TMI Tax Updates - e-Newsletter
September 8, 2012

Case Laws in this Newsletter:

Income Tax Customs Service Tax Central Excise

Articles

1. TRIBUNAL HAS NO POWER TO ADJUST VAT PAYMENT AGAINST SERVICE TAX

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Mandatory E-Payment of Customs Duty.

2. Rate of Exchange of Conversion of Foreign Currency into Indian Currency or Vice Versa Relating to Imported and Export Goodsnotified; To Come into Effect from 7th September, 2012 .

3. Assessment of Black Money Parked Abroad by Indian.

4. Multilateral Convention in Tax Matter.

5. IT Platform to Integrate Central and State Indirect Taxes Regime.

6. Money Deposited through Bulk Deposits.

7. New Pension Scheme for Workers without benefit of Formal Pension.

8. Surplus Amount of CPSEs for Expansion and Overseas Acquisitions.

9. NPA of Nationalized Banks.

10. CCI issues Order against Chemist & Druggist Association, Baroda.

11. Violation of Accounting Principles.

12. Misuse of Public Issue Funds.

13. ICAI Committee.

14. Frauds in DDCA.

15. Fraud in Reebok India.

Notifications

Customs

1. 48/2012 - dated 6-9-2012 - Cus

Seeks to amend Notification no. 125/2011-Customs, dated 30-12-2011 prescribing preferential rates of customs duty for goods imported under SAARC Free Trade Agreement (SAFTA) so as to reduce the number of tariff lines in the sensitive list for Non-Least Developed Countries (NLDCs)

2. 80/2012 - dated 6-9-2012 - Cus (NT)

Rate of exchange of conversion of each of the foreign currency with effect from 07th September, 2012.

Circulars / Instructions / Orders

FEMA

1. 24 - dated 6-9-2012

Exim Bank's Line of Credit to the Government of Mongolia .

Customs

2. 25/2012 - dated 6-9-2012

Verification mechanism and monitoring of export obligation under duty exemption/ reward Schemes- reg.

3. 24/2012 - dated 5-9-2012

Making E-payment of Customs duty mandatory-regarding.

Highlights / Catch Notes

Income Tax

• Minor Tax Return Errors Shouldn't Block TDS Credit if Form AS26 is Accurate; Assessing Officer Must Notify for Corrections.

  Case-Laws - HC : Once the amount is correctly and rightly reflected in Form AS26, small or technical mismatch in the return should not be a ground to deny credit of the amount paid, in such cases, if the AO feels that benefit of TDS reflected in AS26 should not be given, he should issue notice to the assessee to revise or correct the mistake - HC
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• Assessees can respond to TDS credit issues; Assessing Officer must review responses before adjustments.

  Case-Laws - HC : Difficulties in receiving credit of Tax Deducted at Source - The assessees must be given an opportunity to file response or reply and the reply will be considered and examined by the Assessing Officer before any direction for adjustment is made. - HC
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• Legislature Clarifies Difference Between "Total Income" and "Gross Total Income" for Chapter VI-A Tax Deductions.

  Case-Laws - HC : Deduction under chapter VI-A - The Legislature by using the phrases “total income” and “gross total income” has tried to differentiate between the two - HC
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• Court Rules Machinery Replacement Costs as Capital, Not Revenue Expenditure; Not "Current Repairs.

  Case-Laws - HC : Disallowance expenditure towards replacement of machinery - Revenue OR Capital - not amounting to "current repairs" and to be not allowed as revenue expenditure - HC
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• Depository and Dematerialization Costs Deemed Allowable Business Expenses in Income Tax Ruling.

  Case-Laws - HC : Expenditure on Depository Services and Dematerialisation of share certificates - the expenditure was allowable as normal business expenditure - HC
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• High Court Rules AO's Rejection of Tax Deduction Certificate u/s 197 Invalid Due to Misapplication of Rules.

  Case-Laws - HC : Non issuance of Tax Deduction Certificate (TDC) u/s 197 - AO had rejected the application as the assessee had violated the provisions of TDS and proceedings under Sections 276B and 271C of the Act were pending, but none of these grounds validly form part of reasons for rejecting an application filed by an assessee under section 197(1) read with Rule 28AA of the Rules. - HC
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• Court Rules Valuation Officer's Report Cannot Solely Reject Tax Books, Requires Additional Evidence for Discrepancies.

  Case-Laws - HC : The report of the Valuation Officer cannot form the foundation for rejection of the books of account - HC
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• Court Invalidates VO Reference Due to Lack of Evidence on Unaccounted Investments in Building by AO.

  Case-Laws - HC : Reference to VO is not valid as the AO has not brought any material on record to establish that the assessee had made any unaccounted investment in the construction of the building in question - HC
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• Court Rejects Books of Accounts but Decides No Trading Addition Needed Despite Higher Gross Profit Rate.

  Case-Laws - AT : Trading addition – rejection of books of accounts and application of higher G.P. rate – even after the rejection of books of account, no trading addition is required to be sustained - AT
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• Advance Salary Not Classified as Deemed Dividend u/s 2(22)(e) of Income Tax Act.

  Case-Laws - AT : Deemed Dividend - addition of advance salary as deemed dividend - advance was not in the nature of loan and hence cannot be treated as deemed dividend u/s 2(22)(e) - AT
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• Penalty for Quoting Invalid PANs in TDS Returns Not Applicable for Minor Breaches u/s 272B.

  Case-Laws - AT : Penalty u/s 272B - default u/s 139A(5B) - quotation of invalid PAN of deductees in TDS returns - no penalty is leviable when there is a technical or venial breach of the Act - AT
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• Court Rules Seized Unexplained Cash Justifies Assessing Peak Credit of Deposits as Taxpayer's Income in Block Assessment Case.

  Case-Laws - AT : Block assessment - seizure of unexplained cash - it would be justifiable to assess the peak credit of deposits as the income of the assessee. - AT
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• Lender's compensation treated as interest disallowed for non-deduction of TDS u/s 194A, added to taxable income.

  Case-Laws - AT : Compensation paid to lender treated as interest - Disallowance for non deduction of TDS u/s 194A - Liability for payment has neither accrued nor paid/payable in the current year therefore disallowed and added back - AT
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• Supreme Court: No Interest u/ss 234B and 234C if Seized Amount Not Considered in Assessment Order.

  Case-Laws - SC : Levy of Interest u/s 234B, 234C - As the Assessment Order does not give effect to the amount seized and there is no Demand Notice claiming interest on advance tax, interest cannot be levied - SC
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• Business Losses Deductible from Book Profits u/s 115JB for MAT; Stock Valuation Losses Not a 'Provision'.

  Case-Laws - AT : MAT - Book profit u/s 115JB - Business loss was allowable on ordinary commercial principles in computing profits. - Since claim is direct loss in valuation of stock in trade and as this cannot be considered as a ‘provision’ as provided under Explanation-1 - AT
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• Depreciation on Ansal Plaza parking allowed for individuals with control and use rights, not just owners.

  Case-Laws - HC : Depreciation on car parking at Ansal Plaza - assessee is not the owner - depreciation is allowed to the person in whom for the time being vests the dominion over the building and who is entitled to use it- HC
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• Land Value for Stamp Duty Set by District Revenue Officer is Binding u/s 50C of Income Tax Act.

  Case-Laws - AT : Valuation u/s 50C - the value of the land adopted by the District Revenue Officer for the purpose of fixation of stamp duty, is binding on the assessee. - AT
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• Tax Officers Can't Do Ex Parte Assessments Without Notice for Voluntary Returns u/s 139(1.

  Case-Laws - HC : Best judgement assessment ex-parte u/s 144 - The C.B.D.T. has rightly directed that in case where the return is furnished voluntarily under Section 139 (1), the I.T.O. cannot proceed to make ex parte assessment under Section 144 without serving notice under Section 139 (2) or as the case may be under Section 148. - HC
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• Assessing Officer Can Restore Penalty Levy; Section 275(1A) Limitations Don't Apply, ITAT Authority Questioned.

  Case-Laws - HC : Restoring the issue of levy of penalty to the file of AO - whether ITAT has such powers? - apprehension that any order in the penalty proceedings may be barred by limitation under section 275(1A), is not well founded. - HC
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• Compensation for Child's Death in Airport Escalator Accident Exempt from TDS as It's Considered Damages.

  Case-Laws - Commission : T.D.S. deduction on the compensation paid to parents whose child dies in an escalator maintained by an Airport Authority - compensation is by way of damages. - No TDS
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• Court Rules Plot Sales as Business Income, Not Capital Gains, Due to Frequent Transactions.

  Case-Laws - AT : Income from sale of plots - business income OR capital gains - The frequency of purchase and sale belies the stand of the assessee - against assessee. - AT
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• Rebate u/s 88E: Calculate based on derivative income at 30%, capped by actual STT paid.

  Case-Laws - AT : Rebate u/s 88E in respect of STT - rebate has to be calculated with respect to the income from derivative transaction included in the total income @ 30% subject to the limit of STT actually paid. - AT
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• Section 41(1) Income Tax Act: Unclaimed Debts Recognized as Income to Ensure Proper Tax Accounting.

  Case-Laws - AT : Deemed income u/s 41(1) - if the assessee did not claim the debt as bad in earlier years then the claim of assessee will be accepted that he has already been offered as income by the assessee in his computation of income - AT
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• Court Rules in Favor of Assessee: Manufacturing Sales Unsustainable Without Evidence of Purchases.

  Case-Laws - AT : Addition on account of unproved purchases - without purchases, there cannot be any manufacturing of sales - in favour of assessee. - AT
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• Cash Payments on Same Day Not Disallowed u/s 40A(3); Amendment Not Retrospective.

  Case-Laws - AT : Multiple cash payments are made to same party on a single day - no disallowance u/s.40A(3) - amendment in not not retrospective in nature - AT
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• Appellate Tribunal Permits Assessee to Submit Additional Evidence in Income Tax Case, Impacting Taxable Income Assessment.

  Case-Laws - AT : Addition to income - additional evidence submitted by assessee allowed - AT
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• Valuation Method for Capital Gains Tax: Stamp Duty Ready Reckoner Rate Inapplicable to Residential Buildings.

  Case-Laws - AT : Valuation of Sales price under Capital gain - Whether rate adopted by register valuer on the basis of stamp Duty Ready Reckoner, 2005 for Developed Land FSI will applicable to residential building - held no - AT
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Customs

• Court Orders Release of Imported CARLVO Phones After Fixing Declaration Error Under Bill of Entry.

  Case-Laws - HC : Wrong declaration of imported goods - CARLVO Dual Sim Chinese Cellular Phones under Bill of Entry No.5256566 - goods ordered to be released - HC
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• Customs Authority Confirms No Additional Duty Owed; Assessee Entitled to Refund of Excess Payments Collected Unjustly.

  Case-Laws - HC : When the assessee authority held that the customs duty paid by the assessee was proper and no additional duty need be paid, they were under an obligation to refund this additional amount which was collected, which had no basis - HC
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• Amendment to Notification No. 125/2011-Customs: Reducing Tariff Lines for Non-Least Developed Countries under SAFTA Agreement.

  Notifications : Seeks to amend Notification no. 125/2011-Customs, dated 30-12-2011 prescribing preferential rates of customs duty for goods imported under SAARC Free Trade Agreement (SAFTA) so as to reduce the number of tariff lines in the sensitive list for Non-Least Developed Countries (NLDCs) - Notification
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• Systematic Verification of Export Obligations Under Duty Exemption and Reward Schemes to Enhance Transparency and Accountability.

  Circulars : Verification mechanism and monitoring of export obligation under duty exemption/ reward Schemes- reg. - Circular
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• New Foreign Currency Exchange Rates Effective September 7, 2012, Announced Under Customs Regulations.

  Notifications : Rate of exchange of conversion of each of the foreign currency with effect from 07th September, 2012. - Notification
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• Electronic Customs Duty Payments Now Mandatory for Importers and Exporters to Boost Efficiency and Transparency.

  Circulars : Making E-payment of Customs duty mandatory-regarding. - Circular
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• Court Orders Provisional Release of Goods Despite Dispute Over Declared Value, Imposes Specific Conditions for Compliance.

  Case-Laws - HC : Non release of goods - the value of the goods shown by the petitioner could not be accepted - provisional release directed subject to conditions - HC
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• Interest on Refunds: Entitlement Starts Three Months Post-Application Until Sanction.

  Case-Laws - AT : Interest on refund - appellant is eligible for the interest from three months after the date of filing of the refund application till the amount of refund is sanctioned to him - AT
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• Acquittal Ordered Due to Non-Compliance with Customs Act Sections 100-105; Lack of Independent Witnesses Cited.

  Case-Laws - HC : Order of acquittal - Search and seizure was not conducted in accordance with Sections 100 to 105 of the Customs Act inasmuch as independent witnesses - accused is entitled to be acquitted - HC
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• Customs Law: Issuing a Show Cause Notice within six months doesn't require registered post service u/ss 110(2), 124(a).

  Case-Laws - HC : Computation of period of limitation for issuance of SCN - Neither Section 110(2) nor Clause (a) of Section 124 of the Act contemplates service of notice in strict sense within a period of six months from the date of giving/issuing the same by registered post which mode has been prescribed under the Act. It merely speaks about giving of the notice - HC
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FEMA

• Exim Bank Grants Line of Credit to Mongolia for Development Projects Aiming to Boost Infrastructure and Economic Growth.

  Circulars : Exim Bank's Line of Credit to the Government of Mongolia . - Circular
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Service Tax

• Legal Dispute Over Cenvat Credit on Service Tax via ISD Invoices: Compliance with Tax Regulations Questioned.

  Case-Laws - AT : Disallowance of cenvat credit of service tax paid on the invoices issued by Input Service Distributor(ISD) - AT
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• Cenvat Credit Reversal Error Corrected After Mistaken Audit Objection and Irrelevant Circular; Suo Motu Credit Approved.

  Case-Laws - AT : Erroneous reversal of cenvat credit prompted by wrong audit objection and an inapplicable circular, has been rectified by the appellants by taking the suo motu credit of the reversed amount - credit allowed - AT
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• Penalties for Renting Property u/ss 76-78 Imposed; Section 80A Allows for Non-Imposition of Penalties.

  Case-Laws - AT : Penalty imposed u/s 76, 77 & 78 - renting of immovable property - case is squarely covered for non imposition of penalties under Section 80A - AT
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• Court Rules in Favor of Assessee: Excess Service Tax Paid Can Be Adjusted in Subsequent Periods.

  Case-Laws - AT : Non adjustment of excess service tax paid with service tax liability in the subsequent period - in favour of assessee. - AT
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• Commissioner's Order Deemed Unsustainable for Exceeding Show Cause Notice Scope by Disallowing Cenvat Credit Without Notification.

  Case-Laws - AT : Commissioner, while adjudicating the same has travelled beyond the scope of show cause notices by disallowing the Cenvat credit for which the appellant had not been put on notice - order is not sustainable - AT
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Central Excise

• High Court Affirms Cenvat Credit Eligibility for Steel and Cement Used in Storage Tank Construction.

  Case-Laws - HC : Cenvat Credit on steel and cement purchased for constructing a storage tank – assessee is entitled to the benefit of cenvat credit - HC
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• CENVAT Credit Approved for Clearing and Forwarding Services Linked to Importation Costs of Waste Paper.

  Case-Laws - AT : Denail of CENVAT credit on clearing and forwarding services - services received are in relation to the importation of waste paper such as container charges, handling charges incurred in the port etc. thus it cannot be said that there is no nexus with the final product - AT
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• Interest on CENVAT credit is due from the date of incorrect use, not from the date of wrong availment.

  Case-Laws - AT : Interest cannot be claimed from the date of wrong availment of CENVAT credit - interest shall be payable from the date CENVAT credit is wrongly utilized - AT
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• Address Error Correction Allowed Post CENVAT Credit for Input Services Under Central Excise Regulations.

  Case-Laws - AT : Input services - CENVAT Credit - the mention of the address of the service receiver as head office of the appellant and not the factory premises is a rectifiable error and could be done so post availment of CENVAT Credit - AT
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• Assessee pays duty and interest after communication delays; no penalty imposed.

  Case-Laws - HC : Penalty - Assessee wrote letters to the authorities - In return, he did not receive any information - was pointed out that the duty is payable, he paid the duty and interest - no penalty - HC
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• Duty Debit Insufficient to Prove Clandestine Goods Removal; Statements Alone Not Enough Evidence.

  Case-Laws - AT : Clandestine removal of goods - mere debit of duty at the time of visit of the officer by itself is no ground for holding against them - statements itself cannot prove the fact of clandestine removal
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Case Laws:

• Income Tax

• 2012 (9) TMI 164
  Unexplained investment in the purchase Farms - ITAT deleted the additions - Held that:- The additions have been made on the basis of statement of Sh. Rajinder Gupta, the brother of the assessee and the two brokers who had subsequently retracted from their earlier statements and there is nothing in the order of the Tribunal to show how it considered the statements made at the time of the search to be unreliable and what reasons prevailed upon them to hold that the retractions supported by sworn affidavits were genuine and should be upheld. It is also not clear as to what the Tribunal means when it says that no other material was placed on record by the Assessing Officer in support of the claim that the assessee had made undisclosed investment. The statements are good material on which the conclusions can be drawn - There is no evidence of any threat or coercion from the officers of the search party and the allegation of the deponents to the contrary remains unsupported. They did not choose to complain against any high handed behavior of the authorised officers. It is also not known as to what the Tribunal means when it says that neither the vendors of the properties have admitted to receiving any money over and above the stated consideration nor any extra ordinary cash was found in the course of the search - These are vital aspects which the Tribunal has omitted to take into consideration; on the contrary it took into consideration irrelevant material such as retractions, absence of any statements by the sellers of the properties that they received on-monies and the fact that there was no seizure of any “extra ordinary” cash during the search - the Tribunal erred in endorsing the order of the CIT (Appeals) deleting the addition of Rs.4,71,05,000/- made by the Assessing Officer for unexplained investment in KG Farms and Jyoti Farms - against assessee. Undisclosed capital gains on sale of land at Jaipur Highway - Held that:- The capital gains can arise only if property is sold within the meaning of Section 2 (47) of the Act. The assessee is still holding a part of the land for which no consideration has been received. Therefore, there is no sale of the property which can be said to give rise to any capital gain. Even the original cheques form part of the seized documents which shows that the transfer did not take place. Therefore, there is no question of any undisclosed capital gains - in favour of assessee. Unexplained commission paid in cash to broker - Held that:- As it was consequential to the addition made for unexplained investment in KG Farms, it need to be warranted - against assessee. Assessment of Mani Kakkar who sold KG Farms to Kedarnath Gupta - Held that:- It is trite law that if the Assessing Officer does not have the jurisdiction to make an assessment, whatever decision he takes on the merits of the matter and all subsequent proceedings, including appellate proceedings, vis-à-vis the merits of the matter are only an academic exercise or a nullity, not having any legal effect. It cannot be disputed that the recording of the satisfaction that the undisclosed income found in the course of the search belongs to another person is a pre-condition for validly assuming jurisdiction to make an assessment under Section 158BD. The CIT (Appeals) has held that since no satisfaction to this effect was recorded by the Assessing Officer making the assessment of Kedarnath Gupta, the Assessing Officer having jurisdiction over Mani Kakkar had not validly assumed jurisdiction to issue a notice under Section 158BD and to make an assessment on her - against revenue.

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• 2012 (9) TMI 163
  Difficulties in receiving credit of Tax Deducted at Source - Held that:- Section 245 envisages prior intimation to the assessee so that he can respond before any adjustment of refund is made towards a “demand” relating to any other assessment year. Thus opportunity of response/reply is given and after considering the stand and plea of the assesse, an order/direction for adjustment when justified and proper is made. The section postulates and mandates a two stage action. Prior intimation, and then a subsequent action when warranted and necessary of adjustment, of the refund towards arrears - as accepted by department that when a return is processed under Section 143(1), the CPU itself adjusts the refund due against the existing demand i.e. there is adjustment, but without following the procedure prescribed under Section 245, which requires prior intimation so that the assessees can respond or give their explanation, thus interim direction to the respondents that they shall in future follow the procedure prescribed under Section 245 before making any adjustment of refund payable by the CPU at Bengaluru. The assessees must be given an opportunity to file response or reply and the reply will be considered and examined by the Assessing Officer before any direction for adjustment is made. Difficulties in getting refunds on account of adjustment towards arrears - Held that:- There can be small and insignificant mismatches, which if purely technical should be condoned or ignored. After all tax has been paid or credited in the name of the assessee. Once the amount is correctly and rightly reflected in Form AS26, small or technical mismatch in the return should not be a ground to deny credit of the amount paid, in such cases, if the AO feels that benefit of TDS reflected in AS26 should not be given, he should issue notice to the assessee to revise or correct the mistake and only if the necessary rectification or correction is not made, an order under Section 143(1) should be passed and the demand should be raised. We issue an interim direction to this effect. As in several cases refunds have been adjusted on account of the debit entry made under the head “modified”. These entries are made by the AO and thus the refund is reduced to nil or zero. Copies of two such adjustment orders have been shown, thus the said orders will be filed in the Registry and copies will be given to the counsel for the Revenue, who will take appropriate instructions on this aspect. It is stated that there are thousands of cases of similar nature. Learned counsel for the Revenue will obtain instructions whether directions can be issued to the AO to provide full details and particulars of the entries made under the head "modified". We may note that in these cases, processing has been done for the purpose of intimation under Section 143(1) of the Income Tax Act, 1961.

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• 2012 (9) TMI 162
  Deductions under Section 80HH/80IA on the profits of each unit separately - Held that:- On perusal of the bare provisions of the Act it is clear that while calculating deductions under Chapter VI-A only the profits derived from priority units are to be taken into consideration. Section 80A(2) specifically provides that the amount of deduction shall not in any case exceed the gross total income of the assessee. There can be no manner of doubt that Section 80AB has overriding effect and will govern the other provisions of Chapter VI-A. This also clearly indicates that only the income derived from a priority undertaking is to be taken into consideration while making deduction. Section 80B(5) indicates that gross total income means the total income computed in accordance with the provisions of this Act. Therefore, we are of the considered view that the phrase “gross total income” will include profits and losses from other units whether they be priority units or non-priority units. The Legislature by using the phrases “total income” and “gross total income” has tried to differentiate between the two as Gross total income has been defined to mean the total income computed in accordance with the provisions of this Act. Therefore, it will include the profits and losses of all units of the assessee whether they be priority units or non-priority units. However, while computing the deductions specified under Section 80C to 80U only the income derived from the priority units has to be taken into consideration. The deductions shall be calculated only in respect of the income whether profit or loss of the priority unit(s) - If the gross total income is nil, then as laid down in Synco Industry [2008 (3) TMI 13 - SUPREME COURT] the assessee cannot get any benefit of such deductions. Section 80A(2) leaves no manner of doubt that the amount of deductions cannot exceed the gross total income of the assessee.

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• 2012 (9) TMI 161
  Disallowance expenditure towards replacement of machinery - Revenue OR Capital - Held:- As decided in CIT v. Sri Mangayarkarasi Mills P. Ltd. [2009 (7) TMI 17 - SUPREME COURT] that the entire textile mill machinery for spinning yarn cannot be regarded as a single asset and each separate machinery was held to be an independent entity - Replacement of an old machine with a new one would constitute the bringing into existence of a new asset and not repair of the existing machine as asset gives the purchaser (assessee) an enduring benefit of better and more efficient production over a period of time. Such replacement of assets was held to be not amounting to "current repairs" and to be not allowed as revenue expenditure - in favour of revenue.

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• 2012 (9) TMI 160
  Non satisfying of conditions stipulated u/s 54B - assessment u/s 143(3) - recovery proceedings - Held that:- As the bank account of the petitioner in the State Bank of India and certain immovable properties had been attached pursuant to the said assessment order that would substantially cover the tax demand made against the petitioner direction to the third respondent to dispose of the appeal filed by the petitioner on merits and no recovery proceedings shall be initiated against the petitioner - assessee's writ allowed accordingly.

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• 2012 (9) TMI 159
  Allocation of interest to be allocated to dividend income for deduction u/s 80-M - Held that:- As it had been found that no part of interest was attributable to earning income from dividend, as the respondent had sufficient funds for making the said investments, thus Tribunal was justified in law in not allowing interest to be allocated to dividend - in favour of assessee. Disallowance of financial advisory and due diligent services - Held that:- As the payments had been made for financial advice and for due diligence services with regard to utilization of resources / raw material for the respondent's plant and therefore, had to be allowed as an allowable business expenditure - in favour of assessee. Exemption of interest on a gross basis - Held that:- The Party had paid interest to the assessee in respect of the loans advanced to it and the assessee paid interest to party in respect of the outstanding bills issued by party. There was no connection between the two transactions. The section does not require or permit the netting of payments under two independent contracts albeit between the same parties - in favour of assessee. Disallowance of expenditure on Depository Services and Dematerialisation of share certificates - Held that:- The dematerialisation of shares did not result in either a quantitative or qualitative enhancement or improvement in the respondent's assets viz. the said shares. It resulted in the assessee's complying with the SEBI regulations and indeed facilitated the assessee's receiving dividends in respect of the investments. It did not however, affect the value of the shares to any extent whatsoever - the expenditure was allowable as normal business expenditure - in favour of assessee.

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• 2012 (9) TMI 158
  Non issuance of Tax Deduction Certificate (TDC) u/s 197 - assessee is subsidiary of Serco BPO Holdings Private Limited - Held that:- The power vested in the Assessing Officer for non issuance of TDC is to be exercised in a judicious manner & is required to furnish reasons while deciding the application filed by the assessee. The perusal of the application filed by the assessee clearly demonstrates that the AO had rejected the application as the assessee had violated the provisions of TDS and proceedings under Sections 276B and 271C of the Act were pending, but none of these grounds validly form part of reasons for rejecting an application filed by an assessee under section 197(1) read with Rule 28AA of the Rules. The Assessing Officer cannot be held justified to plead that though the assessee fulfills the requisite conditions stipulated under Rule 28AA or the concerned rule, but shall not grant the certificate in exercise of his discretion - direction to the Assessing officer to re-decide the application - in favour of assessee for statistical purposes.

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• 2012 (9) TMI 157
  Difference in the estimated cost determined by the Valuation Officer and the actual cost - addition of undisclosed income - assessee contested against reference made to the Valuation Officer for valuation of the cost of construction - Held that:- On a plain reading of section 142A it is apparent that the question of estimating the value of any investment would arise only when the books of account are not reliable and accordingly the AO would first be required to reject the books of account before making a reference to the Valuation Officer, thus as rightly contended by the assessee that the report of the Valuation Officer cannot form the foundation for rejection of the books of account. From the tenor of the order of the AO it is apparent that he has made the reference to the Valuation Officer merely to seek expert advice regarding the cost of construction. There is nothing in the assessment order to suggest that the AO had any doubt regarding the cost of construction or that he was not satisfied regarding the correctness or completeness of the books of account - prior to making the reference to the Valuation Officer, the AO has not ascertained as to what was the defect in the cost of construction disclosed by the assessee in its returns of income - as the AO has not brought any material on record to establish that the assessee had made any unaccounted investment in the construction of the building in question and that the books of account do not reflect the correct cost of construction the reference made to the Valuation Officer for estimating the cost of construction was not Valid - in favour of assessee.

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• 2012 (9) TMI 156
  Addition u/s 68 - share application money - addition made on ground that there was no compliance of the notices issued - debit entries are mostly same as credit entries - debit entries and credit entries in the bank statement are mostly in round figures - multitude of companies from same addresses - outright refusal of the assesse to furnish details to the satisfaction of AO as requirement of section 68 - no compliance to produce the Principle Officers of such companies who had allegedly furnished funds the ascertain the genuineness and creditworthiness of such parties – Held that:- CIT(A) while deleting the addition, took into consideration the orders passed by the ITO/CIT(A)/ITAT in respect of share applicant companies and further taking into consideration that in A.Y. 2007-08 the AO had accepted the allotment as genuine, deleted the addition. Admittedly, these details were not before the AO and CIT(A) also did not even call for a remand report from the AO in respect of these documents. Thus, there was a clear violation of mandatory requirements of Rule 46A. Further we find that the confirmations filed by various share applicants are all undated and these confirmations have been given mostly by one person on behalf of various entities except in one or two cases. Under such circumstances, unless the directors were produced before the AO, he could not carry out further investigations. Since CIT(A) has taken into consideration fresh evidence, which was not confronted to the AO and by not producing the directors assessee installed all further enquiry into the matter, it would be in the interest of justice that the mater be restored back to AO for denovo considerations.

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• 2012 (9) TMI 155
  Trading addition – rejection of books of accounts and application of higher G.P. rate – assessee not an EOU in the first period of year under consideration disclosing G.P. rate of 20.51% and was an EOU in the second period disclosing G.P. rate of 40.01% - CIT(A) upheld the rejection of books of account but reduced the GP addition to Rs.1 lakh - Held that:- Though assessee has claimed that the rejection of books of account was not justified but he was unable to satisfy us how the rejection of books of account was not justified. In fact, his main thrust of the arguments was also on the application of proper rate of gross profit rather than the rejection of books of account. We, therefore, uphold the rejection of books of account. However, it is a settled law that even after the rejection of books of account, a reasonable rate of GP is to be applied. Admittedly, the GP rate of preceding two years is lower than the GP rate disclosed by the assessee in the first period and GP rate of second period is more than G.P. rate of first period. However, business of the assessee in the second period is different from that of first period. Therefore, GP of the first period is to be compared with the GP of preceding three years, which shows that GP rate disclosed by the assessee is better than the average rate of preceding three years. Hence, even after the rejection of books of account, no trading addition is required to be sustained – Decided against Revenue

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• 2012 (9) TMI 154
  Deemed Dividend - addition of advance salary as deemed dividend - Held that:- From the facts and circumstances of the case, it is observed that the debit balance in the account of assessee at a given point of time is not in the nature of loan or advance. But, it is a running account wherein the assessee had taken the amount as adjustable against future salaries which were being credited to his account monthly. Therefore, advance was not in the nature of loan and hence cannot be treated as deemed dividend u/s 2(22)(e) - Decided in favor of assessee.

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• 2012 (9) TMI 153
  Dis-allowance u/s 14A of ad-hoc expenditure assumed for earning exempt dividend and interest income from shares and mutual funds & RBI tax free bonds - assessee contended that there is no provision under the law for such dis-allowance on an estimate and arbitrary basis for the AY 2007-08 - Held that:- It is observed that out of total income of Rs 29,75,609/-, a sum of Rs.21,66,023/- related to income from old investments and income from new investments is only to the tune of Rs.8,09,586/- and that too as dividend from mutual funds for which assessee need not to incur any expenses. Therefore, the disallowance @ 0.5% of total of average investment as per Rule 8D is not justified as a very small amount of new investment has been made during the year. Moreover, Rule 8D is not applicable for the year under consideration and assessee has not incurred any interest expenditure for earning of the exempt income. Hence, no disallowance of expenditure u/s 14A can be made in the present case - Decided in favor of assessee.

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• 2012 (9) TMI 152
  Deduction u/s 80HHC - exclusion of profit on scrap sale - AO concluded that no expenditure was incurred on generation of scrap and the deduction u/s 80HHC was recomputed by reducing the total sale value of scrap as profit on sale of scrap - Held that:- Aforesaid treatment would mean that the generation of scrap is an activity leading to 100% profits as against normal 10% to 15% profits on the production of finished output of the enterprise. Therefore, only the profit element in the sale of scrap is to be excluded from the profits of the business for determining the profits eligible for deduction u/s 80HHC - Decided in favor of assessee

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• 2012 (9) TMI 151
  Penalty u/s 272B - default u/s 139A(5B) - quotation of invalid PAN of deductees in TDS returns - Held that:- In the instant case, it is an undisputed fact that the amount of tax deducted at source by the assessee was deposited within time allowed under the relevant provisions of the Act. There was no revenue loss to the Income Tax department. It is also an admitted position that the assessee also submitted revised statement in Form No. 24Q on 16.09.2010. The assessee did not derive any benefit whatsoever by filing invalid PAN and PAN was corrected after ascertaining the same from the respective deductees. Even otherwise also, no penalty is leviable when there is a technical or venial breach of the Act - Decided in favor of assessee.

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• 2012 (9) TMI 150
  Adoption of Higher % of net profit - Assessee failed to produce books of account - AO applied net profit rate of 12% - Difference in amount of wages as found in assessee's computer during survey and amount shown in Profit & Loss A/c - Held that:- As the audited accounts are not in confirmation with print-out in possession during survey - Although print-outs taken during survey are unsigned but having great significance - As decided by CIT(A) on the basis of earlier assessment years applied net profit rate at 7% - As the fact of case are not similar to earlier assessment - AO having sufficient materials on record warranting adoption of higher percentage of net profit then the rate earlier estimated by ITAT could not be adopted - Decision matter remanded back to CIT(A). Addition on account of net interest expenditure - AO made addition on basis of TDS certificate - Corresponding interest income not shown in P&L a/c - Held that:- Paper books were available to AO & the details shows that assessee claims interest expenditure net of income therefore, no separate addition could be made on account of interest income. Decision in favor of assessee. Addition on account of Sub-contract work on estimated basis - Assessee claims that expense of sub-contract work should be reduce from gross receipt on the basis of decided case - Fact of case were not similar as assessee failed to produce books of account - AO compute income on the basis of TDS certificates - That is profit margins that he would earned if assessee execute such contract i.e half of such margin - Held that:- Assessee can claim payment made to sub-contractor as expenditure but the turnover cannot be reduced. And also there is no evidence to show that sub-contract work was given on the same rates as received by the assessee in other contracts. Decision remanded back case to AO.

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• 2012 (9) TMI 149
  Block assessment - seizure of unexplained cash - various cash deposits and subsequent withdrawals from Bank account - assessee contending for assessment of income at peak credit and not on entire amount of deposits found in the bank accounts - also seized cash is explained to be source of various cash deposits - Held that:- During the course of assessment proceedings, the assessee has changed his stand and stated that he was carrying on the business of trading in gold biscuits and the transactions in its bank account represented such trading. However, assessee has failed to bring on record any material to substantiate his changed stand. Also, possibility of rotation of funds cannot be discounted with. The tax authorities, cannot simply ignore the withdrawals made by the assessee. Accordingly, it would be justifiable to assess the peak credit of deposits as the income of the assessee. Matter set aside to file of AO for determining the peak credit Amount of peak credit become taxable due to the legal fiction contained in section 68, 69 etc. due to the failure of the assessee to properly explain the bank transactions. It is the responsibility of the assessee to show that the said amount was available with him and it was kept idle for more than nine months. Hence, income declared by the assessee for the AY 1997-98 to 2002-03 cannot be considered as a source for the amount of Rs.65.00 lakhs seized by the police officials - Decided partly in favor of assessee.

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• 2012 (9) TMI 148
  Re-invocation of Section 147 - AO had made assessment u/s 147 - Later on AO observed that he compute income by giving deduction under 80HHC but without deducting profit from undertaking claiming deduction u/s 80IA - AO again invoked the provision of u/s 147 and issue notice u/s 148 - Held that:- Assessee has disclosed all the material and relevant particulars, in respect of claim u/s 80IA and 80HHC of the Act - AO has invoked the provisions of Section 147 read with proviso thereunder on the basis of mere change in opinion and without bringing any tangible material for the formation of record. Therefore AO not complied with the statutory conditions contained in the provision of the section 147. Decision in favor of Assessee.

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• 2012 (9) TMI 147
  Compensation paid to lender treated as interest - Disallowance for non deduction of TDS u/s 194A - Expenditure must be accrued or paid/payable in the current year - Held that:- Explanation to Section 194A r.w.s. 2(28A) provides that when such interest is credited in any account by whatever name it may be called, then such credit will be deemed to be credit of such income to the account of the payee and provisions of Section 194A will apply - Liability for payment has neither accrued nor paid/payable in the current year therefore disallowed and added back - Decided in favor of Revenue. Deduction allowed for expenditure u/s 14A - Computation of book profit under MAT u/s 115JB - Held that:- The provision of section 14A cannot be imported into while computing the book profit u/s 115JB of the Act as decided in case of Goetze (India) Ltd. 2009 (5) TMI 615 - ITAT DELHI - Therefore no addition to the book profit shall be made on account of alleged expenditure incurred to earn exempt income while computing income u/s 115JB of the Act - Decided in favor of Assessee

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• 2012 (9) TMI 136
  Penalty u/s 271(1)(c) - nondisclosure of short term and long term capital gain - CIT(A) deleted the levy - revised return filed by assessee - Held that:- As the assessee submitted revised return since in the original return long term capital gain on UTI liquid plus fund institution plan was claimed exempt u/s 10(38) as also to reflect correct figures of sale of land at Kheri Sadh and rental income, thus merely because the assessee disclosed additional income suo motu after issue of a notice u/s 143(2), does not amount to detection of concealment by the AO. It is not the case of the AO that in reply to a query of the AO, some new facts were discovered or the AO had dug out some information which was not furnished by the assessee. In such circumstances no penalty is leviable - As decided in the decision in CIT v. Suresh Chandra Mittal (2001 (6) TMI 63 - SUPREME COURT) that when an assessee files a revised return showing higher income and gives an explanation that he offered higher income to buy peace of mind and avoid litigation, penalty cannot be imposed merely on account of higher income having been subsequently declared - thus in this case even though the revised return was found to be invalid, the AO accepted the income as declared in the revised return and computation & did not bring any material on record that the declaration of income made by the assessee in his revised return or his explanation was not bonafide - in favour of assessee.

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• 2012 (9) TMI 135
  Levy of Interest - Held that:- As the Assessment Order does not give effect to the amount seized in the calculation of tax payable at the end of the AY in question and there is no Demand Notice claiming interest on advance tax due on 15th September, 15th December and 15th March interest cannot be levied as decided in assessee's own case Commissioner of Income-Tax Versus Gold Tex Furnishing Industries [2002 (8) TMI 6 - DELHI HIGH COURT] - in favour of assessee.

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• 2012 (9) TMI 134
  Diminishing in the value of assets - AO added it in arriving at the book profit as provided under section 115JB - Held that:- Considering assessee’s submission that this amount was not a provision of diminishing in value of the assets but a loss suffered by assessee in the valuation of stock in trade which, however, was claimed separately in the Profit & Loss A/c unable to agree with the Revenue on making adjustment of loss suffered in the valuation of closing stock. There is no dispute with reference to the fact that assessee is in the business of share trading and as part of business activity, it has offered income from shares and securities and claimed diminution in value of stock in trade. There is also no dispute with the fact that this loss was allowed in regular computation and not a provision - As rightly held by the Hon'ble Supreme Court in the case of Dr T A Qureshi (2006 (12) TMI 91 - SUPREME COURT) business loss was allowable on ordinary commercial principles in computing profits. Since claim is direct loss in valuation of stock in trade and as this cannot be considered as a ‘provision’ as provided under Explanation-1, the action of AO and the CIT (A) cannot be upheld - in favour of assessee. Disallowance made u/s 14A r.w.r. 8-D - Held that:- As seen from the balance sheet of assessee as on 31.03.2008 there are no fixed assets and assessee has shown investment of Rs. 1,51,12,500/- at the end of the year as against Rs..5,53,62,500/- at the beginning of the year. Assessee’s stock in trade were shown at Rs. 40,69,22,495/- as against nil in the last year. This indicates that most of the business activities started only during the year and the investment had come down. As against these amounts, AO in the assessment order has taken the closing investment yielding exempt income at Rs..50,20,34,995/- including the stock in trade which is not income yielding exempt income, earning business profits. There is no opening amount which was taken at NIL where as assessee had investments at the end of last year which got reduced in this year. Thus the basis for calculation by AO itself is wrong - Further out of the total amount of interest claimed which were shown interest at Rs. 2,91,38,496/-, there seems to be no examination of interest claims and to whom it is paid, thus it is required restore the matter back to the file of AO to examine the nature of interest expenditure, the amount of dividend earned and the nature on which it is earned - in favour of assessee for statistical purposes.

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• 2012 (9) TMI 133
  Non deduction of TDS on Installation and commissioning charges - CIT(A) deleted disallowance - Held that:- The amount in question paid by the assessee company to M/s Mesto Automation SCADA Solutions Ltd. towards installation and commissioning charges was for services that were ancillary and subsidiary as well as inextricable and essentially linked to the sale/supply of SCADA system and the same, therefore, was not chargeable to tax in India in the hands of M/s Mesto Automation SCADA Solutions Ltd. as fees for included services by virtue of article 12(5)(a) of the DTAA between India and Canada being favorable to the assessee - The assessee, therefore, was not liable to deduct tax at source from the said payment and the disallowance u/s 40(a)(i) was not sustainable - in favour of assessee. Restricting the disallowance of incidental expenses to the extent of 25% - revenue appeal - Held that:- As the Tribunal in assessee’s own case for assessment year 2001- 02 upheld the order of the CIT(A) restricting the disallowance made on account of incidental expenses to the extent of 25%, thus respectively following the same judgment revenue appeal is dismissed - in favour of assessee.

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• 2012 (9) TMI 132
  Disallowance of depreciation on car parking at Ansal Plaza - absence of registered title in favour - Held that:- As decided in Mysore Minerals Ltd. Versus CIT [1999 (9) TMI 1 - SUPREME COURT] that the intention of the Legislature in enacting section 32 would be best fulfilled by allowing deduction in respect of depreciation to the person in whom for the time being vests the dominion over the building and who is entitled to use it in his own right and is using the same for the purposes of his business or profession - in favour of assessee. Addition on payment towards an unrecognized Provident Fund Trust - ITAT deleted the addition - Held that:- A reading of the letter dated 25.08.1976 would indicate that apparently no express approval by the Provident Fund Commissioner to the scheme formulated by the assessee had been actually taken into account by the income tax authorities at the relevant time but in 12 successive assessments, the authorities accepted its position that the scheme was a recognized one - As the tax implication in the present case is far below the prescribed limit of Rs. 10 Lakh as the demand or disallowance itself was Rs. 9,08,359/- and the tax payable on that would be roughly around 1/3rd of the said amount the Court is of the opinion that no interference is called for the appeal is consequently dismissed.

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• 2012 (9) TMI 131
  Determination of undisclosed income - Held that:- The search was conducted on 19.01.1996 and thereafterwards, upto 09.02.1998, there were enquiries going on and the notice was issued only on 27.02.1998. The facts are self-evident that no sufficient opportunity was granted to assessee before finalising the assessment. The Order of Tribunal is set aside on the question of violation of the principles of natural justice, that the assessee was not granted sufficient time to counter the notice of assessment that within three days of receipt of the notice, the assessment was finalized - directions to the assessee to file its objections within two weeks from the date of receipt of a copy of this order and on receipt of the objection, the Assessing Officer shall finalize the assessment within four weeks from the date of receipt of the objection from the assessee - in favour of assessee for statistical purposes.

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• 2012 (9) TMI 130
  Valuation u/s 50C - value fixed by the District Revenue Officer - held that:- The assessee in the income-tax proceedings cannot take the plea that since he was not a party in other proceedings, the same is not binding on him. In the present case, the value of the land adopted by the District Revenue Officer for the purpose of fixation of stamp duty, is binding on the assessee. There is no force in the appeal of the assessee - against assessee. Exemption u/s 54F - The return was filed by the assessee far beyond the time limit - Revenue appeal - Held that:- The assessment was completed under the provisions of section 143(3). At no point of time before the CIT(A) the plea of belated return was raised by the Revenue. Even otherwise, the delay in filing of the return has no bearing on exemption to which the assessee is entitled under the provisions of the Income Tax Act - It is an admitted fact that the entire amount of capital gains has been invested by the assessee in the construction of new residential house within the period prescribed under the provisions of section 54F(1) - against Revenue.

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• 2012 (9) TMI 129
  Completion of assessment ex-parte u/s 144 - defective return filed by assessee in response to a notice u/s 139 (2) - Held that:- The C.B.D.T. circular No.281, dated 22-09-1980 is in the nature of a clarification to the assessing authorities that when there is a default in rectifying a defect in the return as intimated by the I.T.O. by the assessee, the return of income has to be treated as an invalid return and further proceedings will have to be taken on the footing that the assessee had failed to file the return. The C.B.D.T. has rightly directed that in case where the return is furnished voluntarily under Section 139 (1), the I.T.O. cannot proceed to make ex parte assessment under Section 144 without serving notice under Section 139 (2) or as the case may be under Section 148. This circular is binding on the AO. As in the present case when the assessee filed a defective return, and did not rectify the defects which were pointed out by the I.T.O., the AO was bound to treat the return of income as invalid and take further proceedings on the footing that the assessee had failed to furnish the return & could not have proceeded to make ex parte assessment u/s 144 without serving notice u/s 139 (2) or as the case may be u/s 148 - against revenue.

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• 2012 (9) TMI 128
  Restoring the issue of levy of penalty to the file of AO - whether ITAT has such powers? - Held that:- As the appeal against the quantum proceedings has been admitted and is pending hearing in this Court the Tribunal, instead of deciding this issue as to penalty under section 271, by the impugned order restored the same to the file of the Assessing Officer with a direction to decide the issue of levy of penalty after the decision of this Court in the said appeal, thus no prejudice has been caused to the appellant even qua the penalty proceedings - apprehension that any order in the penalty proceedings may be barred by limitation under section 275(1A), is not well founded.

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• 2012 (9) TMI 127
  T.D.S. deduction on the compensation paid to parents whose child dies in an escalator maintained by an Airport Authority - Held that:- The respondent should not have deducted the T.D.S. as in the instant case, the compensation is by way of damages. The damages paid for the death of a person cannot be equated with income as such. As decided in Ghaziabad Development Authority. Versus Dr. N. K. Gupta. [2002 (9) TMI 292 - NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION] interest to the complainant has not been awarded on the basis of any deposit made by the complainant or the GDA being the borrower of any money of the complainant. Here interest payment is by way of damages and merely describing the damages as by way of interest does not make them as interest under the Income-tax Act and thus the provisions of section 194A were not applicable and the GDA was clearly wrong in deducting the tax deducted at source from the interest payable to the complainant - thus, the opposite party-Airport Authority of India Ltd. is directed to pay the TDS amount alongwith interest @9% p.a. to the Decree Holder, within a period of 30 days and to recover the said amount form the Income Tax Department, as per law - in favour of decree holders.

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• 2012 (9) TMI 126
  Penalty u/s 271(1)( c ) - claim of deduction of issue expenses u/s 35D & diminution in value of shares investment - Held that:- It is an admitted position in the present case that no information given in the return was found to be incorrect or inaccurate. It is not as if any statement made or any detail supplied was found to be factually incorrect. Hence, at least, prima facie, the assessee cannot be held guilty of furnishing inaccurate particulars. By any stretch of imagination, making an incorrect claim in law cannot tantamount to furnishing inaccurate particulars - the assessee had furnished all the details of its expenditure as well as income in its return, which details, in themselves, were not found to be inaccurate nor could be viewed as the concealment of income on its part. It was up to the authorities to accept its claim in the return or not. Merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itself would not, in our opinion, attract the penalty under Section 271(1)( c ) - in favour of assessee.

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• 2012 (9) TMI 125
  Income from sale of plots - business income OR capital gains - Held that:- The assessee had purchased nine plots at Coimbatore which were sold the same at higher price within a short span of six months thereby generating profit. The reason given by the assessee in the written submissions for treating the income as capital gains are not convincing - the sequence of events show that the assessee had purchased plots to earn profit in the course of business. The frequency of purchase and sale belies the stand of the assessee - against assessee. Addition on unexplained investment - Held that:- As the assessee has not been able to explain source of investment the CIT(A) has rightly upheld the addition as unexplained investment after deducting the amount already included in the income returned by the assessee - against assessee. Disallowance of expenses towards improvement and development of the plots - Held that:- Except for the bald statement of the assessee, there is nothing on record to show that any expenditure was incurred by the assessee for the development of plots. Even assessee was not able to show any document to substantiate the claim - against assessee.

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• 2012 (9) TMI 124
  Dis allowance of depreciation on membership cards of BSE and NSE - Held that:- As depreciation in this case had been allowed in the earlier year and therefore depreciation has to be allowed and only in the year in which the asset is sold or discarded, demolished, destroyed, the money payable in respect of the asset has to be reduced from the WDV under the provisions of section 43(6) as in the present case, it was pointed out that the card was neither sold nor discarded nor destroyed/demolished and therefore, depreciation had to be allowed on the basis opening WDV - restore the issue to the file of AO for passing a fresh order after examining all aspects - in favour of assessee for statistical purposes. Disallowance of software expenses - Revenue OR Capital expenditure - Held that:- As decided in Alembic Chemical Works Company Limited Versus CIT, Gujarat (1989 (3) TMI 5 - SUPREME COURT) that the assessee had acquired application software to execute jobs in the field of inventory management etc. which had to be updated from time to time based on the changing needs and is to be allowable as revenue expenditure - against revenue. Disallowance of rebate under section 88E in respect of Security Transaction Tax - Held that:- AO himself has calculated income from derivative transactions amounting to Rs.30,89,407/- which is included in the total income and as regards the normal share transaction, the AO has calculated loss which is not included in total income this year and has been carried forward as speculation loss. Therefore, rebate has to be calculated with respect to the income from derivative transaction included in the total income @ 30% subject to the limit of STT actually paid. The STT paid in respect of derivative transaction was Rs.2,56,449/-, therefore, deduction has to be limited to Rs.2,56,449/-. Disallowance of claim of deduction against the share of profit in the branch - non deduction of TDS - Held that:- In this case, the assessee was only sharing profit with M/s. JSMS who was managing only day to day affairs of the branch whereas policy decisions were taken by the assessee and the entire investments had also been made by the assessee therefore, hold that the arrangement was not a case of joint venture, thus claim need to be allowed - the word “payable” used in section 40(a)(ia) has to be given its natural meaning and would be applicable only to expenditure which is payable as on March 31 of every year and can not be invoked to disallow amount which have already been paid during the previous year - allow the claim of the assessee subject to verification of the claim that no amount remained outstanding at the end of the year - in favour of assessee

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• 2012 (9) TMI 123
  Addition on accrued income on actionable claim - that Official Liquidator of the High Court had allowed the claim in favour of the assessee - Held that:- On perusal of the notice of admission of proof it reveals that the claim to the extent of Rs.8,06,69,709/- was allowed and it was not paid to the assessee and the aforementioned claim after a gap of almost one year i.e. on 10/1/2007 was transferred by the deed of assignment by the proprietary concern of the assessee to “Grand”, thus the said amount cannot also be said to have accrued to the assessee as what has been ordered by the Official Liquidator is the notice of admission of proof and not the admission of the payment to be made of the said amount. The payment of the said amount will depend upon several other circumstances and it is a matter of fact that till date the assessee had not received any amount and cannot be taxed in the hands of the assessee - in favour of assessee. Deemed income u/s 41(4) - Held that:- The mention of section 41(4) in the computation of income filed by the assessee suggests that the assessee had earlier claimed the debt as bad debt. Therefore it just and proper to direct the AO to verify from the assessment records of the assessee that whether or not assessee has claimed the debt of “Swadeshi” as bad debt and if the assessee did not claim the debt as bad in earlier years then the claim of assessee will be accepted that he has already been offered as income by the assessee in his computation of income - in favour of assessee for statistical purposes.

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• 2012 (9) TMI 122
  Penalty u/s 271(1)(c) - disentitled for deduction u/s 80HHC - Held that:- AO initiated the penalty proceedings for ‘furnishing of inaccurate particulars’ but finalized the penalty for ‘concealment of income’ - Even though assessee has not contested the issue at the time of assessment, even after giving explanation that the amount was assortment charges/service charges, AO should have examined the nature of amount and should not have disallowed just because the amount was classified as export commission. Just because assessee has not contested the working made by AO it does not automatically lead to penalty under section 271(1)(c). Each and every addition made in the assessment cannot automatically lead to levy of penalty for concealment of income or furnishing inaccurate particulars of income - on the facts of the case there is no case for levy of penalty just because the claim was disallowed in the assessment and assessee has not contested - against assessee.

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• 2012 (9) TMI 121
  Addition on account of unproved purchases - Held that:- It is a matter of common sense that there is no possibility of production if there is no raw material. Without input, there could not be any output. Additionally, the assessee has also proved that if the purchases are not taken into account, then the results are going to be unrealistic and the G.P. had to go high rate away from any reasonable percentage. Even if those concerns were bogus parties, but the basic question is that without purchases, there cannot be any manufacturing of sales - in favour of assessee. The computation of undisclosed income even of the block period has to be made u/s. 158BB and as per Explanation annexed to this Section, the total income or loss of each previous year, for the purpose of determination of undisclosed income, be taken as the total income or loss computed in accordance with the provisions of this Act and the only rider is that the same should be without giving effect to set off of brought forward losses or unabsorbed depreciation - the Legislature has made it clear that the undisclosed income is also required to be determined or computed in accordance with the provisions of I.T. Act, so the basic principle of determination of income has to be followed particularly in a case when the income is out of a trading activity of the assessee.

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• 2012 (9) TMI 120
  Disallowance u/s. 40A(3) - multiple cash payments are made to same party on a single day - Held that:- As none of the payments to the same party in each instance was more than Rs. 20,000/- although the aggregate of the payments to the same party on the same day is more than Rs. 20,000/- therefore, respectfully following the decision in the case of CIT Versus Ashok Iron and Steel Rolling Mills (2009 (10) TMI 414 - ALLAHABAD HIGH COURT) no disallowance u/s.40A(3) in the impugned case can be made. Since the amendment to section 40A(3) was brought to the statute book by the Finance Act 2008 w.e.f. 01-04-2009 wherein the words “aggregate of payments made to a person in a day” was inserted, therefore, same in our opinion being not retrospective in nature cannot be applicable to assessment year 2006-07, i.e. year for which the assessee is in appeal before us - in favour of assessee.

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• 2012 (9) TMI 119
  Addition to income - additional evidence submitted by assessee - Held that:- As per the provisions of Rule 46A of Production of additional evidence before the Deputy Commissioner (Appeals) and Commissioner (Appeals)first stage is the assessee sought permission for admission of additional evidence, the next stage would come that such permission would be granted by recording reasons and thereafter the additional evidence would be sent to AO for examination. In the present case additional evidence produced before the CIT(A) by assessee were sent to the concerned officer which impliedly shows that according to the CIT(A) it is a-prima facie case and only after adducing the additional evidence he should asked for Remand Report from the concerned AO. In view of this subsequent review to withdraw the order for entertaining additional evidence by not calling the Remand Report is not justified - thus it is advisable to restore matter - in favour of assessee for statistical purposes.

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• 2012 (9) TMI 118
  Capital Gain 50C - Weather AO can make reference to DVO u/s 55A - AO could not have record any opinion as to existence of difference between the value of the asset as claimed by the assessee and the fair market value - Held that:- Reference can be made to DVO u/s 55A when AO records opinion that value had been underestimated by assessee as decided in case of HIABEN JAYANTILAL SHAH (2008 (4) TMI 292 - GUJARAT HIGH COURT) - However if the fair market value declared by the assessee is supported by the estimate of the registered valuer and the value so claimed is more than the fair market value as per the AO, no reference to the DVO u/s 55A can be made - Decided in favor of Assessee. Valuation of Sales price under Capital gain - Defects/inconsistencies in the DVO's Valuation of the property - Whether rate adopted by register valuer on the basis of stamp Duty Ready Reckoner, 2005 for Developed Land FSI will applicable to residential building - Held that:- The assessee transferred residential building and not Land. The rate as applicable to Land should not be applied when the property under transfer is 'Residential Building. The value is calculated on the basis of rates applicable to the residential building - Decision, Ground partly allowed. Exemption u/s 54 - Can assessee claim exemption for two residential houses on two different stories of same building u/s 54 - Held that:- As decided in case of K.C. Kaushik (1990 (4) TMI 38 - BOMBAY HIGH COURT) - the assessee to be entitled to exemption u/s 54 only in respect of one residential house - Decided in favor of Revenue.

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• 2012 (9) TMI 117
  Disallowance of land development expense under head PGBP - Assessee paid advance which is in excess of sale price of land prior to the transfer of ownership - Land is developed by the seller and he has incurred the expenses - Meanwhile price of land rises due to development work in that area & seller of land not wiling to refund the advance on account of certain developmental work - Advance claims as land development expense - Held that:- Payment made through cheque but without any documentary evidence & bills of parties regarding the nature of development works. Assessee submit the affidavits before CIT(A) evidencing the receipt of the sum received by seller. CIT(A) did not ask the remand report from the AO and also did not confront to the AO the new evidences produced by the assessee. Tribunal on the basis of Natural justice remand this issue back to the AO to verify from the record as to whether the recipients accepted the payment made by the assessee for peaceful possession of the land and accordingly decide the issue, after providing due and reasonable opportunity of being heard to the assessee - Decision remanded back to AO.

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• Customs

• 2012 (9) TMI 146
  Wrong declaration of imported goods - CARLVO Dual Sim Chinese Cellular Phones under Bill of Entry No.5256566 - Held that:- As the petitioner had paid the entire customs duty payable on the enhanced value of the goods, based on the assessment made by the authorities concerned the respondents are directed to release the goods in question provisionally subject to the adjudication process and the consequential orders that may be passed thereon - As it is not the case of the respondents that the goods in question are prohibited goods, the petitioner is prepared to furnish a personal bond, as required by the authorities concerned, for the release of the goods in question.

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• 2012 (9) TMI 145
  Refund of the extra duty deposit by the assessee – Held that:- When the assessee authority held that the customs duty paid by the assessee was proper and no additional duty need be paid, they were under an obligation to refund this additional amount which was collected, which had no basis - order is legal and valid and does not suffer from any legal infirmity which calls for interference - appeal is dismissed.

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• 2012 (9) TMI 144
  SCN - Held that:- Notice was issued alleging non-payment of customs duties - But under what circumstances this customs duty is payable have not been disclosed - subject says “non-realization of customs duty”. The body of the show cause notice does not disclose how there is non-realization of customs duty or short payment of it - it is completely devoid of any grounds or reasons or particulars in support of its claim for short paid customs duty against the appellant/writ petitioner - show cause notice set aside

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• 2012 (9) TMI 115
  Non release of goods - the value of the goods shown by the petitioner could not be accepted - Held that:- Directions for provisional release of the imported goods on the payment of the entire duty payable as per its declared value, and on the deposit of 30% of the differential duty, based on the value of the goods, as as per the show cause notice and shall execute a personal bond for the balance 70% of the differential duty - the authorities concerned shall adjudicate the matter and pass appropriate orders thereon, on merits and in accordance with law, without any undue delay.

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• 2012 (9) TMI 114
  Interest on refund - refund claim was admitted and sanctioned to the appellant but was credited to Consumer Welfare Fund - Held that:- As the reckoning of the period for the purpose of payment of interest under Section 11BB of the Act is concerned the liability of the revenue to pay interest commences from the date of expiry of three months from the date of receipt of application for refund under Section 11B(1) and not on the expiry of the said period from the date on which order of refund is made - Thus the appellant is eligible for the interest from three months after the date of filing of the refund application till the amount of refund is sanctioned to him - in favour of assessee.

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• 2012 (9) TMI 113
  Order of acquittal - offences punishable under Sections 135(1)(b)(i) of the Gold Control Act, 1968 - accused was carrying 50 gold pellets - accused had no permit or licence to carry the gold pellets – Held that:- Search and seizure was not conducted in accordance with Sections 100 to 105 of the Customs Act inasmuch as independent witnesses, who are also the inhabitants of the locality have not been examined - provisions of Section 212 of the Cr. P.C. which are applicable in respect of a proceeding conducted under the Cr. P.C. cannot be applied to the present - delay in obtaining the sanction order and there was also delay in filing the complaint and the said delays are not properly explained and even the mahazar witness to the sport mahazar and seizure mahazar were not examined before the court - accused is entitled to be acquitted of the offence with which he was charged

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• 2012 (9) TMI 112
  SCN – search and seizure – alleged that SCN given to the petitioner beyond the period of six months – Held that:- Show cause notice must be given before expiry of six months and issuance of notice by registered post within six months is a sufficient compliance in the eye of law, moreso, when the same has been received by the respondent as has been admitted - Neither Section 110(2) nor Clause (a) of Section 124 of the Act contemplates service of notice in strict sense within a period of six months from the date of giving/issuing the same by registered post which mode has been prescribed under the Act. It merely speaks about giving of the notice - it cannot be said that the legislature intended to achieve service of notice within six months from the date of seizure - appeal succeeds and is hereby allowed

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• Service Tax

• 2012 (9) TMI 168
  Disallowance of cenvat credit of service tax paid on the invoices issued by Input Service Distributor(ISD) - Held that:- As appellant has clearly indicated in the submissions to adjudicating authority that they are enclosing 900 copies of the invoices which are co-related with the service distributed to them by ISD against which the adjudicating authority has recorded his finding that appellant has not produced any evidence co-relating the service distributed, thus this issue needs to be reconsidered after calling for the invoices in connection with the service tax credit distributed by the ISD - in favour of assessee by way of remand.

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• 2012 (9) TMI 167
  Goods transport agency - Denial of claim of Notification No.34/2004-ST dated 03.10.04 - Held that:- As the adjudicating authority has disposed the show cause notice without considering the submissions of the appellant submitting an alternative plea of eligibility for abatement of 75% of the value of the amount paid by them towards the goods transport agencies the matter need to be remanded back to the adjudicating authority to reconsider the issue afresh.

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• 2012 (9) TMI 166
  Cenvat Credit - suo mout credit after reversal - held that:- As such, the erroneous reversal made by the appellants, prompted by wrong audit objection and an inapplicable circular, has been rectified by the appellants by taking the suo motu credit of the reversed amount which is not the same as taking refund of excess duty amount paid. - the Larger Bench decision in the case of BDH Industries Ltd. (2008 (7) TMI 78 - CESTAT MUMBAI ) has no application to the present case. As regards the interest amount paid by the appellants – Held that:- The same amounts to excess payment except to the extent it relates to the period 1-9-2004 to 9-9-2004. The refund of the same is required to be considered in terms of Section 11B of the Central Excise Act, 1944 as made applicable to the service tax cases - appellants have filed a refund claim within the time-limit on 13-12-2006, the same requires to be considered by the original authority - appeal is allowed

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• 2012 (9) TMI 165
  Demands are confirmed after denying the benefit of Notification No. 32/2004-S.T - benefit is denied on the ground that necessary declaration as required under the Notification is not on the consignment notes – Held that:- Board has issued a Circular No. 137/154/2008, dated 21-8-2008 wherein it has been clarified that general declaration under Notification No. 32/2004 is sufficient for availing the benefit of Notification - pre-deposit of dues is waived

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• 2012 (9) TMI 140
  Penalty imposed u/s 76, 77 & 78 - renting of immovable property - Held that:- No penalty shall be imposable for failure to pay service tax payable on the taxable service referred to in sub-clause (zzzz) of clause (105) of Section 65 subject to the condition that the amount of service tax along with interest is paid in full within a period of six months from the date on which the Finance Bill, 2012 receives the assent of the President - As the appellants though initially contested the service tax liability but on 28.09.11 paid the entire amount of service tax liability as confirmed by the lower authorities along with interest case is squarely covered for non imposition of penalties under Section 80A - in favour of assessee.

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• 2012 (9) TMI 139
  Non adjustment of excess service tax paid with service tax liability in the subsequent period - Held that:- As the adjudicating authority has himself accepted the ST-3 returns clearly indicating the adjustments being made by the appellant regarding the excess payment towards the subsequent liability, the show cause notice dated 15.10.09 seeking to demand the service tax liability during the material period in question is blatantly time barred - in favour of assessee.

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• 2012 (9) TMI 138
  Waiver of pre-deposit - demand - technical testing and analysis service – Held that:- Only with effect from 1-5-2006 an Explanation is added to Section 65(106) of the Finance Act, 1994 - By adding this Explanation, the activities of technical testing and analysis also made applicable in respect of testing undertaken for the purpose of clinical testing of drugs and formulations - Show Cause Notice was issued on 3-4-2007 i.e. after the introduction of Explanation to Section 65 (106) of the Act i.e. on 1-5-2006. The demand is from the period 1-7-2003 - applicants had a strong case for waiver of pre-deposit – pre-deposit waived

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• 2012 (9) TMI 137
  Waiver of pre-deposit – payment of service tax on provisional basis – demand on account of short payment of service tax – Held that:- None of the two show cause notices, the issue of wrong availment of Cenvat credit has been raised - Commissioner, while adjudicating the same has travelled beyond the scope of show cause notices by disallowing the Cenvat credit for which the appellant had not been put on notice - order is not sustainable - requirement of pre-deposit waived

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• Central Excise

• 2012 (9) TMI 169
  Cenvat Credit on steel and cement purchased for constructing a storage tank – Held that:- Once a storage tank and pollution control equipment constitutes capital goods and any raw material purchased for construction of those goods, the duty paid could be utilized as a cenvat credit by the assessee notwithstanding the fact that the storage tank is an immovable property - appellate authority committed a serious error firstly in holding that the storage tank is an immovable property and secondly, on the ground that it cannot be bought and sold in the market, the criteria which is totally unwarranted - assessee is entitled to the benefit of cenvat credit - in favour of the assessee

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• 2012 (9) TMI 143
  Denail of CENVAT credit on clearing and forwarding services - no nexus between input services and the final products - Held that:- As appellant is engaged in the manufacture of MG craft importing waste paper for the manufacture of final product the services received are in relation to the importation of waste paper such as container charges, handling charges incurred in the port etc. thus it cannot be said that there is no nexus with the final product - in favour of assessee. Invoices are not in the name of the appellant - Held that:- As the lower authorities who have simply denied this claim on the ground that the appellant's name was not found in some of the invoices are required to re-examine the issue and allow the credit if the appellant is able to fulfill the requirement of the proviso to Rule 9(2) of Cenvat Credit Rules, 2004 wherein it is mentioned that if invoice does not contain all the particulars but contains the details of service tax payable, description of the service, assessable value, registration number of the service provider, details of the manufacture/first stage dealer/second stage dealer or provider of textile service, the Assistant Commissioner if he is satisfied that services have been received and accounted for can allow the credit - appellant may have to show that the persons whose names appear in the invoices have not availed cenvat credit so that availment of credit by more than one person can be avoided - issue remanded back to decide afresh.

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• 2012 (9) TMI 142
  Classification of product - under Chapter No. 31 OR Chapter 38 - Held that:- As the copy of report of Chemical Examiner dated 01.7.2011 opining that product of the appellant will not get covered under Chapter No. 31 such copy was not provided to the appellant on which adjudicating authority has relied in deciding the classification issue - set-aside the impugned order and direct he lower authorities to give a copy of the report to the assessee.

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• 2012 (9) TMI 141
  Waiver of pre-deposit - demand of interest - on the ground that the appellant has availed Cenvat credit on the inputs which were used in production of exempted as well as dutiable products – Held that:- Interest cannot be claimed from the date of wrong availment of CENVAT credit - interest shall be payable from the date CENVAT credit is wrongly utilized

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• 2012 (9) TMI 111
  Input services - CENVAT Credit - the invoices do not bear the name and the address of the service recipient - Held that:- As the appellant has only one factory, wherein manufacturing of final product takes place and on removal Excise duty liability is discharged and these services are utilized for the purpose of the manufacturing activity and in relation to the business of the appellant, the mention of the address of the service receiver as head office of the appellant and not the factory premises is a rectifiable error and could be done so post availment of CENVAT Credit as decided in PAREKH PLAST (INDIA) PVT. LTD. Versus COMMISSIONER OF CENTRAL EXCISE, VAPI [2011 (6) TMI 595 - CESTAT, AHMEDABAD] - in favour of assessee.

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• 2012 (9) TMI 110
  Stay Petition is filed for waiver of pre-deposit - Held that:- As the issue needs detailed appreciation of the evidences and the grounds of appeal, taken by the appellant before first appellate authority the appellant has deposited an amount of Rs.3.30 lakhs during the proceedings before the lower authorities along with interest and 25% of the amount towards penalty the appellant should be put to some condition in order to hear and dispose the appeal, thus directed accordingly to deposit an amount of Rs.2.50 lakhs within a period of eight weeks from date of order.

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• 2012 (9) TMI 109
  Penalty - Assessee wrote letters to the authorities - In return, the assessee did not receive any information. On the understanding that the authorities have confirmed his understanding, he did not pay the duty - when it was pointed out that the duty is payable, he paid the duty and interest promptly- Held that:- assessee was in a benefit of doubt about the liability to pay duty, he was corresponding with the department and in those circumstances, it cannot be said that there is a wilful intention to avoid payment of tax – penalty set aside

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• 2012 (9) TMI 108
  Whether Rule 12CC of the C.E. Rules, 2002, Rule 12AA of the C.C. Rules, 2004 and Notification No. 32/2006-C.E. (N.T.), dated 30-12-2006 are ultra vires the provisions of the Central Excise Act, 1944 and the Constitution of India – Held that:- Central Government has made the Rules 12CC of the C.E. Rules, 2002 and Rule 12AA of the C.C. Rules, 2004 in the year 2006 without any authority of law which power was vested in the Central Government in the year 2010 by inserting clause (xiiia) in sub-section (2) of Section 37 and therefore, the two Rules are ultra vires the Central Excise Act, 1944 - Consequently, Notification No. 32/2006-C.E. (N.T.), dated 30-12-2006 issued in pursuance of Rule 12CC of the C.E. Rules, 2002 and Rule 12AA of the C.C. Rules, 2004 is not sustainable in law - writ petition is allowed

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• 2012 (9) TMI 107
  Clandestine removal of goods - demand of duty – penalty – Held that:- Appellants have contended that they had maintained proper records and the goods were cleared under challans to their sister unit - job work challan and job work register etc. were seized by the preventive officers, they were prevented their relying upon the same - mere debit of duty at the time of visit of the officer by itself is no ground for holding against them - statements itself cannot prove the fact of clandestine removal - appellants are contending that job work records were maintained by them but as they were seized by the officers, they were not produced before the authorities below - fact of production and clearance of goods on job work basis can be substantiate from the parallel records maintained by their sister unit - matter remanded to the original adjudicating authority for de novo adjudication.

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