TMI Tax Updates - e-Newsletter
January 10, 2013
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Highlights / Catch Notes
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Income Tax:
Reopening of assessment - failure to take steps under section 143(3) will not render the Assessing Officer powerless to initiate reassessment proceedings - HC
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Income Tax:
Bad debts - Inter Corporate Deposit (ICD) - once interest income has been taxed as business income, and the assessee has written off this amount as irrecoverable, the same has to be allowed as bad debt under section 36(1)(vii) r/w section 36(2) - AT
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Income Tax:
Computation of book profit u/s 115JB - AO directed to exclude the amount of FBT in the computation of book profits u/s 115JB. - AT
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Income Tax:
Deduction u/s 80-IB – interest earned by him on FDRs kept as guarantee with Electricity Department - cannot be computed for deduction u/s 80-IB - HC
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Customs:
Import of printed material from USA - Merely because the textile material occupies more space it cannot be stated that they are not books. - AT
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VAT:
KVAT Act - importer - there is absolutely nothing wrong for having collected and remitted the tax, without having any registration under the CST Act. - HC
Articles
News
Case Laws:
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Income Tax
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2013 (1) TMI 188
Reopening of assessment - ITAT declared the reassessment as invalid as notice was issued beyond a period of four years - Held that:- As original assessment was accepted u/s 143(1) without any scrutiny. That being the position, the requirement of proviso to section 147 that in order to reopen the assessment beyond period of four years from the end of relevant assessment year, the condition of income having escaped assessment due to the failure on part of the assessee to disclose truly and fully all material facts, was not required to be established. Revenue even beyond four years could have reopened the assessment without satisfying such a requirement when the original assessment was not made after scrutiny. So much is plainly clear from statutory provisions Tribunal therefore, committed an error in striking down the reassessment merely on this ground. Notice u/s 148 was issued without issuing notice u/s 143(2) - Held that:- The return filed by the petitioner was not taken in scrutiny. No assessment, thus, took place. The Assessing Officer without any assessment, merely issued an intimation under section 143(1) of the Act accepting such return. In that view of the matter, it cannot be stated that the Assessing Officer formed any opinion with respect to any of the aspects arising in such return. In such a case, scope for reopening such assessment under section 147 of the Act as compared to an assessment which was previously framed under section 143(3) of the Act, whether beyond or within four years from the end of the relevant assessment year, is substantially wider. As decided in ACIT Versus Rajesh Jhaveri Stock Brokers P. Limited [2007 (5) TMI 197 - SUPREME COURT] so long as the ingredients of section 147 are fulfilled, the Assessing Officer is free to initiate proceeding under section 147 and failure to take steps under section 143(3) will not render the Assessing Officer powerless to initiate reassessment proceedings even when intimation under section 143(1)- Thus Tribunal committed a legal error on both the counts - in favour of revenue.
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2013 (1) TMI 187
Disallowance u/s 14A - assessee contested that as almost 99% of the assessee's income and activity pertains to tax free income/interest generated in these circumstances the quantum of disallowance i.e. 33% of the total expense was inadequate - Held that:- Disallowance to be 33% which works out to Rs.38 lakhs i.e. a substantial mark-up of nearly Rs.34 lakhs over and above the disallowance reported by the assessee, the Court is of the opinion that having regard to the nature of activity engaged in by the assessee, the method adopted of apportioning 33% of the expenditure towards earning of tax free income cannot be considered to be erroneous. It is not the revenue's case that an entirely different set of employees or establishment was kept or necessitated for earning such income that income was part of the composite income reported by the assessee which included other heads as sale of investments, sale of securities etc. Applicability of Section 79 - Held that:- As during the earlier period 98% of the assessee's shares were held by IIPL. The holding company was amalgamated with the assessee company. However, the shareholders of that holding company i.e. IIPL continued to be shareholders of the assessee company itself. The shareholders beneficially entitled to 98% of the shares continued to be the same. In these circumstances, the prohibition from carrying forward the losses, placed by Section 79 does not operate, on the other hand Section 79(a) makes the provision consequently inapplicable. The conclusions of the Tribunal in this regard are unexceptionable - no substantial question of law can be determined by the Court.
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2013 (1) TMI 186
Penalty u/s 271(1)(c) - ITAT deleted the levy as no justification for the revenue authorities to conclude that the assessee’s conduct was malafide in claiming the expenditure towards renovation and other repairs which was ultimately disallowed - Held that:- One cannot be unmindful of the fact that the expenditure was primarily incurred by ITDC and at the stage when the return was filed the assessee could not undoubtedly produce the vouchers since the expenditure had been incurred by ITDC. But even eventually the assessing officer disallowed the claim only on the ground that it was capital in nature, and did not doubt the genuineness of the expenditure. The question whether an expenditure is capital or revenue is a debatable one, on which more than one view is possible. Having regard to these facts and decisions relied upon by the ITAT in CIT Vs. Reliance Petroproducts [2010 (3) TMI 80 - SUPREME COURT] & CIT Vs. Zoom Communication Pvt. Ltd [2010 (5) TMI 34 - DELHI HIGH COURT] wherein held that mere submitting a claim which is incorrect in law would not amount to giving inaccurate particulars of the income of the assessee - no infirmity in the reasons of the order of ITAT - in favour of assessee.
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2013 (1) TMI 185
Payments to private parties liable to TDS - Non business expenditure - addition by AO as said sum of Rs.18.79 crores was not expended wholly and exclusively for the purposes business - CIT(A) deleted the addition - assessee’s claim of reimbursement of the said amount from its clients - Held that:- Assessee received the said payment of Rs.18,79,38,741 on account of reimbursement of expenses from its clients apart from agency commission and the agency commission has been considered as assessee’s income and the same is reflected in its profit and loss account. Assessee has adjusted reimbursement of the expenses received on behalf of its clients and, therefore, agreeing that the same do not constitute part of assessee’s income. As decided in Jay Kay Freighters Pvt Ltd (2013 (1) TMI 167 - ITAT NEW DELHI) that the amount mentioned in the bill raised by shipping companies on ultimate consumer were initially paid by the assessee and, thereafter assessee got reimbursed the said amount from its client including the charges of the assessee for service rendered. Therefore, assessee was not a person responsible for deduction of tax at source in terms of section 194C, accordingly, provisions of section 40(a)(ia) cannot be invoked - in favour of assessee. Bad debts written off - disallowance as assessee could not demonstrate that debts which have been claimed as bad debts has actually become irrecoverable - Held that:- As per existing provisions of section 36(1)(vii), after amendment w.e.f. 1.4.1989, it is not necessary for the assessee to prove that the amount written off as bad debt is indeed bad for the purpose of allowance under section 36(1)(vii) as decided in TRF Ltd Vs CIT [2010 (2) TMI 211 - SUPREME COURT] - in favour of assessee. Addition on account of share premium amount - AO on statement of Shri George Joseph and relying on the statement made u/s.133A at the time of survey considered the issuance of share capital as bogus and not genuine - Held that:- assessee filed copies of requisite details viz; copy of share application form from each of the above named four applicants’ along with copy of board resolution, their bank statement giving particulars of cheque nos. and the amount debited from their accounts, as also copy of confirmation letters. Assessee has also filed the copy of the income tax return of each of the applicants evidencing that they are assessed to tax establishing their identity. Assessee has also filed copy of the certificate of incorporation and the Memorandum and Article of Association in the paper book, thus not only proving the identity of the share applicants but also established the creditworthiness of the share applicants and the genuineness of the transactions. The CBDT in its Instruction dated 10.3.2003 stated that confessions, if not based upon credible evidence, are later retracted by the concerned assessee and, therefore, such confession during the course of search and seizure and survey operations do not serve any useful purpose. The CBDIT also advised that there should be focus and concentration on collection of evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed before the Income tax Department. Also while recording statement during the course of search & seizure and survey operation, no attempt should be made to obtain confession as to the undisclosed income - as decided CIT vs. S.Khader Khan son (2007 (7) TMI 182 - MADRAS HIGH COURT) and Paul Mathew & Sons vs CIT (2003 (2) TMI 25 - KERALA HIGH COURT ) that no addition can be made or sustained simply on the basis of statement recorded at the time of survey/search. Therefore, there should be some material to co-relate the undisclosed income with such statement. Thus said statement made at the time of survey on 23.2.2006 cannot be the sole basis for making the addition by treating the issuance of share at a premium of Rs.8000 as bogus. Thus as assessee has furnished details of share application with PAN No. and bank statement. Further, said share applicants have also filed confirmation letters mentioning bank details to make the payment to assessee company for allotment of shares it can be concluded that transactions are admittedly recorded in the books of account both by the assessee company as well as aforesaid share applicants - no addition on account of unexplained cash credit is warranted - the action of AO is contrary to the decision of Hon’ble apex Court in the case of Lovely Exports (2008 (1) TMI 575 - SUPREME COURT OF INDIA) - in favour of assessee.
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2013 (1) TMI 184
Disallowance of expenditure - Tribunal in the first round of the proceedings have already given its finding on the issue of allowability of expenditure relating to manufacturing activity and upheld the cutoff date 20.1.1996 - Held that:- So far as the Manufacturing expenditure incurred prior to the cut off date of 20 May of the Financial year is concerned, AR fairly quantified the same at Rs. 1,54,789/-. Therefore, despite the objection of the DR for bringing finality to the longstanding litigation (nearly 14 years), the argument of the Counsel should be accepted notwithstanding the assessee’s failure to produce any bills and vouchers for the reasons of ‘lost in transit’. To the extent of Rs 1,54,789/-, as consented by the Counsel, revenue succeeds and thus, relevant ground of the assessee is dismissed. Genuineness of the general expenditure for the period subsequent to the cut off date 20.5.1996 - Held that:- Perusing the individual accounts of travelling expenses it is found that the spouse of Mr. D.C. Patil, incurred a sum of Rs. 1,00,523/- towards the foreign travel (from New York to London) in December, 1996 and incurred an expenditure of Rs.1,00,523/- and the business purposes of the same are not ascertainable. It is a trite law that the onus is on the assessee to discharge when a claim of deduction is made in the books of accounts, thus the said expenditure should not be held as the business expenditure. Telephone expenditure on the telephone installed at director’s home and use of the car (repairs, fuel and depreciation) - Held that:- Assessee reliance on Sayaji Iron & Engg. Co. vs. CIT (2001 (7) TMI 70 - GUJARAT HIGH COURT) for no disallowance is not acceptable as case is distinguishable on the facts that cars in question were outsourced by the Company and placed them at the disposal of the Directors’ of that company. Whereas, in the present case, the car in question was owned by the assessee and use of the vehicles wholly and exclusively was not demonstrated with the help of log book to support the nature of use of the cars - the assessee does not have evidences in its possession as they are lost in transit and in effect, the assessee failed to discharge its legal responsibility before the AO. No justification in making any disallowances on account of ‘remuneration and benefit’ as they relate to the employees’ account and they are needed for running of the business and conducting of business of earning commission income is undisputed in this case - disallowance @ 1/10th on the expenditure incurred on residential telephone at the premises of the assessee and also 1/10th of the motorcar expenses (for fuel, repairs and depreciation on car) will meet the both ends of the justice - appeal of the assessee partly allowed.
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2013 (1) TMI 183
Penalty u/s 271BA – Transfer pricing – Assessee failed to furnish Transfer pricing report u/s 92E by due date - form No. 3CEB - Under Rule 10E - Rule 12(2) of the Income-tax Rules, 1962 – Held that:- As per Sec. 92E it is clear that the report in Form 3CEB is to be filed by the specified date i.e. due date for filing the return. Nowhere in sec. 92E or Rule 10E it is mentioned that such report should be annexed with return of income. As per Rule 12(2), the return of income/Fringe Benefits shall not be accompanied by report of Audit. The report in form 3CEB from an accountant is not a report of audit. It is a report in respect of international transaction certifying the claim of the assessee. Therefore, the contention of the assessee that return of income in electronic form was not to accompany the report in Form 3CEB is not correct. In favour of revenue
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2013 (1) TMI 182
Club expenses - Disallowance as in the assessment year 1999-2000 Commissioner (Appeals) has confirmed the said disallowance - Held that:- As in assessee’s own case in the assessment year 1997-98 to 2000-01 the Tribunal after following the judgment in case of Otis Elevator Company (India) Limited Versus CIT (1991 (4) TMI 53 - BOMBAY HIGH COURT) held that the expenditure towards club expenditure are allowable as business expenditure and allowed the assessee’s claim - as there is no change in the facts and circumstances of the case in present AY direction to delete the disallowance - in favour of assessee. Addition on account of unutilized MODVAT credit on the closing stock - Held that:- From the plain reading of the provisions of section 145A, it is evident that for the purpose of valuation of purchase and sale of goods and inventories, adjustment on account of tax, duty, cess or fee actually paid or incurred by the assessee has to be made. Excise duty component in the form of MODVAT in the raw materials has to be included while valuing the purchases and sales of goods and inventories, as it has a direct bearing on valuation of stock. Thus, that the matter needs to be restored back to the file of the Assessing Officer to carry out necessary valuation on account of MODVAT credit on purchases and inventories in accordance with the provisions contained in section 145A. The assessee will provide necessary details and working to the Assessing Officer to this effect, who will verify the same - the corresponding adjustment in the opening stock should also be made in view of the principles laid down in case of Mahalaxmi Glass Works P. Ltd. (2009 (4) TMI 182 - BOMBAY HIGH COURT)- partly in favour of assessee for statistical purposes. Disallowance of interest and expenses u/s 14A r.w.r. 8D - assessee contested that no disallowance u/s 14A where no income is earned by the assessee - Held that:- Commissioner (Appeals) that Rule 8D is applicable in this year, cannot be sustained in view of the judgmentin the case of Godrej Boyce (2010 (8) TMI 77 - BOMBAY HIGH COURT), wherein it has been held that Rule 8D cannot be applied retrospectively i.e., prior to assessment year 2008-09 - unable to accept this contention of the assessee that funds in the form of accumulated depreciation should be treated as available funds because the actual figure, as given in the balance sheet has to be taken into account. As it is noticed that the assessee has earned dividend income of Rs. 6,14,300 and it cannot be said that the assessee has no exempt income forming part of the total income. Secondly, the Delhi Special Bench of the Tribunal in the case of Cheminvest Ltd. Vs. ITO (2009 (8) TMI 126 - ITAT DELHI-B) wherin held that even if no income was received, expenditure incurred can be disallowed under section 14A - matter needs to be restore back to the file of the AO to examine the availability of assessee’s own funds and any other interest bearing funds in view of the principles laid down in Reliance Utilities & Power Ltd [2009 (1) TMI 4 - HIGH COURT BOMBAY] that if the assessee has own funds and non-interest bearing funds, the presumption can be drawn that investments have been made from these funds - partly in favour of assessee statistical purposes. Disallowance of prior period expenses - Held that:- The Tribunal for the assessment year 2000-01, in assessee’s own case, has given a direction to allow these expenditure in the assessment year 2000-01. In view of this fact that these prior period expenses have been directed to be allowed in the assessment year 2000-01, hence, the same cannot be allowed in this year. Disallowance of interest receivable written-off - assessee has written off this amount of interest in the account as irrecoverable as per the decision taken by the board of directors in resolution in May 2002 - whether the decision to write-off the amount after the close of the financial year can be done and treated to be written off in the accounts of the assessee for the previous year - Held that:- As decided CIT v/s United Bank of India [1990 (11) TMI 348 - CALCUTTA HIGH COURT] subsequent resolution by the board of directors approving the bad debt relates back to the date of finalization of accounts - in present case even the board resolution was passed in May 2002, with regard to the approval of writing–off the amount as irrecoverable in the accounts, it will relate back to that previous year in which it is being treated as irrecoverable and written off in the accounts of the assessee. There is no such condition in the said clause i.e., clause (vii) of sub– section (1) of section 36 that the decision for treating debt as bad or irrecoverable should be taken in the previous year itself. If the books of account are not closed and completed, it is permissible to make adjustments before being finally adopted - there is also a categorical finding by the Tribunal in assessment year 2000–01 that interest income has always been treated as business receipts by the AO, thus, once the interest income has been offered on accrual basis, which has been debited in the Profit & Loss account as business income and the same has been written off as irrecoverable in the accounts in this year, the same has to be allowed as bad debt fairly settled in the case of TRF Ltd [2010 (2) TMI 211 - SUPREME COURT] - in favour of assessee. Disallowance of Inter Corporate Deposit (ICD) along with the interest written–off - Held that:- Assessee had shown interest on ICDs on accrual basis in the Profit & Loss account in the earlier years. Also the amount received under one time settlement with the companies, the assessee has adjusted the same against the principal amount first. The interest portion has mostly been written–off. Insofar as the Commissioner (Appeals)’s finding that the amount received should have been first adjusted against the accrued interest and then towards principal, cannot be upheld as there is no such law which permits that adjustment should be first made against the interest and not towards the principal amount unless the parties have agreed to otherwise - it is not disputed that in all these years, the assessee had shown accrued interest on ICDs in the Profit & Loss account and has been offered for tax as business income also been accepted by the Department, therefore, once interest income has been taxed as business income, Commissioner (Appeals) cannot say that lending of money in the form of ICDs was not part of the business activities. Once the assessee has written off this amount as irrecoverable, the same has to be allowed as bad debt under section 36(1)(vii) r/w section 36(2) as all the conditions laid down therein stands fulfilled - in favour of assessee. Capitalization of interest expenditure in the books of account however claimed the same as deduction while computing its taxable income - AO has disallowed the said expenditure on the ground that proviso added to section 36(1)(iii) though brought in statute w.e.f. 1st April 2004 is clarificatory in nature - Held that:- This issue is now covered by the judgment of Core Health Care (2008 (2) TMI 8 - SUPREME COURT OF INDIA) that provision for capitalization of such interest is prospective in nature and will apply w.e.f. A.Y. 2005–06.
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2013 (1) TMI 180
CIT(A) entertained additional evidence u/r 46A of the ITR - revenue contested against ignoring the objections of the AO submitted in the Remand Report - Held that:- As decided in CIT vs Manish Build Well (P) Ltd [2011 (11) TMI 35 - DELHI HIGH COURT] whenever the assessee who is in appeal, invokes Rule 46A, it is incumbent upon CIT(A) to comply with the requirements of the Rule. As in the present case on perusal of remand report it reveals that the AO contended the admission of additional evidence but he did not examine and verify the additional evidence as required by Rule 46A(3) of the Rules. There is nothing in the order of the CIT (A) to show that the Assessing Officer was confronted with the confirmation letters received by the assessee - this issue deserves to be restored to the file of the CIT(A) for compliance of Rule 46A(3) - in favour of the Revenue by way of remand. Addition under the head "Brand Value" - CIT(A) deleted the addition observing the additional evidence pertaining to expenditure & granted relief to the assessee by allowing the same as expenditure incurred for the business & directed the AO to disallow depreciation - Held that:- As the CIT(A) considered the additional evidence without following the procedure as stipulated in Rule 4CA(3) of the Rules and issue has been restored back to the file of CIT(A) for necessary compliance therefore the issue of verification of bills of Rs.16,09,348/- also deserves to be restored to the file of the CIT(A) - also CIT(A) has given contradictory findings as in para 8.6, he held that the expenditure for which no evidence was produced stood at Rs.24,65,795/- and he allowed the expenditure of Rs.16,09,348 for which additional evidence was admitted. In para 8.7 the CIT(A) held that since the amount is recorded in the books of accounts and the best depreciation cannot be allowed directed AO to delete the entire addition of Rs.40,75,143. Further, in para 8.8, he allowed the AO to disallow the depreciation on the amount of Rs.24,65,795 for which no evidence was produced but unable to see any finding that the same was allowed by the AO either as capital or as revenue expenditure. Thus the findings of the CIT(A) are self-contradictory and not sustainable - in favour of revenue. Addition on account of cash balance - CIT(A) deleted the addition - Held that:- As the DR did not disputed that during the year under consideration the total withdrawal of cash from the bank was Rs.16,24,747 and opening cash balance was Rs. 1,70,856 and the closing cash balance was Rs.11,64,598. In this situation the finding of AO cannot be approved that the amount of cash withdrawals during the financial year be considered as assessee’s unexplained expenditure which was not recorded in the books of accounts. As the Assessing Officer has observed cash withdrawals during the year, at the same time, the fact should also be considered that a major amount of cash withdrawals has been found as cash balance at the end of the year - in favour of assessee. Business promotion expenditure - CIT(A)restricted addition to 10% - Held that:- The DR did not dispute the fact that the expenditure as claimed by the assessee was allowed in the AY 2003-04 and in the appellate order dated 23.08.2006, the disallowance was restricted to 10% of the expenses incurred on business promotion. Thus no reason to interfere with the findings of the CIT(A).
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2013 (1) TMI 179
Interest on loan - disallowance as the assessee had not utilized the loan amount in the course of its business activity and the same had been utilized by its sister concern - CIT (appeals) allowed the appeal of assessee in part and further rectified in respect of the remaining disallowed part of the expenses - revenue filed two appeal one against initial order of CIT(A) & then rectified order - revenue filed an application under Order 6 Rule 17 r/w section 151 of the Code of Civil Procedure seeking for substitution of the appeal numbers in cause title by making a reference to the order of the Tribunal passed related to not allowing the entire interest and also for suitable amendment in the Memorandum of Appeal - Held that:- It is not necessary to opine on the scope of Order VI Rule 17 of the Code of Civil Procedure being applicable in a proceeding of this nature particularly as it relates to amendment of pleading and the Court is now examining an appeal under section 260-A the question would be more relevant within the scope of section 260-A. Allowing the application of this nature at this point of time and also to permit the revenue to agitate such question by further alteration of the Memorandum of Appeal etc., is not a feasible course of action at this point of time. However, it is open for the revenue to agitate the matter separately and in a manner permitted in law and if they are so desirous to pursue the question. Maintainability of this appeal is not allowed at this point of time as the revenue involved is not more than Rs. 2,00,000/- and therefore, in terms of board Circular No. 2/05, dated 24.10.2005 the appeal should not be entertained.
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2013 (1) TMI 178
Deduction u/s 80-IB – Whether the assessee is entitled to deduction u/s 80IB on interest earned by him on FDRs kept as guarantee with Electricity Department and the Bank for securing bank limits - Interest earned on Fixed deposit (FDR) - Business income of an Industrial Undertaking or Income from other sources - Profits and gains derived from such industrial undertakings or profits and gains derived from any business Held that:- No, interest income on FDRs declaring it as income from the business of the industrial undertaking, cannot be said to be an income flowing from the business activity of industrial Undertaking, thus, cannot be computed for deduction u/s 80-IB. Section 80-IB(4) would reveal that reference made to 'profits and gains derived from such industrial undertakings' and not to 'profit and gains derived from any business of the industrial undertaking'. A conjoint reading of Section 80-IB(l) and 80-IB(4) would reveal that the expression 'profits and gains derived from any business' is to be read as 'profits and gains derived from the industrial undertaking' and the scope and ambit of Section 80-IB(1) is not in any manner wider than that of 80-IB(4). A holistic view of Section 80-IB would reveal that what is intended by the Law Makers to qualify for deduction is 'profits and gains derived from the industrial undertaking'. 'There is, therefore, no reason to bring within the fold of 'profits and gains derived from industrial undertakings' any income beyond the activities of the industrial undertakings on the ground that the words 'any business' finds expression in 80-IB(l). In favour of revenue Whether interest income allowed to set off against the interest paid – Held that:- Following the decision in case of Dr. V. P. Gopinathan (2001 (2) TMI 10 - SUPREME COURT) that the interest paid by the assessee as interest on overdraft facility cannot be set off against the interest received on the FDRs pledged by him with the Bank so as to avail any deduction under the head 'Income from other sources'. Hence set off not allowed. In favour of revenue
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2013 (1) TMI 177
Reopening of assessment - excessive allowance of the deduction under Section 80HHC - sale proceeds of the quota cannot be considered as export turnover but represented business income covered u/s 28(iv) and had to be reduced to the extent of 90% from the business income as per section 80HHC(baa) - Held that:- The eligibility of the assessee for the deduction under Section 80HHC in respect of premium on sale of quota was covered in favour of the assessee by the order of the Tribunal in the earlier years as well as the orders passed by his predecessor in the assessee's case for the assessment years 2000-01 and 20001-02 and accordingly upheld the assessee's stand. There was no fresh material which came to the notice of the Assessing Officer after the original return was processed under Section 143(1) and having regard to the orders of the Tribunal(supra) and the instruction of the CBDT dated 23rd February, 1998 regarding the treatment to be given to the premium received on transfer of quotas, there was no escapement of income and thus the notice was without jurisdiction. As decided in CIT vs. Kelvinator of India Ltd.[2010 (1) TMI 11 - SUPREME COURT OF INDIA] AO has no power to review, he has the power to reassess. But reassessment has to be based on fulfilment of certain preconditions and if the concept of "change of opinion" is removed, as contended on behalf of the Department, then, in the garb of reopening the assessment, review would take place. One must treat the concept of "change of opinion" as an in-built test to check abuse of power by the Assessing Officer.The reasons to believe must have a material bearing on the question on escapement of income. It does not mean a purely subjective satisfaction of the assessing authority; the reason be held in good faith and cannot merely be a pretence. The reasons disclose that the AO reached the belief that there was escapement of income “on going through the return of income” filed by the assessee after he accepted the return under Section 143(1) without scrutiny, and nothing more. This is nothing but a review of the earlier proceedings and an abuse of power by the AO both strongly deprecated by the Supreme Court in CIT vs. Kelvinator (supra). The reasons recorded by the AO in the present case do confirm apprehension about the harm that a less strict interpretation of the words “reason to believe” vis-à-vis an intimation issued under section 143(1) can cause to the tax regime. There is no whisper in the reasons recorded, of any tangible material which came to the possession of the assessing officer subsequent to the issue of the intimation. It reflects an arbitrary exercise of the power conferred under section 147 - substantial question of law answered in favour of the assessee.
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Customs
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2013 (1) TMI 176
Assessee imported medical equipments - These are used and donated by some foreign resident - Chartered Engineer was appointed for the purpose of valuation of goods and payment of duty - On the basis of that valuation, duty was paid, goods were released - Held that:- The goods have been donated by foreign resident with the certificate that the goods have no commercial value. We further find that the goods are used one. So the value shown in the document is merely to bring the fact that they have made donation of such huge amount. Therefore, the value shown in the document prima facie cannot be relied. Therefore, the applicants have made out a case for hundred percent waiver.
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2013 (1) TMI 175
Import of printed material from USA - technical books relating to subject of textile colour designing/matching - classified under heading 49011010 or 49019900 - exemption notification no. 21/2002 denied as goods under importation were not in the nature of printed books - Held that:- Perusing the samples of the items imported both color passport and F+H color planner have introductory text and all pages have printed material on them including rectangular strips/chips of color of textile material. Obviously, a textile material cannot be printed on a paper and has to be pasted. Further, below every textile chip the color name and code is printed. Merely because the textile material occupies more space it cannot be stated that they are not books. As both color passport and colour planner bear ISBN numbers, which is also indicative that they are in the nature of books. Similarly, in the case of VCP Fall 2010, the product is very similar to colour passport and colour planner, the only difference being it does not have a ISBN number. It has printed matter on paper on every page and, therefore, no different treatment to the said items is to be given - in favour of assessee.
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Corporate Laws
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2013 (1) TMI 174
Grant of ad interim injunction - Sections 111, 397, 398, 402 of the Companies Act, 1956 - Oppression and mismanagement - Discharge the financial liabilities - The respondent Nos. 2 & 3 have approached the petitioner and the respondent nos. 37 & 38 and proposed to purchase the entire shares of the company from the respondent Nos. 2 & 3 subject to condition that respondent nos. 37 & 38 will discharge the entire liability of the company - Petitioner enter into agreement for to paid a sum to the company which is inclusive of the consideration money for the purchase of 50% of shares Held that:- Since the share certificates stand transferred in their name and they, being 50% shareholder, are entitled to get the reliefs prayed for. Having failed to make payment in terms of the agreement within the stipulated period, the petitioner, failed to establish any prima facie case in its favour. Agreement entered into already stands expired due to efflux of time and due to non-compliance of its terms by the petitioner. Time was the essence of the contract/agreement which was not adhered to by the, petitioner themselves in this case, as such, the Agreement the basis of the petition, has no value in the eye of law. In favour of respondent Possession of the property - Held that:- Prima facie, it is not convincing that a party, who fails to make initial payments under the agreement, will be handed over the possession of the property. In addition to above, there is no endorsement in the agreement that the possession was delivered to the petitioner at the time of execution of the agreement Therefore, balance of convenience does not He in favour of the petitioner.
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2013 (1) TMI 173
Scheme of Arrangement - Demerger - Held that:- No proceedings under sections 235 to 251 of the Companies Act, 1956 are pending against any of the Applicant Companies as on the date of the present Application. The proposed Scheme has been approved by the Board of Directors of both the Applicant Companies - Consent accorded from Shareholders, Secured and Un-secured Creditors of the Applicant Companies. In view of the written consents/ NOC given by 99.97% of the Equity Shareholders of Applicant Company –I representing majority in number and more than 3/4th in value of the total Equity Shareholders, the requirement of convening meeting of Equity Shareholders has been dispensed with - Copy of the certificate confirming the pre and post demerger net worth of HCLSS/Applicant Company-I and HCLT/Applicant Company-II, duly certified by PRYD Associates, Chartered Accountants, have also been enclosed with the Application for convening the meeting of the Unsecured Creditors of the Applicant Company. On becoming the unsecured creditors of Applicant Company-II, the unsecured creditors of Applicant Company –I shall be benefitted with a better liquidity position in comparison to the liquidity position they were previously enjoying as the unsecured creditors of HCLSS/Applicant Company –I - the proposed Scheme will not affect the rights of the unsecured creditors of Applicant Company-II as no sacrifice or waiver is called from them. Separate meetings of Secured Creditors of the Applicant Company –I and Equity Shareholders, Secured Creditors of Applicant Company –II are proposed to be held under the supervision of this Court on 19th day of January 2013 at 10:30 A.M. to headed by appointed Chairperson and Alternate Chairperson - advertisements & Individual notices shall be published/send minimum 21 days in advance - Voting by proxy is permitted - Qrom fixed - Chairman/Alternate Chairman shall file their reports within 2 weeks of the conclusion of the respective meetings.
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Service Tax
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2013 (1) TMI 193
Non discharge of Service Tax liability - recipient of services from a person situated abroad - seeking waiver of pre-deposit along with interest and penalties u/s 76 & 78 - Held that:- The issue is no more res-integra as decided in Indian National Shipowners Association [2010 (12) TMI 12 - SUPREME COURT OF INDIA] subsequently followed in CCE Vs Bhandari Hosiery Exports [2010 (10) TMI 907 - SUPREME COURT] . Even the CBE&C vide Circular F.No.276/8/2009-CX8A, dt.26.09.2011, has reiterated and accepted the said judgments of Apex Court.
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2013 (1) TMI 192
Instructions for appeal filed before the Tribunal - Held that:- Since the Board itself had directed the lower authorities not to file an appeal before the Tribunal for an amount of less than Rs.1,00,000/- vide the circular dated 20.10.10, the appeal filed by the Revenue is dismissed. This view has been held by the Hon ble High Court of Gujarat in the case of Stovec Industries Ltd [2013 (1) TMI 72 - GUJARAT HIGH COURT].
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2013 (1) TMI 191
Waiver of pre-deposit - Stay of recovery - Extended period of limitation - under subsection (2) of Section 73A - Service tax to the above extent was collected by them from their customers but did not credit it the exchequer - Held that:- As the appellant collected service tax and, admittedly, did not remit it to the exchequer, they do not have prima facie case against the impugned order. The appellant has not pleaded financial hardships in the present application. Pre-deposit an amount of Rs.2,00,00,000/- (Rupees Two Crores Only) within six weeks and report compliance to the Assistant Registrar on 3.10.2012 and Assistant Registrar to report to the bench on 10.10.2012 Subject to due compliance, there will be waiver of pre-deposit and stay of recovery in respect of penalty imposed on the appellant and the balance amount of service tax and interest thereon In favour of revenue
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2013 (1) TMI 190
Commercial & Industrial Construction services - Service Tax liability for the period 10.07.2004 to 10.09.2004 - assessee contested that work was initiated before the Service Tax liability on Commercial & Industrial Construction services came into existence i.e. 10.07.2004 & completed on 10.09.2004 - Held that:- The contract for construction was entered into by the appellant with the service receiver on 10.07.2004. The scope of contract, undoubtedly, includes all the works as per contract i.e. the work of excavation onwards upto the construction of structures for the service recipient. Assessee's arguments does not boost any confidence as at this juncture that in two months, the appellant could not have completed 75% of the job which has been given to him. The issue is arguable one - the appellant has not made out a prima facie case for complete waiver of pre-deposit accordingly directed to deposit an amount of Rs.2.50 lakhs within a period of eight weeks from today and report compliance on 14.11.2012.
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Central Excise
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2013 (1) TMI 172
Waiver of pre-deposit - Stay of recovery - Interest on differential duty - Interest u/s 11AB - Revision in price - Goods were cleared to a sister concern for captive consumption - CAS-4 - Rule 7 of the Central Excise Rules, 2002 – The assessee had paid duty on these goods on the basis of provisional CAS-4 certificate issued by their Cost Accountant - When the final CAS-4 certificate was received from the Cost Accountant, the assessee paid differential duty on the goods - Held that:- This case is squarely covered against the assessee in case of M/s SKF India Ltd. (2009 (7) TMI 6 - SUPREME COURT) Having made out no prima facie case, the appellant shall pre-deposit entire amount of interest. Waive & stay denied. Against assessee
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2013 (1) TMI 171
Non compliance Pre deposit orders and report compliance on time - Held that:- The appellant had deposited the amount of Rs.2 lakhs on 13.10.12 but did not report the compliance before the lower authorities as directed on or before 18.10.12. Failure to understand why the appellant had taken so much time for pre-deposit of an amount which is only Rs.2 lakhs, which has resulted in dismissal of appeal by the lower authorities. For this act of commission and omission, appellant should be put to further condition of pre-deposit of an amount of Rs.1 lakh be deposite within four weeks from today and report compliance to the first appellate authority on 07.01.13. On such compliance being reported on 07.01.13, the first appellate authority will take up the matter for disposal and pass an order on merits of the case.
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2013 (1) TMI 170
Cenvat credit on invoices issued by non-existing entity - assessee contested against non serving of SCN & OIO - Held that:- The adjudicating authority in his order in original has mentioned that lower authorities tried their level best to find out the actual address of the appellant bot on perusal of the letter dated 27.05.05 written by the CA of the appellant, it is very clear that the superintendent of Central Excise in-charge was kept informed about the change in address who has communicated order in original to the appellant. Thus the impugned order which has been passed is in violation of the principles of natural justice is to be set aside as there was no effective hearing granted to appellant. Appellant directed to file a reply to the show cause notice within four weeks from today on receipt which the adjudicating authority will consider the issue afresh, after granting a personal hearing to the appellant.
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2013 (1) TMI 169
Application for out of turn hearing filled by assessee - Order-in-Original for non-confiscation of the goods and non-imposition of redemption fine - Held that:- Since impugned order in this appeal vide our Final Order dt.05.07.2012 have already set aside the with some direction to the adjudicating authority, in this case also the same treatment is required to be made out. Allow the out of turn hearing application filed by the assessee and set aside the impugned order and remand the matter back to the adjudicating authority to re-consider the issue afresh as per the direction given in our Final Order dt.05.07.2012.
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2013 (1) TMI 168
Excess/ wrong Cenvat Credit - inputs and input services with the invoices not in the name of the appellant - Commissioner upheld the demand for cenvat credit but set-aside the interest levy and reduced the penalty to Rs. 25,000/- from Rs. 1,53,138/- - Held that:- As decided in Rangdhara Polymers [2013 (1) TMI 96 - GUJARAT HIGH COURT] Circular issued by the Board prescribing monetary limit for filing appeal by the Revenue, was issued before the date on which the appeal comes up for consideration before the Court, the monetary limit prescribed in the Circular would apply. Also as decided in Stovec Industries Limited [2013 (1) TMI 72 - GUJARAT HIGH COURT] since the Board itself had directed the lower authorities not to file an appeal before the Tribunal for an amount of less than Rs.1,00,000/- vide the circular dated 20.10.10, the appeal filed by the Revenue is dismissed - appeal of revenue for enhancement of penalty cannot be allowed. Demand for CENVAT Credit, interest and imposition of penalty - assessee appeal - Held that:- As decided in case of Ind-Swift Laboratories Ltd. [2011 (2) TMI 6 - SUPREME COURT] interest has to be paid even if credit has not been utilised. Therefore, assessee has not made out a case for waiver of interest and demand for interest has to be upheld. Penalty - Held that:- The appellant had substantial amount of credit in their account and it was their submission that dealing assistant of the assessee made a mistake and because of the mistake, wrong credit was taken and there was apparently no intention to do so. In view of the case of Ashoka Metals Dicor (P) Limited [2010 (4) TMI 738 - ALLAHABAD HIGH COURT] has held that where the credit has not been utilised, there cannot be any payment of duty without there being sufficient balance and therefore, no penalty is leviable. Respectfully following the decision of the Hon'ble High Court mentioned above, the penalty of Rs. 25,000/- imposed on the appellant is set-aside.
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CST, VAT & Sales Tax
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2013 (1) TMI 194
KVAT Act - Section 2(xxii) of the KVAT Act - Input Tax Credit - Whether a dealer, who is having turn over less than the taxable limit, does require the permission of the departmental authorities to collect tax - Whether the persons like the petitioner, who otherwise satisfy the definition of the term 'importer' under Section 2(xxii) of the KVAT Act, does require registration under the CST Act to be an 'importer' as defined thereunder – Registration u/s 7 – Assessee made only Inter-State purchases and not Inter-State sales - The petitioner had collected tax from customers and paid over to the revenue along with return, since the petitioner had made interstate purchase of goods for local sale, during the year Held that:- Both sub sections 1 and 2 of Section 7 do not give an idea that petitioner/ dealer is liable to take out registration under the CST Act. This is more so, when there is no case for the respondent that the petitioner has effected any Inter-State purchases, paying lesser rate of tax under the CST Act or that, the petitioner has effected any Inter-State sales. The petitioner is entitled to have the benefit of "Input Tax Credit", in so far as he happens to be an 'importer' as defined under Section 2(xxii) of the KVAT Act and there is absolutely nothing wrong for having collected and remitted the tax, without having any registration under the CST Act. In favour of assessee
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Indian Laws
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2013 (1) TMI 189
Appellant through RTI - Wanted to know - About all the cases registered by the CBI since 1980 against public servants for possessing assets disproportionate to their known source of income - the sanctions sought by the CBI for prosecuting public servants under the Prevention of Corruption Act - Held that:- we direct the CPIO of the CBI to provide to the Appellant within 10 working days of receiving this order all the available information across its various offices on the disproportionate assets cases for the period for which such data is centrally available. The CPIO is also directed to provide similar information, as available centrally, on all cases of sanctions sought against public servants for prosecution under the Prevention of Corruption Act and the details of all cases registered under that Act against public servants till date.
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