TMI Tax Updates - e-Newsletter
January 23, 2013

Case Laws in this Newsletter:

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

TMI SMS

• Segregation of the surrendered income from business income - surrendered income can be taxed as deemed income without setting off of the losses u/s 70, 71 - HC

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Articles

1. CENTRALIZED PROCESSING OF STATEMENTS OF TAX DEDUCTED AT SOURCE SCHEME, 2013

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Report of the Committee to Assess the Feasibility of introducing more Long-Term Fixed Interest Rate Loan Products by Banks

2. Global crude oil price of Indian Basket increases to US$ 109.39/bbl on 21.01.2013

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. Interest Rates on Rupee Export Credit -UCBs

5. Interest Rates on Rupee Export Credit -UCBs

6. Shri Kapil Sibal Chairs Round Table on Esdm: Focus on Avionics, Automotive, Electronics, Medical Electronics and LEDs

7. Central Excise (INT) Unearths Servive Tax Evasion of Around Rs.90 Crore

8. Gold Deposit & ETF Schemes Linked to Unfreeze Part of Gold held under ETF Import Duty on Gold & Platinum Raised to 6 Percent Government Appeals to the people to moderate their Demand for Gold

9. Shri Kapil Sibal Inaugurates the Sar and the NGN LABS

Notifications

Central Excise

1. 01/2013 - dated 21-1-2013 - CE

Amends Notification No. 12/2012-Central Excise, dated the 17th March, 2012 - Prescribes effective rate of duty on goods falling under chapter 1 to 96

Customs

2. 01/2013 - dated 21-1-2013 - Cus

Amends Notification No. 12/2012-Customs, dated the 17th March, 2012 - Prescribes effective rate of duty on import of goods

3. F. No. 437/62/ 2012 – Cus. IV - dated 21-1-2013 - Cus (NT)

Appointment of Common Adjudicating Authority - M/s. Allanasons Limited, Allana House, Allana Road, Colaba, Mumbai and others

4. 07/2013 - dated 21-1-2013 - Cus (NT)

Specially Distinguished Record of Service

Circulars / Instructions / Orders

Income Tax

1. F No System/ITBA/Software Committees/11-12/34 - dated 21-1-2013

Suggestions from field officers &Co-opting members for Committees of Stakeholders

FEMA

2. 78 - dated 21-1-2013

External Commercial Borrowings (ECB) Policy –Repayment of Rupee loans and/or fresh Rupee capital expenditure – USD 10 billion scheme

Highlights / Catch Notes

Income Tax

• Stakeholder Committees to Address Income Tax Issues with Guidance from Circulars and Orders: Highlights and Alerts Provided.

  Circulars : Suggestions from field officers &Co-opting members for Committees of Stakeholders - Order-Instruction
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• Interest from Fixed Deposits Not Part of School's Annual Receipts for Tax Exemption u/s 10(23C)(iiiad.

  Case-Laws - AT : Exemption u/s 10(23)(iiiad) – The income from interest on FDRs is an additional income of society and it cannot be considered to be part of annual receipts of the school for claiming exemption u/s 10(23C)(iiiad) in respect of school. - AT
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• Court Rules Surrendered Income Can Be Taxed Separately from Business Income, Disallowing Loss Offset u/ss 70 and 71.

  Case-Laws - HC : Segregation of the surrendered income from business income - surrendered income can be taxed as deemed income without setting off of the losses u/s 70 & 71 - HC
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• Marketing Knowhow Costs Deemed Revenue Expenditure Due to Boost in Sales and Profits.

  Case-Laws - HC : The expenditure incurred on marketing knowhow would result in higher sales as well as lead to higher profit - Consequently, will be revenue expenditure - HC
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• Income Tax Officer cannot classify interest as debenture interest after regular assessment finds it wasn't debenture interest.

  Case-Laws - HC : Interest on securities - Once it is accepted in the regular assessment that interest paid by the assessee was not the debenture interest, it was not open to the ITO (TDS) to treat that interest paid were debenture interest - HC
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• Section 142(1) Notice Jurisdiction Differs from Section 133(6) for Co-operative Societies Under Income Tax Act.

  Case-Laws - HC : Jurisdiction of notice issued u/s 142(1) – The terms of Section 133(6) and Section 142(1) are incomparable - Co-operative Societies are also “persons“ - notices cannot be held as issued without jurisdiction - HC
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• Court Upholds Income Tax on Salary Paid to Spouse; Disallows Deduction Claim for Business Expense Under Tax Laws.

  Case-Laws - HC : Deduction on account of salary paid to wife - addition confirmed even though assessee’s wife was in possession of technical qualification - HC
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• Small Travel Agents' Earnings on Ticket Sales Deemed "Discounts," Not Commissions; No TDS u/s 194H.

  Case-Laws - AT : TDS - commission in respect of the tickets purchased by the small time travel agents on behalf of their respective customers, would partake the character of “Discount” only - No TDS u/s 194H. - AT
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• Merchant banker payments after commission deduction seen as bank charges; no TDS on credit card charges applicable.

  Case-Laws - AT : TDS on credit card charges - Merchant banker making payment after deducting commission from online transactions - these are in the nature of normal bank charges and not in the nature of commission/ brokerage - No TDS - AT
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• Dispute Over Excessive Construction Cost Claim Deemed Incorrect Under Proviso (b) of Section 142(1)(iii.

  Case-Laws - AT : Excessive claim of indexed cost of construction - expenditure made related to a period more than three years prior to the PY - in view of above proviso (b)of Sec 142(1)(iii), the action of the AO was wrong - AT
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• Court Rules TDS Credit Must Be Given to Correct Party, Not Joint Venture or Director Named in Certificate.

  Case-Laws - HC : TDS Credit - TDS certificate is issued in the name of the joint venture or a Director and not the assessee - Revenue cannot be allowed to retain tax deducted at source without credit being available to anybody. - HC
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• Income from overseas administrative services agreement not taxable u/s 5(2) with Section 9(1)(i) of Income Tax Act.

  Case-Laws - HC : Nexus - Income derived from an agreement, entered outside India, for providing administrative and support services outside India and remuneration has been received outside India, will not come within Section 5(2) r.w.s.9(1)(i) - Not taxable - HC
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Customs

• Amendment to Notification No. 12/2012-Customs Sets New Effective Duty Rates on Imported Goods.

  Notifications : Amends Notification No. 12/2012-Customs, dated the 17th March, 2012 - Prescribes effective rate of duty on import of goods - Notification
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• Customs Sector Honors Anonymous Contributor for Exceptional Service and Impactful Achievements.

  Notifications : Specially Distinguished Record of Service - Notification
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• Exemption Granted for Zircon Ore Import as Expert Opinion Unchallenged; Goods Meet ISI Standards.

  Case-Laws - AT : Benefit of exemption notification - Zircon Concentrate or Zircon ore - expert opinion having been not rebutted by any other opinion from any other expert, and specifications of imported goods seems to match with specification of the ISI standard for Zirconium Ore. - benefit of exemption allowed - AT
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• Mis-declaration under Customs Act Section 111(m) deemed trivial; goods confiscation not justified.

  Case-Laws - AT : Confiscation – Under section 111(m) of Custom Act., 2002 - mis-declaration was of no consequence in evading customs duty. - the mis-declaration was of a trivial nature. - Confiscation of the goods not maintainable. - AT
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• Imported False Ceilings Classified as Modular Furniture, Eligible for Exemption Under Notification No. 140/91-Cus.

  Case-Laws - AT : Import - Exemption Notification No. 140/91-Cus - False ceiling is necessary furniture to an office space to make it habitable and functional and therefore imported items falls under the definition of Modular Furniture - AT
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• Excess Imported Material Can Be Used for Manufacturing and Selling After Export Obligations Met, Says Customs Regulations.

  Case-Laws - HC : Import against advance license - the customs notifications under which the goods in question have been imported, itself permit the manufacturer-importer after fulfilling the export obligation to use the excess imported material in the manufacture and sale of goods under other licenses - HC
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FEMA

• New ECB Policy: Guidelines for Repayment of Rupee Loans & Fresh Capital Expenditure Under USD 10 Billion Scheme.

  Circulars : External Commercial Borrowings (ECB) Policy –Repayment of Rupee loans and/or fresh Rupee capital expenditure – USD 10 billion scheme - Circular
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Service Tax

• CENVAT Credit on CHA Services for Exports: Authorities Shouldn't Deny Refund by Revising Supplier's Duty Assessment.

  Case-Laws - AT : Refund of service tax paid on CHA services in respect of the exports - CENVAT Credit cannot be denied by authorities having jurisdiction over the input receiver by revising the assessment of duty at supplier's end. - AT
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Central Excise

• Central Excise Notification Amended: Updated Duty Rates for Goods in Chapters 1-96 to Align with Current Tax Policies.

  Notifications : Amends Notification No. 12/2012-Central Excise, dated the 17th March, 2012 - Prescribes effective rate of duty on goods falling under chapter 1 to 96 - Notification
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• Cenvat Credit Applies to Bagasse and Press Mud from Sugar Cane Processing; No Separate Accounts Needed for Inputs.

  Case-Laws - AT : Cenvat credit - bagasse and press mud emerging during crushing of sugar cane and purification of cane juice – no need to maintained separate accounts for the inputs for production of sugar and molasses (excisable item) and bagasse - AT
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• Cenvat Credit Approved for Service Tax on Godown Rental and Outward Freight to Customer Premises.

  Case-Laws - AT : Cenvat credit - service tax paid on godown rental and on outward freight for transportation of the finished goods upto the customer's premises - Credit allowed - AT
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• Factory's Rural Status Confirmed by Tahsildar Certificate, Ensuring SSI Exemption Eligibility Under Notification No. 8/2001.

  Case-Laws - AT : SSI exemption - Notification No.8/2001 - Urban or rural area – When the Tahsildar issued a certified to the factory falls under rural area and same has also not been challenged, the same has binding force - AT
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Case Laws:

• Income Tax

• 2013 (1) TMI 496
  Exemption u/s 10(23)(iiiad) – Whether interest on FDR can be consider as a part of aggregate annual receipt for claiming exemption u/s 10(23C)(iiiad) - Receipts of the assessee during A.Y. 2006-07 including interest on FDRs exceeded Rs. One crore – Society besides income from running of a school is having other sources of income also - Held that:- From the plain reading of section 10(23C) (iiiad), it emerges that legislature had in its mind annual receipts of school or university as the case may be for consideration of exemption limit and not that of total income of society running that school or university. The income from interest on FDRs is an additional income of society and it cannot be considered to be part of annual receipts of the school for claiming exemption u/s 10(23C)(iiiad) in respect of school. - assessee was eligible for exemption u/s 10(23)(iiiad) as annual school receipts did not exceed Rs. One crore. - In favour of assessee

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• 2013 (1) TMI 495
  Segregation of the surrendered income from business income - treatment as a deemed income - whether taxing it after refusing set off u/s 70 and 71 is legally sustainable in the eyes of law? - survey u/s 133A - Held that:- As decided in Fakir Mohmed Haji Hasan v. CIT [2000 (8) TMI 44 - GUJARAT HIGH COURT] opening words of section 14 clearly leave scope for “deemed income” of the nature covered under the scheme of sections 69, 69A, 69B and 69C being treated separately, because such deemed income is not income from salary, house property, profits and gains of business or profession, or capital gains, nor as it income from “other sources” because the provisions of sections 69,69A, 69B and 69C treat unexplained investments, unexplained money, bullion etc. and unexplained expenditure as deemed income where the nature and sources of investment, acquisition or expenditure, as the case may be, have not been explained or satisfactorily explained. Therefore, in these cases, the source not being known, such deemed income will not fall even under the head “income from other sources”. Therefore, the corresponding deductions which are applicable to the incomes under any of these various heads, will not be attracted in the case of deemed incomes which are covered under the provisions of sections 69,69A, 69B and 69C of the Act in view of the scheme of those provisions - Thus surrendered income can be taxed as deemed income without setting off of the losses u/s 70 & 71 - Decided against assessee.

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• 2013 (1) TMI 488
  Disallowance of non-compete fees - CIT(A) deleted the addition and confirmed by ITAT - Held that:- At paragraph 12 of the impugned order the Tribunal while dealing with marketing knowhow expenses has also observed that non-compete fee was also dictated by business and commercial expediency and was not an expenses incurred for acquisition of capital assets but only enhanced its profitability. However, there is no discussion on the issue before coming to the above conclusion. Therefore, the issue with this regard has to be remanded to the Tribunal to enable it to pass an order with reasons while determining whether non-compete fees was revenue or capital expenditure - in favour of revenue for statistical purposes. Disallowance of marketing know how - CIT(A) deleted the addition and confirmed by ITAT - Held that:- On an examination of marketing knowhow agreement it is very clear that this agreement would lead to an improvement in its existing business resulting in higher sales and consequently higher profitability. This is so as the amounts spent on marketing knowhow would result in improving the profits of the business on the acquired brands as this knowledge would assist in improving the marketing strategy. The expenses incurred for acquiring this marketing knowhow if incurred by the respondent would be revenue and merely because it is outsourced it does not cease to be revenue expenditure. The expenditure incurred on marketing knowhow, according to the Tribunal would result in higher sales as well as lead to higher profit. Consequently,will be revenue expenditure as correctly held by the Tribunal - against revenue. Disallowance of depreciation on Royalty payments - CIT(A) deleted the addition and confirmed by ITAT - Held that:- Tribunal has reached a finding of fact that the royalty payment was a part of the cost of the acquisition of the brand and therefore, would form a part of the cost of the assets namely the brand, thus entitled to depreciation u/s 32 - no fault can be found with the order of the Tribunal - against the revenue. Interest charged u/s 234B and 234C while computing income u/s 115JB - Held that:- Decided in favour of revenue relying on case of Rolta India Ltd v. CIT [2011 (1) TMI 5 - SUPREME COURT OF INDIA] wherein held that interest under Sections 234B and 234C shall be payable on failure to pay advance tax in respect of tax payable under Section 115JA/115JB - against assessee.

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• 2013 (1) TMI 487
  Interest on securities - nonconvertible debentures - whether the ITAT was justified in setting aside the order passed under Section 201(1) / 201(1A) - Held that:- Once it is accepted in the regular assessment that interest paid by the assessee was not the debenture interest, it was not open to the ITO (TDS) to treat that interest paid were debenture interest and pass an order under Section 201(1) /201(1A) on the ground that the assessee has failed to deduct tax at source while paying the debenture interest to the assessee. No fault with the decision of the ITAT in setting aside the order passed by ITO (TDS) under Section 201(1) / 201(1A) - in favour of assessee.

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• 2013 (1) TMI 486
  Recovery proceedings - search u/s 132 - assessee claimed to have paid 50% of the tax due under the revised assessment orders - Held that:- 2nd respondent appellate authority shall pass orders on Exts.P1 to P7 appeals filled against assessment completed following a search as expeditiously as possible As the petitioner had already been remitted 50% of tax the recovery pursuant to the assessment orders shall be kept in abeyance. However, any attachment that has already effected by the respondents will remain in force, during the pendency of the appeal.

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• 2013 (1) TMI 485
  Notice u/s 142 - Held that:- As this Court passed interim order dated 06.12.2011 admitting the writ petition and directing the petitioner to furnish details regarding the income as sought for in Ext.P2 without disclosing the names and addresses of customers of the petitioner based on the information so furnished, AO may complete the assessment. As Petitioner submitted that information was furnished and was rejected when assessment completed against which they have already filed an appeal before the statutory authorities & the appellate authority is seized of the appeal filed by the petitioner, it is unnecessary for this Court to go into the merits of the contentions raised - dispose of this writ petition directing that the appellate authority will pass orders on the appeal.

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• 2013 (1) TMI 484
  Jurisdiction of notice issued u/s 142(1) – Validity of notice u/s 142(1) - Information as provided u/s 142(1) is called for from the assessee – Assessee contended that the he is not "persons" as contemplated in Section 142(1) – Earlier notice issued u/s 133(6) and proceeding are stayed by Apex court Held that:- A combined reading of Section 142(1) and Section 2 (31), leads to the only conclusion that Co-operative Societies like petitioners herein are also "persons" as defined in the Income Tax Act. If that be so, notices which are impugned in this writ petition cannot be held as issued without jurisdiction Proceedings which are pending before the Apex Court are concerned; those were initiated u/s 133(6). The terms of Section 133(6) and Section 142(1) are incomparable and therefore the pending proceedings before the Apex Court cannot be of any assistance to the petitioners. Following the decision in case of Abdu Rahiman (2009 (9) TMI 709 - KERALA HIGH COURT) that has stayed the judgment is no reason to entertain the writ petition - Decides against assessee or petitioner

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• 2013 (1) TMI 483
  Deduction on account of salary paid to wife - disallowance u/s 61 (1) (ii) - assessee engaged in the business of civil construction - Held that:- As noticed the assessee’s wife though was in possession of technical qualification but the assessee was required to prove conclusively that his wife Smt. Nanda Chhajta was in fact looking after plans for execution work and was taking administrative decisions. The assessee cannot be given benefit merely on the ground that the deduction has been allowed to the assessment years 2001-2002 and 2002-2003. The order passed by the ITAT is reasoned and the proviso to section (64 )(1) (ii) have been correctly appreciated. See Ashaben Rohitbhai And Others Versus Commissioner Of Income-Tax [1998 (6) TMI 63 - GUJARAT HIGH COURT]. - Decided against assessee.

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• 2013 (1) TMI 482
  Non-deduction of tax at source u/s 194H on “Commission” - default u/s 201(1) - assessee contested against that though he has accounted the discounts given under the head “Commission payments” in effect, they are only discounts offered by the assessee to its customers - Held that:- On consideration of definition of “Commission or brokerage” given in section 194, finding force in the contentions advanced by assessee as it can be said that the assessee herein has not appointed any sub-agents for canvassing clients for the assessee & these small time travel agents are providing any service to the assessee herein either by acting on its behalf or during the course of sale of flight tickets. On the contrary, they act on behalf of the travelling public or their respective customers. Thus, they provide service only to their customers by identifying the best available rates for the flight tickets ordered by their respective customers. Accordingly, the commission income ceded by the assessee herein in respect of the tickets purchased by the small time travel agents on behalf of their respective customers, would partake the character of “Discount” only & such discount payments will not be attracted by the provisions of sec. 194H. CIT(A) agreed with the contentions of the assessee and accordingly held that the decision rendered in the case of Vodafone Essar Cellular Ltd [2010 (8) TMI 691 - KERALA HIGH COURT] shall not apply to the payments made by the assessee to the small time agents as small time agents have not been appointed by the Airline companies. These small time agents have also not been appointed by the assessee herein also - in favour of assessee.

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• 2013 (1) TMI 481
  Application u/s 254 (2) - ITAT dismissed it holding it amounting to review and not recalling the order - appeal decided ex parte - Held that:- Approach of the Tribunal cannot be faulted as from the rojkam presented it was noticed that atleast on three or four occasions either the appellant prayed for time, or no one remained present before the Tribunal. If therefore, the Tribunal proceeded to hear the appeal on merits, after not accepting further request of the appellant for adjournment, Tribunal committed no serious error. Additions disbelieving the genuineness of the cash credit - Held that:- The Tribunal examining the evidence on record came to the conclusion that to the extent CIT [A] confirmed the additions, no interference was called for even at the appellate stage. Assessee's submission that if the Tribunal had adjourned the matter the assessee would have moved an application for production of additional evidence to establish the genuineness of credits is a too far-fetched an argument to uphold the contention that reasonable opportunity was not granted to the appellant.

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• 2013 (1) TMI 480
  Non deduction of TDS on Merchant Discounting Rate(MDR) charges - default u/s 194H - assessee is a company engaged in the business of providing telecommunication services - assessee contested against no principle to agent relationship between the appellant and time banks - MDR charges are nothing but Bill Discounting Charges and would fall within the definition of the term interest as envisaged u/s 2(28A) and if at all any TDS provisions apply, it could be only 194A - Held that:- As decided in BSNL v. UOI [2006 (3) TMI 1 - SUPREME COURT] the principle to be kept in mind was as to what was the intention of the parties regarding the SIM card transaction. If the parties intended that the SIM card would be a separate object of sale, it will be open to the sales tax authorities to levy the tax. However, if the sale of the SIM card was merely incidental to the services being provided and only facilitated the identification of the subscriber and other details, it would not be assessable to the sales tax. Consequently, the Supreme Court held that both taxes could not possibly apply to the transaction in question and based on the above determination of intent, concluded that the transactions relating to SIM cards were held not taxable to sales tax and these proceedings stood concluded. As decided in IDEA Mobile Communication Ltd. v. CCEC, Cochin [2011 (8) TMI 3 - SUPREME COURT OF INDIA] that the amount received by the telecom company from its subscriber towards the SIM card would form part of the taxable value for the levy of service tax in relation to the activation charges, which were undeniably in the nature of a service, since the SIM card was never sold independent from the above service and was hence considered part and parcel of such service. The dominant intent of the transaction was clearly to provide services and not to sell any goods. It was thus held that value of the SIM card formed part of the activation charges since no activation was possible without a valid functioning SIM card. It was precisely for this reason that the sales tax authorities had withdrawn their attempt to tax such services to the sales tax. Consequently, it held that the sale and supply of SIM cards to subscribers, including the activation charges, was indeed intended and dealt with by both parties as services and not as sale of goods. Therefore,the transactions relating to supply of SIM cards between telecom operators and the subscribers would be charged to just the one tax i.e. the service tax and not the sales tax. Determination of tax payable u/s 201(1) should be done after taking into consideration the decision of Hindustan Coca Cola Beverages (P.) Ltd. v. CIT [2007 (8) TMI 12 - SUPREME COURT OF INDIA] wherein held that if the payee has made payment of taxes then to that extent, the assessee should not be considered as an assessee in default - direct the AO to consider the claim of the assessee only with regard to determination of the liability u/s 201(1) - appeals of the assessee challenging the order u/s 201(1) stand partly allowed for statistical purposes. Whether the payments on account of credit card charges should be treated as commission within the meaning of sec.l94H - Held that:- On going through the nature of transactions commission paid to the credit card companies cannot be considered as falling within the purview of S.194H as the liability to make TDS under the said section arises only when a person acts behalf of another person. In the case of commission retained by the credit card companies however, it cannot be said that the bank acts on behalf of the merchant establishment or that even the merchant establishment conducts the transaction for the bank. The sale made on the basis of a credit card is clearly a transaction of the merchants establishment only and the credit card company only facilitates the electronic payment, for a certain charge. The commission retained by the credit card company is therefore in the nature of normal bank charges and not in the nature of commission/ brokerage for acting on behalf of the merchant establishment - payments to banks on account of utilization of credit card facilities would be in the nature of bank charge and not in the nature of commission within the meaning of sec. l94H.

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• 2013 (1) TMI 479
  Powers of CIT(A) in admitting additional evidence under Rule 46A(3) - Held that:- Unable to support the contention of the revenue that the CIT(A) did not follow the procedure laid down in Rule 46A of the Rules in admitting the information even when the assessee has not requested for admission of additional evidence for deciding the issue involved; however, as regard the investment in purchase and construction of the residential building thereon, the Assessing Officer may take appropriate action because it falls in the A.Y.2007-08 - CIT(A)rightly relied on the judgment of Kanpur Coal Syndicate (1964 (4) TMI 18 - SUPREME COURT) and Jute Corporation of India (1990 (9) TMI 6 - SUPREME COURT). Excessive claim of indexed cost of construction - Addition made on account of alleged investment in construction of house - CIT(A) deleted the addition - Held that:- It is not in dispute that AO asked the assessee to furnish documentary evidence and to explain the source of investment made in construction of house during AY 1996-97 to 2000-01. The assessee furnished the copies of the capital accounts related to the above. AO further observed that in the AY 2000-01, at the opening the assessee had a credit balance of Rs.2,89,185/-, which was a debit balance of Rs.2,06,250 at the end of the year i.e. on 31.3.2000 which is not feasible and acceptable and the AO made the disputed addition with the conclusion that the assessee excessively claimed the indexed cost of construction. In view of above, no hesitation to hold that the AO asked the assessee to produce the accounts pertaining to the expenditure made by the assessee related to a period more than three years prior to the previous year that, i.e. FY 1999-00. Therefore, CIT(A) rightly held that in view of above proviso (b)of Sec 142(1)(iii), the action of the AO was wrong and he rightly deleted the addition. Addition made on account of capital gain - assessee failed to produce any supporting evidence regarding construction of house and deposit of capital gain raised on sale of old house - CIT(A) deleted the addition - Held that:- Deduction u/s 54F is not available for the purchase of plot until a residential house is constructed over it. The intention of the assessee is relevant for this purpose which needs proper examination at the end of AO. As already observed earlier that this issue has been directed to the AO by the CIT(A) for consideration in AY 2007-08. Since the residential house property was sold during AY 2005-06 and assessee is entitled for deduction of capital gain for construction of residential house upto next three years, i.e. AY 2008-09 (F.Y. 2007-08). The issue of deduction for residential house constructed on plot no. 634 Sector 14P has not been examined by the AO and CIT(A) had no opportunity to consider the same, thus this claim of the assessee requires de novo adjudication at the end of AO - in favour of revenue for statistical purposes.

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• 2013 (1) TMI 478
  TDS Credit - Conversion of Partnership firm into Company - assessee along with three others entered into a joint venture agreement - credit of TDS claimed on contract work receipts - refused to give credit on the ground that some of the TDS certificates belong to the joint venture and some other TDS certificates are in the name of Directors and do not relate to the assessee firm/company - not eligible for TDS credit as same is not in accordance with Rule 37-B A - Held that:- CIT (Appeals) and the Tribunal have rightly held that the assessee is entitled to the credit of the TDS mentioned in the TDS certificates issued by the contractor, whether the said certificate is issued in the name of the Joint Venture or in the name of a Director of the assessee company considering the terms of the agreement dated 12-03-2003 among the parties to the joint venture and held that credit for TDS certificates cannot be denied to the assessee while assessing the contract receipts mentioned in the said certificates as income of the assessee. The income shown in the TDS certificates has either to be taxed in the hands of the joint venture or in the hands of the individual co-joint venturer. As the joint venture has not filed return of income and claimed credit for TDS certificates and the TDS certificates have not been doubted, credit has to be granted to the TDS mentioned therein for the assessee. Rule 37BA is a procedural provision dealing with the manner of giving credit for tax deducted at source for the purposes of section 199. It therefore applies to pending proceedings. As observed in State of Madras v. Lateef Hamid & Co. AIR [1971 (9) TMI 155 - SUPREME COURT OF INDIA], where a new procedure is prescribed by law, it governs all pending cases. Alterations in the form of procedure are always retrospective, unless there is some good reason or other why they should not be. The amendment to Rule 37 BA mentioned above which has been introduced by the Income Tax (8th amendment) Rules, 2011 notified vide Notification No. 57/2011 dated 24-10-2011, being procedural in nature, would have retrospective effect and has to be given effect to as decided in Tikaram & Sons v. Commissioner of Sales Tax AIR [1968 (3) TMI 92 - SUPREME COURT OF INDIA] The Revenue cannot be allowed to retain tax deducted at source without credit being available to anybody. If credit of tax is not allowed to the assessee, and the joint venture has not filed a return of income, then credit of the TDS cannot be taken by anybody. This is not the spirit and intention of law. Therefore AO erred in denying the benefit of the TDS on the ground that the TDS certificate is issued in the name of the joint venture or a Director and not the assessee - in favour of assessee.

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• 2013 (1) TMI 477
  Addition taking recourse to Special provision for computing profits and gains in connection with the business of exploration, etc., of mineral oils - nexus between the services rendered in India and administrative and support services provided outside India Agreement No. 70711 entered during the period of fabrication, outfitting and manufacturing of load out platform for Tapti and Panna field development - Held that:- Merely because the agreement in question was entered at the time when the fabrication activity for Tapti and Panna was going on, it could not be contended that the agreement related or the subject matter thereof was for the fabrication of Tapti and Panna field development. As aforesaid, independently also, it could not be established that the said agreement had any nexus with the activities for construction of Tapti and Panna field development. That being the situation, income derived from the said agreement, entered outside India, for providing administrative and support services outside India and, in respect whereof, remuneration has been received outside India, will not come within Section 5(2) r.w.s.9(1)(i) accordingly, is not taxable in India.

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• Customs

• 2013 (1) TMI 476
  Non execution of Bond for goods stored in a warehouse - duty demand - Held that:- There is no dispute of the fact that the respondent herein have satisfied with the conditions of the licence. Inasmuch as the appellant has adhered to the terms and conditions of the licence in respect of the duty free shop and they had removed the goods from the private bonded warehouse to the duty free shop within the bonded period for the private bonded warehouse, there is no violation of law committed by the respondent.

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• 2013 (1) TMI 475
  Benefit of notification - Appellant is a 100% EOU - Appellant imported Mineral fiber sound absorbing sheet - Fire detection alarm system - Claim benefit of Notification No. 140/91-Cus., dated 22-1-1991 – Held that:- Notification grants exemption to modular furniture. In respect of Mineral Fiber sound absorbing sheet are cut to sizes and they are used as false ceiling. False ceiling is necessary furniture to an office space to make it habitable and functional and therefore imported items falls under the definition of Modular Furniture and applicant is entitled for customs duty exemption. In favour of assessee Fire Detection Alarm System - Held that:- Automatic monitoring and alarm operations take place without the intervention of an operator. This provides protection to occupants and building. The functionality of the product surpasses the domain of safety system and it enhances the security functions for the building of CTS, that the infrastructure; protection of the CTS is enhanced by installation of the said device. Security system is genus and fire-fighting is a specie therefore we find that fire-fighting system qualify for the benefit of the Notification. In favour of assessee

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• 2013 (1) TMI 474
  Import against advance license - Whether where the imports are license specific, the imports effected under that particular licenses can be used for the manufacture and export of the final products under another licenses - Assessee had imported 9.10 Crore inner cartons for packing - After packing the same with soap had exported 9.88 Crore cartons by utilizing the imported cartons as well as indigenous cartons Held that:- As concluded from the facts of the case firstly, the Licensing Authority has found that the conditions attached to the said 20 advance licences have been complied with and accordingly granted export obligation discharge certificate in respect of those 20 licences. Secondly, the total quantity of cartons imported is admittedly less than the quantity permitted under the 20 licences and the quantity exported is more than the quantity imported under the 20 licences. Thirdly having not raised any objection at the time of import, the customs authorities are not justified in raising objection after the fulfilment of the export obligation to the satisfaction of the licensing authorities. Moreover, the customs notifications under which the goods in question have been imported, itself permit the manufacturer-importer after fulfilling the export obligation to use the excess imported material in the manufacture and sale of goods under other licenses In favour of assessee

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• 2013 (1) TMI 469
  Benefit of exemption notification - Imported raw material is Zircon Concentrate or Zircon ore - Assessee manufacturing the Zicronium Silicates - Principal raw material is Zircon sand - Classified the same under CTH 2615 10 00 - Whether import of goods and declared the same as Zircon sand (Zircon Ore) and claimed the benefit of non-payment of CVD by availing the benefit of Notification No. 4/2006-C.E., is correct or not – Held that:- Since the experts in the field like Indian Rare Earths Ltd. Research Centre, Kollam and Indian Bureau of Mines has opined categorically that the goods which were imported i.e. Zircon sand are nothing but the Zircon Ore, and the said expert opinion having been not rebutted by any other opinion from any other expert, and specifications of imported goods seems to match with specification of the ISI standard for Zirconium Ore. Therefore the goods imported by the appellant are eligible for the benefit of Notification No. 4/2006-C.E. as the goods which are imported are nothing but Zirconium Ore. In favour of assessee

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• 2013 (1) TMI 468
  Confiscation – Under section 111(m) of Custom Act., 2002 - Mis-declaration of the description of imported goods - Good quality paper declare as waste paper - Found during examination of goods – Held that:- The custom department accepted the goods to be waste paper inasmuch as the value of the goods was not changed. That being the case, the Custom department has accepted that the mis-declaration was of no consequence in evading customs duty. Neither is any case made out that such mis-declaration was for contravening any regulation on import of the impugned goods. Section 111(m) should in the normal course be invoked only in cases involving mis-declaration for evasion of customs duty or contravention of import policy. If such issues are not made out, the mis-declaration was of a trivial nature. Confiscation of the goods not maintainable. Consequently penalty imposed also is not maintainable - In favour of assessee

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• Corporate Laws

• 2013 (1) TMI 473
  Winding up petition - Company approached respondents for financial accommodation - company acknowledged its liability but failed to pay - Company raised a plea that respondents overcharged by raising inflated invoices - Whether winding up petition against company in acute financial stringency for non payment of acknowledged dues was to be admitted ? - Held that:- Company should not have taken dishonest approach as if a company was in difficulty they should be frank and candid before the Court of Law. The Judge recorded that the company wanted to pay off the dues to the extent Rs. 6.05 crores & company did not go back to the Judge by making application for correction of the judgment on that score. Once it was not done it is very difficult to go behind the acknowledgment of liability that too, not disputed at the relevant time. In course of hearing, respondents handed over an auction notice wherefrom it is found, the properties belonging to the respondents were put up for sale. Defence raised was a mala fide approach as there is no plausible dispute that could resist the winding up petition. The amount involved in the petitions would certainly satisfy the test of applicability of sections 433, 434 and 439. The winding up petition of a creditor could only be resisted through a bona fide dispute and nothing else. From the facts it would be clear the parties with their eyes wide open, agreed to the terms and conditions stipulated in the agreement. From the facts it is clear, the company was in financial stringency and their regular suppliers were reluctant to continue supply in view of huge outstanding. At that juncture the company approached the respondent for financial support. No commercial people would agree to support another party without any commercial gain. If the rate charged by the respondent was higher than the market rate the company was free to refuse to accept supply, they did not do so. The company would contend, they came to know at a later stage. It cannot be believed. In any event, when the respondent agreed to give rebate, the company did not raise any protest. Their protest came when the respondent insisted payment and threatened legal action. The defence so advanced was not bona fide. Thus where appellant company was in acute financial stringency, defence of over pricing raised by it when respondent insisted payment was mala fide to resist winding up petition.

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• Service Tax

• 2013 (1) TMI 493
  Cenvat credit on ineligible input services - demand for interest and penalty equal to the amount demanded - Held that:- In this case the appellant did not contest the view taken by the Revenue that credit was inadmissible and therefore the amount already reversed by them cannot be refunded when the matter has attained finality. At the same time credit itself does not become inadmissible just because the appellant has reversed the credit. Therefore penalty is set-aside. Assessee even though presented very detailed argument as to why the interest is not payable when the credit itself was not utilized, it was proposed that instead of going into discussion of several cases and decisions to consider the issue, since the amount is very small, the appellant may not contest the issue. The ld. Advocate agreed. Thus the demand for interest is upheld.

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• 2013 (1) TMI 492
  Entitlement to adjust the excess payment of tax - pre deposit demanded - Held that:- As there is no evidence to show that the appellant had worked out invoice-wise amount received and tax paid month-wise to show that indeed there was excess payment, instead of submitting summary statement no adjustment is warranted. As appellant had deposited Rs.3,70,000/- on 18/06/2010 which is much more than the confirmed demand in other matters which are pending decision this is a fit case for waiver of pre-deposit.

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• 2013 (1) TMI 491
  Waiver of pre-deposit - Stay of recovery - Construction Services - Commercial or Industrial Construction Services - Site Installation Services - Site installation for ATMs – Held that:- These activities were covered by the definitions of "Construction Service" (up to 15.6.2005) and "Commercial or Industrial Construction Service" (from 16.6.2005) and, therefore, the appellant is liable to pay service tax. Having prima facie found no merit in the plea of limitation, they are liable to pay the entire demand of service tax. Considering the plea of abatement that the demand of service tax, if at all sustainable, should be restricted to an amount calculated at 33% of the gross amount received from the Bank. Therefore, direct the appellant to pre-deposit this amount of Rs.1.25 Crores. In favour of revenue

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• 2013 (1) TMI 490
  Waiver of pre-deposit - Stay of recovery - Gross value as cum-tax value - Construction of Complex Services - Abatement - Demand relating to the activities on semi-finished residential flats - Finishing works such as flooring, painting, commissioning of lifts and other petty works incidental to the completion of the residential flats - Assessee contended that cost of materials used in the above activities should be abated from the gross amount collected from the flat owners to arrive at the taxable value - Held that:- The appellant has not produced even a sample copy of any of the agreements and, therefore, we are constrained to decipher their activities from the text of the impugned order. Prima facie, these activities were covered by the definition of 'Construction of Complex Services' and therefore the appellant was liable to pay service tax, which they did not pay. Their plea for treating the gross value as cum-tax value was prima facie liable to be considered by the revisionary authority. The present application does not contain any plea of financial hardships. Direct the appellant to pre-deposit an amount of Rs. 5 lakhs and waive the balance amount.

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• 2013 (1) TMI 489
  Refund of service tax paid on CHA services in respect of the exports - Clearing House Agent - AO argue that it includes services like demurrage charges - documentation charges - detention charges - which should not have formed part of the CHA service and, therefore, the appellant is not entitled for the credit - Held that:- Following the decision in case of Anant Commodities (P.) Ltd.(2009 (10) TMI 229 - CESTAT, NEW DELHI) that CENVAT Credit cannot be denied to the receiver of duty-paid inputs by the Central Excise authorities having jurisdiction over the input receiver by revising the assessment of duty at supplier's end. In favour of assessee

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• Central Excise

• 2013 (1) TMI 472
  Cenvat credit of excise duty paid on inputs - bagasse and press mud emerging during crushing of sugar cane and purification of cane juice – alleged non maintenance of separate account and inventory of the inputs used in or in relation to manufacture of dutiable final products - amount equal to 5%/10% of the sale value of bagasse/press mud would be payable in terms of the provisions of Rule 6 (3) (b) of the Cenvat Credit Rules, 2004 – Held that:- Issue stands decided in favour of the appellants not only by the judgment of Balrampur Chini Mills Ltd. vs. Union of India [2003 (5) TMI 74 - HIGH COURT OF JUDICATURE AT ALLAHABAD] but also in case of Indian Potash Ltd. vs. CCE, Allahabad [2012 (12) TMI 347 - CESTAT, NEW DELHI] that Bagasse emerges in course of crushing of the sugarcane, a necessary to extract cane sugar juice which in turn is processed for production of sugar and molasses. Bagasse is the waste product left after the crushing of sugarcane - no need to maintained separate accounts for the inputs for production of sugar and molasses (excisable item) and bagasse – in favor of assessee

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• 2013 (1) TMI 471
  Eligibility for Cenvat credit - service tax paid on godown rental and on outward freight for transportation of the finished goods upto the customer's premises - Held that:- The department accepts that the appellant has paid central excise duty on the FOR destination price i.e. the factory gate price plus freight charges. According to the department the sales are not on FOR destination basis as in the invoices, there is no reference to the insurance charges. Thus just because the appellant did not insure the goods during transit, it cannot be inferred that the risk of loss of goods, or damage to the goods during transit was not of the appellant, when the invoices mentions that the sales are on FOR destination basis and duty had been paid on the price which includes the freight charges. That it is the customer's premises which has to be treated as the place of removal and the appellant would be eligible for Cenvat credit of the service tax paid on outward freight and as such this Cenvat credit has been wrongly denied. Cenvat credit in respect of godown rental - Since this service had been availed prior to removal of the goods in as much as the place of removal is the customer s premises, the appellant would be eligible for Cenvat credit for this service, more so, when this service has also been availed for storage of the raw material - the impugned order of denial of CENVAT credit is not correct & is set aside - in favour of assessee.

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• 2013 (1) TMI 470
  Condonation of delay - Delay in filling of appeal - Sections 35B - 35E of Central Excise Act, 1944 - Order was received on 1-11-2011 - Committee of Commissioners authorized filing of appeal on 13-2-2012 - The condonation of delay has been sought on the ground that during the period from May 2011 till the appeal was filed, there was no regular Commissioner posted – Held that:- Following the decision in case of CRYSTAL CO. (2008 (10) TMI 518 - CESTAT, NEW DELHI) that condonation of delay may not be a futile exercise. It would be in the interest of justice to condone the delay. Being satisfied that the delay caused on the part of the Department was not deliberate, condone the delay and thus allow the COD application. Hence waiver of condonation of delay In favour of revenue

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• 2013 (1) TMI 467
  SSI exemption - Notification No.8/2001 - Jurisdiction of Factory – Urban or rural area – Whether the Tehsildar is the authority to verify whether a particular area of land falls under rural area or urban area – Held that:- When the Tahsildar of the area concerned certified to the effect that the factory falls under rural area and same has also not been challenged by the Revenue before any of the Revenue authorities, we are bound by the certificate issued by the Tahsildar concerned. Decides in favour of assessee

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• 2013 (1) TMI 466
  Maintainability of objection raised on the basis of National Litigation Policy - Held that:- Any preliminary objection has got to be raised on the earliest available occasion. The objection presently raised by the learned counsel was never raised before. Though the respondents could have raised it when the Tribunal heard the stay applications filed by the appellant. Those stay applications were heard with due notice to the respondents but none of them chose to raise any objection of the above kind when the stay applications were taken up for disposal. In the circumstances, the above objection raised by the learned counsel cannot be entertained at this stage. This apart, the National Litigation Policy purports to avoid litigation between the department and assessees in cases involving relatively small amounts in the present cases, the litigation between the department and the assessees is at the concluding stage. To raise an objection of the above kind at this stage will be futile exercise. Issue is therefore held against assessee. Interest under Section 11AB - whether liable to pay interest on differential duty paid by them under supplementary invoices issued subsequent to clearance of the goods - Held that:- As decided in Commissioner of Central Excise, Pune Versus M/s SKF India Ltd. [2009 (7) TMI 6 - SUPREME COURT] he payment of differential duty without supplementary invoices on the basis of enhancement of price of goods under escalation clause of agreement between the assessee (manufacturer) and his customer, subsequent to clearance of the goods on payment of duty based on the price originally agreed, is a payment under sub-section 2B of Section 11A of the Central Excise Act and that interest under Section 11AB of the Act was liable to be paid on such differential duty for the period from the date of clearance of the goods to the date of payment of differential duty - against assessee. Whether the demands for the above interest on differential duty is time barred - Held that:- In the cases covered by Appeals E/1512, 1517 & 1519/2011, the demand of interest on additional duty is within the normal period of limitation in terms of the above view taken by the apex court in TVS Whirlpool case [1999 (10) TMI 701 - SUPREME COURT OF INDIA] - for Appeals E/930/09, E/1509,1511, 1513, 1514, 1515, 1516 and 1518/2011 plea of limitation was raised by the respondents before the original authorities. However, it appears, no attempt was made either by the original authorities or by the appellate authority to examine whether the demands of interest were wholly or partly time barred - remand the limitation issue to the original authority for fresh decision

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• CST, VAT & Sales Tax

• 2013 (1) TMI 494
  KVAT Act - seeking condonation of delay of 30 days - Held that:- The appeals can be considered only if the delay in filing the appeals are condoned. Therefore, the 2nd respondent appellate authority is directed to consider Exts.P13 to P16 applications to condone delay in filing Exts.P9 to P12 appeals and also Exts.P25 to P28 applications seeking condonation of delay in filing Exts.P21 to P24 appeals within 4 weeks from today and if delay is condoned as sought for, the appeals filed by the petitioner shall also be considered and orders thereon shall be passed at any rate within two months thereafter - recovery of the tax and penalty due stand stayed subject to the petitioner remitting 1/3rd of the amount due thereunder within two weeks from today.

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