TMI Tax Updates - e-Newsletter
October 19, 2012
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
FEMA
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Highlights / Catch Notes
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Income Tax:
Unexplained purchase u/s 69C - Section 69C clearly refers to the “source of the expenditure” and not to the expenditure itself - AT
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Income Tax:
Penalty u/s 271(1)(c) - The absence of due care does not mean that the assessee was guilty of furnishing inaccurate particulars to conceal his income - HC
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Income Tax:
Deduction u/s 10B – Domestic sale of scrap - it has to be included in the total turnover of the assessee and cannot be reduced from the business profits of the assessee while computing the deduction u/s 10B. - AT
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Income Tax:
Depreciation on leased asset - in case the said lease rent is assessed under the head ‘income from other sources, then assessee is eligible for depreciation u/s 57(ii) - AT
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Income Tax:
When in the opinion of the CIT (A) the appeals are not maintainable against the order u/s 200A and the appeals have been dismissed by him as not maintainable, there is no question of giving effect to the order of CIT (A) that A.O.should give appeal effect to these orders within two months of the receipt of the order. - AT
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Income Tax:
Tax Deduction at Source on Gas Transportation Charges paid by the purchasers of Natural gas to the sellers of gas. - Purchase and sale of gas. Transportation of gas is only a part of the entire sale transaction - Circular
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Income Tax:
Labour Charges - Violation of any law as long as the payment does not become illegal on account of such violation the same cannot be hit under the Income Tax Act - AT
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Income Tax:
TDS - Payment by the assessee to accredited advertising agencies could not be terms as payment of commission and, therefore, the provisions of section 194H were not applicable - AT
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Income Tax:
SSI Benefit - value of plant and machinery - limit of 3 crore - Since the assessee did not comply with the conditions of the Proviso to clause (iii) of subsection 2 of section 80IB, it is not eligible for claiming deduction u/s 80B of the Act - AT
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Income Tax:
As the business in respect of which the said development cost has been incurred is discontinued, the same cannot be claimed as revenue expenditure in respect of another business being real estate business, just because the land has been converted into stock in trade for the present busines - AT
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Customs:
In view of the fact that the threatened arrest of the petitioner is based on the allegation of customs violations, it would be appropriate for the State Government to obtain the comments of the Settlement Commission before any final order is passed. - SC
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DGFT:
SION for new product “Copper Based Pre-alloyed Powder R-800” under Engineering Product Group. - Public Notice
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DGFT:
Amendments in Policy Condition No. 1 under Chapter 93 in Schedule 1 - Import Policy of ITC(HS)-2012 - Import of arms (including parts thereof) & ammunition is permitted freely to the following sports persons/sports bodies. - Notification
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FEMA:
SAFEMA - illegal flat - The title in the subject flat is deemed to have vested in the Central Government on or about 08.12.2003 when the first notice under Section 6(1) was issued and served on one of the vendors. - SC
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Corporate Law:
Quality of XBRL filing certified by Professional members. - Circular
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Corporate Law:
Constitution of Committee for Reforming the Regulatory Environment for doing Business in India. - Circular
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Corporate Law:
Constitution of National Advisory Committee on Accounting Standards - Notification
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Corporate Law:
Amendment in National Advisory Committee on Accounting Standrads Constitution - Notification
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Corporate Law:
Suit for mortgaged property – suit being one for enforcement of a mortgage by sale, it should be tried by the court and not by an arbitral tribunal - SC
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Indian Laws:
GUIDANCE NOTE ON MAINTENANCE OF COST ACCOUNTING RECORDS FOR CONSTRUCTION INDUSTRY INCLUDING REAL ESTATE AND PROPERTY DEVELOPMENT ACTIVITY
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Indian Laws:
OECD “Better Policies” Series
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Service Tax:
Activity of installation of solar system falls under the category of ‘Erection, Installation and Commissioning Service’ - AT
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Service Tax:
Condonation of Delay - management, maintenance or repair of roads - Held that:- In view of the amendment by Finance Act, 2012, No Service tax shall be levied or collected in respect of management - AT
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Service Tax:
Business Support Service - appellants are international cricket players - pre-deposit ordered equal to 20% - AT
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Central Excise:
Central Government hereby declares that the provisions of section 28AAA of the Customs Act, 1962 (5 of 1962) - Regard to like matters in respect of the duties imposed by section 3. - Notification
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Central Excise:
Condonation of delay of 525 days - Subject to the cost of Rs. 5000/-, delay condoned. - AT
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Central Excise:
SSI exemption - mere fact of management, control or grant of interest free loan is not sufficient to hold the units as a dummy unit in the absence of any money flow back and/or profit sharing and total control on another unit - AT
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Central Excise:
Provisions contained in Rule 8 does not absolve the assessee from substantial conditions of payment of duty of claim of rebate of duty under Rule 18 of Central Excise Rules, 2002 - CGOVT
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VAT:
Period of limitation for revision of the order - Three years period cannot be said to be a very long period - HC
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2012 (10) TMI 517
Unexplained purchase u/s 69C - disallowance of 100% of expenditure and depreciation - CIT(A) deleted the addition - Held that:- As decided in COMMISSIONER OF INCOME TAX-V Versus M/S RADHIKA CREATION [2010 (4) TMI 100 - DELHI HIGH COURT] Section 69C clearly refers to the “source of the expenditure” and not to the expenditure itself - No material as such was found during the search and seizure operations and it is only in the special audit directed by the Assessing Officer, who was unable to find any material at the time of search, that the authenticity of the expenditures were doubted. In this case the fact that all the sales made by the assessee stood recorded in the assessee’s books of account, which included the sales and purchase vouchers and stock registers maintained by the assessee on a day-to-day basis. These books of account were duly produced before the AO who examined them, on examination, no negative observation thereagainst was recorded. Most of the customers were assessed to income-tax. Sales were made against the opening stock. The purchases made during the year and the sales were but conversion of stock. The profit therefrom had already been taxed. The sale transactions were got confirmed by the Assessing Officer on a test check basis but more inquiries were made - Thus source of the expenditure incurred in purchases is obviously explained - Decided in favour of assessee.
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2012 (10) TMI 516
Self-contradictory order of CIT(A)'s - dismissal of revenue appeal as not appealable u/s 246A and simultaneous direction to AO at appeal effect should be given within two months of the receipt of the order - Held that:- As decided in Air India Limited case [2012 (10) TMI 494 - ITAT, DELHI] when in the opinion of the CIT (A) the appeals are not maintainable against the order u/s 200A and the appeals have been dismissed by him as not maintainable, there is no question of giving effect to the order of CIT (A) that A.O.should give appeal effect to these orders within two months of the receipt of the order. As assessee has pointed out that there were certain mistakes committed by the A.O. while taking the view that there was delay in deposit of TDS where he submitted that there is no delay in the deposit of the TDS by the assessee. Thus the proper course for the assessee would have been to file the rectification petition under Section 154 requesting the AO to modify the order passed u/s 201(1A).
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2012 (10) TMI 515
Non deduction of TDS - Disallowance u/s 40(a)(ia) - Held that:- As decided in Shri Piyush C. Mehta Versus The ACIT Mumbai [2012 (4) TMI 349 - ITAT MUMBAI] following the decision in CIT, KOL-XI, KOL Versus VIRGIN CREATIONS [2011 (11) TMI 348 - CALCUTTA HIGH COURT] Amendment to the provisions of Sec. 40(a)(ia) by the Finance Act, 2010 is retrospective from 1.4.2005. Consequently, any payment of tax deducted at source during previous years relevant can be made to the Government on or before the due date for filing return of income u/s.139(1) of the Act. If payments are made as aforesaid, then no deduction u/s. 40(a)(ia) can be made. As in the present case assessee has deducted TDS on an amount of Rs.66,29,926/- out of deductible amount of Rs.73,65,220/- and paid the same on 4th of August, 2008 as per copy of TDS challans which is well within the due date for filing of the return as provided under sec. 139(1) - in favour of assessee.
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2012 (10) TMI 514
Penalty u/s 271(1)(c) - ITAT deleted the levy - Held that:- The findings of the Tribunal on the assessment was not on the ground of treating the claim as not bona fide. The assessment on the consumption of bottles made on the ground of alleged non-existence of two firms was rejected by the Tribunal by rendering a finding that the suppliers were very much in existence. On the 2% addition made to the bottles sent direct to the factory without entering into the books of accounts and on the price difference, the Tribunal ultimately sustained the addition to the extent of 25%. Going by the quantum appeal order agreeing with the assessee's contention that the additions made were not in respect of lack of bona fides, but on the circumstances stated in the order of the Tribunal. The absence of due care does not mean that the assessee was guilty of furnishing inaccurate particulars to conceal his income - the computation error based on the tax audit report was only an inadvertence; this would not raise a presumption against the assessee that the explanation was lacking in bona fides. As the assessee gave an explanation on each of the four heads, which was accepted by the CIT(A) & for inland flight charges the assessee had explained the circumstances under which the provision was sustained and further proof was produced before the CIT (Appeals) - no hesitation in confirming the order of the Tribunal, thereby rejecting the Revenue's appeal - in favour of assessee.
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2012 (10) TMI 513
Unexplained purchase u/s 69C - Disallowance of expenditure and depreciation - CIT(A) deleted the addition - Held that:- As decided in ACIT, Versus /s Blue Luxury Impex Pvt. Ltd., (Formerly known as Alfa Engitech (P) Ltd.][2012 (7) TMI 467 - ITAT DELHI] section 69C clearly refers to the “source of the expenditure” and not to the expenditure itself. As in this case books of account were duly produced before the AO who examined them, on examination, no negative observation there against was recorded by the Assessing Officer. Complete names and addresses of the parties to whom the goods were sold were available with the Assessing Officer. The sale transactions were got confirmed by the Assessing Officer on a test check basis. No more inquiries were made. The assessee’s books of account were audited books of account. The tax audit report was on record. The auditors had not made any negative observation therein. Thus, source of the expenditure incurred in purchases is obviously explained - Decided in favour of assessee.
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2012 (10) TMI 512
Provision for Rehabilitation and eviction of illegal encroachments - Capital v/s Revenue - Held that:- The question as to whether there is a 'real income which has accrued to the assessee is dealt in State Bank of Travancore Vs. CIT, (1986 (1) TMI 1 - SUPREME COURT) that the concept of real income is applicable in judging whether there has been income or not. If income does not result at all, there cannot be a tax, even though in book-keeping, an entry is made about a hypothetical income which does not materialized. This principle is applicable whether the accounts are maintained on cash system or under mercantile system. If the accounts are maintained under the mercantile system, what has to be seen whether income can be said to have been really accrued to the assessee company. Tribunal is not correct that merely because a meager sum is received, the entire amount is to be treated as income and same treatment is to be given in other assessment years. What was to be seen as to which Government Department is remitting the amount. From the details furnished, it is obvious that some of the Departments have never made any payment on the application of “real income” theory and taking a realistic view, it is held that no income has accrued merely because proforma advices were raised, that too, at the instance of the CAG of India - restore this issue back to the Assessing Officer to examine the matter afresh - in favour of assessee for statistical purposes. Disallowance of retired medical benefit scheme - Held that:- CIT (A) rejected the additional evidence filed by the assessee which comprised an actuarial valuation report. The CIT (A) rejected this evidence, even though it was held that the provision for rehabilitation and eviction of illegal encroachments, as claimed by the assessee, needed to be allowed in view of various judicial pronouncements. In his remand report, AO himself agreed that the expenditure was an allowable expenditure. Thus remit this issue to the file of the Assessing Officer to examine the actuarial report and to re-decide the issue on the basis thereof. Disallowance of u/s 40 (a)(ia) - Held that:- As decided in Deputy Commissioner of Income-tax - 11(2) Versus Chandabhoy & Jassobhoy [2011 (7) TMI 956 - ITAT MUMBAI] the provisions of Section 40(a)(ia) can be invoked only in the event of non-deduction of tax, but not for lesser deduction of tax - in favour of assessee. Prior period income - expenditure netted off against prior income - Held that:- Though the assessee has disclosed much more income of the prior period & the prior period income offered by the assessee was more than the prior period expenses claimed in the year under consideration AO has assessed the prior period income and disallowed prior period expenses. He cannot adopt different yardstick for assessing the income and allowing the expenditure - in favour of assessee.
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2012 (10) TMI 511
Invisible loss - Process Loss - Assessee had made a claim for “staking loss” in the process of consumption of cotton – AO made addition for the loss in the respective assessment years - Assessee had worked out the raw material consumption based on the opening quantities, purchased quantities and closing quantities – Held that:- Consumption in excess of industrial norms could be due to production efficiency or inefficiency levels of the units. There is no rule that every unit manufacturing cotton yarn should have same standard of production. None of these factors were considered by the lower authorities. Issue remit back to the file of AO to compare it with industrial standards and corroborate it with further evidence if at all any adverse conclusion is to be drawn on the consumption of material claimed by the assessee. Issue remand back to AO
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2012 (10) TMI 510
Deduction u/s 10B – Domestic sale of scrap - Total export turnover was 99.68 % of the total turnover - Domestic sales of scrap was 0.32 % of the total turnover – AO argued that proceeds of scrap sales are not realized in convertible foreign exchange as per Sec. 10(3) – Held that:- The domestic turnover was less than 25 % of the total sales of the assessee and therefore, the conditions of the second proviso to sub- section (1) of section 10B are fully satisfied. Therefore, respectfully following the decision of the Hon'ble Jurisdictional High Court in the case of Savvy Systems (India) Limited. (2006 (11) TMI 154 - MADRAS HIGH COURT), that assessee entitled for deduction u/s 10B. In favour of assessee Deduction u/s 10B – Sale of scrap - Whether sale proceeds of scrap could be reduced from the eligible profits u/s 10B – AO reduced the receipt from scrap sales from the business profits and treated it as income from other sources - Held that:- As the sale of scrap is part and parcel of the business receipt of the assessee. That being so, it has to be included in the total turnover of the assessee and cannot be reduced from the business profits of the assessee while computing the deduction u/s 10B. Issue in favour of assessee
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2012 (10) TMI 509
Disallowance of depreciation on leased asset - Assessee did not use the auto corners for its business purposes, but leased out the same - Shown the lease income under the head ‘business income’ and thereby claimed depreciation on the same – AO disallow the same on ground that leasing out of assets is not the business of the assessee – Held that:- As leasing of auto corners by the assessee is not treated as its business then also depreciation is allowable u/s 57(ii). We find that none of the lower authorities has given its finding in respect of allowability of depreciation on auto corners u/s 57(ii). It is not discernible whether the lease rent received by the assessee was assessed under the head ‘business income’ or under the head ‘income from other sources’. In our considered opinion, if the relevant lease rent derived from leasing of auto corners is assessed under the head ‘business income’ then assessee is eligible for depreciation u/s 32 and in case the said lease rent is assessed under the head ‘income from other sources, then assessee is eligible for depreciation u/s 57(ii). Remand back to AO – In favour of assessee TDS u/s 40(a)(ia) - JV was dated 10.6.2008 for commission payment on which TDS deducted and paid to the credit of the Central Government on 5.7.2008 – Deduction allowed in A.Y 2009-10 or 2008-09 – Held that:- As the method of accounting employed is mercantile. Therefore, the expenditure for which liability accrued to the assessee on or before 31.3.2008 is allowable to the assessee in assessment year 2008-09 irrespective of the date of entry made in the books of account. We find that both the lower authorities have not examined as to the date on which such commission became payable by the assesse. Issue remand back to AO
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2012 (10) TMI 508
Validity of notice issued u/s 148 - Reopening of assessment u/s 147 – AO made assessment u/s 143(3) and pass order on 28.02.2006 - AO issued notice u/s.148 dt.19.3.2008 after recording reason – Assessee contended that no reopening lie on a mere change of opinion when an issue had been decided in the original assessment made u/s 143(3) - AO has reason to believe that due to some inherent defect in the assessment, the income chargeable to tax had been under assessed or assessed at too low rate or excessive relief was granted - Held that:- The reopening of assessment based on the materials already considered and adjudicated would amount to reviewing the assessment order by re-appreciating the material already on record, which is not contemplated u/s.147. That initiation of reassessment proceedings by the AO is not valid as he has initiated reassessment proceedings only on re-appreciation of material already considered and thus it is a mere change of opinion. Therefore, action of AO to issue notice u/s.148 is not valid. In favour of assessee
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2012 (10) TMI 507
Assessment u/s 144 – Arbitrary addition - AO made assessment u/s 144 on the basis of material on record - Assessee furnished all the relevant bills and vouchers along with the details of expenses before the CIT(A) the in support of the entries in the books of accounts shown before the AO – Assessee contended that additions made under the various heads of expenses are not only arbitrary but also unjustified - Held that:- The AO while completing the best judgement, assessment u/s.144 has made very arbitrary additions on each and every items of expenses debited in the P&L account, without assigning any proper reasons. Even during the course of the remand proceedings, he has failed to examine the details and evidences in the form of bills and vouchers and rather has objected to findings of the CIT(A) for admitting the fresh evidence filed by the assessee. Once the CIT(A) in his power has admitted the additional evidence on record, the AO was required to examine the evidences rather than challenging the CIT(A)’s power for admission of additional evidence. Issue in favour of assessee
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2012 (10) TMI 494
Rectification of mistake - Self-contradictory order of CIT(A)'s - rejection of appeal by CIT(A) and giving directions given by the CIT(A) to AO - Held that:- When in the opinion of the CIT (A) the appeals are not maintainable against the order u/s 200A and the appeals have been dismissed by him as not maintainable, there is no question of giving effect to the order of CIT (A) that A.O.should give appeal effect to these orders within two months of the receipt of the order. As in the grounds of appeal, the assessee has pointed out that there were certain mistakes committed by the A.O. while taking the view that there was delay in deposit of TDS where he submitted that there is no delay in the deposit of the TDS by the assessee. Thus in view of the above, the proper course for the assessee would have been to file the rectification petition under Section 154 requesting the AO to modify the order passed u/s 201(1A).
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2012 (10) TMI 487
Bogus unexplained credit - Addition made u/s 68 - reopening of assessment - CIT (A) deleted the addition - Held that:- The CIT (A) found as a fact that the assessee had duly filed the documentary evidence concerning these two parties before the AO in the form of confirmation from the investor company, its acknowledgement of return, PAN, Board’s Resolution, Form Nos.18 and 32 filed with the ROC, bank statement and audited balance sheet. This documentary evidence was found to support the identity of the investor companies and to establish the genuineness of the share capital money transaction. AO had not brought any material on record to prove that the money in question was the assessee’s own undisclosed income & had simply explained the modus operandi involved in accommodation entry transactions and had merely relied on the information received from the Investigation Wing, without verifying the facts, that from the evidence on record, it was observed that the subscription of share capital was received by the assessee from the two investor companies through cheques and the companies were duly registered with the ROC and that it had been submitted on behalf of the assessee that the companies were having PAN and were regularly filing their returns of income, but the AO had not tried to ascertain their latest addresses from the assessee, for conducting any further inquiry in their cases, thus In the absence of these inquiries and non-verification of the details at the time of assessment proceedings, the factual findings recorded by the Assessing Officer were incomplete and sparse - in favour of assessee.
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2012 (10) TMI 486
Unaccounted labour charges - CIT(A) deleted the addition - Held that:- Considering the comparative position of the year under appeal and the immediately preceding year the percentage of labour charges to the export turnover has reduced to less than half of the immediately preceding year which was accepted by the Revenue. Thus even when the assessee’s accounts are to be rejected and income has to be computed to the best judgment of the AO, there would not be any justification for disallowance of even part of the labour expenses. Even in a best judgment assessment there would not be any justification for making any addition, especially when the percentage of net profit is also better than the preceding year - against revenue.
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2012 (10) TMI 485
Income from sale purchase of shares - income from short term capital gain v/s business income - Held that:- Habitual dealing in a particular item is indicative of the assessee’s intention of trading. Merely for taking benefit of provisions of sec. 111A applicable from the AY 2005-06, the assessee can not be categorised as an investor, especially when the aforesaid facts speak otherwise and lead to the conclusion that the assessee is indulging in activities of a trader in shares - the character of a transaction cannot be determined solely on the application of any abstract test or rule and the cumulative factors affecting the transactions have to be seen The voluminous share transactions were in the nature of the business, purchase of shares by them was not for the purpose of earning dividend, but with the dominant intention of resale in order to earn profits, the profit made by the assessee is not of mere enhancement of value of the shares, but is a profit made in the carrying on of a business scheme of profit making & huge volume of share transactions, the repetition and continuity of the transactions, give them a flavour of “trade”, the magnitude, frequency and the ratio of sales to purchases on the total holdings is evidence that the assessee had not purchased the shares as an investment, but with the intention to trade in such scrips. Thus the CIT(A) was not justified in accepting the claim of the assessee as investor in shares. Accordingly the findings of the CIT(A) are vacated and restore the order of the AO - against assessee.
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2012 (10) TMI 484
Low GP ratio - Addition by rejecting books of accounts u/s 145 - Held that:- The addition for low GP has been made primarily on the ground that the proper books of accounts have not been produced by the assessee before the lower authorities whereas assessee submitted that the required books and documents were produced but were not considered, thus in the interest of justice the matter is remitted to the file of AO to consider the case afresh - in favour of assessee for statistical purposes. Disallowance of deduction u/s. 80G - Held that:- Disallowance has been made in the absence of the proper evidence submitted by the assessee. Thus it proper and fit to remit this issue to the file of the AO to consider the same afresh as assessee has now claimed to have proper documentary evidence - in favour of assessee for statistical purposes. Disallowance of expenses - advertisement, business promotion & diwali - Held that:- As the issue discussed on account of low GP has been remitted back to the file of the AO for de novo consideration, hence this issues is also to be remitted back - in favour of assessee for statistical purposes.
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2012 (10) TMI 483
Addition on account of computation of Annual Letting Value - CIT(A) deleted the addition - Held that:- The only reason given by the Assessing Officer for making the addition was his finding in the assessment year 1996- 97 which have been set aside by the CIT(A) and the findings of the CIT(A) have become final. Therefore, no basis is left with the Assessing Officer for making the enhancement in the ALP adopted by the assessee - In the light of view taken by the co-ordinate Benches in the preceding years on the identical issue, especially when the Revenue have not placed any material, controverting the aforesaid findings of the CIT(A) to enable to take a different view in the matter to interfere is required - in favour of assessee. Addition on account of expenditure not pertaining to business - CIT(A) deleted the addition - Held that:- The assessee consistently followed the system of allocating direct expenses to the respective heads viz. house property and business income while indirect expenses were allocated in the ratio of 40:60 between house property and business income. Since the portion of expenses relating to house property income had already been disallowed by the assessee suo moto, keeping in view the past history and method followed by the assessee, the CIT(A) was of the opinion that the AO was not justified in making further disallowance of expenses since certain expenses were required for maintenance of the corporate structure of the assessee. In view of consistent practice followed by the assessee, especially when the Revenue have not placed any material controverting the aforesaid findings no different view in the matter is called for - in favour of assessee. Disallowance of set off of speculation loss - CIT(A) deleted the addition - Held that:- The term 'derivatives' in which underlying asset is shares, would fall within the meaning of 'commodity' used in s. 43(5) and that cl. (d) of s. 43(5) introduced by Finance Act, 2005 w.e.f. 1st April, 2006 was prospective in nature and would be effective from the date from which the legislature made it effective, i.e. AY 2006-07 onwards. The case of the assessee relates to AY 2008- 09 and therefore, applicability of aforesaid cl. (d) of s. 43(5) of the Act is required to be examined - since neither the AO nor the CIT(A) examined the applicability of said clause (d) nor relevant facts and figures are before us it fair and appropriate to set aside the order of the CIT(A) and restore the matter to the file of the AO for deciding the aforesaid issue afresh.
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2012 (10) TMI 482
Penalty u/s 271(1)(c) - Held that:- The assessee did not discharge the onus regarding credit of cash in the name of two partners in the books of the firm, instead, in response to a query by the AO, seeking evidence in support of aforesaid cash, the assessee surrendered to tax the amount of Rs.30 lacs on 30.3.2007. Subsequently, in response to a show cause notice before levy of penalty, the assessee did not explain the source of cash introduced in the name of two partners nor submitted any further explanation, establishing their bonafide. Also, the assessee did not improve upon his case in the penalty proceedings. Before the ld. CIT(A) or even before us, no attempt was made to establishing the source of aforesaid cash, thus he assessee's explanation has not been found to be bona fide and it failed to furnish all relevant material particulars relating to the concealed income and to discharge its burden that lay upon it under Explanation 1 to section 271(1)(c). A very heavy onus is placed on the assessee to explain the difference between the assessed income and returned income and the assessee in the instant case did not discharge the said onus, thus no hesitation in upholding the order of the CIT(A) in confirming the penalty imposed by the AO u/s 271(1)(c) - against assessee.
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2012 (10) TMI 481
Rejection of request for extension of time to pay the balance amount of tax by Ist respondent - Held that:- As the assessee aggrieved by order 1st respondent has filled appeal to the 2nd respondent he is directed to dispose of the appeal filed by the petitioner on merits and in accordance with law, within a period of three months from the date of receipt of a copy of this order. The 1st respondent is directed not to recover the balance amount of tax, payable by the petitioner, before final orders are passed, by the 2nd respondent.
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2012 (10) TMI 480
Ex party Order passed by CIT(A) - appellant contested against no intimation about service of notice - Held that:- As is apparent from the facts of the case, none of the notice dated 21.01.2010, 30- 09.2011, 12.12.2011, 14.02.2012 and 16.04.2012 issued by the CIT(A) appear to have been served upon the assessee nor the DR placed any material regarding service of any of these notices. Also CIT(A) dismissed the appeal without even analyzing the issues or recording his specific findings on the said issues raised in the grounds of appeal before him. This approach of the CIT(A) is not in accordance with law. A mere glance at the impugned order reveals that the order passed by the CIT(A) is cryptic and grossly violative of one of the facets of the rules of natural justice, namely, that every judicial/quasi - judicial body/authority must pass reasoned order, which should reflect application of mind by the concerned authority to the issues/points raised before it. The application of mind to the material facts and the arguments should manifest itself in the order - As CIT(A) has not passed a speaking order on various issues raised before him it is fair and appropriate to set aside the order of the CIT(A) and restore the matter to his file for deciding the issues afresh - in favour of assessee for statistical purposes.
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2012 (10) TMI 479
Converting limestone into limestone powder - whether the process is a manufacturing activity within the meaning of Section 80IA and 80IB - Held that:- As decided in Lucky Minmat Pvt. Ltd. Versus Commissioner of Income-Tax [2000 (8) TMI 6 - SUPREME COURT] the conversion into lime and lime dust or concrete by stone crushers can legitimately be considered to be a manufacturing process while the mere mining of limestone and marble and cutting the same would not be so considered. The observation of the Supreme Court cannot be termed to be ‘obiter dicta’ since the Supreme Court has held that the process of conversion of limestone into lime and lime dust is a manufacturing process - in favour of the assessee
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2012 (10) TMI 478
Interest earned on deposits made out of the non-SLR funds - Deduction under Section 80P(2)(a)(i) - Held that:- As decided in Mehsana District Co-operative Bank Ltd. Versus Income-Tax Officer [2001 (8) TMI 15 - SUPREME COURT] no dispute with the preposition that the word attributable is much wider in scope than derived. The Legislature has used the words “attributable to” in conjunction with the phrase “any one or more of such activities”. Investment of the funds by the banks including the non reserves were part of the banking activities since no bank would like its reserve funds to remain idle and not earn any interest. This is not only prudent business management but is also a part of the activity of banking. Therefore, the interest earned on such deposits is directly attributable to the business of banking - in favour of assessee.
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2012 (10) TMI 477
Interest granted to the land owner on enhanced amount of compensation - Calculated on year to year basis or in the year in which the amount is actually credited to the landowner - Held that:- As decided in CIT, Faridabad Versus Ghanshyam (HUF) [2009 (7) TMI 12 - SUPREME COURT] interest is different from compensation as interest paid on the excess amount under Section 28 depends upon a claim by the person whose land is acquired whereas interest under Section 34 is for the delay in making payment. As the amount in question is to be treated as part of compensation itself and is not to be treated as interest. Therefore, the question of law framed above does not survive any more.
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2012 (10) TMI 476
Depreciation on leased out boilers - disallowance as the transactions was only loan transactions subsequently given the colour as lease transactions - Held that:- Persuing grounds of appeal raised before this Court reveals that nowhere the assessee had questioned the findings of fact as regards the genuineness of the lease transactions. A reading of the various grounds raised thereon shows that it relate to claim of depreciation. Thus, when the finding of fact on the genuineness of the transaction had not been challenged in the manner known to law and the same having attained finality, there exists no ground to interfere with the order of the authorities below rejecting the claim for depreciation. No useful purpose would be served by permitting the assessee to file additional grounds on the genuineness of the lease transaction - against assessee.
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2012 (10) TMI 475
Addition made u/s 68 on account of share application money received from non-existent companies viz O Ltd and M Ltd - Revenue contended that ultimate beneficiaries introduced cash in accounts such as M/s S and then transferred to entities like O ltd and M Ltd in the form of cheque and from there it reached to the ultimate beneficiaries in the form of share application money or unsecured loans - whole process of layering was done only to give this money laundering activity a colour of genuineness - in the absence of identity, credit worthiness and genuineness of such transactions, the share application was treated as unexplained income u/s 68 Held that:- It is found that O Ltd and M Ltd are non-existent companies, therefore, their identity is even in dispute. The transaction made with the non-existent entity cannot be said to be genuine rather a circuitous method has been devised by the assessee itself to enroute its own money through these camouflage routes. Inspite of sufficient opportunities and summons issued u/s 131, the identity and credit worthiness was not established. It is not the case that no opportunity was provided to the claimed share applicant. Right from the assessment stage, first appellate stage and even before the Tribunal, no effort was made by the assessee to prove the required ingredients of section 68, therefore, order of CIT(A) in upholding addition is affirmed – Decided in favor of Revenue
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2012 (10) TMI 474
Addition made on account of rejection of books – Held that:- As there is no allegation in order of lower authority about the correctness or completeness of books, sales recorded, method of accounting. Only allegation is that accounting standard has not been followed in valuation of inventories and sales are not amenable to verification. The valuation of stock has no negative impact on the overall result of this year as shown at cost. Decides in favour of assessee. Disallowance of bad debts claim u/s 36(1)(vii) – Assessee claims bad debts of advances made to parties for promoting the business since they are outstanding from long time – Held that:- As the purpose of advances is not ascertainable. Assessee failed to filed his past accounts and particular the account for the year in which the money was advanced has also not been furnished. Therefore contention that the amount was given for promoting business is not substantiated. Decision in favour of revenue.
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2012 (10) TMI 473
Fees for Market Development Overseas - Revision u/s 263 - Held that:- Giving marketing services outside India, even if we consider it as technical services, nothing was made available to the assessee in the nature of any technical knowledge, experience, skill know-how or processes. There was no development or transfer of any technical plan or technical design. CIT in his order under Section 263 has not pointed out any sort of similar transfer or any sort of technical knowledge being made available to the assessee. Twin conditions required for invoking Section 263, that there should be an error in the order of Assessing Officer and such error should be prejudicial to the interests of Revenue, have not been satisfied. - in favour of Assessee.
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2012 (10) TMI 472
Disallowance of discount paid/given to advertising consultants - Appellant has paid a sum of ₹ 49,93,84,045/- towards agents commission for sale of space for advertisements in newspapers and time slots for television broadcasting. Held that:- The relationship between advertising consultant and the appellant, is on principal to principal basis, and not as an agent and principal for the reason that the advertising consultant neither act on the directions of the appellant nor rendered any services on behalf of the appellant to the advertisers. This is evident from fact that advertising consultant has to pay the bills of the publisher/broadcaster irrespective of the collections from their clients. As no services are rendered by the advertising consultant to the appellant, and further no payment/credit is made by the appellant, who is the publisher/broadcaster, to the advertising agency, the appellant is not liable for making any TDS and therefore, no disallowance can be made u/s. 4O(a)(ia) of the Act, for the said amount of ₹ 49,93,84,045 allowed towards discount to the advertising consultants.therefore, the payment by the assessee- company to accredited advertising agencies could not be terms as payment of commission and, therefore, the provisions of section 194H were not applicable to the instant case - against revenue. payment of data circuit rentals to BSNL - Assessee had incurred an amount of ₹ 8,68,80,460/- towards data circuit lines charges, which was paid to BSNL. The AO disallowed the said amount applying the provisions of section 40(a)(ia) on the ground that the assessee had not deducted any tax (TDS) on such payments. On appeal, the CIT(A) deleted the disallowance made by the AO observing that though in the assessment the AO has mentioned that the said payment made by the assessee to BSNL towards contractual obligation, he has not clarified as to how there is a contractual obligation for the said payment. Held that:- U/s 194C, tax is required to be deducted when an assessee as contractee, makes payment to another person/party, which is a contractor, for execution of work. Since in this case there is no contract involved, provisions of section 194C are not applicable to the said payment made by the assessee to BSNL. There is no evidence to show that borrowed funds were used for the purchase of assets which had not been put to use. Therefore, we do not find any ground to interfere with the order of the CIT(A) and the same is hereby upheld - ground of appeal of the revenue is dismissed.
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2012 (10) TMI 471
Deduction u/s 80IB - SSI Benefit - Held that:- The assessee had Plant and Machinery much exceeded the limit of ₹ 3 crore applicable to an SSI on the last day of the previous year. Assessee cannot be considered as a Small Scale Industrial Undertaking within the meaning of sec. 11-B of the IDR Act, 1951 as on the last day of previous year relevant to the A.Y. 2008- 09. Since the assessee did not comply with the conditions of the Proviso to clause (iii) of subsection 2 of section 80IB, it is not eligible for claiming deduction u/s 80B of the Act - appeal of the assessee is dismissed as infructuous - against the assessee.
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2012 (10) TMI 470
Unexplained Cash Credits - CIT(A) On remand report of the assessing officer and reply of the assessee classified the loans into two categories, viz. loans pertaining to the period prior to commencement of business, and loans pertaining to the period subsequent to the commencement of business by the assessee. As decided by Court in case of [CIT V/s. Kapur Bros 1978 (10) TMI 26 - ALLAHABAD HIGH COURT] CIT(A) held that any cash credit introduced before the commencement of business cannot be added in the hands of the firm, as the firm has not earned any income or made any sale. He accordingly directed the assessing officer to identify the cash credits which were made prior to the commencement of business and delete the additions made in that behalf. As for the other cash credits relating to the period subsequent to the commencement of business, the CIT(A) confirmed the additions made by the assessing officer in that behalf. Aggrieved by the relief granted by the CIT(A), Revenue is in appeal, whereas the assessee preferred its appeal objecting to the addition sustained by the CIT(A). Held that:- It is for the assessee to prove the genuineness of a cash credit not only by establishing the identity of the creditor, but also his creditworthiness and the genuineness of the transaction, and unless all the three ingredients are satisfied, genuineness of a cash credit cannot be accepted. In the circumstances, the order of the CIT(A) is upheld with regard to cash credit additions relating to the period subsequent to the commencement of business by the assessee - Grounds of the assessee as well as the Revenue are dismissed.
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2012 (10) TMI 469
Taxability of Deemed Dividend - Shri K.Pratap is a shareholder the companies in his individual capacity, and the assessee company itself is not the shareholders - Held that:- the appellant company is not a shareholder in M/s. Golden Gate Properties Ltd. and therefore the provisions of section 2(22)(e) are not applicable. Advance of Rs.1,23,50,000 received by the assessee company cannot be treated as deemed dividend. In this view of the matter, we find no infirmity in the impugned order of the CIT(A), which is accordingly confirmed, and the grounds of the Revenue in its appeal are dismissed - in favour of assessee. Addition made in Income by Assessing Officer - Appeal by Assessee - Assessee contended that in Survey which take place in premises of assessee director of the assessee company, Shri K.Pratap, admitted an additional income tax of Rs.5,00,000 for the financial year 2006-07 relevant to the assessment year 2007-08, but did not offer the corresponding income for the assessment year 2007-08. Not convinced with the explanation of the assessee in this behalf, the assessing officer made an addition of Rs.15,00,000/- to the income returned by the assessee, to cover the income relatable to the additional income tax admitted at the time of survey, to be paid for the year under appeal. Held that:- Impugned addition made by assessing office is merely based on the above statement and without pointing out any deficiencies in the books of account or bringing on record any material to substantiate the addition of Rs.15,00,000 is not justified and has to be disallowed - in favour of assessee.
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2012 (10) TMI 468
Labour Charges - register does not contain the addresses of the labourers nor it contains revenue stamp, nor is it signed by the Labour Department, no PF has also been deducted - Held that:- Violation of any law as long as the payment does not become illegal on account of such violation the same cannot be hit under the Income Tax Act - Appeal dismissed against revenue. Payment to supervisors - Held that:- Direction of CIT(A) to delete out of labour charges of Rs. 31,01,255/- which was admitted by the assessee before ld. CIT(A) as not payments to the supervisors but to the contractors is justified as this ground is misconceived and does not arise on the order of the lower authorities - appeal by revenue dismissed. Rental payments/Hire charges - Held that:- provisions of section 194I has been amended to encompass within its provision, the hire charges in respect of plant and machinery w.e.f. July, 2006 - CIT(A)has rightly deleted the amount of Rs. 8,15,000/- added u/s. 40(a)(ia) made by the Assessing Officer as the said provision does not apply for the assessment year under appeal. Disallowance in respect of slurry removal expenses,Repair & Maintenance Charges - Held that:- slurry removal expenses has been categorically shown in respect of tankers and lorries on which the assessee has reimbursed the expenses and this break-up has not been disproved nor shown to be wrongly claimed by the assessee. finding of the ld. CIT (Appeals) on this issue is on a right footing and does not call for any interference - revenue's appeal stand dismissed.
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2012 (10) TMI 467
Notice - Recall the order - delay of nine years - petitioner filed an appeal Tribunal on 27.12.2001 - case of the petitioner is that there was no communication from the Tribunal subsequent to the filing of the appeal regarding its status and the petitioner continued to be under the bona fide impression for over a period of nine years that the appeal filed by him is pending disposal - petitioner received a demand notice on 4.1.2011 – Held that:- Tribunal was obliged to inform the petitioner - but neither the regulation nor the Act provides for such an eventuality - Regulation 52 of the Regulations no doubt contemplates that every order passed by the Tribunal is required to be communicated within a specified time. But however, that once again pre-supposes that the proceedings must have been disposed of on merits - inordinate delay of nine years has not been explained by the petitioner. The order passed rejecting the Misc. Petition cannot be faulted. It is no doubt true that sufficient cause is required to be construed liberally but however, not so liberal so as to make it redundant and inoperative. Petition stands rejected
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2012 (10) TMI 466
TDS u/s 194C of the IT Act - contract of work versus contract of sale - assessee has entered into a contract of manufacturing agreement with M/s Nicholas Piramal to manufacture certain products - M/s Nicholas Piramal was required to perform quality control testing of products - assessee reimbursed the validation charges to M/s Nicholas Piramal without deducting tax at source – Held that:- It is not clear as to the party which has to bear the expenses relating to the said quality control tests - in view of the statements of the assessee that there are certain documents to establish liability of the assessee to reimburse the expenditure to M/s Nicholas Piramal and in the interest of justice – matter remanded back to the AO Depreciation on machinery - whether it is used for the purpose of assessee's business or profession - assessee has entered into contract for manufacture of certain ophthalmic solutions and for the said purpose the machinery was purchased and installed in the premises of M/s Nicholas Piramal during the relevant financial years – Held that:- Manufacturing is done as per specification of the assessee and the goods are also recognized as manufactured by the assessee, since they are sold in the brand name of the assessee - it can be said that the goods are manufactured by the assessee itself. When the machine is being used for the manufacture of goods for the assessee, it cannot be said that they are not used for the purpose of business or profession of the assessee - assessee is entitled to depreciation on this machinery Denial of depreciation on plant & machinery – Held that:- Machinery though, was purchased in the year 1995-96, but was put to use in FYs: 1997-98 & 1998-99 - machines were written off in the books of assessee as obsolete in the FY: 1998-99, but was added in the computation of income filed along with its tax return for the assessment years 1999-2000 - assessee ought to have reduced the written down value of the said machinery from the block of assets and ought to have claimed depreciation on the balance of the block of assets – denial of depreciation upheld
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2012 (10) TMI 465
Terminal depreciation - revenue expenditure or capital - assessee had acquired land and put up a factory during 1995 - in 2003, the assessee had stopped its business of offset printing and typesetting and it had converted the land and building into stock in trade – Held that:- For claiming depreciation u/s. 32(1)(iii), it must first comply with the provisions of Sec. 32(1) of the Act that the asset is used for the purpose of business or profession. As the asset being the land and factory building, the assets were used in the business of offset printing and typesetting, which was discontinued business from 2003, the provisions of Sec. 32(1) is no more available in regard to such business as the business itself does not exist - As the business in respect of which the said development cost has been incurred is discontinued, the same cannot be claimed as revenue expenditure in respect of another business being real estate business, just because the land has been converted into stock in trade for the present business - appeals of the Revenue are allowed
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2012 (10) TMI 464
Unexplained cash credits – Held that:- assessee has discharged the burden that lay on him, then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence - mere non-appearance of eight other persons in response to the notice given by the AO, by itself cannot be a reason to discard their version particularly when one of them had appeared and admitted advancement of loan. Even if others have subsequently filed their confirmations supported by their affidavits, it cannot be assumed that they would not have made same statements, if they had appeared in response to the notice issued by the AO. AO was required to have examined those confirmations and the contents of the affidavits on their merits treating as if they were statements given to him - there was no reason to doubt correctness of the claimed cash credit taken from the creditors - in favour of the assessee - appeal dismissed
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Customs
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2012 (10) TMI 505
Smuggling - vessel was carrying High Speed Diesel (HSD) from Muscat & Captain was not holding any legal documents for import of the said diesel oil into India - S.L.P. against detention order on non-application of mind - Held that:- It is true that though the detenu was granted bail on 12.04.2005, for the reasons best known to him, he did not avail such benefit and continued to be in jail on the date of the detention, i.e., 03.05.2005. It is true that this aspect has not been mentioned in the detention order, however, on the other hand, it is not in dispute that the grounds of detention which forms part of the Detention Order dated 03.05.2005 clearly mention the details about the bail order dated 12.04.2005 and non-availing of the same on the date of detention order, i.e., 03.05.2005. As the Detaining Authority was aware of the grant of bail and clearly stated the same in the grounds of detention, the contra arguments made by the appellant rejected. The Detaining Authority was conscious that the detenu was having the order of bail in his hand, it is presumed that at any moment, it would be possible for him to come out and indulge in prejudicial activities of all relevant aspects and passed the impugned order of detention in order to prevent the appellant from abetting the smuggling of goods in future. It is the subjective satisfaction of the Detaining Authority whether the order of detention is to be invoked or not. Keeping the writ petition pending after hearing the parties and compelling the detenu to wait for 5 months to know the result of his petition, cannot be accepted. We request all the High Courts to give priority for the disposal of the matters relating to personal liberty of a citizen, particularly, when the detention period is for one year or less than a year and, more so, after hearing the parties, the decision must be known to the affected party without unreasonable delay.
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2012 (10) TMI 504
Fear of likely order of preventive detention - Held that:- in view of the fact that the threatened arrest of the petitioner is based on the allegation of customs violations, it would be appropriate for the State Government to obtain the comments of the Settlement Commission before any final order is passed. If the detention of the petitioner is being considered only on the basis of the recommendations of the Customs Department, the State of Maharashtra is directed, to seek the comments of the Settlement Commission, before passing any order of preventive detention against the petitioner.
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2012 (10) TMI 463
Licencing of Custom House Agent - old regulation v/s new regulation - Held that:- Those who had cleared the examinations under the regulations issued in the year, 1984, would be eligible for the grant of licence, subject to their fulfilling the other conditions of eligibility, as the actions already taken under the earlier regulations issued in the year, 1984, had been saved by the new regulations issued in the year 2004. Therefore, the petitioner is eligible for the grant of Customs House Agents Licence, as he had passed the written, as well as the oral examination under Regulation 9 of the Customs House Agents Licensing Regulations, 1984 held prior to the coming into force of the new regulations in the year, 2004 - direction to the department to issue the necessary certificate granting the Customs House Agents Licence to the petitioner - against department.
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2012 (10) TMI 462
Confiscation of goods - heavy melting steel scrap – Held that:- Once the classification is accepted and goods are held to be used pipes, it is quite clear that they are not covered by para 2.17 of Import Trade Policy which allows free import of goods since this paragraph does not cover goods under CTH 7304. Since the goods are old and used, restriction applicable on second hand goods would apply - appellant requires license and therefore goods are liable to confiscation – confiscation upheld Mis-declaration – Held that:- Claim of the appellants that they had given the full description of the goods is correct – Held that:- It is a question of interpretation as to whether used and old pipes can be considered as heavy melting scrap or not and appellant has gone by the description in the invoice and the party from whom they have imported goods to give the description in the bill of entry. Therefore the charge of mis-declaration cannot be sustained – penalty reduced
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2012 (10) TMI 461
Stay application - Computer networking equipments were imported by the respondent and assessment was sought on the basis of the unit price declared by them – Held that:- Lower appellate authority has, in fact, allowed deduction to the extent of over 97% on HP listed prices, for which no rhyme or reason is forthcoming - appellate Commissioner's order should be stayed till final disposal of this appeal
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Corporate Laws
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2012 (10) TMI 503
Scheme of Amalgamation - meeting of Secured Creditors of the Transferee Company not held - Held that:- In view of the written consents/NOC given by all the Equity Shareholders of the Transferor Company-4, the requirement of convening meeting of Equity Shareholders of the Transferor Company-4 is dispensed with. There are no Secured and Unsecured Creditors in the Transferor Company-4 therefore, the requirement of convening meeting of Secured and Unsecured Creditors of the Transferor Company-4 does not arise - scheme of amalgamation allowed.
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2012 (10) TMI 460
Scheme of Amalgamation - contravention of the Provisions of Section 295 of the Companies Act, 1956, as the Company has given loans & advances to M/s Prayaga Constructions (India) Pvt. Ltd., a private limited Company in which directors are interested in terms of Provisions of Section 295 of the Companies Act, 1956 - Held that:- Mr. Ashwani Kapoor, Director of the Petitioner Transferee Company filed his affidavit that all the Transferor Companies and the Transferee Company are group Companies and are controlled by same set of shareholders and Directors. Also the Transferee Company has given inter corporate loans to the Transferor Company No. 2 and the said loans were given on good faith. The alleged violation of Section 295 of the Companies Act, by the Transferee and Transferor Company no. 2 was unintentional and without any malafide. Further the said inter corporate loans have not caused any loss to any of the shareholders, Government or others. Moreover the said inter corporate loans have already been repaid in full by the Transferor Company No. 2 to the Transferee Company. However the Transferor Company no. 2 & Transferee Company along with its Directors, have already filed an Application to the Ld. Company Law Board, New Delhi Bench, New Delhi through Registrar of Companies, NCT of Delhi & Haryana U/s 621A of the Companies Act, 1956 for compounding of the alleged offence vide Form 61 through SRN B57238628 dated 10th September 2012. In view of the submissions made at the bar and the settled law on the subject, the objection raised by the Regional Director is rejected and the Scheme is sanctioned subject to and without prejudice to the liability, if any, in the civil and criminal proceedings in respect of past transactions. It is further clarified that the proceedings pending before the ACMM, Tis Hazari, Delhi against the transferor company and/or its Board, Directors and management etc. shall continue and the liability, if any, of the Board, Directors, Management etc., in the said proceedings would continue as if the Scheme has not been made. Thus sanction is hereby granted to the Scheme of Amalgamation under sections 391 and 394 of the Companies Act, 1956.
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2012 (10) TMI 459
Suit for mortgaged property – Applicability of scope of section 8 of the Arbitration and Conciliation Act – Held that:- There is no impediment for the parties to mortgage suits being referred to arbitration under section 8 of the Act - mortgage suit is not only about determination of the existence of the mortgage or determination of the amount due. It is about enforcement of the mortgage with reference to an immovable property and adjudicating upon the rights and obligations of several classes of persons who have the right to participate in the proceedings relating to the enforcement of the mortgage, vis-a-vis the mortgagor and mortgagee. Even if some of the issues or questions in a mortgage suit are arbitrable or could be decided by a private forum, the issues in a mortgage suit cannot be divided - suit being one for enforcement of a mortgage by sale, it should be tried by the court and not by an arbitral tribunal - appeal is accordingly dismissed
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FEMA
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2012 (10) TMI 506
SAFEMA - notice in respect of illegal flat to assessee and his wife holding 50 per cent share in the subject property - whether appellants who purchased the subject flat during pendency of forfeiture proceedings are entitled to an opportunity to prove that they are transferees in good faith for adequate consideration ? - Held that:- Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 (SAFEMA) came into effect from 05.11.1975 provides for forfeiture of illegally acquired properties of smugglers and foreign exchange manipulators. Where the competent authority is satisfied that some of the properties referred to in the show-cause notice are illegally acquired it shall declare that such property shall, subject to the provisions of this Act, stand forfeited to the Central Government free from all encumbrances. Section 8 provides that burden of proving that property specified in the notice served under Section 6 is not illegally acquired property shall be on the person affected. Admittedly, SAFEMA was applicable to both vendors here. One of the vendors, a detenu, who was covered by Section 2(2)(b), was issued notice way back on 8.12.2003 under Section 6(1) of SAFEMA. The other vendor, wife of the detenu, was also issued notice under Section 6(1) in 2004 once it transpired that she held 50% share in the said flat. Both vendors were served with notices under Section 6(1) before transaction of sale in favour of the appellants. After the issuance of notices under Section 6(1) of SAFEMA to the vendors, the transaction of sale in favour of the appellants has to be ignored by virtue of Section 11 and on passing of the order of forfeiture under Section 7, the sale in favour of the appellants had become null and void. The order of forfeiture dated 23.06.2005 under Section 7 of SAFEMA relates back to the issuance of first notice under Section 6(1) to one of the vendors. In respect of a transfer after issuance of notice under Section 6, the property referred to therein, the holder cannot set up plea that he is a transferee in good faith or a bona fide purchaser for adequate consideration. Such plea is not available to a transferee who has purchased the property during pendency of forfeiture proceedings - the protection given to a bona fide sale under Section 2(2)(e) would not extend to a sale made subsequent to the issuance of notice under Section 6 and in violation of Section 11 of SAFEMA. The title in the subject flat is deemed to have vested in the Central Government on or about 08.12.2003 when the first notice under Section 6(1) was issued and served on one of the vendors. The vendors ceased to have any title in the subject flat on the date of transfer i.e. 10.02.2005. They had no transferable right. The appellants cannot claim any right in the flat.
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Service Tax
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2012 (10) TMI 521
Confirmation of service tax liability - Held that:- Service tax liability has been fastened on assessee without indicating the details that under which category of services the service tax liability has arisen. The adjudicating authority has dwelled upon the definition of four different categories in his findings but has not clearly come to any conclusion. Remand the matter back to the adjudicating authority to reconsider the issue afresh - in favour of assessee by way of remand.
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2012 (10) TMI 520
Erection, Installation and Commissioning Service - appellants are clearing the solar system through dealers also and the dealers further sell it to the customers and charge certain amount for installation – Held that:- Activity of installation of solar system falls under the category of ‘Erection, Installation and Commissioning Service’ Quantification of service component – Held that:- Matters remanded back to the original adjudicating authority to consider the records, documents for computation of service components in the activity of the appellants and pass appropriate orders in accordance with law
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2012 (10) TMI 519
Condonation of Delay - Held that:- In view of the amendment by Finance Act, 2012, No Service tax shall be levied or collected in respect of management, maintenance or repair of roads, during the period on and from the 16th day of June, 2005 to the 26th day of July, 2009 (both days inclusive) - impugned order is set aside and the appeal is allowed.
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2012 (10) TMI 500
Business auxiliary service v/s business support service - Held that:- This Court has no jurisdiction to entertain this appeal under section 35G of the Central Excise Act, 1944 as decided in C.C.E., MANGALORE Versus MANGALORE REFINERIES & PETROCHEMICALS LTD. [2010 (9) TMI 756 - KARNATAKA HIGH COURT]as an order passed by the Appellate Tribunal relating to the determination of any question having relation to the rate of duty of excise or to the value of goods for the purposes assessment lies to the Supreme Court under Section 35L(b) the Act and not to the High Court under Section 35(G). Thus need to be adjudicated by the Apex Court under section 35L.
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2012 (10) TMI 492
Non fulfillment of conditions of Notification No.32/2004-ST dated 03.12.2004 and Notification No.1/2006-ST dated 01.03.2006 - declaration required to be filed by the respective GTA as prescribed has not been complied with - Held that:- In absence of any particular format prescribed under the respective notifications, the department insisting for declaration on each consignment note for allowing the abatement under the said Notifications is un-sustainable in law. In these circumstances the declarations filed by the goods transport agencies (GTA) in their letter-heads or in the respective payment bills certifying that they have not availed CENVAT Credit on inputs or capital goods nor availed the benefit of exemption Notification 12/2003-ST dated 20.06.2003 should have been accepted by the department in extending the benefit of Notification No.32/2003-ST and 1/2006-ST - in favour of assessee.
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2012 (10) TMI 491
Business Support Service - appellants are international cricket players - petition for waiver of pre deposit - Held that:- As decided in M/s KPH DREAM CRICKET (P) LTD Versus CCE, CHANDIGARH [2012 (7) TMI 504 - CESTAT, NEW DELHI] the service tax was demanded from the franchisees in respect of fee paid to foreign players by invoking reverse charge mechanism for recovering the service tax since the players involved were foreigners. Also the appellants had been required to deposit 10% of the service tax demanded as pre-deposit. As entire amount cannot be and may not be considered as available for promotional events and also considering the fact that whether extended period can be invoked in these cases or not has to be considered in detail, it is appropriate that appellants deposit about 20% of the liability within the normal period quantifying the same as Rs.7.5 Lakh and Rs.3.5 lakh respectively for the the appellant cricketers - against assessee.
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2012 (10) TMI 490
Penalty imposed under Section 76 and Section 78 – non-payment of service tax - appellant paid the full amount of service tax with interest before issue of show cause notice – Held that:- In the absence of any finding by both the lower authorities that service tax had been collected from all the customers, it cannot be said that there was deliberate intention to collect service tax and not to pay the same to the government.. Payment was made as soon as investigation was taken up, would show that this was a fit case for invocation of provisions of Section 73(3) of Finance Act, 1994 which provides that if service tax with interest is paid before issue of show cause notice, no further proceedings should be initiated – penalty set aside
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2012 (10) TMI 489
Franchise Service - appellants are engaged in providing Commercial Training and Coaching Services – alleged that appellant had paid an amount towards royalty to their USA based Franchiser for the use of logo and study materials - held that:- It is evident from the records and the internet details that the appellant termed as Master distributor in the agreement is marketing the Bullet proof manager course as the only franchisee in India for M/s. Crest Com International Ltd. USA and that he is paying royalty to the foreign company for marketing the course. Thus, I hold that the appellant is engaged in franchise service and he is liable to pay Service tax on the Royalty charges paid to the foreign company under “Franchise Service”. Payment of service tax - Held that:- it is evident that the appellant had collected service tax while charging the above fees from their distributors but they had not produced any evidence whether the collected service tax was paid to the Department - onus is on the appellant to substantiate their contention that the royalty paid by them to the Foreign service provider had already suffered Service tax and the same had been paid to the Department. In the absence of any documentary evidence it cannot be said that he had paid service tax to the department on the fees collected which includes royalty charges, which is shared by the appellant and the foreign company as per their agreement – demand upheld
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Central Excise
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2012 (10) TMI 502
Demand of duty in respect of molasses - clandestinely removed - Molasses stored in kuchcha pit - rejection of remission application - Held that:- Revenue is simply proceeding on the ground that it cannot be believed that molasses were intact during 14 months of the period irrespective of stored in katcha pits, but lost the same within a period of 4 months. As sale of molasses is controlled by UP Sheera Niyantran Adhiniyam, 1964 and manufacturer again cleared the goods beyond the State Supervision and Promotion by the State Controller of Molasses. It is found that there is absolutely no evidence on record reflecting upon clandestine removal of the goods. It has been held in number of decisions that where the molasses are stored in katcha pits and are unfit for consumption their destruction has to be allowed as decided in U.P. STATE SUGAR & CANE DEVELOPMENT CORPN. LTD. Versus CCE, ALLAHABAD [2007 (2) TMI 473 - CESTAT, PRINCIPAL BENCH, NEW DELHI] - as in thus case it has to be held that Molasses were destroyed or damaged on account of weather conditions and rainy season, the remission has to be granted in such a case - in favour of assessee.
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2012 (10) TMI 501
Benefit of the reduced penalty u/s 11AC - 30 days from the communication of the original order OR date of receipt of the order - Held that:- As decided in CCE&C v. Harish Silk Mills [2010 (2) TMI 494 - GUJARAT HIGH COURT] if duty amount with interest is not paid in time and even reduced penalty of 25% of duty amount is not paid in time and option is not given to respondent assessee, such option should be given to assessee and period of 30 days would commence from the date of giving such option. No illegality is committed by the Tribunal in giving option to the Assessee under the Proviso to section 11AC as the benefit of payment of reduced penalty can be availed by the assessee at the appellate stages also and it is not the import of the said provision that such benefit can be availed of only within 30 days from the communication of original order - in favour of assessee.
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2012 (10) TMI 499
What is the rate at which additional duty of customs (CVD) is to be levied - goods cleared by the appellant’s EOU to the Domestic Tariff Area – Held that:- Additional duty of customs shall be reckoned on the effective rate and not tariff rate - duty leviable under Section 3 of the Central Excise Act is to be calculated after giving effect to the exemption notifications. Therefore, goods produced in EOUs/EPZs cannot be charged to duty at Tariff rate - in favour of assessee
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2012 (10) TMI 498
Benefit of exemption Notification No. 39/2001-C.E. – whether the petitioner had made investment in plant and machinery in excess of Rs. 20 Crores or not; and whether the commercial production had actually commenced or not - allegations of irregularities and impropriety in the previous round of show cause notice and hearing proceedings – Held that:- From the very documents on record, admitted facts and circumstances and materials which were available before the previous committee, it was impossible to come to the conclusion that the petitioner had in fact made investment in plant and machinery in excess of Rs. 20 Crores, and further that the commercial production had commenced before 31st December 2005 - power of the respondents therefore to make thorough inquiry into the declarations made by the manufacturer cannot be curtailed - petition is dismissed.
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2012 (10) TMI 497
Rebate claim - whether reversal of equal amount of cenvat credit availed on inputs/capital goods under Rule 3(4) of Cenvat Credit Rules, 2002 is to be treated as payment of duty for the purpose of Rule 18 of Central Excise Rules, 2002 read with Notification No. 19/2004-C.E. (N.T.), - Held that:- Amount reversed under Rule 3(4) of Cenvat Credit Rules, 2002 when inputs are removed as such, is to be treated as payment of duty of excise for the purpose of Rule 18 of Central Excise Rules, 2002 read with Notification No. 19/2004-C.E. (N.T.), - Circular No. 283/1996 dated 31st December, 1996 has held that amount paid under Rule 57F(1)(ii) of Central Excise Rules, 1944 (which is analogous to the Cenvat Credit Rules, 2002/Cenvat Credit Rules, 2004) on export of inputs/capital goods by debiting RC 23A Part II would be eligible for rebate - denial of rebate on the ground that the duty has been paid by reversing the credit cannot be sustained.” Rejection of the rebate claims – Held that:- All the above clearances were made vide proper Central Excise Invoices, ARE-1s and other particulars submitted to the jurisdictional Central Excise Office. The goods were examined under Central Excise supervision and duty payment was also certified by Central Excise as per endorsements on the ARE-1s. The assessments/value of clearances were stated to be proper “transaction value” and due duty was calculated/paid as above - such clearances of “used” capital goods from the factory of their uses which is other than the factory of manufacture of said capital goods when exported are eligible for rebate
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2012 (10) TMI 496
Penalty – assessee stopped paying duty on the ground that it is not excisable to tax. However, after the department noticed the default and brought to their notice, they have paid the duty and the interest even before the issue of a show cause notice – Held that:- Assessee has paid the duty with interest even prior to issue of show cause notice. If that is so, the authorities had no jurisdiction to initiate proceedings at all and consequently, the question of payment of penalty would not arise at all
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2012 (10) TMI 495
Waiver of pre-deposit – cenvat credit - alleged that Jammu unit actually cleared what was an input which was not excisable; the Jammu unit paid duty in the guise of clearing DFMO with the fraudulent intent to claim a refund in terms of Notification 56/2002-C.E. and to enable the Taloja unit to avail of Cenvat credit – Held that:- During the period April 2005 to December 2006 (which also covers the period of dispute in the present Case), the Jammu unit manufactured DFMO out of Crude Menthol Oil and had correctly paid duty and taken a refund under the exemption notification - during period in dispute, the Jammu unit cleared Crude Menthol Oil without subjecting it to the process of manufacture – pre-deposit waived
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2012 (10) TMI 458
Direction for pre deposit - Held that:- As the petitioner seeks only reconsideration of the matter at the hands of the Tribunal the points highlighted by the petitioner requires consideration. The finding in Ext.P9, that in the earlier stages there was no direction to make a pre-deposit is also not correct. The duty now fixed has come down to Rs.14,99,801/- from Rs.51,82,048.50, according to the learned counsel for the petitioner. The petitioner will be free to re-agitate the matter before the Tribunal. For enabling the Tribunal to pass fresh order, Exhibit P9 is set aside.
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2012 (10) TMI 457
Delay of 726 days in filing appeal - Held that:- The plea for condoning the delay is that the appellant is a sick company and the appellant-Company was lying closed when the impugned order was received. Only one male Director was looking after the affairs of the company who due to heavy losses and involvement in various cases, could not file the appeal within time. The company is likely to revive now. On these premises, condonation of delay has been prayed. The narration of cause for claiming condonation of delay in filing the appeal would not fall within the expression “sufficient cause” so as to entitle the assessee for condonation of inordinate delay of 726 days in filing the appeal - against assessee.
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2012 (10) TMI 456
Denial of benefit of Notification No. 75/84-C.E. - respondents are found to have brought into their factory Benzene and Toluene on payment of duty at concessional rate in terms of Notification No. 75/84, and the same were, admittedly, used in the manufacture of thinners, which were cleared without payment of duty - once thinners were removed from L-6 premises intended use of the same are in manufacture of paints, varnishes, lacquers etc., and no end use verification is necessary. Therefore, condition of the exemption notification has been fulfilled in this case - demands are not sustainable
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2012 (10) TMI 455
Condonation of delay of 525 days - assessee submits that this delay was inadvertent. It is the submission that the issue involved is the same as was in respect of the very assessee, which is being contested by the assessee in Appeal No. E/922/09 and this Bench had granted unconditional stay – Held that:- Delayed filing of appeal against the impugned order, has been in negligent and needs no sympathy - since negligence is on the part of the assessee the assessee must bear the cost of Rs. 5000/- which should be paid to the Commissioner of Central Excise - Subject to the cost being deposited, delay condoned.
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2012 (10) TMI 454
SSI exemption - extended period on limitation – clubbing of clearance – Dummy unit - Held that:- case against them has not been proved by the authorities with requisite evidence - clubbing of two units cannot be made on the premise that the assessee sold/cleared their entire production to other units - mere fact of management, control or grant of interest free loan is not sufficient to hold the units as a dummy unit in the absence of any money flow back and/or profit sharing and total control on another unit - Allegation of wilful mis-statement and suppression of facts justifying the extended period of limitation for making the duty demand cannot be sustained
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2012 (10) TMI 453
Rejection of Rebate claim – alleged that applicant had exported the goods in March 2008, they had debited the duty involved in August 2008 and had thereby, not complied with the provisions of Notification No. 19/04 dated 6-9-2004 issued under Rule 18 of the rules read with condition (i) of part-I, Chapter 8 of the C.B.E.C. Manual of Supplementary Instructions – Held that:- Provision for claim of rebate is governed by Rule 18, which requires payment of duty at the time of export - provisions contained in Rule 8 does not absolve the assessee from substantial conditions of payment of duty of claim of rebate of duty under Rule 18 of Central Excise Rules, 2002 - rebate of duty is not admissible
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2012 (10) TMI 452
Demand of Cenvat credit in respect of Special Additional Duty of Customs debited in Target Plus/DEPB Scheme - manufacture of Safety Razor Blades – Held that:- Duty debited through DEPB, DFCE, Target Plus etc. schemes would be eligible for Cenvat benefit or drawback facility by the licensed holder and full credit of the 4% Special CVD will be allowed to manufacturers of excisable goods and further clarified that 4% CVD duty debited in DEPB, EFCE, Target Plus etc. certificates may be allowed to be taken back at draw back (brand rate) – demand set aside
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2012 (10) TMI 451
Cenvat credit – intermediate product - manufacture of ethyl alcohol – Held that:- Question of duty liability of the intermediate product arises only when the finished goods are exempted - When the appellant is in the manufacture of dutiable as well as non excisable goods, question of looking into the intermediate product does not arise in the determination as to the final product - requirement of pre deposit waived
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CST, VAT & Sales Tax
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2012 (10) TMI 522
Refund claim – Validity of revision proceedings - independent opinion - held that:- it was not a revision initiated on the basis of any application filed by an aggrieved party namely the Deputy Commissioner but initiation of a Revisional proceeding by the Joint Commissioner by forming his own opinion and satisfaction to exercise suo motu power vested under Section 46(4) of the BFT Act on the basis of the materials on record. - decided against the assessee. Limitation - power of drawing up a revisional proceeding by exercising suo motu power – Held that:- Power cannot be exercised by the revisional authority indefinitely - such extra ordinary power i.e. suo motu power of initiation of revisional proceeding has to be exercised within a reasonable period of time - powers have been exercised within about three years of time in some cases and in some cases soon after the expiry of three years period - Three years period cannot be said to be a very long period and power was exercised within a reasonable period of time. - Decided in favor of assessee. Whether the order passed by the Joint Commissioner setting aside the revised assessment order is proper and could be maintained, as the said order was passed during the pendency of the writ petition in the High Court – Held that:- Order was passed while the respondent was fighting out the litigation in the High Court and therefore, it was not possible for the assessee to give his entire focus and attention and also to give full concentration to the aforesaid proceeding pending before the Joint Commissioner. The learned counsel appearing for the appellant also could not dispute the fact that the respondent was somewhat handicapped in contesting the aforesaid matter very effectively before the Joint Commissioner - matter remited to the Joint Commissioner once again to hear the parties
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2012 (10) TMI 493
Sale occasions import - Taxation on Air conditioning equipments - @20% OR @10% - Period of limitation for revision of the order - reasonable period - Held that:- In the absence of limitation period for revision under Section 21 of the Tripura Sales Tax Act, 1976, it would be very difficult to come to a conclusion that in the given case the revisional jurisdiction invoked by the Revisional Authority under Section 21 of the said Act after a period of three years would be one exercised with malafide intention or the Revisional Authority should not exercise its revisional jurisdiction after the lapse of three years from the date of passing the order against which revision lies under Section 21 of the Act. Three years period cannot be said to be a very long period and therefore, in all these cases, we hold that the power was exercised within a reasonable period of time. As the petitioner strenuously contends that the point in the paragraph 6(v) of the impugned order dated 26.03.2012 was decided wrongly, the Revisional Authority is directed to take into consideration of the decisions of the Apex Court in State of Maharashtra v. Embee Corporation [1997 (8) TMI 443 - SUPREME COURT OF INDIA] while interpreting the expression "sale occasions import" occurring in sub-section (2) of section 5 of the Act, it is not necessary that a completed sale should precede the import. Revisional Authority is directed to dispose of the Revision Case by passing a reasoned order within a period of two months.
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Indian Laws
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2012 (10) TMI 518
First time offenders - Charged for possession of brown sugar falling under the head "commercial quantity" - Narcotic Drugs and Psychotropic Substances Act, 1985 - Rigorous Imprisonment & Fine - prosecution - Held that:- As both the appellants are first time offenders and there is no past antecedent about their involvement in offence of like nature on earlier occasions. It is also not disputed by the State that as on date, the appellants had served nearly 12 years in jail. Thus as decided in BALWINDER SINGH Versus ASSTT. COMMISSIONER, CUSTOMS & CENTRAL EXCISE 2005 (2) TMI 127 - SUPREME COURT OF INDIA), while confirming the conviction, the sentence is reduced to 10 years from 15 which is the minimum prescribed sentence under the relevant provisions of the NDPS Act. The order of payment of fine of ₹ 1.5 lakhs each is also upheld Term of imprisonment in default of payment of fine - Held that:- It is clear that clause (b) of sub-section (1) of Section 30 of the Code authorizes the Court to award imprisonment in default of fine up to 1/4th of the term of imprisonment which the Court is competent to inflict as punishment for the offence. However, considering the circumstances placed on behalf of the appellants-accused, that they are very poor and have to maintain their family, it was their first offence and if they fail to pay the amount of fine as per the order of the Additional Sessions Judge, they have to remain in jail for a period of 3 years in addition to the period of substantive sentence because of their inability to pay the fine causing serious prejudice will be caused not only to them but also to their family members who are innocent. Therefore, if default of payment of fine of ₹ 1.5 lakhs persists, the appellants shall undergo RI for 6 months instead of 3 years.
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2012 (10) TMI 488
Penalty - Delay in deposit of Foreign Travel Tax - Applicant was required to collect from all passengers embarking on an international journey a Foreign Travel Tax Foreign Travel Tax is required to be deposited in Government Account/Treasury in accordance with the Foreign Travel Tax Rules, 1979/FTT (Amendment) Rules, 2003 – whether it was not open for the adjudicating authority to enhance the quantum of penalty while considering the Show Cause Notice after its remand by the appellate authority to the adjudicating authority – Held that:- the applicant had deliberately contravened the provisions of sub-section (3) of Section 38 of Finance Act, 1979 (FTT). For these contraventions, the applicant is now circumventing the basic truths and for these contraventions the department has very rightly imposed the minimum penalty as mandatorily prescribed in this Section itself. No dispute that there had been delay - in mandatorily depositing of the impugned foreign travel tax amounts collected during the relevant three months, there is also no dispute regarding liability/responsibility of the applicant for depositing the same and therefore in contravention thereof the applicant was liable to pay all the legally imposable penalties for such delays - If one goes through the order of remand, one would find that it was not a limited remand - remand was to enable the adjudicating authority to consider all the issues after affording opportunity of personal hearing to the petitioner - Show Cause Notices were restored to the file of the adjudicating authority for consideration afresh. It was not a limited remand - it was open for the adjudicating authority to enhance the amount of penalty in consonance with the provision of sub-section (3) of section 38 of the Act.
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