TMI Tax Updates - e-Newsletter
January 19, 2013

Case Laws in this Newsletter:

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

News

1. Eminent Persons Advisory Group Suggests CCI to Focus on Promoting the Competition Culture in the Country

2. Personal Hearing for Compounding under FEMA : RBI Clarification

3. Know Your Customer (KYC) norms /Anti-Money Laundering (AML) Standards/Combating of Financing of Terrorism (CFT)/Obligation of banks under Prevention of Money Laundering Act (PMLA), 2002

4. Restructuring of Import Duty on crude edible Oil

5. Heads of the Revenue of Brics Countries Identifies Seven areas of tax policy and tax Administration for Extending their Mutual Cooperation; joint Communique issued after Two Day meeting of the heads of Revenue of Brics Countries

6. Glimpses of Manual on exchange of information

7. Request for Proposal (RFP) for Evaluation Study of Plan Scheme “National Quality Campaign” carried out by Quality Council of India from consultants/research institutes empanelled with the Planning Commission

8. Ministry of Information and Broadcasting Seeks Recommendations of TRAI for Further Reforms in the Cable Tv Sector

9. Extension of date for receipt of comments on TRAI’s consultation paper on “Definition of Adjusted Gross Revenue (AGR) in Licence Agreements for provision of Internet Services and minimum presumptive AGR”.

Circulars / Instructions / Orders

Income Tax

1. Instruction No. 01/2013 - dated 17-1-2013

Exchange of Information for Tax Purpose with Foreign Jurisdictions – Guidelines for inbound and outbound requests

2. 01/2013 - dated 17-1-2013

Issues relating to export of computer software Direct tax benefits -Clarification reg.

FEMA

3. 77 - dated 18-1-2013

Exim Bank's Line of Credit (LOC) of USD 20 million to Nigerian Export-Import Bank

4. 76 - dated 17-1-2013

Reporting under Foreign Exchange Management Act, 1999 (FEMA)

Highlights / Catch Notes

Income Tax

• Section 54F Deduction Allowed for House Purchased in Wife's Name, Entirely Funded by Assessee.

  Case-Laws - HC : Deduction u/s 54F - house purchased in the name of his wife - The entire purchase consideration was paid only by the assessee and not a single penny was contributed by the assessee’s wife. - Deduction allowed - HC
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• Export Business Credits u/s 10B: Inclusion Allowed if Arising During Business Activities, Not Directly from Exports.

  Case-Laws - AT : Deduction u/s.10B - It is not necessary that every credit or receipt of the export business must arise directly from the export itself, for it to qualify for inclusion, and it would be suffice that the same arises in the course of the assessee's business. - AT
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• Section 43B Interpretation: "Actual Payment" Means Act of Payment, Not Physical Cash Exchange.

  Case-Laws - HC : Addition u/s 43B - “actual payment” means “actual payment” and not actual receipt and delivery of the currency by the two parties transacting when they are creditor and debtor both - HC
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• New Guidelines Set for Secure, Efficient Tax Information Exchange Between Jurisdictions to Combat Evasion and Boost Cooperation.

  Circulars : Exchange of Information for Tax Purpose with Foreign Jurisdictions – Guidelines for inbound and outbound requests - Order-Instruction
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• Circular Clarifies Tax Benefits for Software Exporters: Guidance on Eligibility and Compliance for Direct Tax Incentives.

  Circulars : Issues relating to export of computer software Direct tax benefits -Clarification reg. - Circular
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• Business Know-How Relinquished Before April 1, 2003, Classified as Capital Receipt, Not Taxed as Long-Term Gain.

  Case-Laws - AT : Long Term Capital Gain on relinquishment from utilization of business know-how - prior to 1st April 2003 such a payment is to be treated as capital receipt not liable for tax - AT
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• Retirement Compensation for Workers Due to Business Closure Must Be Fully Deducted as Expense in the Incurred Year.

  Case-Laws - AT : Retirement compensation paid to workmen - the expenditure was incurred upon the closure of the business - must be allowed in its entirety in the year in which it is incurred - AT
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Customs

• High Court Rules Writ of Mandamus Valid; Port Charges on Seven Containers Deemed Unjustified.

  Case-Laws - HC : Writ of Mandamus - demanding or collecting any port charges from the petitioner in respect seven containers - There is no error or illegality in the same. - HC
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FEMA

• Exim Bank Grants $20M Credit Line to Nigerian Export-Import Bank to Boost Trade Under FEMA Regulations.

  Circulars : Exim Bank's Line of Credit (LOC) of USD 20 million to Nigerian Export-Import Bank - Circular
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• New FEMA Circular Updates Reporting Rules for Foreign Exchange Transactions, Emphasizes Compliance, Transparency, and Penalties for Non-Compliance.

  Circulars : Reporting under Foreign Exchange Management Act, 1999 (FEMA) - Circular
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Service Tax

• Laborers Cutting and Supplying Sugar Cane Not Liable for Service Tax Under Manpower Recruitment Rules.

  Case-Laws - AT : Man power Recruitment and Supply Agency Service - the applicant along with other labourers entered into a contract for cutting and supply of sugar cane. - prima facie not liable to service tax - AT
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Central Excise

• CENVAT Credit Denial Overturned: Duty Non-Payment on Job Worker Sacks Doesn't Affect Input Credit for Packing Materials.

  Case-Laws - AT : Denial of CENVAT Credit – Merely because they have not paid the duty on the sacks which were manufactured in the factory of the job worker, there is no justification for denial of credit on the inputs which have gone into the packing materials. - AT
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VAT

• High Court Addresses Non-Registration of Business Locations u/s 27(2) TNVAT Act & Section 9 CST Act.

  Case-Laws - HC : Non registration of additional place of business/branches or godown with the Commercial Taxes Department - Section 27(2) of TNVAT Act read with Section 9 of the CST Act - HC
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Case Laws:

• Income Tax

• 2013 (1) TMI 402
  Deduction u/s 80-IC - delay in filing application u/s 80-AC for claiming the benefit - writ petition before this Court against application rejected - Held that:- Though the petitioner definitely has an alternative remedy under Section 253 in case the petitioner so desires she may approach the Central Board of Direct Taxation under Section 119 (2). It is made clear that in case the petitioner moves an application before the Central Board of Direct Taxation under Section 119 (2), the same shall be disposed of as expeditiously as possible - writ petition disposed of.

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• 2013 (1) TMI 401
  Deduction u/s 54F - disallowance as residential house purchased in the name of his wife - assessee inherited 50% share in a residential house from his father - both the brothers jointly sold the property - sale proceeds invested in the acquisition of a vacant plot for Rs.31,25,100/- and the purchase of a residential house for Rs.34,35,700/- in the name of his wife - Held that:- Following the decision of CIT Vs. V. Natarajan [2006 (2) TMI 136 - MADRAS HIGH COURT], Late Gulam Ali Khan Vs. CIT [1984 (12) TMI 9 - ANDHRA PRADESH HIGH COURT] adopting the rule laid down in CIT Vs. Vegetable Products Ltd [1973 (1) TMI 1 - SUPREME COURT ] which says that if a statutory provision is capable of more than one view, then the view which favours the tax payer should be preferred. Also that Section 54F being a beneficial provision enacted for encouraging investment in residential houses should be liberally interpreted. The entire purchase consideration was paid only by the assessee and not a single penny was contributed by the assessee’s wife. As a matter of fact, Section 54F in terms does not require that the new residential property shall be purchased in the name of the assessee; it merely says that the assessee should have purchased/constructed “a residential house”. See CIT Vs. Gurnam Singh [2008 (4) TMI 28 - PUNJAB AND HARYANA HIGH COURT] - in favour of the assessee.

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• 2013 (1) TMI 400
  Deduction u/s.10B - eligibility of Interest on monies held in FD with bank for availing credit facilities by way of LC and bank guarantee - Held that:- It is not clear if monies held in deposit account/s form part of the regular arrangement adopted or followed by the bank for extending non-fund based credit facilities to its constituents. If so, the same can only be regarded as integral to the assessee's business, forming part of the profits of the business of the assessee's eligible undertaking, even as held by the tribunal on more than one occasion. The receipt though arising in India directly impacts the input cost of goods or services required for carrying on the export business, if not the availability of those goods and services themselves. However, if these (deposits) serve only or principally as a collateral for availing the facilities, in which case these could well be substituted with any other security as mutually acceptable to the lender-bank and the borrower, the position would be different. Subject to verification on this count by the AO, and returning a positive finding of the deposits not serving merely as a collateral, but extended as a part of a normative business arrangement by the bank with its clients for allowing such non-fund facilities for their business, the assessee's claim is allowed. Interest on FD and bank on surplus funds - Held that:- Even as admitted by the assessee during hearing, the same is only on surplus funds for the time being and, therefore, cannot be said to be derived from the assessee's business. The same stands rightly excluded. Sales tax refund and excise duty draw back - Held that:- The same represents refund of sales-tax on purchases for an earlier period, being not payable by an export unit. The said benefit is only a part of the receipt of the business. No doubt, it arises from a government policy toward non-levy of tax on the purchases meant for export, is yet only to provide an incentive to the export business by making it more competitive in the international market, by reducing the input cost. The same would, thus, have to be regarded as an eligible receipt of the eligible business. Likewise for the duty draw back. It is not the business of the undertaking per se but the relevant policy of the government that leads to a different treatment of the assessees engaged in exports vis-a-vis those in domestic business and, thus, responsible for the said profit. See Liberty India (2009 (8) TMI 63 - SUPREME COURT ). Scrap sale - Held that:- It is not necessary that every credit or receipt of the export business must arise directly from the export itself, for it to qualify for inclusion, and it would be suffice that the same arises in the course of the assessee's business. Further, the very fact that section 10B(4) provides for an apportionment in the ratio of ET to TT implies that receipts other than that comprised in ET are contemplated for inclusion in TT. The same is, thus, eligible and, further, would go to form part of the TT. As this aspect does not arise directly but constrained to observe so, as the same only follows; rather, forms the basis of finding of the scrap sales forming part of the receipt of the assessee's export business, i.e., accepting the assessee's case, so that the said profit stands derived from such business. Miscellaneous Income - Held that:- As assessee informed that the credit does not constitute an income per se, but only represents recovery (to that extent) out of canteen expenses, which stand already debited and reduced in arriving at the eligible profits. If so, there is no question of it being an item of income, and would only go to reduce a cost, which stands incurred and, secondly, already considered as part of the cost and reduced from the profits of the eligible business, to that extent. The A.O. shall verify the same, and allow relief only to the extent the said amount goes to reduce the relevant expenditure, where already claimed and allowed - No case qua fine from workers is, however, made out - The details of the discount would be required to be similarly considered, which have not been by the Revenue. The assessee's claim, where found to be so, is a part of the profits derived from the eligible business - in favour of assessee for statistical purposes.

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• 2013 (1) TMI 399
  Whether a respondent- assessee can be considered to be a tax resident of Germany? - Held that:- Respondent-assessee is receiving royalty and fees for technical services rendered in India & as Article 12 of DTAA, royalty and fees for technical services received in India by a person resident outside India are not liable to tax in India in excess of 10% of the gross amount received. On examination term 'resident' in terms of Article 4 of the DTAA means "any person who, under the laws of Germany is liable to tax therein by reason of his domicile, residence, place of management or any criterion of a similar nature". Thus both the CIT(A) and the Tribunal has on examination of records found that respondent-assessee is filing Trade Tax Return in Germany and therefore is paying tax to which the DTAA applies. Further, the Tax Resident Certificate dated 18.03.2005 issued by German Authorities evidences the fact that the respondent-assessee is considered as a taxable unit under the taxation laws of Germany. Therefore, the DTAA is applicable to the respondent-assessee and the benefit of Article 12(2) thereof cannot be denied - it is not open to deny the benefit of the DTAA on the basis of the OECD commentary - in favour of assessee. Interest chargeable u/s 234B - Held that:- The issue is covered in favour of the assessee as Director of Income Tax (International Taxation) v/s. NGC Network Asia LLC [2009 (1) TMI 174 - BOMBAY HIGH COURT] wherein held that when a duty is cast on the payer to pay the tax at source, on failure, no interest can be imposed on the payee-assessee - in favour of assessee.

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• 2013 (1) TMI 398
  Addition u/s 43B - Payment of Statutory liability of interest to State Finance Corporation claimed to have been made by book adjustment and not by actual payment - Tribunal deleted the addition - Held that:- Effective payment of interest on the loan taken from Bihar State Financial Corporation by the assessee cannot be denied because the interests were adjusted against the subsidy and the term loan due to assessee. Also that instead of withdrawing the subsidy and the term loans and getting it deposited in the assessee's bank account and again making the payment either by cash or by crossed cheque or bank draft, the payment has been effected by book adjustment, therefore, there is effective payment of the interest on loan to Bihar State Financial Corporation. Hence, disallowance under Section 43B in all the three accounting years were not correct. For making “actual payment” it is always not necessary that one should, if having a credit entry, also have a debit entry, then he should receive the “actual payment” in cash or through cheque or demand draft in his bank account so as to take physical delivery of the currency and then deliver it again to the same creditor who is also debtor of the receiving person. So, “actual payment” means “actual payment” and not actual receipt and delivery of the currency by the two parties transacting when they are creditor and debtor both - thus if the interest is paid not by actually receiving amount from the loan advancing person or institution but is paid out of fund lying in any another account of the assessee with such creditor, then that is the “actual payment” - against revenue.

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• 2013 (1) TMI 397
  Applicability of proviso to section 132(4) - whether Oath recorded on 24.9.87 will be governed by provision as it stood on 24.9.87 or as amended by insertion of the explanation therein w.e.f 1.4.89 - Held that:- Statement recorded under section 132(4) is evidence but its reliability depends upon the facts of the case and particularly surrounding circumstances. Here in this case, all the authorities below have merely reached to the conclusion of one conclusion merely on the basis of assumption resulting into fastening of the liability upon the assessee. The statement on oath of the assessee is a piece of evidence as per section 132(4) and when there is incriminating admission against himself, then it is required to be examined with due care and caution. As decided in Kailashben Manharlal Chokshi case (2008 (9) TMI 525 - GUJARAT HIGH COURT), that retracted statement recorded under section 132(4) cannot be the basis for assessing undisclosed income of the assessee and found the explanation given by the assessee to be more convincing and that was not considered by the authorities below. Here in this case also, no specific reason has been given for rejection of the assessee's contention by which the assessee has retracted from his admission - None of the authorities gave any reason as to why AO did not proceed further to enquire into the undisclosed income - wrong inference had been drawn by the authorities below in holding that there was undisclosed income to the tune of Rs.20 lacs - no answering the question about retrospective operation of the proviso to section 134(4)required.

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• 2013 (1) TMI 396
  Deduction u/s 10B - not entitled to the benefit in the assessment year 2004-05 as period of ten years has to be reckoned from the assessment year relevant to the previous year in which the assessee begins manufacturing process i.e. 1994-95 - Held that:- A perusal of sub-section (3) of section 10B prior to the amendment of Income Tax (Second Amendment) Act, 1998 shows that the assessee could have availed the benefit of section 10B in any of the five consecutive assessment years falling within a period of eight years beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce articles or things. It is an admitted fact that the assessee started manufacturing in May, 1993 & assessee was eligible for claiming deduction under section 10B for the period of 10 years beginning with the assessment year 1994-95. Accordingly, the assessee was entitled for benefit upto assessment year 2003-04. The Tribunal inadvertently calculated the period of 10 years starting from assessment year 1995-96 and ending with assessment year 2004-05. This is a mistake which has to be rectified. Assessee fairly conceded to the factual error in calculation of period of 10 years. Since the change of the year goes to the root of the order, it fit to recall the order dated 24.7.2012 and the Registry is directed to fix the hearing of appeal in due course after informing both the parties - Miscellaneous Petition filed by the Revenue allowed.

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• 2013 (1) TMI 395
  Notional interest computed on account of a delay in realization of the dues from AE added back for the purposes of arriving at the arm's length pricing u/s 92CA(3) - DR stated that the "receivable from the AE" is an international transaction within the meaning of section 92B - Held that:- Not in dispute that the impugned addition was made prior to the amendment made u/s 92B of the Act by inserting Explanation by the Finance Act, 2012 w.r.e.f. 1-4-2002 and all the decisions of the Tribunal relied on by both the parties are prior to the said amendment. This being so and keeping in view that the assessee has taken certain new plea at the stage of rejoinder reiterating that sale value and interest cannot be regarded as a separate transaction, relied on the second part of the decision in Nimbus Communications Ltd.'s case (2010 (1) TMI 921 - ITAT, MUMBAI) thus in the interest of justice, the matter should go back to the file of the A.O. to decide the same afresh - grounds of assessee partly allowed for statistical purpose. Setting off the past-unabsorbed losses prior to calculating exemption u/s 10A - Held that:- The issue stands covered in favour of the assessee by the recent decision of The Commissioner of Income Tax-10 Versus Black & Veatch Consulting Pvt.Ltd. [2012 (4) TMI 450 - BOMBAY HIGH COURT] Section 10A is a provision which is in the nature of a deduction and not an exemption - the deduction under Section 10A has to be given effect to at the stage of computing the profits and gains of business - Section 80B(5) defines for the purposes of Chapter VI-A “gross total income” to mean the total income computed in accordance with the provisions of the Act, before making any deduction under the Chapter - against revenue. Disqualification of interest income, directly sprang from the business operations, from exemption u/s 10A - Held that:- Following the consistent view of the Tribunal as decided in Jewelex International (P.) Ltd.'s case (2010 (9) TMI 906 - ITAT MUMBAI), Greytrix (India) (P.) Ltd. case (2013 (1) TMI 381 - ITAT MUMBAI) & Tropicate Textiles (P.) Ltd. [2012 (7) TMI 57 - ITAT, MUMBAI] to hold that the assessee is entitled to deduction u/s 10A of the interest income of Rs. 25,002/- on the FD pledged with the bank on account of margin money. As regards the interest on NSC Rs. 248/- and interest on loan to employees Rs. 135,583/- there is no nexus between the interest income and the income derived by the undertaking of the assessee in terms of the provisions of section 10A, therefore, the A.O. was justified in treating the same as income from other sources not eligible for deduction u/s 10A - partly in favour of assessee.

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• 2013 (1) TMI 394
  Penalty u/s. 271(1)(c) - interest income assessed by the AO as income from other sources and not as business income - non-indication per its return of income by the assessee that the said income stands imbedded in its (reduced) claim for interest expenditure on borrowings income for which is exigible to deduction u/ss. 10A & 10B - Held that:- With regard to the assessment of the impugned income as from other sources, as against from business, which is a prerequisite for it to be considered as exigible for deduction u/s. 10A(1) or s.10B(1), what is relevant and is to be seen is the assessee’s return of income, per which the claim stands made, and not its treatment by the AO, which though not disputed by the assessee, would yet not detract from the merits of the assessee’s explanation in having returned it only as business income and, further, as derived by its eligible undertaking, so as to be eligible for deduction u/s. 10A(1) or, as the case may be, s.10B(1), in view of ss. 10A(4) and 10B(4) respectively. The issue qua head of income under which the same is to assessed stands clarified by the hon’ble jurisdictional high court in the case of CIT vs. Indo Swiss Jewels Ltd. (2005 (9) TMI 47 - BOMBAY HIGH COURT ), since followed by the tribunal in Tropicate Textiles Pvt. Ltd. (2012 (7) TMI 57 - ITAT, MUMBAI) wherein held that the interest earned on the short-term deposits of the money kept apart for the purpose of business has to be treated as income earned on business and cannot be treated as income from other sources Thus the impugned penalty is liable to be deleted also drawing support from the decisions in the case of ITO v. Jewelex International Pvt. Ltd. (2010 (9) TMI 906 - ITAT MUMBAI) and ITO v. Greytrix (I) Pvt. Ltd. (2013 (1) TMI 381 - ITAT MUMBAI) .

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• 2013 (1) TMI 393
  Long Term Capital Gain on relinquishment from utilization of business know-how - CIT(A)deleted the addition - whether utilization of business know- how constitutes an asset within the meaning of Section 2(14)? - Held that:- The assessee has received a sum of Rs. 5.00 crores under an agreement dated 27th November 1998, in consideration of 10 years of restraint on right to carry on business or to carry on specified activities mentioned therein. The AO has treated the sum so received to be taxable under the head “Capital Gains” firstly, on the ground that the assessee has itself invested the sum of Rs. 3.00 crores out of the receipts of Rs. 5.00 crores in the securities specified under section 54EA and, secondly, the non–compete right is also a valuable right and is covered by section 55(2)(a). Thus finding no merit in such a conclusion drawn by the AO for the reason that section 55(2)(a) is for the purpose of determining the cost of acquisition in relation to a capital asset which also includes right to manufacture produce or process any article or thing or right to carry on any business. In the present case, the assessee has not received any right to carry such kind of activities. In fact, the amount has been given for not to carry out any such business activities or manufacturing. Regarding other aspect that the assessee has itself treated part of its receipt as capital gain by making the investment in specified securities for the purpose of exemption under section 54EA, will also not help the case of the Revenue as one has to see the nature of receipts and not the conduct of the assessee. Thus as rightly pointed out assessee that if at all this sum can be treated to be as taxable income, the same can be taxed under the provisions of section 28(va) which has been brought in the statute w.e.f. 1st April 2003. Thus following the judgment in case of Guffic Chem Pvt. Ltd. (2011 (3) TMI 6 - SUPREME COURT) wherein held that prior to this period, such a payment is to be treated as capital receipt not liable for tax no merit in the grounds raised by the Revenue and, consequently, the findings given by the Commissioner (Appeals) are upheld that the sum of Rs. 5.00 crores is treated as a capital receipt and is not chargeable to tax in the year under appeal - in favour of assessee. Addition of Rs. 6 Crores for computing book profit under Section 115JA as these amounts were not credited to P & L A/c. and directly brought to reserve account in the balance-sheet - CIT(A)deleted the addition relying on Appollo Tyres case [2002 (5) TMI 5 - SUPREME COURT] - Held that:- The Explanation is very clear that the book profit means the net profit as shown in the Profit & Loss Account which has been prepared in accordance with Parts-II and III of Schedule-VI to the Companies Act, 1956, and such net profit has to be increased and reduced in view of the provisions given in the Explanation. Thus, the Explanation pre-supposes that the amount received should be debited to the Profit & Loss Account and if the same has not been debited and has been directly taken to the capital reserve account in the balance sheet, the same cannot be tinkered with so as to include it in the Profit & Loss Account. Otherwise, it will enhance the scope of the AO to re-work the net profit arrived at by the company which has been certified by the prescribed authority and duly approved by the company in its general meeting and which has been filed before the Registrar of Companies who has a satisfactory obligation to examine and satisfy that the accounts have been maintained in accordance with the requirement of Companies Act, 1956. Thus, in view of the ratio laid down Malayala Manorama Co. Ltd. v/s CIT [2008 (4) TMI 20 - SUPREME COURT] wherein referred the decision of Kynetic Motors [2003 (1) TMI 47 - BOMBAY HIGH COURT] & Apollo Tyres [2002 (5) TMI 5 - SUPREME COURT] that AO cannot re-work the net profit prepared by the company in accordance with Companies Act no reason to deviate from the findings given by the Commissioner (Appeals) - against revenue. Disallowance of set-off of unabsorbed depreciation against income chargeable under the head short term capital gains - Held that:- As issue now stands covered by DCIT v/s Times Guarantee Ltd [2010 (6) TMI 516 - ITAT, MUMBAI] insofar as the issue of brought forward unadjusted depreciation allowance up to assessment year 1996-97 is concerned, the same is to be treated as current depreciation and can be set-off against the income under any head. Also see General Motors Pvt. Ltd. v/s DCIT [2012 (8) TMI 714 - GUJARAT HIGH COURT]- in favour of assessee. Disallowance of retirement compensation paid to workmen - the expenditure was incurred upon the closure of the business - Held that:- The issue now stands covered by the judgment of Jurisdictional High Court rendered in Bhor Industries Ltd. [2003 (2) TMI 20 - BOMBAY HIGH COURT] wherein held that the retirement compensation paid to the workmen is revenue expenditure and is to be allowed in this year - revenue expenditure, which is incurred wholly and exclusively for the purposes of business, must be allowed in its entirety in the year in which it is incurred and it cannot be spread over a number of years even though the assessee has written it off in its books over a period of years - in favour of assessee.

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• Customs

• 2013 (1) TMI 391
  Testing report of the goods - Revenue says that CRCL report is conclusive whereas appellant says that a second report from Sri Ram Institute of Industrial Research, New Delhi or IIT is correct - as submitted by appellant that report of Sri Ram Institute for Industrial Research, New Delhi was obtained but it is clarified today that no sample was tested by Sri Ram Institute for Industrial Research - Held that:- It would be proper to send the matter back to the Adjudicating Authority to confront the report of CRCL to the appellant for leading its defence. If the authority is satisfied that retesting is warranted he should order for retesting of the goods Appellant is directed to make application to the Adjudicating Authority within one month of receipt of this order and request for fixing date of hearing and provide copy of CRCL report to the appellant for leading its defence granting time for that purpose.

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• 2013 (1) TMI 390
  Inflation of quantum of potato bags on the body of the Challan - Deliberate attempt to create an impression that besides potato, the truck in question was carrying no other goods - Held that:- It is not in dispute that the truck bearing Registration No.WB-63-3575 loaded with 30,000 bottles of Phensydel New Cough Linctus (100 ml. each) packed in 150 numbers of bags of different types and sizes valued at Rs.21,60,000/- along with a load of 9,675 Kgs. of potato valued at Rs.48,375/- (packed in 215 numbers of gunny bags), while proceeding to Ambasa, Tripura in taking an unauthorized route under fabricated documents, was seized by the Customs Officers on 06.03.2010. All the bottles containing Phensydel New Cough Linctus were absolutely confiscated under Section 113(b) & (d) of the Customs Act, 1962 and all the bags containing potato were also confiscated under Section 119 of the Customs Act, 1962. However, the said confiscated goods had not been claimed by any one. As from the evidences recorded in the impugned Order it is found that the Appellant had initially engaged Shri Nurul as his driver for transportation of the potato on the said truck for a consideration of Rs.52,000/-. After the truck was intercepted by the Customs Officers at Chagolia MVI Gate, Tripura, Assam, Shri Nurul who claimed to be not in possession of the driving licence, had been replaced by the Appellant with another driver for completion of the transportation of the said goods, initially agreed to have been delivered by Shri Nurul at Ambasa, Tripura. Thus, it can be inferred from these circumstances that the Appellant who was eager and committed to completing the transaction from its initial place of loading to the place of its delivery, must be aware of the fact that Phensydel New Cough Linctus along with the potato had been loaded on the said truck. Therefore, agreeing with the finding of the Commissioner that the Department could able to link the chains of the circumstantial evidences in establishing that the transportation of the said Phensydel New Cough Linctus along with the potato, was within the knowledge of the Appellant. In these circumstances, the said vehicle No.WB-63-3575 is liable for confiscation under Section 115(2). However, as at the time of seizure, the value of the truck was assessed to be Rs.3.00 lakh and the fine imposed by the Adjudicating Authority, was Rs.1,50,000/-, which is around 50% of the value of the truck and which sounds to be disproportionate. Hence, to meet the ends of justice, the fine is to be reduced from Rs.1.50 lakh to Rs.75,000/-. Also, the penalty imposed on the Appellant deserves to be reduced from Rs.50,000/- to Rs.25,000/- - appeal of assessee partly allowed.

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• 2013 (1) TMI 389
  Writ of Mandamus - forbearing the respondents 3 to 5 from demanding or collecting any port charges from the petitioner in respect seven containers - Petitioner in this case claims that the cargo which arrived at the containers were abandoned by the owners of the cargo and the containers which were lying at the terminal is suffering tariff charges as per the TAMP [Tariff Authority for Major Ports] Orders in force dated 15.5.2009 - Held that:- On a reading of clause 3.12.11 of the TAMP Order dated 15.5.2009 as above it is clear that the demand made by the respondents 4 and 5 is based on the tariff determined by the Tariff Authority for Major Ports in exercise of power under Section 48 of the Major Port Trusts Act, 1963. The petitioner relied upon Section 42(4) of the Major Port Trusts Act, 1963 to say that no person authorized under sub-section (3) shall charge or recover for such service any sum in excess of the amount specified by the Authority, by notification in the Official Gazette. Section 42(4) of the Major Port Trusts Act, 1963 reads as that no person authorized under sub-section (3) shall charge or recover for such service any sum in excess of the amount specified by the Authority, by notification in the Official Gazette. Thus find no infraction of the above provision as the TAMP Order is issued from time to time invoking the above provision of law. On a reading of clause 3.12.11 of the TAMP order dated 15.5.2009, the respondents 4 and 5 are justified in demanding the storage charges because it is on the basis of the order of the Tariff Authority for Major Ports. They are not demanding anything in excess other than what has been specified in the TAMP Order. Therefore, the said plea has no basis. Petitioner relied upon section 61 of the Major Port Trusts Act, 1963 which deals with sale of goods after two months if the rates or rent are not paid or lien for freight is not discharged. Section 62 of the Major Port Trusts Act, 1963 deals with disposal of goods not removed from premises of within time limit. These two provisions are relatable to the third respondent. No specific relief is sought for against the third respondent, in terms of Section 61 or 62 of the Major Port Trusts Act, 1963 - Petitioner's case is based on interpretation of TAMP earlier Notification which had no relevance to the facts of the present case - no relief as sought for by the petitioner can be granted as the respondents 4 and 5 are demanding payment in accordance with the TAMP Order dated 15.5.2009 notified in G.No.85 dated 29.5.2009. There is no error or illegality in the same.

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• Corporate Laws

• 2013 (1) TMI 388
  Scheme of amalgamation - Held that:- There being unanimity amongst the shareholders and unsecured creditors of the Transferee Company that the amalgamation be directed to take place and there being nothing adverse in the report of the Chairman which may occasion this Court to deny the relief which is being sought in this company petition, and having regard to the entirety of the record, this Court considers it expedient, appropriate and in the interest of justice that subject to some conditions the relief sought in effect on amalgamation be granted and the scheme of amalgamation as specified be accepted subject to orders passed on a similar application/petition filed by the Transferee Company before the High Court of Delhi. Consequently this petition stands allowed and the Scheme of Amalgamation hereby sanctioned with effect from 01.01.2012, provided the transferor and transferee companies give an undertaking that they shall comply with all the requirements of the Reserve Bank of India as required under the Foreign Exchange Management Act, 1999 (FEMA) for the transactions involving foreign banks / entities - meet all requirements / conditions as laid down by the Regional Director, Northern Region, Ministry of Corporate Affairs in its representation, and give the undertaking to that effect as required by the Regional Director in its report with certified copy of this order filed before the ROC within 30 days of the receipt of the certified copy.

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• FEMA

• 2013 (1) TMI 392
  Failure to comply with the summons issued u/s 37 - investigations being carried out against him for violation of the provisions section 13 of the FEMA - action of revocation of passport of the petitioner under section 10(3)(c) of the Passports Act, 1967 - Held that:- The DOE investigation had revealed that the petitioner as the Chairman of the Governing Council of the IPL of the Board of Control for Cricket in India (in short BCCI), had committed gross irregularities in the conduct of the IPL tournaments, leading to fraudulent activities in violation of FEMA, had led to the siphoning of funds to the extent of hundreds of crores of rupees, which apparently he was suspected to have parked outside India. In response to the first summon, issued on 02.08.2010, as replied by petitioner vide communication dated 07.08.2010, delivered on 09.08.2010, that there was an apprehension of threat to the petitioner's life. The concerned authority not being convinced, sought further details, from the petitioner vide communication dated 13.08.2010. It is at this stage that the petitioner referred to the threat assessment made by the Mumbai Police, with regard to the petitioner's safety, and the provision made for his security, while he was in Mumbai. The concerned authority, not being persuaded, by the material supplied and the reasons put forth, issued a second summon to the petitioner under Section 37 on 24.08.2010, requiring the petitioner to appear before him, on 07.09.2010. Admittedly, the petitioner did not appear before the concerned authority, and trotted out the same reasons, i.e., threat to his life. It is at this stage that a complaint under Section 16(3) of the FEMA was filed, on 16.09.2010. Notice in this complaint was issued on 20.09.2010. The DOE, in the background issued a communication to the APO as received by him on 05.10.2010, to take action for revocation of the petitioner's passport under Section 10(3)(c) of the Passports Act who in turn sought an explanation as to why, action ought not to be initiated under Section 10(3)(c) of the Passports Act. Admittedly, the petitioner did not present himself either in response to the summons issued by the DOE nor in response to the show cause notice dated 15.10.2010. Replies were filed, however, on behalf of the petitioner on 12.10.2010, followed by several other communications demanding the material on the basis on which the passport authorities were proceeding to take action in the matter. Thus by virtue of the impugned order, the passport authority, came to the conclusion that the reply did not answer the main charge made against the petitioner, which is, his failure to present himself in person, in response to the summons issued under Section 37 of FEMA. The copies of the summons issued under Section 37 of FEMA, and the complaint filed under Section 16(1) of FEMA were admittedly available with the petitioner. Therefore, the action of the RPO under the Passport Act, which invested upon him, amongst others, the power to impound/ revoke the passport, was clearly within the scope of the show cause notice dated 15.10.2010. Briefly perusing the provisions of clauses (a) to (h) of Sub-Section 3 of Section 10 of the Passport Act provides for various eventualities under which a passport authority has been invested with the power to impound or cause to be impounded or revoke a passport or a travel document. Some of these powers pertain to circumstances which require either direct determination by the passport authorities of the fact situation and / or require the passport authority to seek or receive inputs from other statutory authorities with regard to the eventuality referred to the clause in issue. Therefore, having regard to the fact that the APO received information on 04.10.2010, which was actionable, provided the necessary jurisdictional facts to exercise power under Section 10(3)(c) of the Passports Act. Section 131 of the Income Tax Act, which is a precursor to Section 132 of the Income Tax Act, empowers an Income Tax Officer, and thus by implication an officer of the DOE, to enforce the attendance of the persons who have violated the provisions of the Income Tax Act, and by necessary implication the provisions of FEMA, and are therefore necessarily the noticees in the said proceedings. The statute quite clearly, thus empowers the officers of the DOE exercising powers under Section 37 to take recourse to the provisions of Section 32 of the CPC, even against the noticee, like the petitioner, and not just the witnesses - The right to have interminable hearings, as demanded by the petitioner, cannot be a ground to lay challenge to the impugned order on the ground of breach of principles of natural justice. Argument that show cause notice was issued by one authority i.e., the APO while the impugned order dated 03.03.2011 was passed by the another i.e., the RPO hence breached the principles of natural justice is misconceived as it is seen that against item no. 7A(a) of Schedule I the RPO (Mumbai) is also described as a passport authority alongwith the APO. Therefore, it is not as if the RPO does not have the necessary power invested in him in Section 10(3)(c) of the Act. This is not a case where a hearing was held by the APO and the impugned order was passed by the RPO. This is a case where show cause notices were issued by the APO, while hearing in the matter was held by a superior officer, i.e., the RPO. Therefore, this argument is also not tenable. Argument that the relevant material which formed the basis for issuing the show cause notice was not supplied is also not quite correct as APO vide letter dated 01.11.2010, admittedly had given extracts of the material, which was supplied by the DOE to him. The receipt of the said letter is not denied by the petitioner. It is also not denied by the petitioner that he was made available the complaint filed by the DOE under Section 16(3) of FEMA. The petitioner was well aware of the charge against him and the material which formed the basis of the charge, and therefore, cannot be heard to plead that he had not been supplied with the requisite material to answer the charge. Argument of no right was given to cross-examine officers of DOE, is also untenable as that there is no inalienable right to cross-examine, it is not unknown to law that proceedings can be decided based on documents, especially documents which form the basis of the decision are not in dispute. And while the petitioner chooses to keep himself from his investigators, he seeks to subject his investigators to cross-examination, a request if granted would really turn the situation on its head. Thus as the petitioner has refused to surrender the passport, therefore, in the absence of the passport being available with the authorities concerned, the only order which could have been passed in the given circumstances was of revocation. For the reasons given hereinabove, no merit in the petition - Writ dismissed.

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• Service Tax

• 2013 (1) TMI 406
  Man power Recruitment and Supply Agency Service - seeking waiver of pre deposit - Held that:- As per the definition Manpower Recruitment and Supply means any person engaged in providing any service directly or indirectly of recruitment and supply of manpower. In the present case, the applicant along with other labourers entered into a contract for cutting and supply of sugar cane. There is no evidence that the applicant provided any service directly or indirectly for recruitment and supply of manpower. In view of this pre-deposit of the dues are waived and recovery stayed.

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• 2013 (1) TMI 405
  Manpower recruitment and supply agency services - seeking waiver of pre-deposit, interest and penalty - Held that:- As the applicant are deputing their employees to the other associate companies of UTI therefore has made out a strong case in their favour in view of the stay order passed by the Tribunal in the case of ITC [2012 (7) TMI 744 - CESTAT, NEW DELHI] therefore, pre-deposit of the dues are waived and recovery, thereof, stayed during the pendency of the appeal.

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• 2013 (1) TMI 404
  Goods Transport Agency service - denial of benefit of Notification No. 34/2004-ST dated 03.12.2004 - Held that:- As in respect of the very same assessee, for the subsequent period the very same first appellate authority has held that the appellant is eligible for the benefit of Notification No. 34/2004-ST. Finding strong force in the contentions raised by the Chartered Accountant that in respect of an identical issue, in the case of Essel Mining & Industries Limited [2009 (6) TMI 386 - CESTAT, KOLKATA] the coordinate bench of the Tribunal has granted an unconditional stay where the gross amount charged by the service provider is Rs. 1500/- or less - appellant has made out a case of the waiver of pre-deposit of amounts involved.

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• 2013 (1) TMI 403
  Waiver of pre-deposit - Denial of CENVAT credit - on furniture and fittings under Chapter 96 - service tax paid on canteen services - Circular dated 29.04.2011 - Held that:- During the relevant period the furniture classifiable is not covered under the definition of capital goods and as the canteen service is not free to the employee, therefore, we find that the applicants have not made out a case for total waiver of pre-deposit. Direct to deposit pre-deposit

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• Central Excise

• 2013 (1) TMI 387
  Denial of CENVAT Credit – Non-payment of duty - Inputs for making packing materials have been sent to the job worker - Under Rule 4(5) of the CCR. 2004 - The goods manufactured by the job worker viz. the sacks have been returned to the assessee without payment of duty - Clearances have been permitted at the hands of the job worker by allowing the benefit of Notification No.214/86 – Assessee have received the goods viz. sacks and utilized the same for packing their final product viz. sugar on which duty has been paid - Held that:- Merely because they have not paid the duty on the sacks which were manufactured in the factory of the job worker, there is no justification for denial of credit on the inputs which have gone into the packing materials. In favour of assessee

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• 2013 (1) TMI 386
  Waiver of Pre-deposit - Stay of recovery - Cenvat Credit on capital goods - HR coils HR plates, MS plates, channels, joists, angles, beams - The aforesaid structural items were claimed to have been used for fabricating/manufacturing chimney, pollution control equipment, material handling equipment and other items of machinery - Held that:- We have not found any strong prima facie case for the assessee. Appellant is running through a financial crisis. Partly waive. Allow this appeal by way of remand.

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• 2013 (1) TMI 385
  Whether Tribunal is right in allowing the appeal and remanding the matter back to the adjudicating authority when on merits the appeal of the Respondent is liable to be rejected - Held that:- Since the Tribunal relying the decision of Larger Bench of the Tribunal and appeal by the revenue against such decision is pending before High Court. It could not be a ground for not following the Larger Bench decision of the Tribunal - Appeal decides against revenue

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• 2013 (1) TMI 384
  Benefits of Notification - Instead of filing the declaration under Notification No. 50, the same was filed under Notification No. 49 - Held that:- A look at Notification No. 49 will show that the goods dealt with by the assessee were not covered by said Notification, but the goods dealt with by the assessee were covered by Notification No. 50. By submitting a declaration, as was submitted, the assessee was entitled to the benefits of Notification No. 50. No question of Law. In favour of assessee

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• 2013 (1) TMI 383
  Power to grant refund - Jurisdiction - Refund claim - Whether while granting refund under Rule 5 of CCR, 2004 of unutilized CENVAT Credit by Additional Commissioner without recording that he is exercising power u/s 12E can be a ground for order without jurisdiction - Section 11B of the Central Excise Act, 1944 - powers u/s 12E of the Central Excise Act, 1944 - Held that - It is not the requirement of Section 12B that the Additional Commissioner would have jurisdiction to grant refund of unutilized credit of duty paid on input only if the said section is specifically mentioned in the order. Therefore, no fault could be found with the order passed by the Additional Commissioner merely because the said order does not refer to Section 12B. Therefore, granting refund of unutilized input credit is allowed. In favour of assessee

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• 2013 (1) TMI 382
  Settlement commission - Whether difference in interest liability calculated by assessee amounts to non-cooperation in disclosing full facts with honesty, results relegated the matter to the adjudicating authority - Assessee filed an application before the Settlement Commission seeking settlement - Entire amount claimed in the SCN has been offered to tax - Held that:- Since the petitioner has admittedly paid the entire duty liability of Rs. 60.45 lakhs claimed by the Revenue and has also offered to pay interest amounting to Rs. 5.28 lakhs. The Settlement Commission could not have recorded that the petitioner has not cooperated.The decision of the Settlement Commission that the petitioner has not cooperated in the proceedings cannot be sustained. In favour of assessee

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• CST, VAT & Sales Tax

• 2013 (1) TMI 407
  Non registration of additional place of business/branches or godown with the Commercial Taxes Department - dealers have violated the provisions of the Act thus materials kept in the undisclosed place will be treated as sale and no Input tax credit be allowed - Held that:- As Government Advocate states that the objections of the dealer could be made to the authority concerned and the authority will consider the same and pass reasoned order. Therefore, to challenge the revision notices at this stage is premature and may not be justified. Assuming without admitting that the contention of the counsel for the petitioner is sustainable, the fact that the authority has got the power to issue notice under Section 27(2) of TNVAT Act read with Section 9 of the CST Act is not disputed. As to how a particular transaction will be treated for the purpose of assessment or for extending certain benefits will be examined by the authority after considering the objections that may be placed before him. At the stage of issuance of notice, the court will only go into the issue as to whether there is lack of jurisdiction or the notice is inherently not maintainable in law. That situation does not arise in the present cases. In view of the above, it will be appropriate that the petitioner should submit a detailed objection and the legal plea now taken before this court by way of objection within two weeks time from the date of receipt of a copy of this order. The authority shall consider the same on merits and pass appropriate orders and if the petitioner seeks personal hearing in the reply/objection that may be filed, the authority shall grant him such opportunity.

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