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2013 (4) TMI 659
Proceedings initiated u/s 153A - search and seizure u/s 132 - Whether AO has all powers to go beyond the seized material during the search? - Addition in respect of share capital received - admission of additional evidence - whether on the basis of material furnished by the assessee and available on the record, the assessee has discharged its onus as cast by sec. 68 in terms of identity and creditworthiness of the shareholders and genuineness of the transaction - Accrual of income - Held that:- The availability of balance-sheet, certificate of incorporation, confirmations and certificates of good standing etc. filed by the assessee in respect of shareholders establish that they are non-resident entities, having independent and legal existence. The moneys have come to assessee through banking channels as is evident from FIRC, which also mentions the purpose of remittance and also the particulars of the remitting bank. FIPB approval that too with a liberty to collect share capital up to 600 crores and ROC compliance etc. clearly indicate the stand of the assessee.
Merit in the contentions of assessee and reliance on the decisions of Finlay Corporation [2003 (1) TMI 266 - ITAT DELHI-D], Smt. Sushila Ramaswamy [2009 (4) TMI 554 - ITAT CHENNAI] and Saraswati Holding (2007 (7) TMI 345 - ITAT DELHI-F) and the import of CBDT Circular No. 5 in F. No. 73A/2(69)-IT (A-ll), dt. 20th Feb., 1969 that whenever remittances are made by the non- resident holding company for purchase of shares of its subsidiary in India, the money undoubtedly is capital in the nature and if documents like FIRC etc are produced, it can safely be stated that the said money came in through banking channels.
In the absence of any evidence to show that the money remitted by the non-resident accrued in India, it cannot be held to be taxable in India. Hence, moneys remitted by non-residents whose identity is not in question through their bank accounts outside India have to be held as capital receipts not exigible to tax. It therefore naturally follows that if the identity of the non-resident remitter is established and the money has come in through banking channels, it would constitute a capital receipt and ordinarily cannot be treated as deemed income under sections 68 or 69 of the Act. Thus the share application money as raised in the grounds of appeal cannot be held as non-genuine and added as income of the assessee u/s 68 - In favour of assessee.
Disallowance of various expenses holding that no business activity was carried out - Held that:- For A.Y. 2002-03 & 2003-04 the assessee was not granted registration as vendor by the Ministry of Defence as suppliers. Besides, no supply had taken place. Thus the expenditure has been rightly disallowed as business of the assessee was not set up. Apropos A.Y. 2005-06, the assessee had obtained the registration and participated in the tenders invited by the Ministry of Defence for which necessary evidence has been referred in the form of correspondence demonstrating the negotiations at various stages. Thus, in A.Y. 2005-06, the assessee was in a state of readiness to obtain the orders if found successful for tendering/ bidding and the expenditure incurred by it is to be allowed as revenue expenditure for the defined period.
Addition on unsecured loans from M/s Claridges SEZ Pvt. Ltd. (CSEZ), as creditworthiness of M/s CSEZ was not established - Held that:- Merit in the arguments of assessee that CSEZ also being searched on the same date and the seized record being with the department, department could have verified the same from its record. The interest of justice will be served if the issue is remitted back to the file of AO to verify from the seized record about the bank statement of CSEZ and decide the issue after giving the assessee fair and reasonable opportunity of being heard. In favour of assessee for statistical purposes.
Disallowance of Interest - Held that:- In the absence of the details about disallowance of interest, it will not be possible to adjudicate this ground. Therefore, set aside the issue of interest back to the file of AO to decide the same afresh, considering our conclusion on applicability of sec. 68, commencement of business in 2007- 08, after giving the assessee reasonable opportunity of being heard.
Addition of US$ 3360 found at assessee's premises at the time of search - Held that:- The contention of the assessee that the confirmation and statement of Sri Govind Singh director of M/s Alpcord Network being on record, has not been denied by the department. The addition has been made on the basis that assessee could not produce necessary evidence & if the record is available with the department and assessee pointed out towards it, then as a principle of natural justice, lower authorities should verify that evidence and decide about the allowability. In favour of assessee for statistical purposes.
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2013 (4) TMI 658
Re opening of assessment - assessing officer formed an opinion that income of the assessee is only Rs.2,96,246/-, whereas he has deposited an amount of more than 27,24,750/- in two saving bank accounts in cash, thus the income has escaped assessment - Held that:- As during the course of hearing a query being put to the assessee that, whether assessee has annexed the copy of the bank statement with the return or made any note on the computation of income showing as to how a large number of amounts have been deposited in cash replied in negative. The information received from the investigation wing suggest deposits of Rs.27,24,750/- in cash in two banks accounts. It could be cross verified with the bank statements along with the disclosure of facts that this amount was received on account of sale proceeds of the hotel etc. In absence of complete information, assessing officer has to make an inquiry. Thus the assessing officer has concrete information which enable him to form an opinion that income has escaped assessment. Against assessee.
CIT(A) deleted the addition - cash deposited in cash in two bank accounts - Held that:- The assessee has explained the source in this case. The grievance of the AO is, why he has not deposited the amount in the bank on the date of receipt itself is too be hyper technical in his approach, once assessee has demonstrated the availability of cash in hand more than the one deposit in the bank account, though subsequently, then probably explanation of the assessee ought to be accepted, unless some other incriminating facts brought on record. AO has simply disbelieved and the explanation of the assessee and simple denial is a no denial, he has to assign the reason which is acceptable in law. No merit in this appeal of the revenue.
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2013 (4) TMI 657
Unexplained cash credit - addition u/s. 68 - Held that:- Assessee company has submitted that the share application money was received through the proper banking channel. The above also establishes the identity of the share application money provider company which are duly incorporated Company under the Companies Act. In this regard, confirmation by way of affidavit, PAN No., resolution passed by the share application provider company and the evidence of share allotment to the share company provided by the assessee company was duly submitted. In this regard, we note that Assessing Officer has not made any further independent enquiries to substantiate that the assessee has received bogus share application entry.
Thus as decided in CIT Vs. Lovely Exports [2008 (1) TMI 575 - SUPREME COURT OF INDIA] that that if the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the AO then the Department is free to proceed to reopen their individual assessments in accordance with law, but it cannot be regarded as undisclosed income of the assessee. Also see C.I.T. vs. Gangeshwari Mtetal (P) Ltd. [2013 (1) TMI 624 - DELHI HIGH COURT] & C.I.T. vs. Goel Sons Golden [2013 (4) TMI 571 - DELHI HIGH COURT] . Thus as Assessee has submitted enough cogent material before the AO which substantiate the identity, creditworthiness and genuineness of the transactions who in turn has not done any exercise to bring on record any evidence which refute the above submissions of the assessee - In favour of assessee.
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2013 (4) TMI 656
Penalty u/s 271(1)(c) - assessee has claimed depreciation on technical know-how of @ 25% & as observed by AO that technical know-how fees was to be allowed u/s. 35AB deduction was to be allowed in six equal installments - CIT(A) deleted the penalty levy - Held that:- CIT(A) is correct in observing that the claim of the assessee for depreciation on account of payment of third installment of technical know-how was bonafide viewed in the context of history of the assessee's case on the issue. It was with respect of the third installments which was paid during the financial year 1991-92 that the assessee capitalized the amount of Rs. 1,78,61,880/- to the plant and machinery being technical know-how fees treating the same as pre-operative expenses. AO however, on perusal of the details filed observed that Section 35AB was specific provision for allowability of expenditure on acquisition of know-how. Therefore, the deduction was required to be given by spreading it equal of six years.
Thus, it is clear that the assessee has made the claim for payment of technical know-how under the bonafide belief that its claim for payment of third installment was also allowable as deduction on the same basis as in the previous year. Thus, the assessee cannot be held guilty of furnishing of inaccurate particulars or concealment of income in this case. See CIT vs. Reliance Petro Products Ltd. [2010 (3) TMI 80 - SUPREME COURT], Dilip N. Shroff Versus Joint Commissioner of Income-tax And Another [2007 (5) TMI 198 - SUPREME Court] wherein held that mensrea was a essential requirement of penalty u/s 271(1)(c). Also see Hindustan Steel vs. State of Orissa [1969 (8) TMI 31 - SUPREME Court] - In favour of assessee.
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2013 (4) TMI 655
Imports of used digital multifunction and copying machine under the Foreign Trade Policy 2009-2014 - Whether the import of these goods is restricted as per Para 2.17 of the Foreign Trade Policy or not? – As per Notification No.35 (RE02012)/ 2009-2014 the Government had amended Para 2.17 of the Foreign Trade Policy.
Held that:– It is no doubt true that in exercise of the powers conferred under Section 5 of the Foreign Trade (Development and Regulation) Act, 1992, read with paragraph 2.1 of the Foreign Trade Policy, 2009-2014, under Notification No.35 (RE02012)/ 2009-2014 the Government had amended Para 2.17 of the Foreign Trade Policy that under the Head of "second hand goods", in the category of "second hand capital goods", import of (i) personal computers/ laptops, including their refurbished / reconditioned spares; (ii) photocopier machines/Digital multifunction print and copying machines (iii) Air conditioners and (iv) Diesel generating sets can be imported only as against authorisation. Taking the said amendment further, rightly, the Hand Book of Procedures (Vol.1) omitted Clause 2.33. The amendment to the policy has no relevance to the import under consideration.
A comparative study of Notification No.35 (RE02012)/2009-2014 dated 28.02.2013 amending Para 2.17 of the Foreign Trade Policy and the provision that existed prior to 28.02.2013, show that the amended notification made the import policy regime as subject to an authorisation for import as against the original requirements viz., allowed to be imported only as per provisions of FTP, ITC(HS), HBPv1, Public Notice or an authorisation issued for import of the specified second hand item. In the light of the amendment and the clear provision, we do not find any justifiable ground to accept the case of the appellants to interfere with the order of the learned single Judge. We have already held that there is no conflict between the policy and the procedure laid down.
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2013 (4) TMI 654
Appellant claimed benefit of Notification 21/2002-Cus on imported goods – Rejection of granting the benefit of exemption as the importer did not have a valid contract at the time of importation and he did not satisfy the condition 40(b) stipulated in the said Notification, which stipulates that only a person who has been awarded a contract for the construction of roads in India by a or on behalf of the Ministry of Surface Transport, by the NHAI, by the PWD of a State Government or by a road construction corporation under the control of the Government of a State or Union Territory is eligible for the exemption. Accordingly, the claim of the appellant was rejected and duty demand was confirmed against the appellant.
Revenue further points out that Notification 21/2002 was re-issued in the budget 2012 and in the new notification No.12/2012,. "Metropolitan Development Authority" was also specifically included. Therefore, it is clear that the notification distinguishes between a Metropolitan Development Authority and a Road Construction Corporation. Otherwise, there is no need to use these two expressions specifically and separately and, therefore, he contends that prior to Budget 2012, when Notification No.21/2002 was in force, benefit was not be available in case the contracts for road construction were awarded by MMRDA.
Held that - In the light of the notifications issued, we hold that prior to budget 2012, benefit of customs duty exemption on road construction equipment was not available in cases where the contract for such construction was awarded by a Metropolitan Development Authority. Thus the appellant in the present case is not eligible for the benefit of duty exemption under notification No. 21/2002-Cus. Accordingly, we dismiss the appeal as devoid of merits.
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2013 (4) TMI 653
Mis - declaration & undervaluation proceedings – enhancement on value of goods - entire case is built on the premise that the impugned goods are other than ‘Old and Used garments’ claimed to be classifiable under Chapter 6309 of CTA 1975.
The import of ‘worn clothing’ is restricted in terms of Foreign Trade Policy provisions, the subject consignment was pending adjudication by the Additional/Joint Commissioner of Customs, Custom House, Kolkata. In terms of Board’s Circular No. 36/2000-Cus., dated 8th May, 2000 while importing old and used garments under CTH 63.09, the imposition of fine and penalty for violation of EXIM policy. The DRI working on information came to conclusion that M/s. A.N. Impex ought to have declared the various articles of consignments in the import documents. Giving the declaration of subject goods as old and used worn garments, the conceding by the DRI to be vague and complete.
Held that - In the case before us, it is not alleged that the appellant has mis-declaced the price actually paid nor was there a mis-description of the goods imported. We find that value was sought to be enhanced by treating the impugned goods as other than old and used garments; and by comparing the sale price of earlier imported old and used garments. There is no specific findings as to how many articles are other than old and used articles, therefore, this aspect is required to be determined followed by valuation thereof. In these circumstances the case is remanded to ld. Commissioner for deciding the issue afresh while keeping in view our above observations. It is made clear that all the issues are kept open. Both sides are at liberty to produce documents in their support. Needless to say a reasonable opportunity of hearing may be granted to the appellant. The appeal is allowed by way of Remand.
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2013 (4) TMI 652
Irregularities in books of accounts - Market abuse - company charged with inflated profits and revenues in the financial statements and lured the general public to invest in the shares of the company based on such false financial statements thereby violated the provisions of SEBI(Prohibition of Fraudulent and Unfair Trade Practice - violation of Section 12A of SEBI Act and Regulation 3(b), 3(c), 3(d), 4(1), 4(2)(a), 4(2)(e), 4(2)(f), 4(2)(k), 4(2)(r) of Regulations 2003 - Held that:- As in this case that the Directors of the company had clearly violated provisions of Section 12A of SEBI Act read with Regulations 3 and 4 of 2003 Regulations. Companies whose securities are traded on a public market, disclosure of information about the company is crucial for the accurate pricing of the companies’ securities and also for the efficient operation of the market.
The facts clearly indicated that the company had made false corporate announcement stating that it had entered into agreements with 802 theatres and that false corporate announcement gave false figures relating to advance, security deposit and income pertaining to the theatres which were not inexistence. The deposits shown were turned out to be not genuine but mere book entries to hide receivables in the balance sheet.
Responsibility is cast on the Directors to prepare the annual records and reports and those accounts should reflect ‘a true and fair view’. As decided in Official Liquidator v. P.A. Tendolkar (1973 (1) TMI 53 - SUPREME COURT OF INDIA) a Director as so long associated personally with the management of the company that he will be deemed to be not merely cognizant of but liable for fraud in the conduct of business of the company even though no specific act of dishonesty is provide against him personally.
The facts in this case clearly reveal that the Directors of the company in question had failed in their duty to exercise due care and diligence and allowed the company to fabricate the figures and making false disclosures by overlooking the numerous red flags in the revenues, profits, receivables, deposits etc. which should not have escaped. Profit as on quarter ending June 2007 was three times more than the preceding quarter, it doubled in the quarter ending December 2007 over the preceding quarter. Further, there was disproportionate increase in the security deposits i.e. ₹ 36.05 crore in September 2007 to ₹ 270.38 crore in December 2007 as compared to increase in the number of theatres during the same period. They have participated in the board meetings and were privy to those commissions and omissions.
Thus conduct of the appellant and others was, therefore, fraudulent and the practices they had adopted, relating to securities, were unfair, which attracted the penalty provisions contained in Section 15 HA read with 15J of the SEBI Act.
Books of accounts were maintained in the Tally accounting software and for the financial year 2007-08 separate books of accounts were maintained for each region/unit. As already indicated, after the declaration of financial results on January 31, 2008, containing inflated profits, revenues for the quarter ended on 31.12.2007, MD of the company, his wife and the appellant had together pledged 72,75,455 shares of the company with various banks and financial institutions and raised 97.30 crores as loans. Thus the Directors and the Chief Financial Officers of the company had caused to publish forged and misleading results of the company, various quarterly financial results and the annual results for the year 2007-08, were reported to the stock-exchanges containing inflated figures of the company’s revenue, profits, security deposits and receivables and those financial statements which were relied upon by investors in making investment decisions, which did not reflect a true and fair view of the state of affairs of the company.
Thus the SEBI has rightly restrained the appellant for a period of two years from the date of that order from buying, selling or dealing with any securities, in any manner, or accessing the securities market, directly or indirectly and from being Director of any listed company and that the adjudicating officer has rightly imposed a penalty of ₹ 50 lakhs under Section 15HA of SEBI Act. The appeals are, therefore, dismissed. However, there will be no order as to costs.
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2013 (4) TMI 651
Infringement of copyright - Persistent breach and default of the terms of the licence - Held that:- The judgement of a Division Bench of this Court in Music Choice India Private Limited v. Phonographic Performance Limited () similarly emphasises that exclusive jurisdiction to grant a licence is vested with the Copyright Board - Defendant has prima facie been guilty of a persistent breach of its obligation - The Plaintiff has made out a strong prima facie case - The balance of convenience must necessarily weigh in favour of the Plaintiff since, to allow the Defendant to broadcast songs on the basis of the terms of the compulsory licence which has been validly terminated would amount to an infringement of the copyright of the Plaintiff - Moreover, admittedly the Plaintiff does not command a monopoly in respect of the entire market - The grant of an injunction may at worst be a matter of inconvenience but would not result in the closing down of the business of the Defendant.
Learned Single Judge was in error in allowing the Defendant the continued use of the repertoire of the songs of the Plaintiff - We set aside the operative direction contained in paragraphs 9 and 10 of the impugned order of the learned Single Judge allowing the Defendant to broadcast sound recordings from the repertoire of the Plaintiff subject to the deposit of an amount of Rs.11.50 lakhs - For the reasons indicated earlier, we grant an ad-interim order in terms of prayer clause (a) of the Notice of Motion - We also clarify by way of abundant caution that this order shall not come in the way of the final disposal of the Notice of Motion on merits.
The appeal filed by the Defendant stand dismissed - Cross-Objection of the Plaintiff is allowed.
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2013 (4) TMI 650
Winding up petition – Maheshwari/appellant could not repay the dues to their creditors/Tata resulting in litigations at the instance of creditors - Whether the secured creditors could file the petition for winding up and if so, what would be the role of the company Court in the matter of admission of the winding up proceeding?
Held that:- Winding up is a discretionary remedy. Section 443 of the Act empower the Court to pass appropriate order that would be just in the facts and circumstances of the case as there exist no dispute to the ascertained/ claim of the creditor. The company also could not make any positive effort on that score. However, the Court should use its discretion judiciously.
After following considering the case of Kotak Mahindra Bank Limited and Eastern Spining Mills & Industries Limited [2012 (11) TMI 82] We are inclined to give one more opportunity to Maheshwari to repay the dues of Tata. As Maheshwari would pay the dues of Tata as quantified and adjudicated by His Lordship by the order and judgement impugned by monthly installment of Rs.10 lakhs per month for one year commencing from April 10, 2013 and thereafter on the 10th day of the succeeding month. For the next financial year Maheshwari would pay Rs.12.5 lakhs per month on the date fixed as above. In the third financial year Maheshwari would pay Rs.15 lakhs per month until the entire dues are cleared off but if, any dues are still outstanding, that would be paid in four equal monthly installments payable on the date fixed as above. The payment of interest at the contractual rate would be at the yearly rest and be paid on the reducing claim. Frozen amount as on the date of the foregoing order would be taken as a principal sum and would be cleared off first and the subsequent interest component would be paid thereafter. So long the installments are paid off the winding up petition would remain permanently stayed. In default of payment of anyone installment this order would stand recalled and the parties would be at liberty to proceed before the learned company Judge.
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2013 (4) TMI 649
Merchant Overtime Tax Charges (MOT) - whether the Central Excise Officer has discharged his duty in the factory premises of respondent & has functioned as a “Customs Officer”, as such, MOT is leviable? - Held that:- It is an admitted position that stuffing work was done in the factory of respondent under the supervision of jurisdictional Central Range Officer during working hours only. The place of working/supervision was at the factory of the respondent which is at Mayapuri. Respondent has pointed out that as per Notification No.14/2002-CE(NT) dated 08.03.2002 as amended by Notification No.22/2002-CE(NT) dated 04.06.2002, the jurisdiction of Delhi II, Range 26 of Central Excise division-V includes Mayapuri Indl. Area Ph.-II where the factory of respondent is located, the services were rendered by the officer within his range only. The same fell within the jurisdiction of the Central Excise Range Officer who supervised the work. Chapter 13 of the CBEC's Customs Manual deals with “Merchant Overtime Fee” wherein it is provided that if services are rendered by the Customs Officer at a place which is not his normal place of work or a place beyond the Customs area, overtime is levied even during the normal working hours.
Thus none of the conditions for levy of MOT is satisfied.
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2013 (4) TMI 648
Rejection of refund claim – refund of amount deposited during the pendency of the case - Held that - Assessee herein had paid the dues/amount voluntarily through PLA on contention raised by the revenue related to excisibilty of its manufactured goods. It is also seen that once the Tribunal has held that the activity is not amounting to manufacture and is not being upturned by higher judicial fora, the amount which has been paid to pursue the appeal before the higher judicial fora, needs to be refunded to the assessee, is the law which has been settled. I find that the first appellate authority has correctly followed the law in this case. The appeal filed by the Revenue is rejected.
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2013 (4) TMI 647
Cenvat credit of service tax paid – Waiver of pre-deposit & stay of duty/interest/penalty - credit has been denied to appellant in respect of services like port service, storage and warehousing service, cargo handling service, CHA service, export freight charges and outward courier charges on the ground that these services have been rendered after the ‘place of removal'. Held that - The present case are already held by the Hon’ble Gujarat High Court in Customs vs. Mundra Port & Special Economic Zone Ltd. [2010 (5) TMI 483 - GUJARAT HIGH COURT] has held that credit in respect of these services cannot be denied to the assessee. Following the decision of the stay petition is allowed and pre-deposit is waived and stay of recovery of dues is ordered till the disposal of the appeal.
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2013 (4) TMI 646
Admissibility of SSI Exemptions – Waiver of pre-deposit of duty/education Cess/interest/penalty - .Department is of the view that the benefit of small scale notification will not be admissible to the appellant as their value of all the excisable goods is more than the amount stipulated in the said notification as the appellant has not included the value of chasis supplied by the customer while computing the aggregate value of the clearances. - Held that - the person who does not avail the benefit of exemption notification of special purpose vehicle or is not eligible for the same and if he does not avail the Cenvat credit of the duty paid on chasis, the value of the motor vehicle so fabricated in his factory premises would be the value excluding the value of the chasis; but if a person who wants to avail the benefit of exemption notification, value needs to be enhanced by inclusion of the value of chasis. Tribunal find that this is not the intent of the legislation at least in this Chapter heading note and Chapter 87. Accordingly, the application for waiver of pre-deposit of amounts involved is allowed and recovery thereof stayed till the disposal of the appeals.
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2013 (4) TMI 645
Manufacture - Marketability - Chargeability of duty on treated water whether it was marketable for the very purpose or not. - Held that - the department's case in this batch of appeals is no better than what was noted by this Bench in the earlier case of the main assessee Hyderabad vs. Hindustan Coca-Cola Beverages (P) Ltd [2009 (6) TMI 509 - CESTAT, BANGALORE].
There is always a distinction between packaged water and treated water. Packaged water has minerals added to it. The treated water cleared by the respondents are not marketable as such. We also find force in the contention that the name "cococola" is only a house mark of the company. It cannot be said that the treated water is marketed under the brand name of cococola in the light of the Hon'ble Supreme Court's decision in the case of Crane Betel Nut Powder Works v. CCE cited (2007 (3) TMI 6 - SUPREME COURT OF INDIA). The processes undertaken for treatment of water did not result in the emergence of new product.
Therefore, we are constrained to follow our own earlier decision affirmed by the apex court. Accordingly, the demands of duty and the connected penalties are set aside and these appeals are allowed.
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2013 (4) TMI 644
Valuation - inclusion of charity/dharmada in the valuation for the purpose of excise duty - Extended period of limitation - held that:- Held that - A ordinary citizen, in our view, under the ordinary course of circumstances cannot be expected to keep track of the judgment of various Courts. He is not expected to know about the law laid down by judicial pronouncement unless he comes across the judgment itself. The judgment of Supreme Court in the matter of Panchmukhi Engineering Works [2002 (11) TMI 122 - SUPREME COURT] was published in the year 2003 - Even Central Board of Excise & Customs issued clarificatory circular pursuant to aforesaid judgment on 21-11-2003, therefore, it would be unfair to infer that the appellant was aware the law laid down by the Supreme Court in the matter of Panchmukhi Engineering Works (supra) immediately after the pronouncement of judgment on 28-11-2002.
There is no reason to impute mala fide intention on the party of the appellant to evade the excise duty by deliberately not included the “Dharmada charges” in the transaction value. Undisputedly, it is not a case of fraud or dishonest concealment of fact. - Demand set aside being beyoind the normal period of limitation - Decided in favor of assessee.
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2013 (4) TMI 643
Royalty / FTS – back-up services and IT support services for solving IT related problems - DTAA - Assessee is a non-resident company incorporated in Australia and appeal is on following grounds – (i) IT support services rendered by the Appellant are in the nature of Royalty/FTS within the meaning of article 12 of the India-Australia treaty and/or Section 9(1)(vii) of the Income Tax Act, 1961. (ii) services rendered by the Appellant fall within the ambit of Royalty/FTS and making an addition by treating such IT support services as chargeable to tax in India.
Held that - In the present case, the assessee has not made available any technical knowledge or expertise to the recipient Indian company. In our opinion, the assessee has only provided the back-up services and IT support services for solving IT related problems to its Indian subsidiary. Hence, unless and until the services are not made available, same cannot be taxable in India. We, therefore hold that the services rendered by assessee company to its Indian group companies, though are in the nature of technical services, but is not covered in para (3)(g) to Article 12 of the India Australia Treaty and hence, the same is not taxable in India. We also hold that the amount received by the assessee cannot be treated as a Royalty even under the normal provisions of I.T. Act. But under the normal provision of the I.T. Act the same constitute consideration for rendering the technical services covered u/s.9(1)(vii) of the I.T. Act. Accordingly, Ground No. 1 is allowed and issue is decided in favour of the assessee. The assessee has taken alternative Ground by way of Ground No. 2. As we have decided the issue in favour of the assessee, the alternate Ground does not survive. In the result, the assessee's appeal is allowed.
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2013 (4) TMI 642
Invocation of the provision of section 10A(7) r.w.s. 80IA(10) of the Act on the basis of the Transfer Pricing (TP) Study undertaken by the assessee - assessee's service Center is registered under the Software Technology Parks of India and provides services to its Associate Enterprise (AE) – Assessee choose CUP method for determination of ALP - the Assessing Officer invoked the provisions of S.10A(7) read with S.80IA(10) to consider that the assessee has earned more than the ordinary profit and considering the same TP study submitted by the assessee under TNMM method, determined the excess profit and denied deduction under S.10A while completing the assessment.
Held that - In view of the decisions of the Coordinate Benches of the Tribunal we hold that the exercise undertaken by the Assessing Officer under S.10A(7) is neither sustainable on facts nor under the provisions of law. The Coordinate Bench in the above referred case has relied on the decision in the case of Tweezerman (India) (P.) Ltd. v. Addl. CIT [2010] 4 TMI 892 - ITAT Chennai]. In this case, the transfer pricing study has not resulted in any addition and ALP was accepted. Even though the authorities relied on "arranged" transaction between the assessee and AE, we do not see any such arrangement on the facts of the case. Nor there is any passing of profits directly or indirectly. In view of this, since the assessee's operations are efficient enough to obtain more profits and since the receipts are at arms length and there is no passing of excess profits by the parent company (AE) to the assessee, we are of the opinion that Assessing Officer's action in restricting the profits is not correct. We also do not see any reason to restore it to the Assessing Officer since there is nothing else to examine. Accordingly, we allow the grounds of the assessee and direct the Assessing Officer to treat the profits declared by the assessee as ordinary profits and allow deduction under S.10A, without any further adjustment.
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2013 (4) TMI 641
Royalty income received by assesse/respondent – claiming for concessional rate of tax provided in Article 12 of DTAA – tax rate of 10% - held that:- the CIT(A) and the Tribunal arrived at a finding of fact on the basis of the evidence in the form of certificate dated 25/7/2003 from revenue authorities in Netherlands certifying that the respondent assessee was a beneficial owner of the royalty received in respect of musical track given to M/s. Universal Music Pvt. Ltd. Besides, reliance was placed by the Tribunal upon the CBDT Circular No.789 dated 13/4/2000 that certificate from revenue authorities is sufficient evidence of beneficial ownership. On these findings of fact the Tribunal upheld the order of CIT(A) and held that the respondent assessee is entitled to benefit of Article 12 of DTAA. - Appeal of the revenue dismissed.
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2013 (4) TMI 640
Depreciation claim u/s 32 - Depreciation claim by the assessee, disallowed and penalty proceedings u/s 271(1)(c) were initiated by the AO. – Held that - During the assessment proceedings, the assessee had voluntarily come forward and pointed out the mistake to rectify the same. The assessee was under the bonafide belief that there cannot be said to have concealed particulars of income and the case cannot fall under the provisions of section 271(1)(c) of the Act. In the facts and circumstances, the ld. CIT(A) is not justified in confirming the action of the A.O. of levying penalty under section 271(1)(c) of the Act. The A.O. is directed to cancel the penalty so levied.
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