requirement under the SWM Act or the Rules made thereunder for declaration of MRP on the package, then there would be no question of applicability of Section 4A(1) & (2) of the Act - Even if the assessee voluntarily displayed on the pack the MRP, that would be of no use if otherwise there was no requirement under the SWM Act and the Rules made thereunder to declare such a price - The case of repacking of one type of retail pack into another type of retail pack-assortment pack called “Celebrations” by a job worker cannot be called bulk sale to an intermediary for further sale or distribution in smaller quantities – Decided against assessee.

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• CST, VAT & Sales Tax

• 2013 (9) TMI 147
  Inter-State OR Intra-State Purchases - Despite a billed purchase by the petitioner the AO after formal enquiry branded the transactions of the petitioner with these dealers as fake one - Whether the Tax Board was justified in upholding that the intra-state purchases of Gwar split made by the petitioner assessee were intra-state purchases - Held that:- The Tax Board had committed a manifest error of law in concluding that the sale transactions were intra-State and not inter-State, and that being so the question of law framed by this Court in all these petitions is decided in favour of the assessee and against the Revenue. On examining the assessment orders with bird’s eye view it was amply clear that the assessing authority had not at all cared to verify the genuineness of the bills from the dealers of Gujarat and had categorized those bills as fictitious bills castigating the assessee for camouflaging the transaction - For arriving at the conclusion the enquiry procedure adopted by the assessing authority was per-se an empty formality - It was really strange that when the assesses had produced umpteen material before the assessing authority to show genuineness of the sale transactions why the assessing authority had shown utmost haste in drawing the drastic conclusion that the alleged inter-State transactions were sham and in fact are intra-State sale transactions. State of Kerala Vs. M.M. Mathew & Anr. [1978 (8) TMI 178 - SUPREME COURT OF INDIA] - The methodology, which was pressed into service by the assessing authority for drawing this sort of conclusion solely on the basis of sample transaction and statements of truck owners and drivers prima facie falls short of the requisite enquiry for unearthing the truth - The Court was quite conscious about the fact that evasion of tax was a menace to the society and the revenue authorities acting as watchdogs were empowered to unearth truth for penalizing potential tax evaders - The Court cannot lose sight of a very vital aspect of the matter that no revenue authority should term a genuine sale transaction as a sham on mere conjectures and surmises. Before castigating an assessee for a fake, or spurious transaction, or for his conduct of evasion of tax, a proper and meaningful enquiry was utmost essential which confirmed adherence of principles of natural justice - The assessing authority while categorizing the inter-State sale transactions of the assessee as fake and spurious, had not made any endeavor to verify the facts from the traders of Ahmedabad, nor any effort was made by the assessing authority to examine account books of the dealers - It was a bare requirement for the assessing authority before drawing an inference that the alleged transactions were intra-State transaction and not inter-State transactions. The assessing authority were also required to be set at naught for deciding the matter afresh in the light of observations made by the Court - the matter was remanded back to the assessing authority for making assessment of the tax for the assessment years 1995-96, 1996-97 and 1997-98 afresh after affording reasonable opportunity of being heard to the assessee strictly in accordance with law - Decided in favour of Assessee.

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• Wealth tax

• 2013 (9) TMI 148
  Jurisdiction u/s 18B - Power to reduce or waive penalty - Whether the Commissioner of Wealth Tax had exercised jurisdiction in accordance with parameters set out in Section 18B of the Wealth Tax Act - Held that:- A perusal of the order revealed that the learned Commissioner had passed a nonspeaking order - The order does not indicate the facts that do not signal towards full and true disclosure - No other reason had been assigned whether by reference to Section 18B of the 1957 Act to the facts pleaded by the petitioner. Section 18B empowered the Commissioner of Wealth Tax to entertain an application for reducing/waiver of penalty in accordance with factors detailed in Section 18B and required the Commissioner to pass a speaking order recording whether the facts pleaded fall within the factors enumerated in Section 18B - The matter was remitted to the Commissioner of Wealth Tax, Jalandhar to decide the petition under Section 18B of the 1957 Act afresh – order set aside – Decided in favour of Petitioner.

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