TMI Tax Updates - e-Newsletter
January 25, 2013

Case Laws in this Newsletter:

Income Tax Customs Law of Competition Service Tax Central Excise CST, VAT & Sales Tax

Articles

1. CENVAT CREDIT ON STRUCTURAL/CELL TOWERS

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Steel Minister Presented with Bonus Share Certificate by MSTC Ltd.

2. Public Debt Management for the Third Quarter of 2012-13 (Oct-Dec 2012) Released by Ministry of Finance

3. Presidential Awards to 37 Officers of the Customs, Central Excise and ED

4. CCI Holds Round-Table Meeting With Top Corporates, Emphasises Competition Compliance for Good Corporate Governance

5. WTO DG Contenders call on Anand Sharma for India’s Support Top Global Business Leaders Positive about India’s Investment climate

6. Revision in the norms for the scheme ‘Special Industry Initiative Scheme for Jammu & Kashmir (Udaan)’

7. Interest Rates on and Premature Withdrawal of Rupee Term Deposits

8. Report of the Expert Committee (Chairman: Dr. Prakash Bakshi, Chairman, NABARD) on Streamlining of Short Term Co-operative Credit Structure (STCCS)

9. Change in Tariff Value of RBD Palmolein, brass Scrap (All Grades) Poppy seeds, Gold and Silver Notified

Notifications

Customs

1. 02/2013 - dated 23-1-2013 - Cus

Amends Notification No. 12/2012-Customs, dated the 17th March, 2012 - Regarding increase in basic custom duty on all types of crude edible oil.

2. 14/2013 - dated 24-1-2013 - Cus (NT)

Appointment of Common Adjudicating Authority- M/s J.K. Tyres and Industries Limited., New Delhi.

3. 13/2012 - dated 24-1-2013 - Cus (NT)

Appointment of Common Adjudicating Authority- M/s. Dharmendra Kumar,

4. 12/2013 - dated 24-1-2013 - Cus (NT)

Appointment of Common Adjudicating Authority - M/s KLJ Polymers and Chemicals Ltd.,

5. 11/2013 - dated 24-1-2013 - Cus (NT)

Appoints the Common Adjudicating Authority - M/s Sanam Exports, 25/75, Gali No.15 Vishwasnagar, New Delhi

6. 10/2013 - dated 24-1-2013 - Cus (NT)

Appoints the Common Adjudicating Authority - M/s Aparna Lace Crafts, Delhi and Others, New Delhi.,

7. 09/2013 - dated 24-1-2013 - Cus (NT)

Appointment of Common Adjudicating Authority - Joint Commissioner or Additional Commissioner of Customs

8. 08/2013 - dated 23-1-2013 - Cus (NT)

Amends Notification No. 36/2001-Customs (N.T.), dated the 3rd August, 2001 - Palm oil, Palmolein, Soyabean Oil (Crude) and Brass Scrap (all grades) - Traiff Values

FEMA

9. 255/2013-RB - dated 19-1-2013 - FEMA

Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Second Amendment) Regulations, 2013 - Amendment in Schedule 5

Circulars / Instructions / Orders

VAT - Delhi

1. PUBLIC NOTICE - dated 18-1-2013

System Assisted Assessment on the basis of 2A and 2B data mismatch for Tax period July, August, September, 2012.

FEMA

2. 80 - dated 24-1-2013

Foreign investment in India by SEBI registered FIIs in Government securities and corporate debt

3. 81 - dated 24-1-2013

Memorandum of Instructions for Opening and Maintenance of Rupee/Foreign Currency Vostro Accounts of Non-resident Exchange Houses

Highlights / Catch Notes

Income Tax

• Honest Income Disclosure by Taxpayer Doesn't Count as Wrong, Even if Filed Under Incorrect Category.

  Case-Laws - HC : Reassessment - as long as the assessee makes a full and true disclosure of the income, the fact that it might claim that as falling under one head which is ultimately not accepted, would not make it a wrong disclosure, or suppression. - HC
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• Exemption Denied: Appellant Fails to Qualify for Agricultural Land Exemption u/s 54B Due to Construction Approval.

  Case-Laws - HC : Exemption u/s 54B - agricultural land - appellant has not been able to satisfy the requirements of Section 54B as the appellant's late father had applied for sanction for construction of a compound wall - HC
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• Tax Department's Reassessment Scrutinized: Allegations of Bogus Companies and Information Disclosure Disputed in Initial Proceedings.

  Case-Laws - HC : Reopening of Assessment - bogus companies - it is difficult to believe the plea taken that the said information was neither available with the department nor did the assessee disclose the same at the time of assessment proceedings - HC
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• Exemption Denied: Assessee Failed to Submit Form No.10 Before Assessment Completion, Losing Section 11(2) Benefits.

  Case-Laws - HC : Entitlement for exemption u/s 11(2) - assessee having failed to furnish Form No.10 before the completion of the assessment, the benefit under the provisions of Section 11 for accumulation of profits had been rightly denied by the authorities below - HC
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• Section 12AA Focuses on Trust's Objectives, Not Income, for Registration u/s 12A.

  Case-Laws - HC : Registration u/s 12A – Trust - The object of Section 12AA, is to examine the genuineness of the objects of the Trust, but not the income of the Trust for charitable or religious purposes - HC
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• Taxpayer's Deductions u/s 80IB(10) Challenged Due to Inflated Profit Margin and No Sales Reported.

  Case-Laws - AT : Deduction u/s. 80IB(10) – In absence of any sales – Assessee had shown inflated profit, i.e., at 60%, as against the rate of 23% for another non-80IB - AO to redetermine the accrual of income - AT
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Customs

• Illegal Red Sander Wood Found in Rice Export; No Penalty for Appellant Due to Lack of Awareness.

  Case-Laws - AT : Imposition of penalty - illegal Red Sander Wood Logs found in containers of Par Boiled Rice exported - There is no evidence to show that the appellant was aware of attempts of illegal export - No penalty - AT
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Service Tax

• High Court Examines Presumed Service of Orders in Service Tax Cases Affecting Limitation Periods via Registered Post A.D.

  Case-Laws - HC : Period of limitation - Presumption of service of Order - Delivery of the order - Receipt of order - Registered Post A.D.(RPAD) - Against assessee - HC
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• Can CAG Audit Private Companies? Jurisdiction and Powers Under Scrutiny for Non-Government Entities.

  Case-Laws - HC : Whether the CAG of India, has power and/or authority and/or jurisdiction to audit the accounts, service tax records or other documents of the petitioner company, which is not an undertaking of the Central Government or any State Government - HC
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• Sub-contractor avoids penalty for unpaid service tax, as main contractor had already paid it; no intent to evade found.

  Case-Laws - AT : Assessee did not pay the service tax on the ground that the main contractor has paid the same - it cannot be alleged that the sub-contractor was not discharging service tax liability deliberately with an intention to evade service tax. - no penalty - AT
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Central Excise

• Court Approves CENVAT Credit for Paint Enhancing Production Hall Safety and Cleanliness.

  Case-Laws - HC : CENVAT Credit on the paint used on the floor of production hall to make it dust free and fire retardant - credit allowed - HC
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• Court Rejects Appeal Due to Six-Year Delay in Addressing Defects, Exceeding Limitation Period.

  Case-Laws - HC : Application for condonation of delay dismissed - Since, the appellant has taken more than six years to remove the defects in the appeal, it is thus beyond the period of limitation - HC
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• Tool Kit Classified as Input Accessory Under Central Excise Law Definition.

  Case-Laws - AT : Whether tool kit can be termed as accessories of final product as envisaged in the definition of ‘input’ - ‘tool kit’ is squarely covered by the definition of ‘input’ - AT
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• Doctrine of Merger: Different Appeal Subjects Between Parties and Revenue Means No Application.

  Case-Laws - AT : Applicability of Doctrine of merger – doctrine of merger will not be applicable inasmuch as the subject matter of appeal by party was entirely different with the subject matter of appeal by the Revenue. - AT
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• CENVAT Credit Allowed Using Photocopies of Bills of Entry: Rule 9(1)(a) Interpretation Under Cenvat Credit Rules 2004.

  Case-Laws - AT : CENVAT Credit - duty paying documents - Rule 9(1)(a) of Cenvat Credit Rules, 2004 - CENVAT Credit on the basis of photocopy of seven bills of entry - Credit allowed - AT
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• Revenue Authority Questions Oil Goods Valuation; No Related Parties or Additional Consideration Claimed in Transactions.

  Case-Laws - AT : Under-valuation of goods - It is not the case of the revenue that other manufacturing companies to whom the oil was supplied at the rate based on the volume at 15ºC are the related parties and invoice price was not the sole consideration - AT
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VAT

• Court Grants Concessional Tax Rate for Inter-State Purchases via Auction; Writ Petition Succeeds with Sufficient Evidence.

  Case-Laws - HC : Disallowance of concessional rate against Form-C - inter-state - purchase in open auction - there was enough evidence to consider that it was an inter-state sale - writ petition succeeds. - HC
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Case Laws:

• Income Tax

• 2013 (1) TMI 553
  Deduction u/s 80P(2)(a)(i) - respondent - assessee is a Cooperative Bank - Held that:- Reserve Bank of India had permitted the assessee - opposite party to continue to operate its banking activities. Thus, for all practical purposes, the assessee is entitled to claim deduction under Section 80P(2)(a)(i). The banking activities carried out by the respondent - assessee cannot be termed to be illegal, contrary or in violation of any statutory provisions - in favour of assessee.

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• 2013 (1) TMI 552
  Deduction u/s 80P(2)(a)(i) - respondent - assessee is a Cooperative Bank - Held that:- Reserve Bank of India had permitted the assessee - opposite party to continue to operate its banking activities. Thus, for all practical purposes, the assessee is entitled to claim deduction under Section 80P(2)(a)(i). The banking activities carried out by the respondent - assessee cannot be termed to be illegal, contrary or in violation of any statutory provisions - in favour of assessee.

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• 2013 (1) TMI 546
  Relinquished of ownership rights in Plot sold - Memorandum of Understanding (MoU) with two developers for the purchase of 500 sq mtrs. of land or a residential flat not exceeding 300 sq mtrs paying a sum of Rs. 68,00,000 when MOU entered and the balance in two installments - supplementary MoU by which plot no. A-1 measuring 500 sq mtrs was allotted to the Petitioner - reopening of assessment - Long term capital gain v/s Short term capital gain - Held that:- It is clear from the record that by way of first agreement which was entered in the year 1990, the assessee had acquired right in the property and this right he has relinquished in favour of new vendee in 1995. Thus, in considered opinion that the assessee is liable to long-term capital gain and not to short term capital gain. Under these circumstances, no infirmity in the impugned order passed by the Tribunal and since it is a finding of fact given by the Tribunal that the assessee acquired right in the property at the time of execution of first agreement in the year 1990 and had relinquished his rights in favour of new vendee in 1995, no substantial question of law arises for our consideration. This Court is in agreement with the above reasoning as in the present case, the Petitioner had acquired right to a specific plot, furthermore, the interest was in the nature of an actionable claim, which could be asserted in a legal proceeding. The tax authorities had issued a no objection certificate in respect of the transaction. In these circumstances, the reporting of the amount received as capital gains was correct. Moreover, Calcutta Discount Ltd. vs. ITO, (1960 (11) TMI 8 - SUPREME COURT) is an authority for the proposition that as long as the assessee makes a full and true disclosure of the income, the fact that it might claim that as falling under one head which is ultimately not accepted, would not make it a wrong disclosure, or suppression. The question as to the proper assessability of any amount, to income tax falls within the domain of the tax adjudicator - writ petition is entitled to succeed & the reassessment proceedings are hereby quashed - in favour of assessee.

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• 2013 (1) TMI 545
  Entitlement to exemption u/s 54B - Appellant had 1/4th share in 1.10 acres of land in Ayyanthole Village sold for Rs.44 lakhs on 14.11.2004 - Whether the subsequent purchase of land (at Koothattukulam) in which a farm house is situated satisfied the requirements of Section 54F and/or Section 54B and thus there was no liability to pay any long term capital gains tax on the sale of land at Ayyanthole, in the AY 2005-06 ? - Held that:- Section 54F is intended to encourage construction of or acquisition of residential house with the aid of the proceeds from the transfer of any long term capital asset, which is not a residencial house. The provision contemplates computing the cost of the residential building, but the value of the plot on which the farm house stands and the land appurtenant could also be considered. The tribunal has categorically found that the appellant has not produced material to show that the entire area of 1.92 acres should be considered as land appurtenant to it. It is in such circumstances, the tribunal made an estimation and directed that the value of the plot on which the farm house is located and the land appurtenant be fixed as Rs. 2 lakhs. Thus unable to accept the contention of the appellant that the value of the entire land must be considered in arriving at the value of the residential building. No illegality committed by the tribunal. It is not open to the appellant to invoke Section 54B of the Act in regard to the rest of the land at Koothattukulam. This is for the reason that the appellant has not been able to satisfy the requirements of Section 54B with regard to the land at Ayyanthole as the appellant's late father had applied for sanction for construction of a compound wall before the Thrissur Urban Development Authority. The appellant had claimed in the return, exemption on the basis of Section 54F of the Act. But, during the assessment proceedings, the appellant relied on Section 54B of the Act. In other words, initially the appellant even did not have a case that the land at Ayyanthole was used for agricultural purposes. Therefore, at any rate, there can be no basis for invoking Section 54B for deducting the value of the land purchased at Koothattukulam - against assessee.

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• 2013 (1) TMI 544
  Reopening of Assessment - about 90 companies were floated for the purpose of providing accommodation entries - all the companies are "bogus" - Held that:- Persuading a letter circulated by the ACIT (Respondent No.2) to all the assessing officers of Range-14, which includes the assessing officer of the present petitioner dated 24.08.2009 a list of beneficiaries mentioned for the AY 2007-08 was found with the serial No.19 shows the petitioner as a beneficiary - the petitioner furnished a reply to the earlier questionnaire which had been issued on 18.02.2009 giving details of share capital raised by the petitioner. Those details included the sums received from the aforesaid alleged accommodation entry providers. Alongwith the said reply dated 09.11.2009, confirmations from the said parties were also furnished.A similar reply was again furnished on 27.11.2009. Despite the furnishing of these details, AO further issued notices under section 133(6) to the said companies directly, on 27-30.11.2009 which the said five parties responded, thus in the backdrop of these facts, it is difficult to believe the plea taken that the said information was “neither available with the department nor did the assessee disclose the same at the time of assessment proceedings”. There is nothing to show that the assessing officer did not receive the said information as it is apparently because he was mindful of the said information that he issued notices under section 133(6) directly to the parties to confirm the factum of application of shares and the source of funds of such shares - in favour of assessee.

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• 2013 (1) TMI 543
  Entitlement to benefit of section 158BB (1) (b) - assessee having filed the return under Section 139 sufficiently after action u/s 132A was invoked - Held that:- As evident from the perusal of sub clause (b) of Sub-section (1) of Section 158BB, that the AO is required to reduce the income disclosed in the return filed by the assessee under Section 139 or Section 147 but the assessments had not been finalised till the date of search or the requisition while computing the income for the block period. In the present case, the cash was seized by the police on 15.9.1998 and action u/s 132A was initiated on 5.10.1998. The warrant of requisition was executed on 9.8.2001 when the money was paid by the police to the Income Tax department and notice u/s 158BC was issued to the assessee on 7.4.2003 in respect of block assessment for the period 1.4.1988 to 5.10.1998. The assessee filed return in Form 2B on 5.8.2003 and the block assessment was framed on 29.8.2003. It may, however, be noticed that prior thereto for the assessment year 1999- 2000, the assessee had filed return on 10.3.2000 in which the cash of Rs. 7 lacs was not disclosed but the same was disclosed by the assessee while filing the revised return on 5.6.2000. This return was processed u/s 143(1) on 31.3.2001. In the present facts and circumstances, the CIT(A) and the Tribunal held that the benefit of the amount of Rs. 7 lacs which was disclosed in the return filed by the assessee under Section 139 was admissible to the assessee while computing his undisclosed income & the revenue was unable to demonstrate that the aforesaid view was not in accordance with law - in favour of the assessee.

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• 2013 (1) TMI 542
  Entitlement for exemption u/s 11(2) - ITAT denied the claim - appellant is a charitable institution registered under Section 12A - Held that:- Following the decision of Nagpur Hotel Owners's Association's case [2000 (12) TMI 99 - SUPREME COURT] it is mandatory under the provisions of the Act and the Rules to give intimation to the assessing authority in Form 10 as required under Rule 17 of the Rules to claim benefit of Section 11. This information in Form 10 is required to be furnished at any time before the finalisation of the assessment proceedings. Thus the assessee having failed to furnish Form No.10 before the completion of the assessment, the benefit under the provisions of Section 11 for accumulation of profits had been rightly denied by the authorities below - against the assessee.

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• 2013 (1) TMI 541
  Delay in filing advance tax - interest u/s 234B or section 234C - assessee claimed to be exempt as per circular dated 23.5.1996 - Held that:- Ground taken by the assessee for payment of advance tax belatedly is that he suffered financial losses in his publication business. However, such a ground does not exist in the circular dated 23.5.1996 in order to grant exemption to the petitioner for payment of interest of late advance tax. Therefore, the revenue authority has rightly come to the conclusion that such waiver cannot be granted to the petitioner. Since this is a fiscal matter and has to be construed strictly, this Court after perusing the circular dated 23.5.1996 comes to a conclusion that the findings of the revenue authority on this aspect are indeed correct. Since the petitioner does not fall under the exemption category such exemption cannot be given to the petitioner - against assessee.

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• 2013 (1) TMI 540
  Deduction u/s.10B - disallowed the claim for the Chennai Unit as section 10B requires that the industrial unit should not be formed by the transfer of previously used machinery - Held that:- The start point of the limitation for claiming the benefit flowing from section 10B would commence from the year of manufacture or production of the undertaking. If the conditions prescribed in the section are not satisfied in the year of commencement of production, it would not be able to claim such deduction in the subsequent years, unless the said initial test on the date of the starting point has been satisfied. Section 10B therefore do not give any indication that in each year of claim it’s eligibility should be newly established, because the relevance of the phrase “newly established undertaking” is only to identify initial year of period for which assessee is eligible for claim of exemption u/s.10B. Thus on examination of the facts recorded by the AO, it was noticed that the Chennai Unit was established/ acquired in the year 2000-01. Due to this reason, reliance can be placed on Saurashtra Cement & Chemical Industries(1979 (2) TMI 21 - GUJARAT HIGH COURT) and thus to hold that in the absence of any disturbance in respect of relief granted in initial year, there was no legal justification to disturb the continuous deduction of section 10B in any of the subsequent assessment year. Although it is possible, as in the present case, that in any of the subsequent years the assessee had acquired new plant & machinery, may be of substantial value, as also may be increase the turnover or efficiency, nonetheless the act subscribes that the undertaking must not be formed by the splitting up or the reconstruction of a business already in existence. Therefore, the initial year is the year to establish the eligibility of the claim - it was not evident from the records that the transaction relating to the machinery constituted outright sale thus hereby hold that the AO has wrongly presumed that the transaction in question was a purchase of machinery by Chennai Unit - rejection of deduction u/s.10B was bad in law - in favour of assessee. Deduction u/s.10B - CIT(A) allowed claim observing the activities carried on by the assessee were manufacturing - revenue contested against as it was engaged in polishing the valves - Held that:- The petitioner has shown various manufacturing steps which the raw castings have to undergo [viz.Turning, boring, milling, radial drillings and boring, deburning, etc.]. He purchased raw valves and thereafter put them under the aforesaid process. Therefore, after processing that raw valves, that becomes altogether a new product, which is distinct from raw casting and is commercially marketable, and that comes under the manufacturing activity. See CIT v/s. Perfect Liners [1979 (1) TMI 4 - MADRAS HIGH COURT] - As decided in CIT v. M.R. Gopal [1965 (7) TMI 40 - Madras High Court] the word “manufacture” has to be understood in a wide sense - in favour of assessee. Computation of deduction u/s.80HHC - addition of interest on deposit with banks - Held that:- interest only constitutes income and it can never be part or equivalent to turnover. Further it is assessable under the head income from other sources and in no case it will form part of computation mechanism as provided under section 80HHC unless it is held as business income and if it is so then 90% thereof would be required to be excluded. See CIT vs. Delhi Brass & Metal Works [2008 (11) TMI 42 - HIGH COURT DELHI] - in favour of assessee. Addition of Bogus payment - disalloance of Commission payment - Held that:- As the payments were made to independent unrelated parties made to procure the business as supported by details of the commission agents and the details of the TDS payments no bogus payment is to be concluded - AO had not examined the commission agents as certain basic information about the payment of commission was very much part of the record as also had been enquired by the Auditor, hence very much part of the assessment record. Without any investigation AO has wrongly disallowed claim - in favour of assessee. Ad-hoc disallowance - Held that:- Since most of these expenses are incurred on cash basis and incurred for snacks, food and hotel expenses etc. Various gift items were also purchased for different persons including guest. Since the business purpose of these expenses cannot be fully verifiable part disallowance is justified. However looking to the quantum of expense 10% disallowance is on higher side. I restrict the same to Rs. 1 lac. The balance disallowance of Rs. 5,70,800/- is deleted - partly in favour of assessee.

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• 2013 (1) TMI 539
  Non deduction of TDS on Ground Rent - Whether the payments towards rent of the ground along with other facilities requiring deduction of tax at source u/s 194I or the payments are for works contract as per section 194C? - Held that:- Before coming to a definite conclusion on this issue, it is very much necessary to ascertain the exact nature of payment and the services rendered or facilities provided for which such payment was made. As find from the order of the AO that he has not made any endeavour to ascertain the correct fact by taking necessary enquiry either with the BCCI or HCA for finding out the true character of the payment made. At the same time, the CIT (A) was also not justified in presuming the payments to be in the nature of work contract falling u/s 194C when she herself has observed that the claim of the assessee cannot be accepted since the payment could not have been just on the basis of debit note and there might have been an agreement either oral or written for providing the particular services. Thus the CIT (A) was not justified in directing the AO to consider the payment u/s 194C and accordingly calculate tax and interest u/s 201(1)& 201(1A). The order of the CIT (A) is modified to this extent only. However, it is proper to remit the matter to the file of the AO for determining the issue afresh after conducting necessary enquiry affording a reasonable opportunity of being heard to the assessee - in favour of assessee for statistical purposes.

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• 2013 (1) TMI 538
  Rate to be applied for determining the profits of the business - Whether the Tribunal was justified in adopting net profit rate of 7% on contract receipts including sub-contract receipts . Assessee not produced the purchase file and fixed assets bill – AO referred the case for special audit under Section 142(2A) of the Act - As per special auditor - Assessee had not maintained proper books - Assessing officer rejected the books of account and applied 10% net profit rate – Assessee filed an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)] - CIT(A) applied net profit rate of 6.5% to the direct contract receipts and rate of 5% to receipts of sub contract – revenue went in Tribunal - Tribulal adopted consolidated rate of 7% to be applied on the total contract receipts . Held that :- Nothing could be shown by either side that the rate was either arbitrary or irrational in the facts and circumstances, though some amount of guess work may necessarily be there in adopting the net profit rate as there is no definite method prescribed under the statute, the court shall interfere only where the same appears to be excessive or arbitrary or discriminatory, that being not the situation in the present case. Adoption of 7% rate by the Tribunal accepted.

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• 2013 (1) TMI 537
  Registration u/s 12A – Trust - Charitable activities – Trust was created on 23.6.2010 - Application u/s 12A(1) (aa) was moved on 19.7.2010 - Same was rejected on 26.11.2010 - Held that:- Following the decision in case of Surya Educational & Charitable Trust (2011 (10) TMI 47 - PUNJAB AND HARYANA HIGH COURT) that the application for registration is required to be made within one year of the creation of the Trust and there is no requirement that the Trust or the institution should have started all its envisaged activities in the first year itself. Under Section 12AA of the Act satisfaction regarding the genuineness of the activities of the Trust is to be seen and the stage for application of income is yet to arrive i.e. when such Trust or Institution files its return. The object of Section 12AA, is to examine the genuineness of the objects of the Trust, but not the income of the Trust for charitable or religious purposes The Trust was not set up for charitable purposes and it was utilizing its income not for the said purpose cannot be examined at this stage as only objects of the Trust had to be considered by the Commissioner. The Trust was in nascent stage and was yet to work towards its objects. No substantial question of law - Decides against revenue

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• 2013 (1) TMI 536
  Addition on account of diesel expenses – Bogus purchase – Cash Purchase – Held that:- Assessee has submit the confirmatory letter given by the officer in charge of Bharat Petroleum Limited stating that diesel worth Rs. 82,20,254/- was supplied by it to the assessee. The confirmatory letter issued by BPCL clearly mentioned that the bills issued to the assessee have also been verified before issuance of the certificate. Considering the fact that the petrol pump of Bharat Petroleum Limited was run by the company itself. Therefore, certificate could not be doubted. – In favour of assessee Addition made u/s. 41(1) - Cessation of trading liability – A.O. added the old creditor standing in the books as income under the provisions of section 41(1) – Held that:- The liability of the assessee has ceased to exist in the year under consideration, either by operation of law, or by mutual contract between the parties. There in no declaration by the assessee that it does not intend to honour its liabilities nor is there any discharge of the debt. In the aforesaid premises, as no event had taken place in the year under consideration to indicate remission or cessation of the liabilities in question, the provisions of section 41(1) could not have been invoked. No question of law involved - Decides against revenue

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• 2013 (1) TMI 535
  Deduction u/s. 80IB (10) - Whether the assessee is a developer and builder or a Contractor – Land owned by five persons – Assessee enter into agreement to develop such land with the land owners - Construction of a residential-cum-commercial complex - Development agreement, 46% of the constructed space and, consequently, 46% of the land continues to belong to the land owners, who have thus divested themselves - through this arrangement, only the balance 54% of the land against the value of 46% of the construction - Assessee develops only 54% of the project on its own account, and the balance 46% on account of the land owners - Realizes profit from only its 54%, claiming deduction u/s. 80IB(10) thereon Held that:- Though the assessee develops the entire project, its interest therein is limited to a part thereof (54%). Not only the assessee undertakes the entire work, even the sale function is also managed by it. It is, thus, it who pays the land owners through the value of a part of the project, i.e., 46%, rather than being paid for, similarly, by them, i.e., at 54% of its value, as a contractor would be, where not by paid in cash. In favour of assessee Deduction u/s. 80IB(10) – In absence of any sales – Assessee had shown inflated profit, i.e., at 60%, as against the rate of 23% for another non-80IB – Held that:- We set aside the impugned order to this extent, and remit the issue of determination of the accrual of income, including, where so, its extent, back to the file of the AO Also clarify as to the revenue neutrality of this exercise, as, if and to the extent income has not accrued, it could neither be brought to tax nor deduction in its respect claimed by, or allowed to, the assessee. The same though is crucial in the overall context of the case, inasmuch as only the real income, since accrued, can be assessed. Further, the value of the closing WIP, as assessed, shall be adopted as the opening WIP for the following year. Also, as this is the first year of construction, and some qualifying conditions u/s. 80IB(10) are subject to satisfaction over time, which has since elapsed, the AO shall also, if not already so verified, i.e., while framing the assessment for any succeeding year(s), satisfy himself as to the satisfaction of those conditions, being, principally, though not limited to, the completion of the project within the stipulated time period, issuing definite findings in its respect. Remand back to AO

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• Customs

• 2013 (1) TMI 534
  Imposition of penalty - illegal Red Sander Wood Logs found in containers of Par Boiled Rice exported - Held that:- As find from the finding of the Commissioner that the appellant attended the stuffing of the consignment of rice at the Container Freight Station (CFS)as supported by the statement of Shri G.P. Krishna Prasad but there is no material to show that the appellant had any knowledge of loading of the red sander wood logs after removal from the CFS. There is no evidence to show that the appellant was aware of attempts of illegal export. Hence,no reason for imposition of penalty on the appellant - in favour of assessee.

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• 2013 (1) TMI 533
  Conditional interim order waiving pre-deposit but directing to deposit Rs.60 lakhs as confirmed by Single Judge - assessee contested against multifarious contentions against an officer of the department who allegedly had ventured on a witch hunt - Held that:- It is pertinent to note that the said officer was not impleaded in these proceedings. But for making some vague allegations, absolutely nothing has been produced to substantiate the same. It is pertinent to note that the said officer has not passed the order and it is the Commissioner who has passed the order after going into the materials recovered from abroad. The appellant relied on the decision of Benara Valves Ltd. v. Commissioner of Central Excise [2006 (11) TMI 6 - SUPREME COURT OF INDIA] to contend that in considering waiver of pre-deposit, a cursory glance is not sufficient. However, on going through the judgment of Single Judge and also the order of the Tribunal, it is to be opined that the appreciation was not of a cursory nature and the materials have been gone into and a prima facie case on behalf of the department was found - no interfere with the judgment of Single Judge required - appellant granted with six weeks time from today to make the pre- deposit as modified by the Tribunal.

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• Law of Competition

• 2013 (1) TMI 532
  Competition Act – termination of commission payable to agents by the Airlines - appellant were travel agents to whom foreign airlines used to pay commission on sale of tickets - airlines discontinued commission by forming a cartel and were abusing their dominant position - Competition Commission of India rejected the argument of the informant that on a particular route, a particular airlines operating thereupon should be the relevant market - Whether foreign airlines had abused their dominant position in terminating commission payable to travel agents ? – Held that:- CCI has rightly observed that as long as the consumer is transported to his ultimate destination, the route taken hardly matters. The airlines which provide international flight services to the consumers of India for travel to various destinations outside India and those routes are not necessarily fixed. The CCI had rightly observed that these routes are substitutable. The selection by the consumer for a particular airline would be on the basis of various factors namely the timing, quality of service and also air fare charged by the airlines. It is not necessary that the route taken by one airlines operating would be the same in case of other Airline operating on that route. It could be via some other city. It will make no difference to the consumer so long as airline reaches the consumer to his destination. Therefore, it would be wrong to hold one route as the relevant market for that particular airlines. CCI is right in holding that the relevant market for the respondents was the international routes reaching from and to India from the foreign destinations and not a particular route of being operated by a particular airline. Director General had concluded on the basis of his investigation that it was not proved that foreign airlines hold about 90 per cent market share in the relevant market of international flying to and fro from India. The appellant was unable to give any specific statistics before the CCI or even before the Court. On the other hand, from the documents on record, it is clear that none of the nine foreign airlines has substantial market share in the relevant market of international flight services in India. Thus Director General referring to the information available to the DGCA has come to the conclusion that individually none of the opposite parties has a market share of more than 5 per cent or 6 per cent of the International traffic. Again as per the study conducted by the CAPA most of the opposite parties do not have any meaningful share in the international flying market based on the seat strength. Therefore, the CCI has committed no error in coming to the conclusion that individually speaking none of the opponent could be said to be in a dominant position. Joint decision to terminate the commission system is not accepted as individual foreign airlines cannot be clubbed together and held to be enterprise. They are all independent companies. There is no evidence of enmity of these airlines with the travelling agents nor is there any support to suggest that there was any meeting of minds among them. There was no joint decision to terminate the commission system as there is no agreement spelling out a cartel or any meetings of mind between these independently operating foreign airlines. The decision by these airlines was an independent decision and as such there could be no question of violation of section 3(3). There is no evidence that the travel agents have suffered. On the other hand in the line of world trend, the system has been substituted with Net Fare Model all over the world and not only in India.

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• Service Tax

• 2013 (1) TMI 550
  Period of limitation - Presumption of service of Order - Delivery of the order - Receipt of order - Registered Post A.D.(RPAD) - Acknowledging the receipt of order - Evasion of duty - Assessee contended that dispatch of a document through Registered Post A.D. and purported service thereof by the postal authority with supporting document acknowledging the receipt, a presumption would arise of proper service of such document and such presumption would be rebuttable - Held that:- Entire issue is based on disputed questions of fact. Commissioner (Appeals) as well as the Tribunal held that the service of the order was complete. - Appeal dismissed.

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• 2013 (1) TMI 549
  Writ Petition - Whether the CAG of India, has power and/or authority and/or jurisdiction to audit the accounts, service tax records or other documents of the petitioner company, which is not an undertaking of the Central Government or any State Government - Whether Rule 173(6)(c) of Central Excise Rules, 1944, which provides that Commissioner or the Comptroller and Auditor General of India would be entitled to undertake the audit of records of any assessee - The word “or” has to be read conjunctively or disjunctively in Rule 173(6)(c) - Special audit u/s 72A of the Finance Act 1994 – Ultra Virus of Rule 5A of the Service Tax Rules Held that:- In view of Single member bench notice cannot be sustained and the same is liable to be set aside. But in view of judgment rendered in case of Berger Paints India Limited in the context of Rule 173-G(6)(c) which is in para materia with Rule 5A of the Service Tax Rules, this Court is of the view that judicial propriety demands that this writ application be referred to a Division Bench for adjudication - Referred to divisional bench

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• 2013 (1) TMI 548
  Pre-deposit - Dismissal of appeal by Tribunal for non-compliance of condition of Pre-deposit - Opportunity of being heard - Commissioner (Appeals) order to deposit 10% of the total amount i.e. Rs. 4.5 lacs - Appellants could not deposit the amount, the Tribunal in the order dated 27.12.11 enhanced the pre-deposit requirement to Rs.10 lacs within six weeks time - Advocate who was representing the appellants before the Tribunal had expired on 28.7.2011 - The Tribunal's order insisting on certain pre-deposit was passed without any representation from the appellant - Held that:- The appellants deserve a chance to argue their appeals on merits. Tribunal, ought not to have enhanced the pre-deposit requirement to more than double the amount which the Commissioner has imposed. Place these appeals before the Commissioner (Appeals) for consideration on merit. Remand back to Commissioner

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• 2013 (1) TMI 547
  Survey and Map Making Service - Rendered the said service to related firm – Assessee did not pay the service tax on the ground that the main contractor, namely, M/s Monarch Surveyors and Engineering Contractors Pvt. Ltd., have discharged the service tax liability on the value inclusive of the service charges received by the appellant - Held that:- Board on a number of occasions had clarified that if the main service provider is discharging service tax liability then the sub-contractors to the main service provider need not pay service tax on the same activity. Only after the extension of CENVAT credit scheme to the service tax sector, this position changed and the Board again clarified the matter vide Circular dated 23/08/2007. Therefore, it cannot be alleged that the sub-contractor was not discharging service tax liability deliberately with an intention to evade service tax. That was the reason why the lower appellate authority has dropped the penalty proceedings against the appellant subject to their payment of service tax along with interest thereon by invoking the powers u/s 80. I do not find any infirmity in the lower appellate authority's order. In favour of assessee

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• Central Excise

• 2013 (1) TMI 554
  CENVAT Credit on the paint used on the floor of production hall to make it dust free and fire retardant - Held that:- The definition of input clearly includes "goods used as paint". The findings, that the paint used on the floor of production hall to make it dust free and fire retardant, is used for manufacture of the final product. The sensitivity and sophistication of the product i.e., Color Picture Tube (CPT) required dust free environment for its manufacture. The finding, therefore, that the use of paint on the floor of production hall, is a finding of fact, which does not call for any interference - CENVAT claim allowed - in favour of assessee.

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• 2013 (1) TMI 531
  Application for condonation of delay dismissed - Whether the Tribunal could dismiss the appeal when defect memos were returned back to the registry? - Held that:- The appellant has filed memo of appeal disclosing a address. The defect memos were sent under registered A.D. post on the addresses so given. Once, the letter has been sent under registered A.D. post, the same is presumed to be delivered in terms of Section 27 of the General Clauses Act 1897. See Harcharan Singh v. Shivrani [1981 (2) TMI 199 - SUPREME COURT] Clauses (b) and (c) of Sub Section (1) of Section 37-C has no applicability to the facts of the present case in as much Sub Section (1) (a) contemplates that the notices issued under the Act shall be served by tendering the notice by registered post to the person intended or its authorized agent with acknowledgment due. Sub Clause (b) and (c) would be applicable in the event, notice cannot be served in terms of Sub Clause (a). Once, the appellant has not removed the objections within a reasonable period of the defective memo of appeals, the memorandum of appeal has been rightly rejected being barred by limitation. Since, the appellant has taken more than six years to remove the defects in the appeal, it is thus beyond the period of limitation - against assessee.

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• 2013 (1) TMI 530
  Shortages of re-melted lead ingots and lead blocks involving duty to the tune of Rs.3,68,161/- were detected - Held that:- Confirmation of demand of duty in respect of short found inputs is based upon the statements of the appellant's representative but there are no inventories prepared by the Revenue for arriving at the shortages. Also no evidence for clandestine removal of the inputs in question. Mere reliance on the statement of authorised representative which in any case admitted shortages but not clandestine removal, is neither fair nor proper. Cenvat credit on refined lead ingots - Held that:- Cenvat credit was availed on the basis of invoices issued by M/s Gravita India Ltd. and were duly entered in RG-23A part 1&2 record, the same were shown as having been utilized in the manufacture of final product. The affidavit of Director also stands placed on records. Thus there is no evidence showing clandestine removal of the said goods. No justifiable reasons to upheld the impugned order, the same is set aside and appeal allowed with consequential relief to the appellant.

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• 2013 (1) TMI 529
  Whether tool kit can be termed as accessories of final product as envisaged in the definition of ‘input’ in Rule 2(k)(i) of Cenvat Credit Rules, 2004 - Appellants are engaged in the manufacture of two wheelers – Under chapter 87 - Cenvat credit on bought out items - Department argued that the Cenvat credit availed on tool kits was not permissible - under Rule 3(1) of Cenvat Credit Rules, 2004 – Tool kits are “bought out items” which are neither fitted with motorcycle/two wheelers nor are used in or in relation to the manufacture of motorcycles by the appellant Held that:- Rule 138 of Central Motor Vehicle Rules, 1989 (as amended) deals with “signals and additional safety measures” for motor vehicle. Clause 4(b) of Rule 138 makes it incumbent on driver of every vehicle to carry the tool kit prescribed by the manufacturer. Since carrying of the tool kit in the vehicle is obligatory for the driver, it can be safely inferred that tool kit is necessary accessory of the motor vehicle because driving of the vehicle without those accessories would be violative of Rule 138(4)(b) of Central Motor Vehicle Rules, 1989. The tool kits were sold by the appellant along with final product and their cost is included in the price charged from the customers. The appellants have supplied the tool kit as per statutory requirements under Central Motor Vehicle Rules, 1989 as accessories to be used in relation to the manufacture of vehicle. Thus, ‘tool kit’ is squarely covered by the definition of ‘input’ given under Section 2(k)(i) of Cenvat Credit Rules. And appellant have rightly availed the Cenvat credit in relation to tool kits. In favour of assessee

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• 2013 (1) TMI 528
  Applicability of Doctrine of merger – Penalty imposed on late deposition of duty - Rule 96ZP of the Central Excise Rules, 1944 - Revenue impose penalty - Assessee preferred appeals before the first appellate authority who has sustained the said penalties imposed - Subsequently, the Revenue had preferred appeals against non-imposition of equivalent amount of penalties on all the assessee - The first appellate authority dismissed the appeals of the Revenue only on the question of doctrine of merger Held that:- Difference of opinion - Whether it can be said that the orders of adjudicating authority have merged with the orders of Commissioner (Appeals) on appeals filed by the respondents as held by learned Member (Judicial) - The doctrine of merger is not applicable and the Commissioner should have decided the appeals filed by the Revenue on merits as held by Member (Technical). Third member decision agree with Member (Technical) - First appellate authority has erred in coming to a conclusion that his order of sustaining the penalties imposed by the adjudicating authority would be an order in which the impugned orders-in-original have merged and doctrine of merger will apply. Following the decision in case of Godrej & Boyce Mfg. Co. Ltd. (2008 (12) TMI 45 - BOMBAY HIGH COURT) that the doctrine of merger will not apply in the case as the Revenue is in appeal against non-imposition of equivalent amount of penalty, as provided in the Rules. Also following the decision in case of ULTRA TECH CEMENT CO. LTD. (2008 (9) TMI 246 - CESTAT AHMEDABAD) that doctrine of merger will not be applicable inasmuch as the subject matter of appeal by party was entirely different with the subject matter of appeal by the Revenue. Set- aside the order and the matters are to be remitted back to the Commissioner (Appeals) for reconsideration. Remand back

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• 2013 (1) TMI 527
  Denial of CENVAT Credit - Rule 9(1)(a) of Cenvat Credit Rules, 2004 - CENVAT Credit on the basis of photocopy of seven bills of entry – Held that:- Since assessee submits evidence of payment of customs duty, receipt of inputs in the factory of the respondent which was evidenced by the fact that respondent had produced certificates issued by Deputy Commissioner of Customs, Navasheva in respect of six bills of entry, bills of C & F agents, LRs of the transporters, goods receipt notes, RG 23A Part 1 & 2 registers, supplier’s ledger, account proof of payment. The goods have been received and used in the manufacture and duty has been paid. Therefore, there is nothing legally or factually wrong with the impugned order. In favour of assessee

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• 2013 (1) TMI 526
  Evasion of duty – Transactional value – Under-valuation of goods - Whether or not by converting the actual volume of oil at room temperature to notional volume at 15ºC for the purpose of fixing the price amounts to undervaluing the product to evade excise duty - Appellant is engaged in the manufacture of petroleum products - Volume of the petroleum product undergo change with change in temperature - Appellant has supplied goods to other oil manufacturing companies by charging the price per litre based on notional volume by converting the volume at room temperature to the volume at 15ºC - Pay excise duty on transaction value of goods supplied at 15ºC. Held that:- For the purpose of calculating the excise duty chargeable, the price charged if it is sole consideration for the sale, would be the transaction value. The goods have been cleared on payment of excise duty as per the price declared in the invoices. It is not the case of the revenue that other manufacturing companies to whom the oil was supplied at the rate based on the volume at 15ºC are the related parties and invoice price was not the sole consideration for sale or the appellant/assessee has received any other additional consideration apart from the declared sale price. Thus, the appellant has rightly paid the excise duty as per transaction value in terms of Section 4 of the Central Excise Act and there is no justification for allegation of under-valuation of the goods with a view to evade excise duty - In favour of assessee

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• CST, VAT & Sales Tax

• 2013 (1) TMI 551
  Manufactur and sell of “kathha” and catechu - basic raw material “khair wood” is procured through auction purchase - the petitioner was enjoying the benefit of Section 4B of the U.P. Trade Tax Act - after 9.11.2000 the territory from which the “kathha” was being procured by the petitioner became the part of Uttarakhand - benefit of notification issued by the State of Uttarakhand on 26.12.2000 - Held that:- Notification dated 26.12.2000 states that such dealers who were getting the benefit under Section 4-B, now under U.P. Reorganisation Act, they would continue to get the concession against Form–C of Central Sales Tax Act, 1956, as the said sale will now be an inter-state sale. Disallowance of concessional rate against Form-C as the purchase made by the petitioner is in an “open auction” which cannot be considered as an “inter-state” sale is not a factum of the sale which would define it as an inter-state sale but in order to bring a particular sale under the definition of inter-state sale is both a question of fact as well as law and what the Court has to see is the totality of circumstances and the fact that the goods which have been purchased in State “A” are actually being transported to State “B” which would make it an inter-state sale. The ruling of the State of Bihar and another v. Tata Engineering & Locomotive Co. Ltd. (1970 (11) TMI 73 - SUPREME COURT OF INDIA) gives a wide meaning to the definition of inter-state sale. In this petition the petitioner in order to strengthen his argument has also annexed invoice bills which show that the Forest Development Corporation itself, from whom the “khair wood” was purchased, has prepared the invoice on the strength of which the goods were being transported to Uttar Pradesh and there was enough evidence to consider that it was an inter-state sale - writ petition succeeds. The petitioner is entitled to get the benefit of notification dated 26.12.2000 provided he gives enough evidence before the said authorities that the goods which he has purchased are to be consumed at its factory at Kotwali Road, Najibabad, District Bijnor (U.P.), which would make it an inter-state sale - in favour of assessee.

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