TMI Tax Updates - e-Newsletter
October 30, 2012
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
Indian Laws
TMI SMS
Highlights / Catch Notes
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Income Tax
There were at the relevant time and even today no thin capitalization rules in force. Consequently, the interest payment on debt capital cannot be disallowed - HC
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Disallowance of loss under the head 'income from other sources' - In-genuine transaction - ITAT rejected invitation on the ground that it was not an investigating agency & allowed the claim - ITAT is not correct - HC
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Penalty u/s 271(1)(c) - cash payment u/s 40A(3) - The offer made by the assessee was on the basis that it could not give the details of the parties, and in order to buy peace, the AO was requested to tax the gross receipts on net profits basis. - no penalty - SC
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Penalty u/s 271-B - failure to get accounts audited - Under Section 271B there is discretion with the income tax authorities to award penalty and this discretion has to be exercised fairly and reasonably - HC
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Transfer Pricing additions by DRP/TPO - order reveals that DRP has not applied its mind - It simply opinied that the Draft Assessment order proposed by the Assessing Officer is to be approved. - matter remanded back - AT
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Deduction u/s.80-IB(10) of the Act - Not every condition of the statute can be seen as mandatory. - If substantial compliance thereof is established on record, the court may allow deduction. - HC
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Reopening of assessment - Completion of the assessment proceedings under Section 143(3) read with 147 without issue of notice under Section 143(2) was bad in law. - HC
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Transfer Pricing – Arm Length Price – selection of comparables - assessee is not estopped from pointing out a mistake in the assessment. - AT
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Difference in stock submitted to bank and income tax department -addition based on stock statement submitted to Bank is not sustainable - AT
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Franchisee fees - satellite schools which are running under the name and logo of Delhi Public School - not liable to tax and additions deleted following principle of consistency - AT
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Payment to MCD towards registration, conversion and parking charges - revenue v/s capital - harges paid by the assessee to MCD, could not be allowed in view of explanation to sec. 37(1). - AT
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Unexplained jewellery found in the lockers - no seizeure of gold jewellery, if it is found to the extent of 500 grams and claimed to be of a married lady. - AT
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Compensation for delay in handing over the possession of the property - holding charges - held as capital receipt in nature - AT
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Penalty paid to NSE for trading violation - not in the nature of violation of law and hence cannot be termed as penalty. - deduction allowed - AT
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Under Section 132(4) unless the authorized officer puts a specific question with regard to the manner in which income has been derived, it is not expected from the person to make a statement in this regard - AT
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Tender Fees Expenses - Revenue v/s Capital - It was incurred in connection with the integral part of profit earning process and not for acquisition of any asset- held as revenue in nature. - AT
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Customs
Anti dumping duty - The term 'domestic industry', as amended, has not taken away the discretionary power of the Designated Authority - The word 'only' under Rule 2(b) need not be concentrated much - HC
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EPCG Scheme - as the catalysts are separately mentioned in addition to consumables in the EPCG scheme for existing plant and also separately mentioned in the definition of capital goods under the policy - stay granted - AT
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Penalty under Section 114(i) of the Customs Act - non-mention of Section 113 in the show-cause notice would not per se invalidate the penalty imposed under Section 114 if the penalty is otherwise supported by the essential facts alleged and proved - AT
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Service Tax
Business Auxiliary Services - activities of visa facilitation and providing customer care services to the Diplomatic Mission Embassies/Consulates and the Visa applicants - held as not taxable - AT
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2012 (10) TMI 817
Deduction of Interest claimed - Held that:- Borrowings on which the interest has been claimed as a deduction are in fact capital of the assessee and brought only under the nomenclature of loan for tax consideration. Debt capital is required to be re-characterized as equity capital. However, the Tribunal held that in India as the law stands there were no rules with regard to thin capitalization so as to consider debt as an equity. It is only in the proposed Direct Tax Code Bill of 2010 that as a part of the General Anti Avoidance Rules it is proposed to introduce a provision by which a arrangement may be declared as an impermissible avoidance arrangement and may be determined by recharacterzing any equity into debt or vice versa. There were at the relevant time and even today no thin capitalization rules in force. Consequently, the interest payment on debt capital cannot be disallowed – As no substantial question of law is involved - Appeal is admitted
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2012 (10) TMI 816
Whether reimbursement of traveling expenses taxable as fees for technical services – Assessee is a non-resident, received a sum in lieu of reimbursement of traveling expenses – AO argued that such reimbursement is taxable as fees for technical services – Held that:- Following the decision in case of SIEMENS AKTIONGESELLSCHAFT (2008 (11) TMI 74 - BOMBAY HIGH COURT) that reimbursement of expenses is not liable to tax. Therefore, reimbursement does not have any element of income comprised therein and hence not liable to tax. In favour of assessee Whether payment of living allowance by the Indian company to expatriates as fees for technical services – Non-resident assessee deputed its personnel for rendering services to Indian companies – Indian company reimburse the living allowances as per the agreement - AO included this amount in fees for technical services – Held that:- Reimbursement does not have any element of income comprised therein and hence not liable to tax. In favour of assessee
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2012 (10) TMI 815
Disallowance of Bad debts - Held that:- No infirmity in the order of CIT(A) in allowing the claim as after the assessment of section 36(1)(vii) w.e.f. 01.04.1989, in order to obtain a deduction in relation to bad debts, it is not necessary for the assessee to establish that the debt, in fact has become irrecoverable. It is enough of the bad debt is written off as irrecoverable in the accounts of the assessee as decided in TRF Ltd. vs CIT [2010 (2) TMI 211 - SUPREME COURT]. Bad debt should be allowed in the year of write off - in favour of assessee.
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2012 (10) TMI 814
Deduction u/s 80 IB - whether conversion charges, testing charges and interest income would be eligible for deduction? Held that:- Assessee has two activities, the first is where it purchases raw material and converts the same into finished products and secondly where raw material is supplied by the customer and the same is used for manufacturing of finished products and then given to the customer on payment of conversion charges. As far as conversion charges is concerned, there is no dispute that the assessee is entitled for claim of deduction under Section 80 IB as that the appellant had done a process on the raw material which was nothing but a part and parcel of the manufacturing process of the industrial undertaking & gains derived from industrial undertakings and so entitled for the purpose of computing deduction under Section 80IB as decided in CIT – III Versus Sadhu Forging Ltd. [2011 (6) TMI 9 - DELHI HIGH COURT] - FAA was right in holding that the assessee is entitled to deduction of conversion and testing charges earned by the assessee for doing job work on the facts and circumstances of the case - against revenue. Interest received from customers for delayed payments - exclusion of only net interest income - Held that :- As decided in Nirma Industries Limited Versus Deputy Commissioner of Income-Tax [2006 (2) TMI 92 - GUJARAT HIGH COURT] while computing deduction under section 80-I interest received from trade debtors towards late payment of sales consideration is required to be excluded from the profits of the industrial undertaking as the same cannot be stated to have been derived from the business of the industrial undertaking - directed to tribunal to examine the factual matrix of the present case including the balance sheet and accounts of the assessee, to decide the question - in favour of assessee for statistical purposes.
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2012 (10) TMI 813
Revised statements in Form 26Q - errors in reconciliation of TDS rectification - petition under Section 154 - Held that:- The issue raised by the Revenue is an academic question as the Assessing Officer has already rectified his orders passed under Section 200A. There is no grievance to the assessee or to the Revenue as on date. In any event the AO was bound to act as per law and dispose off the petition under Section 154 filed by the assessee, which he did. Dismissal of all these appeals of the Revenue, as infructuous.
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2012 (10) TMI 812
Depreciation on capital assets - disallowance on double deduction - CIT(A) allowed the claim - Held that:- As decided in Commissioner of Income-tax Versus. Tiny Tots Education Society [2010 (7) TMI 377 - PUNJAB AND HARYANA HIGH COURT] the income of the assessee being exempt, the assessee was only claiming that depreciation should be reduced from the income for determining the percentage of funds which had to be applied for the purpose of the trust. It could not be held that double benefit was given in allowing the claim for depreciation for computing income for purposes of section 11 - in favour of assessee. Provision for diminution in the value of investment - CIT(A) deleted the addition - Held that:- CIT(A) has not given a speaking order and not properly dealt with the issue. He has remitted the matter also to the Assessing Officer which was beyond of his jurisdiction. Thus on the facts and circumstances of the case, interest of justice will be served if the matter is remitted to the file of the AO - in favour of revenue for statistical purposes. Exempt income included in the assessed income - CIT(A) directed AO to delete the sum - Held that:- Neither the Assessing Officer nor the CIT (A) has made any addition on account of exempt income. The assessee has not reduced the exempt income from the computation income and the assessee is trying to raise a fresh ground as it is not permissible in view of the decision of Goetze (India) Limited Versus CIT (A) [2006 (3) TMI 75 - SUPREME COURT] that the power of the Tribunal under section 254, is to entertain for the first time a point of law provided the fact on the basis of which the issue of law can be raised before the Tribunal - against assessee.
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2012 (10) TMI 811
Unexplained cash credits - CIT(A) deleted the addition - Held that:- AO has given notices u/s. 133(6) to these parties, but the notices were received back, since persons were not found in the given address. Since CIT(A) has observed that AO has not brought on record any material to controvert the submissions of the assessee in this regard it is not the case that CIT(A) has himself has done enquiries and found that the assessee’s submissions are cogent. Thus, the proper enquiry of the submissions by the assessee has not been done. Shares of 10/- each were said to have been given at a premium of Rs.40/- each for which apparently there is no justification. The company’s balance sheet and other particulars have not been furnished before us from where it can be adduced that the companies shares can command so much of premium. CIT(A) has not touched upon this aspect, thus the matter needs to be remitted to the files of the AO, to enable the assessee to furnish cogent evidences to prove the justification of such huge share premium being received by the assessee company - in favour of revenue for statistical purposes.
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2012 (10) TMI 810
Penalty u/s. 271 (1) (b) - non-compliance of three notices issued in connection with assessment year 2003-04 - Held that:- Penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so as decided in Hindustan Steel Limited Versus State Of Orissa [1969 (8) TMI 31 - SUPREME COURT] In the present case assessee’s conduct was not contumacious to warrant levy of penalty as there was no deliberate attempt on the part of the assessee to evade the assessment proceedings as he claimed that on some occasions, he himself had gone to the office of the concerned Assessing Authority where the concerned assessing authority’s office was found locked and also some of the notices were general notices without requiring any specific documents to be complied with - in favour of assessee.
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2012 (10) TMI 809
Disallowance of loss under the head 'income from other sources' - In-genuine transaction - ITAT rejected invitation on the ground that it was not an investigating agency & allowed the claim - Held that:- Section 57 provides for deductions in computing the income under the residuary head i.e. 'income from other sources'. Clause (iii) of the Section allows deduction of any expenditure (not being in the nature of capital expenditure) laid out or expended wholly or exclusively for the purpose of making or earning such income. Interest paid on borrowings made for making investments with the object of making or earning income falls for consideration under this clause. As rightly pointed out on behalf of the Revenue, the principle would apply to a genuine case of borrowing and lending and if there are materials to show that the transaction of borrowing and lending was sham or was got up with the purpose of avoiding or reducing the tax liability, nothing prevents the revenue authorities from ignoring the claim. The difficulty in the present case with the order of the Tribunal is that despite being told that there are several unusual features which throw considerable doubt on the assessee's claim for deduction of the interest, it did not consider it proper to examine the matter further, but chose to take umbrage on the principle that the Tribunal cannot be expected to act as an investigating agency. It is true that the Tribunal cannot by itself embark upon an investigation and try to raise a new issue or make out a new case for the revenue which has not occurred to the revenue authorities, however, in the present case the AO did indicate the broad contours of the intention of the assessee to reduce his tax liability by claiming interest under Section 57(iii) on borrowings allegedly made from companies belonging to the same group for the purpose of acquiring shares, again in companies of the same group, which were closely held and did not yield any dividend. It is therefore, not a case where the Tribunal, for the first time, was being invited to investigate into an aspect which was not raised by the income tax authorities. The Tribunal, with respect, was not justified in brushing aside the invitation on the ground that it was not an investigating agency and has to limit itself to the issues raised before it. The issue as raised before it was the motive of the assessee and the Tribunal, given the status as the ultimate fact finding authority under the Act, ought to have remanded the matter, so that the motives of the assessee in making huge claims for deduction of interest under Section 57(iii) are made known to those who matter, particularly the taxing authorities - thus set aside the orders of the CIT (Appeals) and the Tribunal on the point of Section 57(iii) and remand the cases to the AO for de novo proceedings - in favour of revenue.
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2012 (10) TMI 808
Penalty u/s 271(1)(c) - Whether the disclosure/admission of Assessee of taxing the income @ 8% when faced with detailed enquiry is a voluntary surrender and not liable for penalty under section 271(1)(c) of the Act - The assessee was asked to explain as to why the cash payments made ought not to be disallowed under Section 40A(3). It was also asked to explain the substantial expenses claimed in the P&L account with the aid of vouchers and bills. Held that:- The offer made by the assessee was on the basis that it could not give the details of the parties, and in order to buy peace, the AO was requested to tax the gross receipts on net profits basis. This, as noticed earlier, resulted in addition of over Rs. 51 lakh, which represented more than the amount disallowable under Section 40A(3). The assessee’s cash payments were concededly not the amount which was disallowed, they had no co-relation to what could not be established, and were disallowable. The assessee did provide particulars, but could not back up its claim with confirmation with the explanation that the payees insisted on immediate payment, to fulfill their contractual commitment to their suppliers. Considering a case for business expediency, the material which led to the penalty order i.e. absence of the payees at their places or address provided, was gathered after notice under Section 271 (1) (c) was issued. Thus assessee ought to have been provided with opportunity in this regard during the assessment and that material which did not exist at time of initiation of the penalty proceeding ought not to have been put against it. Thus addition on the basis of the assessee’s offer to be taxed at 8% on gross receipts cannot be concluded that it had provided inaccurate particulars in its returns & the imposition of penalty was not justified - in favour of the assessee
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2012 (10) TMI 807
Penalty u/s 271-B - failure to get accounts audited - violation of the provisions of Section 44-AB & its 2nd proviso - ITAT deleted the levy - Held that:- Apart from the fact that the audit of the respondent-society under Section 64 of the U.P. Cooperative Societies Act, 1963, has to be carried out by the Accountant appointed by the Registrar of societies, who has specific qualifications, there was an order passed by the High Court directing that no cooperative society in the State of U.P., will get its account audited through the private Chartered Accountants. Thus it cannot be concluded that Tribunal committed any error in law in observing that in view of the order issued by the High Court, which was binding upon all the cooperative societies in the State of U.P. including the respondent-assessee, the respondent cooperative society could have got its account audited through a chartered accountant - in favour of assessee. Under Section 271B there is discretion with the income tax authorities to award penalty and this discretion has to be exercised fairly and reasonably on the facts and circumstances in accordance with the settled judicial principles.
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2012 (10) TMI 806
Exercising jurisdiction u/s 263 by CIT(A) - re assessee assessee's claim under section 10B - ‘live plants’ produced by the assessee through tissue culture the same was concerned with “live article” or things - AO allowed the claim - Held that:- The assessee’s business activity of tissue culture is ‘manufacture or produces’ within the meaning of section 10B(2)(i) and CIT had wrongly held that since assessee’s produce is “plant”, which is a lively object, therefore, it is covered by section 2(29)(BA), as CIT (A)has not proceeded on the correct factual and legal interpretation of section 2(29BA) qua facts and circumstances of the instant case as where the assessee is involved in tissue culture, which can in no way be called any activity other than ‘manufacture or produce’ because one mother plant is tissue cultured, which gives rise to production of voluminous number of plants by artificial processes and stages AO in finalizing the assessment had rightly granted the assessee deduction under section 10B. It was one of the ‘possible view’ as per law, which could not be revised by CIT under section 263. Consequently, once the assessee’s unit is entitled to be treated to be a qualifying unit under the provision of section 10B(2)(1) the order of the Commissioner of Income Tax revising the assessment does not withstand the test of the law - in favour of assessee.
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2012 (10) TMI 804
Transfer Pricing additions by DRP/TPO - warranting provision & provision for sale promotion - Additions to income to arrive at the Arm's Length Price of the International transactions - Held that:- Perusal of the order it nowhere suggest that DRP has considered the facts and circumstances of the case, nature of dispute and what is the defence. The order is running into few lines and does not disclose the mind applied by the Adjudicators. Thus it can safely be said that it is totally a non speaking order. It simply opinied that the Draft Assessment order proposed by the Assessing Officer is to be approved. As in ROADMASTER INDUSTRIES OF INDIA P. LTD. Versus INSPECTING ASSISTANT CIT (ASSESSMENT) AND ANOTHER [2006 (5) TMI 86 - PUNJAB AND HARYANA HIGH COURT] the necessity of assigning reason in support of an order adjudicating the controversy between the parties is considered. Thus order reveals that DRP has not applied its mind. The assessee has filed objections running into more than 400 pages not a single objection has been considered by the DRP. Therefore, the order of Ld DRP is set aside and remit the issue back to the file of Ld DRP for re-adjudication - in favour of assessee by way of remand.
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2012 (10) TMI 803
Deduction u/s.80-IB(10) of the Act - Held that:- In the present case, the facts are peculiar. The assessee had not only completed the construction two years before the final date and had applied for BU permission. Such BU permission was not rejected on the ground that construction was not completed, but the some other technical ground. In that view of the matter, granting benefit of deduction cannot be held to be illegal - In favor of assessee. Not every condition of the statute can be seen as mandatory. - If substantial compliance thereof is established on record, in a given case, the court may take the view that minor deviation thereof would not vitiate the very purpose for which deduction was being made available.
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2012 (10) TMI 802
Whether the Department is entitled to charge interest under Section 234B of the Income Tax Act, 1961, on the assessee bringing forward the tax credit balance into the year of account relevant to Assessment Year 2001-2002 Following the judgement of court in case of [ CIT v. Tulsyan NEC Ltd 2010 (12) TMI 23 - SUPREME COURT OF INDIA] Held that:- It is immaterial that the relevant form prescribed under Income Tax Rules, at the relevant time (i.e. before 1.4.2007), provided for set off of MAT credit balance against the amount of tax plus interest i.e. after the computation of interest under Section 234B. This was directly contrary to a plain reading of Section 115JAA(4). Further, a form prescribed under the rules can never have any effect on the interpretation or operation of the parent statute. Mat credit allowed to be set off from advance tax before calculating interest - in favour of assessee - civil appeals filed by the Department are dismissed with no order as to costs.
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2012 (10) TMI 801
Penalty under section 271(1)(c) of the Income Tax Act, 1961 - Whether penalty can be levied if Part of sale consideration has been applied for purchase of another residential house and assessee is allowed proportionate amount of deduction under section 54F when income declared was not correct - Held that:- Mere addition in Income is not sufficient there must be concealment of Income to attract penalty. - Revised return can be filed by an assessee where there is omission or wrong statement or any inadvertent mistake. [Udayan Mukherjee v. CIT 2005 (11) TMI 62 - CALCUTTA HIGH COURT ] - In the Present case under consideration a bonafide mistake has happened in the matter of deduction under section 54F or under section 54 of the Act. This is a case of bona fide misconception and belief, therefore, penalty under section 271(1)(c) is not leviable. - Further when the assessee has disclosed the transaction which is the basis for capital gains tax and though wrongly claimed exemption from the capital gains tax, that cannot be a case of Penalty.Thus, the explanation of the assessee was bonafide and under that facts and circumstances, section of 271(1)(c) is not applicable - A.O. is not justified in levying penalty of Rs. 2,78,660/- under section 271(1)(c) of the Act. Therefore, the same is cancelled. - decided in favor of assessee.
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2012 (10) TMI 800
Waiver of interest charged u/s234A, 234B, 234C - Delay in filing Returns - Held that:- During search operation in premises of assessee delay of about 18 months in respect of assessment year 1994-95 and 12 months in respect of assessment year 1995-96 in filing the returns ,this issue is remitted back to the Chief Commissioner of Income Tax, Kochi for re-consideration after giving an opportunity of hearing to the petitioner. In order to avoid delay, the petitioner shall appear before the Chief Commissioner on a day fixed by him after receipt of notice from the Chief Commissioner and the Chief Commissioner shall dispose of the case of the petitioner within three months from the date of receipt of the notice to him. Till the disposal of the application of the petitioner,the impugned demand shall not be executed - writ petition is disposed off.
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2012 (10) TMI 799
Restraining of illegal business running by respondents which was wrong and without sanction of law - Held that:- Writ of prohibition can be issued only when inferior court or Tribunal acts in excess of jurisdiction, in violation of the principles of natural justice etc. The remedy of the petitioner is to approach appropriate forums to get a proper adjudication. Writ Petition is not a proper remedy in respect of the matters highlighted by the petitioner - Leaving open the right of the petitioner to prosecute such remedies, this writ petition is dismissed.
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2012 (10) TMI 798
Reopening of assessment - Held that:- As decided in CIT Versus M. Chellappan And Another [2004 (11) TMI 17 - MADRAS HIGH COURT] completion of the assessment proceedings under Section 143(3) read with 147 without issue of notice under Section 143(2) was bad in law. When there was failure on the part of the Revenue from complying with the procedure laid down under Section 143(2), the assessment had to fail. The facts of this case are no different from the case already discussed above as there was no notice issued under Section 143(2) no hesitation in confirming the order of the Tribunal cancelling the assessment - in favour of assessee.
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2012 (10) TMI 797
Non deduction of TDS - CIT(A) deleted the demand raised - Held that:- Undisputedly, payment of Rs. 15 lacs had been made by the assessee company to M/s Nesco Ltd. on 01.04.2002 also clear from the copy of account of M/s Nesco Ltd. for the period from 01.04.2002 to 31.03.2003. On a query as to why the assessee had failed to deduct tax at source on such payment @ 22.44%, the assessee had submitted that the certificate u/s 197 stood already applied for by M/s Nesco Ltd. even before the date of payment, i.e., 01.04.2002. Undisputedly, the certificate u/s 197 was granted only on 23.04.2002, authorizing the assessee to deduct tax at source @ 2% plus surcharge u/s 194 from the licence and maintenance fee/rent compensation payable by the assessee to M/s Nesco Ltd. upto 31.03.2003, thus it is quite clear that it was to remain in force till 31.03.2003, unless cancelled by the ITO prior to the said date Thus, the assessee has not been shown to have committed any default in deducting the tax and depositing it. It was only because the assessee did not have the TDS certificate for low deduction @ 2% on 01.04.2002 while paying the advance rent, that the Assessing Officer treated the assessee as an assessee in default for not deducting 20% tax on 01.04.2002, on the advance rent paid to M/s Nesco Ltd - the tax having been deducted @ 2% and having been deposited before the prescribed date, by no stretch of imagination can the assessee be deemed to be an assessee in default - in favour of assessee.
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2012 (10) TMI 796
FMV of capital asset on 01-04-1981 – Land & building held on partition of HUF – Assessee had taken FMV as on 01-04-1981 calculated by register valuer - AO found difference in the FMV as on 01-04-1981 in comparison with as comparable sales instances in the same area – AO compute cost of acquisition as FMV on 01-04-1981 on the basis of comparable sales of same area – Held that:- The matter of valuation of FMV as on 01-04-1981 there is always an element of estimation and guess work as the data available cannot be comparable with the property in question in all aspects. In the matter of valuation FMV as on 01-04-1981, the revenue always takes a stand that the same is less than what is adopted by the assessee, because doing so, will increase the quantum of capital gains. The assessee on the other hand, will content with the FMV as on 01-04-1981 is higher, because that will result in capital gains being computed at a lower figure. Keeping in mind that valuation can never be exact, we would be much more magnanimous than the AO and fix the value of FMV of the property as on 01-04-1981 at Rs.5,000/- per cent for the first and second property. In relation to Property sold on 10-07-1981 - There is evidence available that the value of the land was adopted as on 10-07-1981 at Rs.14,000/- per cent. The assessee has also adopted the same value while computing the capital gains. The reasons assigned by the AO for rejecting the comparable sale instances are not justified. The valuation as declared by the assessee for this property is directed to be accepted. Thus, the appeals are partly allowed.
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2012 (10) TMI 791
Addition on account of undisclosed investment u/s 69B - Assessee had acquired land and paid the consideration in F.Y. 2000-01 - Got the possession of land in F.Y. 2000-01 and get registered in the F.Y. 2005-06 - AO has relied on the jantry price or minimum price of land in a particular area - And presumed that the amount expended is more than the amount recorded in the books – AO made addition u/s 69B of difference amount – Held that:- As the provisions of Sec.50C cannot be applied for making addition u/s. 69B. AO has relied on the jantry rates without bringing any material on record to prove that assessee has in fact made investments over and above than that recorded in the books, no addition required to be made. In favour of assessee
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2012 (10) TMI 790
Transfer Pricing – Arm Length Price – Whether assessee is estopped from pleading before the CIT(A) that the comparable taken by it are wrong, whereas same has been accepted by TPO - CIT(A) holding that the 4 comparable selected by the assessee and accepted by the TPO, are not functionally comparable and decides in favour of assessee – Held that:- Following the decision in case of Quark Systems Pvt. Ltd. (2009 (10) TMI 591 - ITAT, CHANDIGARH) that assessee is not estopped from pointing out a mistake in the assessment, for such mistake is the result of evidence adduced by the tax payer. In this case the assessee has demonstrated that prima facie there is a mistake in its taking all these comparables. Appeal decides against revenue. In respect of retrospective amendment to Sec.92C - Set aside the issue to the file of the CIT(A) for fresh adjudication
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2012 (10) TMI 789
Addition u/s 68 - Assessee purchase the property in the capacity of power of attorney holder - Subsequently, the same property was sold - The sale consideration was received in the form of DD for Rs. 90 lakhs and the remaining amount by way of cash - AO treats payment received by way of DD as the sale consideration – And made addition u/s 68 for the difference amount – Held that:- When the assessee purchased the property the payment made to the seller was debited to the books of accounts and when he sold the same it was credited to the books of account. He paid the taxes also. These very important aspects were neither considered by the AO nor considered by the CIT(A). The assessee had purchased the property for Rs 2,71,42,870/- and sold it at Rs. 90,00,000/- the balance amount has to be considered as a business loss. Issue remits the matter back to the file of the AO to examine the issue afresh in accordance with law. Issue remand back to AO
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2012 (10) TMI 788
Unexplained investments - Difference in valuation shown by the assessee and determined by DVO - reopening of assessment - CIT(A) deleted the addition - Held that:- Assessee has not disputed the fact that except the letter dated 06.06.2008, he did not submit any information or explanation in response to the notices and questionnaire issued by the AO, thus AO had no option but to call the report from the DVO about the valuation of the property purchased by the assessee on 11.8.2005 to verify the consideration declared by the assessee. Therefore, AO rightly proceeded to call the report from the DVO with regard to valuation and verification of the consideration of the property purchased by the assessee. As per the CIT(A)'s Order the issue was related to the property in Mayurdhawaj Apartments, Patpar Ganj, Delhi, but the issue in the present appeal is related to the property purchased by the assessee in Darya Ganj, New Delhi. Furthermore, the assessee filed a copy of sale deed related to property purchased during the AY 2004-05 before ITAT ‘E’ Bench but on careful perusal of the orders of the authorities below, it is observed that the assessee has not filed a copy of the registered sale deed in his favour either before the authorities below or before us. AO called a DVO report on compelling circumstances and at the same time did not confront the same to the assessee as per provisions of Section 142A(3), thus the impugned order is cryptic and not well-reasoned. Therefore, it is appropriate to restore the issue to the file of AO with a direction to decide the issue de novo following the provisions of Section 142A, inter alia provisions of Section 56(2) - in favour of revenue for statistical purposes.
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2012 (10) TMI 787
Difference in stock submitted to bank and income tax department - CIT(A) deleted the addition - Held that:- Quantitative detail of stock was the same as in the statement submitted to the bank as well as that maintained for finalization of accounts for income tax purposes. The difference occurred only because of difference in valuation method and the same was valued at dealer price for the bank, whereas it was valued at cost or market price, whichever is less, for the balance sheet - there is no evidence that bank had verified the stock physically. AO has not made any independent verification of the books of accounts and stock. He has not pointed any error in the books of accounts and stock. It is a settled law that if two views are possible, the view in favour of the assessee has to be adopted. Under the circumstances, the addition based on stock statement submitted to Bank is not sustainable - in favour of assessee. Non deduction of tax u/s. 194H - CIT(A) deleted the addition - Held that:- The payments made by the assessee was for services rendered to the distributors of the assessee. Hence, the same would fall under the definition ‘commission or brokerage’ u/s. 194H as decided in M/s Vodafone Essar Cellular Ltd. vs. ACIT [2010 (8) TMI 691 - KERALA HIGH COURT] hence, principally, in agreement with the view taken by the AO on this issue - Considering the submissions of assessee that the payments in this case on many occasions did not cross the threshold limit for deduction of tax u/s. 194H submitting the ledger of discount a/c in the books of assessee. Thus upon careful consideration of the documents in this regard the issue is remitted to the file of the AO to ascertain the exact amount of tax which the assessee was liable to deduct - in favour of Revenue for statistical purposes.
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2012 (10) TMI 786
Franchisee fees - satellite schools which are running under the name and logo of Delhi Public School - CIT(A) deleted the addition - Held that:- As decided in assessee's own case that the amount received by the assessee society from various satellite schools which are running under the name and logo of DPS having a different managerial set up than the assessee DPS society was considered as not liable to tax and additions made by the Assessing Officer in this regard had been deleted following principle of consistency - AO has not brought any substantial or incriminating cause against the assessee society which supported him in his action to consider the fee received from satellite schools liable to be taxed in the hands of assessee society - in favour of assessee. Depreciation - capital expenditure treated to have been applied for the object of the trust, allowance of depreciation will amount to double deduction - CIT(A) allowed the claim - Held that:- As decided in D.I.T. vs. Vishwa Jagriti Mission [2012 (4) TMI 289 - DELHI HIGH COURT] claim of depreciation on fixed assets utilized for the charitable purposes has to be allowed while arriving at the income available for application to charitable and religious purposes, since the income of the society should be computed on the basis of commercial principles. Claim to depreciation for determination percentage of funds to be applied for purposes of trust is permissible – Not a case of double benefit - in favour of assessee. No provision for set off losses u/s. 11, 12 & 13 - Held that:- As decided in D.I.T. vs. Raghuvanshi Charitable Trust [2010 (7) TMI 158 - DELHI HIGH COURT] the adjustment of the expenses incurred by the trust for charitable and religious purposes in the earlier year against the income earned by the trust in the subsequent year would amount to applying the income of the trust for charitable and religious purposes in the subsequent year in which such adjustment has been made and will have to be excluded from the income of the trust u/s 11(1)(a) - in favour of assessee.
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2012 (10) TMI 785
Difference in gross receipts as per TDS certificates and as declared by assessee - CIT(A) deleted the addition - Held that:- As per the reconciliations submitted by assessee out of gross receipts as per TDS certificates, a sum of ₹ 1,63,93,102/- was received as advance from U.P. Jal Nigam and ₹ 40,00,000/- was received as advance from C & D S Unit of UP Jal Nigam, Baghpat and the same were duly reflected in the balance sheet under the head secured loan. The assessee has also furnished the confirmations in this regard from the respective departments confirming the advance given to the assessee vide its letter dated 17.3.06 & the assessment was framed after considering the reconciliation statement and confirmations furnished by the assessee. CIT(A) has clearly given a finding that the assessee has submitted its reconciliation of the total turnover and the variation in the receipts as per accounts and that as per the TDS certificates is cogently explained. Based on the reconciliation, the addition in this case is not sustainable - in favour of assessee.
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2012 (10) TMI 784
Deduction u/s 80HHC in respect of DEPB credits - Held that:- Following the order of ITAT in assessee’s sister concern case the issue about calculation of 80HHC in respect of DEPB credits is set aside and restored back to the file of Assessing Officer. Direction to AO to decided afresh in the light of the decision of Topman Exports Versus Income-tax Officer, (OSD), 14(2), Mumbai [2009 (8) TMI 827 - ITAT MUMBAI] wherein held that the face value of DEPB is chargeable to tax under section 28(iiib) at the time of accrual of income, that is, when the application for DEPB is filed with the competent authority pursuant to exports and profit on sale of DEPB representing the excess of sale proceeds of DEPB over its face value is liable to be considered under section 28(iiid) at the time of its sale - in favour of assessee for statistical purposes.
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2012 (10) TMI 783
Addition towards estimated interest on advances - Held that:- AO disallowed interest @12% per annum on the amount paid to three relatives on loan taken by the assessee on the ground that the assessee paid interest to the bank and on unsecured loans. Neither the date of advances nor the nexus between loans or advances and funds borrowed is evident from the impugned order nor the CIT(A) recorded any findings as to the business expediency of interest free advances or on the nexus between borrowed funds and interest free advances. As the complete facts are not available nor the assessee furnished date(s) of interest free advances or dates of borrowings and nor furnished any material, establishing commercial expediency in advancing aforesaid funds nor the CIT(A) recorded any findings on these aspects, it will be fair and appropriate to set aside the order of the CIT(A) and restore the issue raised in this ground back to his file for deciding the matter afresh in accordance with law - in favour of assessee for statistical purposes. Payment to MCD towards registration, conversion and parking charges - revenue v/s capital - Held that:- Expenses which are permitted as deductions are such as are made for the purpose of carrying on the business and if a sum is paid by an assessee conducting his business because in conducting it he has acted in a manner which has rendered him liable to penalty for breach of laws, it cannot be claimed as a deductible expense. The assessee is expected to carry on the business in accordance with law. The evasion of law cannot be a trade pursuit. Since in the instant case, MCD demanded the aforesaid compounding charges only when Hon’ble Apex Court directed the MCD to act and seal the premises in view of flagrant violations of various laws including Municipal Laws, Master Plan and other plans besides Environmental laws and indisputably, the assessee misused its property and violated the civic and Environmental laws, it is to be opined that aforesaid charges paid by the assessee to MCD, could not be allowed in view of explanation to sec. 37(1). Thus the issue as to whether expenditure is revenue or capital, becomes academic and therefore, does not survive for our adjudication - against assessee. Disallowance of 1/5th of expenses - conveyance, vehicle maintenance & telephone expenses - Held that:- Since personal use of cars and telephones by the Karta of the assessee HUF and his family members or staff has not been denied nor it was claimed that the Karta or his family members had any independent vehicles or telephones for personal use, disallowance of 1/5th of the conveyance expenses, expenses on running and maintenance of vehicles as also expenses on telephones/mobiles, in the light of provisions of sec. 38(2) is reasonable - against assessee.
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2012 (10) TMI 782
Unexplained jewellery found in the lockers - search - Held that:- Central Board of Direct Taxes Circular No. 1916, dated May 11,1994, lays down guidelines for seizure of jewellery and ornaments in the course of search, the same takes into account the quantity of jewellery which would generally be held by the family members of an assessee belonging to an ordinary Hindu household - not to seize gold jewellery, if it is found to the extent of 500 grams and claimed to be of a married lady. Similarly, to the extent of 250 grams claimed to be belonging of a unmarried lady and 100 grams claimed to be belonging of male member, than no seizure is to be affected. In the present case value of jewellery surrendered by assessee is 738.570 grams of Rs. 5,64,674/-. The total jewellery treated to be “explained” one is 2888 grams as per the circular & rest of the jewellery is to be treated as “unexplained” - First Appellate Authority has erred in deleting the total value of jewellery , thus the total addition required to be made by the AO is value of jewellery i.e 139 gms + 234 gms by taking the value at 755 per gm - partly in favour of revenue.
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2012 (10) TMI 781
Sale of agricultural land as an adventure in the nature of trade - Whether "Agriculture Lands" fall with the definition of "Capital Asset" ? - Held that:- The properties are duly shown in the returns more particularly in the wealth-tax return. Thus, AO draw wrong inference by considering the facts in an erroneous manner. He could not bring any material which suggests the dominant intention of the assessee to earn profit by selling the properties at higher rate immediately after the purchase. On the other hand, assessee has demonstrated that she has been making investment in the properties intending to hold them, enjoy their income - in favour of assessee. The revenue in its grounds of appeal has also pleaded that CIT (Appeals) has deleted the addition by entertaining additional evidence in contravention of Rule 46A of Income-tax Rules, 1962. However, DR was unable to point out which document was produced by the assessee by way of additional evidence. The assessee did not move any application under Rule 46A . The documents considered by the CIT(Appeals) were produced before the Assessing Officer. In view of the above discussion, no merit in the appeal of the revenue - in favour of assessee. Compensation for delay in handing over the possession of the property - holding charges - Income from property v/s Capital receipt - t in case the developer failed to construct the building then it will pay a compensation of Rs. 50 per sq.ft. of the super area per month to the intending allottee for the period of such delay - initially assessee shown receipt of holding charges as rental income - Held that:- Compensation received form DLF Commercial is a capital receipt - in favour of assessee.
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2012 (10) TMI 780
Repair and maintenance of the office - Capital v/s revenue - Held that:- From perusal of details of the expenses it reveals that all these details pertained to minor repairs carried out in the office. Incurrence of these expenses did not result into any asset of enduring nature. Therefore, CIT(Appeals) has rightly observed that the expenses incurred by the assessee are of revenue nature, which were incurred in order to carry out current repairs in the office as well as on other items so that the office premises can be used more effectively for the purpose of the business - in favour of assessee. Disallowance of bad debts - amount forfeited by the landlord, on account of notice period rent, outstanding rent, water and electricity charges - Held that:- The assessee has submitted that all these items are of revenue nature as had the security was not adjusted then equal amount would have been paid by the assessee and it could get refund of security. The situation will remain the same. As far as the advance given to the lorry vendor is AO did not investigate the issue with the angle whether it is a revenue expenditure or not & simply disallowed. Thus FAA has considered all other details and thereafter deleted the disallowance no force in the ground of appeal raised by the revenue - in favour of assessee.
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2012 (10) TMI 779
Transfer Pricing Adjustment - working capital adjustments - assessee contested against the comparables selected - Held that:- Assessee has surplus capital from reserve, share capital etc. but still it operates its activity from the borrowed fund, then on the surplus capital, it would earn interest income which is independent to the operation of the company. Such income would be assessed as income from other sources, but the profit margin from the operations would be on lower side because of interest expenses etc. Thus, the working capital as envisaged by the assessee would always effects its profit. If the assessee was not require to use its own working capital then it will be a relevant factor for determining the profit margin and an adjustment to eliminate the disparity would always require. Considering the stand of the learned TPO in assessment years 2007-08 and 2008-09 where benefit of working capital adjustment was granted to the assessee, the plea of the assessee is allowed and set aside the issue to the file of the Assessing Officer with a direction that AO shall grant working capital adjustments after considering the computation filed by the assessee before the DRP - in favour of assessee. Exclusion Allsec Technology Ltd. from the list of comparables - Held that:- Extracting the filters applied by the assessee for eliminating the non-comparable companies or adjusting their profit margin, the assessee has not applied the filter i.e. the companies who have incurred expenses of more than 5% of its sales on advertisement and marketing which required to be excluded. At this stage, in the absence of any finding, at the level of the TPO or of the learned DRP, it is difficult to verify the version put forth by the the assessee. Apart from this profit margin of any company is dependent upon many factors. By taking into consideration the one aspect, if on excluding the comparables then not a single comparable would be identified. The simple reason is whenever any adjudicating authority would try to carry out a study of the result of any company with a particular angle then the result would be different. The assessee ought to have placed specific details before the TPO and demonstrated how a prejudice had caused to the assessee, if comparables who have incurred more than 5% of sales a expenses towards advertisement and marketing are selected. Therefore no in the contentions of the assessee for excluding of Allsec Technology Ltd. from the list of comparables - against assessee. Excluding of Maple E-Solution from the list of comparables - Held that:- Maple e Solution has shown 100% loss in financial year 2002-03 but all of a sudden shown profit at 37.38% in financial year 2004-05. In financial year 2008-09, it again shown losses and its profit margin is -65.23%. Considering this aspect, we are of the view that this comparable deserves to be excluded from the list of comparables. With the above observations the issue is set aside back to the file of the Assessing Officer for re adjudication - in favour of assessee. Filter of 25% transaction with related party of the total revenue - Held that:- In a scheme of Income-tax Act the expression “associate enterprises” is somewhat similar to that of “related party”, defined in section 92A(2)(a) i.e. if an enterprises holds 26% share in the other enterprises then it can be considered as an associate enterprises. Similarly, under sec. 40A(2)(b) interested persons means if a person is having not less than 20% of voting power in a company then such person would be considered as substantial interest in the company. This section relates to examination of the cases where some undue benefit is being extended by a company. These two provisions give an indicator that whenever any issue regarding an interest created in any company is being examined which has influenced over the results of the company then these aspects can be taken as guidance one can safely say that an entity can be taken as uncontrolled, if its related party transaction do not exceed 25% of the total revenue. Thus, no fault in the conclusion of the TPO for applying this filter to the extent of 25% transaction with related party of the total revenue - against assessee. Very large companies who have a turnover of more than Rs.260 crores cannot be considered as a comparable companies, in view of their huge turnover. Therefore, finding force in the contentions of the assessee and direct the AO to exclude these three comparables and thereafter reworked out the means profit of the comparables - in favour of assessee.
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2012 (10) TMI 778
Jurisdiction power u/s 263 by CIT(A) - Failure of AO to initiate penalty proceedings while completing assessment under Section 143(3) - Held that:- The Assessing Officer while passing the assessment order under Section 143(3) had given an office note that the surrender of the agricultural income which was made by the assessee was subject to no penal action under Section 271(1)(c). A perusal of the same clearly shows that the assessee had made surrender with a clear condition that no penal action under Section 271(1)(c) would be initiated. The office note further depicts that the offer of the assessee was accepted by the department since the department had no documentary evidence against the assessee except the report of the Inspector. Once that was so, the department could not take somersault and seek to levy penalty. The penalty imposeable under sec. 271(1)(c) or under section 273(b) are independent proceedings then the assessment order. The penalty imposeable under sec. 273-B is to be imposed for false statement of/or failure to pay advance tax. Both these penalties are not dependent upon the assessment order but relying on decision taken in Additional Commissioner Of Income-Tax, Madhya Pradesh Versus Indian Pharmaceuticals [1978 (10) TMI 12 - MADHYA PRADESH HIGH COURT] AO has exercised his discretion for not visiting the assessee with the penalty. His order cannot be termed as erroneous and, therefore, no action under sec. 263 is justifiable - in favour of assessee.
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2012 (10) TMI 777
Penalty u/s 271(1)(c) - addition to income - Held that:- The assessee has given an explanation the amount represents sale of car and recovered from the blues on account of Shri Deepak Seth. The addition was made because supporting documents were not given by the assessee. Its explanation was not found to be false. Only thing is that assessee could not substantiate its explanation with the supporting evidence. Thus, this amount, prima facie, cannot be considered for the purpose of the penalty. Non deduction of TDS - Held that:- The revenue authorities have not referred any circumstance or past conduct of the assessee which suggests that such type of mistake expressed by the assessee as bona fide cannot happen in its case. Though it is quite difficult to prove or disprove such type of claim with the help of demonstrative evidence but the Assessing Officer who assessed the assessee annually may refer some circumstance which can highlight the antecedents of the assessee or its conduct in earlier or subsequent year to suggest that it was not a bona fide mistake rather it was a deliberate attempt. No such material is available on the record, therefore, we do not have any hesitation to conclude that such type of mistake can happen while filing the return - direction to delete the penalty levy - in favour of assessee.
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2012 (10) TMI 776
Penalty paid to NSE for trading violation - Disallowance - Held that:- The nature of assessee’s business is that it is regulated by NSE and NSE as part of its exercise to keep check on members keep on checking books of accounts from time to time and for violation of procedure and norms generally imposes penalty, which are not in the nature of violation of law and hence cannot be termed as penalty. Moreover, the assessee has been paying these types of penalties from 1998 onwards till 2007-08 and in none of the years the so-called penalty was disallowed. Therefore, the first ground of appeal with respect to penalty for trading violation is allowed - in favour of assessee. Disallowance of Telephone expenses for personal usage - Held that:- It is clear from the facts of the case that the telephone was installed at the residence of the director and its personal use cannot be denied the disallowance of 20% is very reasonable disallowance which is based upon the facts and circumstances of the case - against assessee. Disallowance of business promotion expenses - Held that:- The facts of the case that assessee was generally engaged in trading of shares on its own account and had spent an amount of Rs.1,10,615/- as business promotion expenses, keeping in view the facts of the case, the disallowance of 20% is reasonable especially keeping in view the fact that as per assessment order, the assessee had very few clients. Disallowance of municipal tax - Held that:- It is seen that at the time of sale of property, the seller is required to clear all outstanding dues of municipal taxes if any. The Assessing Officer has made disallowance on the basis that the assessee had sold the property vide agreement to sell dated 29.8.2002 and whereas the date of tax was 19.9.2002 i.e. after the date of agreement to sell. However, AO has not appreciated the fact that past accrued taxes and liabilities before the date of sale has to be borne by the seller. Nor AO has brought out any contrary observation from the agreement to sell from where it could be said that municipal tax was to be paid by the purchaser. Therefore, the disallowance made by the AO and upheld by the Ld CIT(A) was not justified - in favour of assessee.
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2012 (10) TMI 775
Speculative loss - CIT(A) deleted the addition - Held that:- The genuineness of loss was never questioned by A.O., therefore, without going into the findings whether the loss was genuine or not, the case of the assessee is covered by the case of sister concerns M/s. Orient Overseas Pvt. Ltd. wherein under similar facts and circumstances, the ITAT had remitted the case back to the file of A.O. - in favour of revenue for statistical purposes. Disallowance of interest being not incurred for the purpose of business and profession - CIT(A) deleted the addition - Held that:- On analysis of balance sheet, there does not seem to be any loans or advances which can be said to have been given out of borrowed funds. The non charging of interest from sister concerns is also covered by the decision of Hon'ble Apex Court in the case of SA Builders vs. CIT reported (2006 (12) TMI 82- SUPREME COURT OF INDIA ) wherein it was held that transfer of borrowed funds to a sister concern is to be seen from the point of view of commercial expediency and not from the point of view whether the amount was advanced for earning profit, thus no reason to interfere in the order of CIT (A) on this account - against revenue.
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2012 (10) TMI 774
Penalty u/s 271 AAA - search and seizure u/s.132 - Held that:- Under Section 132(4) unless the authorized officer puts a specific question with regard to the manner in which income has been derived, it is not expected from the person to make a statement in this regard and in case in the statement the manner in which income has been derived has not been stated but has been stated subsequently, that amounts to the compliance with Explanation 5(2) of the Income Tax Act, 1961 as decided in CIT vs. Mahendra C Shah [2008 (2) TMI 32 - GUJARAT HIGH COURT] Examining the statements recorded at the time of search u/s 132(4) came to a conclusion that the assessee was never asked about the manner in which the income was earned, nor that she was even asked to substantiate the manner in which undisclosed income was arrived - in favour of assessee.
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2012 (10) TMI 773
Tender Fees Expenses - Revenue v/s Capital - Held that:- The assessee has been submitting tender in its day-today business which are basically works contract on turn key basis. The assessee has procured orders for sale of its items manufactured. It has to fulfill the tenders floated by State Governments or Electricity Boards. It is not necessary that it will get the order. It does not create any new asset. It was incurred in connection with the integral part of profit earning process and not for acquisition of any asset, thus Revenue authority has failed to look into the true nature of the expenses - in favour of assessee. Bank Guarantee & Loan Processing Charges - Held that:- Considering assessee's submission it can be concluded that loan was taken for working capital on perusal of the copies of invoices issued by various vendors as it reveals that the goods purchased by the assessee are insulator, panels etc. FAA fail to look into the fact that assessee is in the business of manufacture distributor transformers, HT cable box on job contract basis. It also constructs power houses and lays electrical lines. In connection with these operation, assessee has to purchase all these items. These items were consumed in the ultimate final product, which is the trading stock of the assessee - in favour of assessee.
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Customs
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2012 (10) TMI 834
Food Safety and Standards Act, 2006 - imported consignment of Crude Palm Oil (Edible Grade) - Interim order to allow the petitioner to clear the imported consignment – petitioner submitted that goods are conform to the standards laid down under the Food Safety and Standards Act, 2006 and the applicable regulations – Held that:- Petitioner is also entitled to an order of injunction restraining the respondent and each of them, their officers and subordinates from causing any delay or further delay in allowing the petitioner to process the imported consignment – interim order passed
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2012 (10) TMI 833
Validity of show cause notice - Held that:- It is not a mere formality, but a statutory right to oppose the decision for extension of time. Issuance of a notice of three day has defeated the right of the petitioner to effectively defend its case. The petitioner had not only submitted reply, but also requested for more time, so as to represent the case before the department. The department in hurry to pass the order before six months, passed an exparte order, by considering the objection filed by the petitioner, without giving an opportunity of personal hearing. The impugned order therefore on the face of it is in violation of principles of natural justice - alternative remedy of statutory appeal cannot be a bar to maintain this writ petition - Writ petition is allowed. Impugned order is set aside. The petitioner shall be entitled to release of goods subject to payment of admitted duties and right of department to hold enquiry and impose duties & penalties under Section 124 of the Act -Connected Miscellaneous Petition is closed - No costs.
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2012 (10) TMI 832
Definition of the term Domestic Industry - anti dumping duty on Soda Ash - held that:- between 1999 and 2010 in respect of the producers who are related to the exporters or importers of the dumped articles, or who are themselves importers, the term “domestic industry” was liberally construed by giving discretion to the Designated Authority treating such persons as forming part of the domestic industry. In the amendment which was brought in with effect from 27-2-2010, on a reading, it is clear that the first portion of the definition of the domestic industry, which relates to the domestic producers as a whole whose collective output constitutes the major portion of the total domestic production, remains intact. Insofar as it relates to the producers who are related to the exporters or importers of the dumped article or who are themselves importers of the dumped articles, the law-makers made it very clear that while construing them as domestic industry, the Designated Authority “may be construed as referring to the rest of the producers only”. The term “may be construed as referring to the rest of the producers only” on a bare and literal interpretation, in our view, should be construed only in respect of the producers who are related to exporters or importers, or producers who are themselves importers, and simply because the term “only” is construed, it cannot be taken to the first portion of the definition. The word “only” under Rule 2(b) of the Rules need not be concentrated much and in our view it has no significance as such. While it is true that the international agreements like WTO and GATT may not be the absolute and only source for interpreting the Indian Law, so long as there is no contradiction between the definition of the agreement in the international law and the terms of the Indian Law, there is absolutely no prohibition for this Court to take note of the terms of the international agreements for the purpose of better appreciation of the term. The term “domestic industry”, as it was amended on 27-2-2010, has not taken away the discretionary power of the Designated Authority and the Designated Authority is entitled to proceed further. As elicited above, under Rule 5(3)(a) proviso, there is a prohibition against the Designated Authority not to investigate when the domestic producers expressly supporting the application account for less than 25% of the total production of the like article by the domestic industry. But under the first portion of the term “domestic industry” defined under Rule 2(b) of the Rules, elicited above, it is very clear that the collective output of the entire manufacture put together totally must constitute the major proportion of the total domestic production. While so, on the admitted fact that M/s. DCW Limited is the only producer of Soda Ash in the country, even though it has produced only 4%, by a combined reading of Rule 2(b) and Rule 5(3) proviso, M/s. DCW Limited must be considered as a domestic industry. The writ petition against the preliminary finding published by the Designated Authority is maintainable
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2012 (10) TMI 831
Offence under Section 135A of the Customs Act – confession of the co-accused – Petitioner contends that the statement of the Petitioner recorded under Section 108 of the Customs Act is exculpatory in nature and the statement of Virender Singh Batra, recorded under Section 108 of the Customs Act, 1962 cannot be relied upon for the purpose of framing charges as he was not examined as a witness in terms of Section 244 Cr.P.C in the complaint case – Held that:- Confession of the co-accused is admissible only under Section 30 of the Evidence Act. One of the essential requirements of the said provision is that the two accused should be tried jointly. Since the confession of the co-accused is not admissible as he is not being jointly tried with the Petitioner and besides this piece of evidence there is no other evidence, no charge can be framed against the Petitioner for offence under Section 135A of the Customs Act - order directing framing charge and the consequent order framing charge against the Petitioner for offence under Section 135A Customs Act are set aside
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2012 (10) TMI 830
Refund claim – benefit of Notification No. 21/2002-Cus. – Held that:- There is no ‘contest’ or ‘lis’ between the appellant and the department at the time of clearance of the goods - payment of higher rate of duty by the appellant is by way of inadvertent mistake without taking the benefit of notification - benefit of said notification, was available to the importer - it is clear case of payment of higher duty due to ignorance - appellants are entitled to refund of excess duty paid by them
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2012 (10) TMI 772
EPCG Scheme - Revenue contended that the Notification provides exemption to the spare parts for existing plant and machinery whereas as per the EPCG scheme under para 5.1A, spares including reconditioned spares, tools, spare refractories are covered and the Notification during the period in dispute provides exemption only to the spares and not to the catalysts hence the demand is rightly made. - Held that:- In the policy, the capital goods also include catalysts for initial charge and under the EPCG scheme for existing plant, the catalysts are separately mentioned in the spares. Catalysts and consumables are separately mentioned in para 5.1A of the Policy. The Notification in question provides exemption from payment of duty in respect of spares as well as consumables. Subsequently, the consumables were omitted for the benefit of the Notification. The applicant was declaring catalysts in the bills of entry and the same were cleared without any objection. In these circumstances, as the catalysts are separately mentioned in addition to consumables in the EPCG scheme for existing plant and also separately mentioned in the definition of capital goods under the policy, prima facie we find merit in the contention of the applicant on merits as well as on time bar. - stay granted.
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2012 (10) TMI 771
Penalty under Section 114(i) of the Customs Act - wrong provision of law has been quoted by the Revenue in the show-cause notice - non-mention of Section 113 in the show-cause notice would not per se invalidate the penalty imposed under Section 114 if the penalty is otherwise supported by the essential facts alleged and proved - no allegation of “fraudulent” export in the show-cause notice - show-cause notice did not allege the essential, and consequently the adjudicating authority could not hold any goods to be liable to confiscation in terms of Section 113 of the Act - nobody could have been held to have rendered the goods liable to confiscation so as to attract a penalty under Section 114 of the Act in the present case - question whether Section 114 of the Act could be invoked against the appellant did not arise in that case - in favor of assessee.
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Corporate Laws
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2012 (10) TMI 829
Reduction of Equity Share Capital of Company – Held that:- As Petitioner has followed the required procedure as contemplated under Sections 100 and 101 of the Act for the proposed reduction of capital. The Court also finds that Article 8 of the Articles of Association of the petitioner-Company permits reduction of capital. It also appears that as there was no outlay of funds, the interest of the creditors is not adversely affected, therefore, the procedure as contemplated under Section 101(2) of the Act is not required to be followed that the petitioner has effectively met with the observations made on behalf of the Registrar of Companies in its affidavit-in-rejoinder and further affidavit. No adverse material has been pointed out by the Registrar of Companies against sanction of the reduction of share capital - Reduction of the paid up share capital proposed by the petitioner is hereby sanctioned. No further publication in the Government Gazette is required - Accordingly, the petition is allowed, in the above terms - Petitioner Company is directed to pay Rs.7500/- to Mr. Y.V. Vaghela, learned Central Government Standing Counsel, appearing on behalf of the Regional Director.
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2012 (10) TMI 828
Scheme of Amalgamation - contravening the Provisions of Section 295 as the company has granted a loan to Ms. Manju Goel, relative of director - Held that:- Mr. Anuj Goyal, Director of Transferor Company No.1 filed an affidavit in response to the affidavit filed by Regional Director stating that that the above non-compliance has occurred inadvertently and due to oversight; without any mala-fide intention on the part of the Board of Directors of the Transferor Company No. 1. also whole amount of Rs. 15,80,000/- has been repaid on 09.11.2011 by Ms. Manju Goel to the Transferor Company No. 1 and the Transferor Company No. 1 has filed a compounding application under section 621A r.w.s. 295 in respect of the loan given by the Transferor Company No. 1 to Ms. Manju Goel. 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 - No objection has been received to the Scheme of Amalgamation from any other party by either of the Petitioner Company or the counsel neither the Petitioner Companies nor the counsel has received any objection pursuant to citations published in the newspapers, Consequently, 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 770
Scheme of Amalgamation - Held that:- In view of the approval accorded by the Shareholders and Creditors of the Petitioner Companies, representation / reports filed by the Regional Director, Northern Region and the Official Liquidator, attached with this Court to the proposed Scheme of Amalgamation, there appears to be no hurdle to grant of sanction to the Scheme of Amalgamation. Consequently, sanction is hereby granted to the Scheme of Amalgamation under sections 391 and 394 of the Companies Act, 1956. Certified copy of the order be filed with the ROC within 30 days from the date of receipt of the same. The whole or part of the undertaking, the properties, rights and powers of Petitioner & also all the liabilities and duties be transferred to and vest in the Transferee Company without any further act or deed. All the Permanent employees of all the Transferor Companies shall become the employees of the Transferee Company without any break or interruption in their service & Petitioner shall stand dissolved without winding up. This order will not be construed as an order granting exemption from payment of stamp duty or taxes or any other charges, if payable in accordance with any law - the Petitioner Companies would voluntarily deposit a sum of Rs. 1,00,000/- with the Common Pool of the Official Liquidator within three weeks from today - Scheme of Amalgamation sanctioned.
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Service Tax
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2012 (10) TMI 837
Business Auxiliary Services - appellants engaged in the activities of visa facilitation and providing customer care services to the Diplomatic Mission Embassies/Consulates and the Visa applicants - Revenue contended the same to fall under the category of business auxiliary service - Held that:- Since issue involved is being clarified by the Circular No. 137/6/2011-ST dated 20/04/2011, therefore requirement of pre-deposit of the impugned demands is waived. On perusal of the said Circular, it is found that appellants are providing exactly the same services, which are discussed in para 3 of the said circular and as clarified by the CBE C the activity undertaken by the appellants are not taxable under Section 65 (105) of the Finance Act, 1994 - Decided in favor of assessee
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2012 (10) TMI 836
Whether department can file appeal with HC u/s 35 with regard to applicability of rate of service tax – Held that:- As per Sec.35G, an appeal shall lie to the High Court from every order not being an order, relating to among other things, to the determination of any question having a relation to the rate of duty on excise or to the value of goods for the purpose of assessment. Following the decision of Karnataka HC in the case of Prakash Air Freight (P.) Ltd. (2011 (4) TMI 581). This case, falls squarely within the phrase "determination of any question relating to rate of service tax" and it is the Apex Court alone which has exclusive jurisdiction to decide the said question u/s 35-L.
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2012 (10) TMI 835
Limitation u/s 11B - rejection of refund claim of demand of service tax paid - demand raised on ground of short duty paid without adjusting excess duty paid in other quarters - Held that:- It is observed that petitioner deposited the duty on billing basis without actual collection, but within the time limit provided for depositing the duty on actual collection. In such case, u/s 68(3), the time available to a service provider such as the petitioner for depositing with the Government service tax though not collected from the service recipient was 75 days from the end of the month when such service was provided. Section 68(3) never provided that the same cannot be paid by the 15th of the month following the end of the month when such service was provided. Thus, if the petitioner deposited such duty with the Government during a particular quarter on the basis of billing without actual collection, he had discharged his liability under sub-section (3) of section 68. Thereafter, on an artificial basis, the Assessing Officer could not have held that he ought to have deposited same amount once all over again in the following quarter. This is fundamentally flawed logic on the part of the Assessing Officer. Further, to accept such formula adopted by the Assessing Officer would amount to collecting the tax from the petitioner twice. Before raising demand under the head of duty short paid, the Assessing Officer should have granted adjustment of the duty already paid by the petitioner towards the same liability.Under the circumstances, question of applying limitation under section 11B of the Act would not arise since we hold that retention of such service tax would be without any authority of law. Issuance of unjust enrichment - held that:- A question of unjust enrichment is wholly irrelevant. It is not refund of a duty which is found upon completion of assessment excess paid that the petitioner is asking for. It is a duty which the petitioner has already paid separately and second time under insistence of the department which he is asking for being refunded. Under the circumstances, the question of unjust enrichment cannot be applied. - Decided in favor of assessee
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2012 (10) TMI 826
In-eligible CENVAT Credit of the Service Tax paid on courier/telephone services - the appellant having accepted that they are not eligible for availing CENVAT Credit, the interest liability arises and they are liable to pay interest on the CENVAT Credit availed. Regarding penalty - held that:- the appellant has reversed the CENVAT Credit which has been pointed out as erroneously taken in August and September 2008 itself. It is also to be noted that the credit which has been availed on courier/telephone/security services, if would have been contested on merit they may have succeeded, as these services are eligible for availing CENVAT credit of Service Tax paid. - penalty set aside.
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2012 (10) TMI 795
Service Tax paid on GTA services - Following the decision of court in case of [ INDIA CEMENTS LTD. Versus COMMISSIONER OF C. EX., SALEM, 2007 (3) TMI 83 - CESTAT, CHENNAI] Held that:- In the presence of specific provision providing for treatment of service for which the Assessee is liable to pay Service Tax on out-put services - appellant is eligible for Cenvat credit. Out-ward transportation - whether the appellant is eligible for the credit of Service Tax paid on out-ward transportation of finished goods from the place of removal during the period from April, 2005 to September, 2005 - Held that:- Credit of Service Tax would be available in respect of Service Tax paid on out-ward transportation of finished goods from the place of removal. Accordingly the entire demand for service tax and penalties imposed cannot be sustained. Therefore, the appeal filed by the Revenue is rejected and cross objection also gets disposed of.
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2012 (10) TMI 794
Stay petitions – Whether Liability of Service tax arise on the services of a Builder himself if he is constructing residential complex – Held that:- As circular dated 21.01.2009 discusses about the issue, which needs reconsideration by the lower authorities after perusing the agreement entered into by the perspective customers or buyers of the flats. As both the lower authorities have not considered the Board Circulars dated 21.01.2009 and 10.02.2012. Appeal remand back to AO for fresh consideration stay granted.
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2012 (10) TMI 793
Demand - Extended period of limitation – Held that:- Error was detected by the department on their own - appellants had made a wrong entry in their ledger accounts and on the basis of wrong entry, earlier show-cause notice was issued. Subsequently, after finalization of the balance sheet the appellant had confirmed that the higher amount shown in the balance sheet was the correct commission amount paid to the foreign service provider. On the higher amount paid, the department sought additional service tax liability - appellant’s plea that the demand is hit by limitation of time cannot be accepted - appellant directed to make pre-deposit
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2012 (10) TMI 767
Cenvat credit - show cause notice to point out that if the Mobile-phone was not installed in the registered premises, that became the reason for denial of Cenvat credit – Held that:- In the view of show cause notice, it is inconceivable how an input service wherever exists shall be reason to grant Cenvat credit - requirement of law is that such service must be relevant to manufacture or providing output service. That was not disputed in the show cause notice - waiver of pre-deposit allowed.
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Central Excise
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2012 (10) TMI 827
Waiver of pre-deposit of amount of penalty - in-eligible CENVAT Credit- Held that:- Appellant is not disputing the in-eligible CENVAT Credit availed by them and has reversed the same along with interest - to that extent order of first appellate authority is upheld and appeal of the appellant is rejected on merit. Penalty - Held that:- appellant had a CENVAT Credit of more than Rs.Two Crores from the time the audit party pointed out the in-eligible CENVAT Credit of Rs.4,49,426/-. If that be so, visiting the appellant with the penalty under the provisions of Rule 15(2) of CENVAT Credit Rules, 2004 read with Section 11AC of Central Excise Act, 1944, seems to be unwarranted as the appellant would not have any reason to utilize the amount as he has enough balance in CENVAT - penalty imposed on the appellant is unwarranted and needs to be set aside and appeal is allowed.
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2012 (10) TMI 825
Rejection of appeal as time bar - Held that:- The order was first issued under speed post and was received back to the Revenue with postal remarks that there is no firm at the given address. As such, even if the order would have been issued under registered post, the same would have came back with the same postal ground. It stands admitted by the appellant that they have closed their factory in the year 1999 and the proceedings against the appellant were initiated by way of issuance of show cause notice in April, 2006. The appellants never bothered to give complete new address for communication purpose. Thus finding favour with Revenue action having pasted the order on the factory gate on 5.12.07 for fulfilling the legal obligation placed upon them in terms of section 37C. The appellant had not made any averment to show that only first page of the order was pasted. Also it is seen that appellant having addressed a letter in December, 2007, for supply of copy of impugned order never further made any efforts to procure a copy immediately. He having came to know that order stand served upon them in December, 2007 and the appellant being aware that an appeal has to be filed within a period of 60 days from the date of receipt of order, made no further efforts for procurement of the order - as the Commissioner (Appeals) has no power to condone the delay beyond the period of 30 days he has rightly rejected it - against assessee.
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2012 (10) TMI 824
Manufacture - movable versus immovable - marketability of goods - erection at the site – manufacturing of trusses, purlins, bracings, crane girders – Works contract - Held that:- When a part of structure is prepared and disassembled, the members thereof will be angles, rods etc., prepared for use in such structure. These are not angles, or plates merely cut or drilled without reference to a particular structure. The later part of Heading 73.08 would apply to the members such as plates, rods, angles, etc., that are prepared for use in structures or their parts in their pre-assembled or disassembled state of an identifiable article of the types of the parts of structures covered under Heading 73.08. The goods manufactured by the assessee it is excisable and duty is leviable. Since this circular is issued in exercise of powers under Section 37B of the Act is binding and the legality and clarity is visible. there was a manufacture of excisable goods by M/s. Richardson & Cruddas Ltd. out of the raw materials supplied by the M/s. Ahmedabad Electricity Company Limited. The Board’s circular clearly clarifies the excisability and marketability and removes the doubt regarding the excisability or dutiability of immovable properties in terms of Rule 2(a) of Rules of Interpretation of Central Excise Tariff. It also makes a clear distinction though the inputs, parts or components which are specified excisable products will remain dutiable and identifiable at the time of their clearance from the factory or place of manufacture. If the person sought to be taxed comes within the letter of the law he must be taxed, however great the hardship may appear to the judicial mind to be.
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2012 (10) TMI 823
Demand of duty and penalty – confiscation - materials outside the premises – Held that:- Since construction activities were going on, the materials could not be accommodated in the premises - assessee has paid duty on the goods along with interest. Since duties and interest has been paid without any ingredient of intention to evade, present confiscation was unwarranted - Act of confiscation is penal in nature. Provision relating to that cannot be loosely invoked without motive being tested by evidence - interest not being disputed by the assessee, the confiscation is held to be bad. Penalty - certain procedural irregularities having been noticed. The appellant need not be penalised to the fullest extent of the duty leviable. Keeping in view that there is no cogent reason brought by Revenue to deny concession in penalty, the appellant is directed to pay penalty to the extent of 25% of the duty demand
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2012 (10) TMI 822
Benefit of export - Manufacturing of Bulk Drugs – The applicant while accepting statutory applicability of all the relevant Rule/Notification/Circular is basically impressing upon whatever act of omission and commission, whichever occurred in this case is only of a nature of procedural error which is liable to be condoned and such substantial benefit of exemption from duty should not be denied in this case of exports. Held that:- whatever may be the internal/personal agreement between different parties/agents etc. the act of duty free clearance in this case was statutorily required to be done in the manner of provision of applicable Rules/Regulations and all legal documentations should be done accordingly. Once a specific category has been chosen then the individuals becomes liable and bound by respective regulatory procedure which (admittedly) stands violated in this case - Benefit of export not available to the assessee.
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2012 (10) TMI 821
Rebate claims - applicant had filed the copies of the AREs-1 which were not certified by the concerned Customs Authorities regarding export of the goods - Held that:- Non-submission of statutory document of ARE-1 and not following the basic procedure of export goods as discussed above, cannot be treated as just a minor/technical procedural lapse for the purpose of granting rebate of duty - rebate claim is not be sanctioned in the absence of original and duplicate ARE-1 as the same is not admissible under Rule 18 of Central Excise Rules, 2002 read with Notification No. 19/2004-C.E. (N.T.) - rebate claim rejected
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2012 (10) TMI 820
Rebate claim filed after one year – time limit – Held that:- In the case of Kirloskar Pneumatics Company (1996 (5) TMI 87 - SUPREME COURT OF INDIA ) Writ jurisdiction cannot direct the custom authorities to ignore time limit prescribed under Section 27 of Customs Act, 1962 even though High Court itself may not be bound by the time limit of the said Section - Custom authorities, who are the creatures of the Customs Act, cannot be directed to ignore or cut contrary to Section 27 of Customs Act - Section 11B of the Central Excise Act, 1944 provides for the time limit and there is no provision to extend this time limit - rebate claims are clearly time barred as they were filed after the time limit of one year as specified under Section 11B of Central Excise Act, 1944 - time barred rebate claim rejected
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2012 (10) TMI 819
Condonation of delay of 405 days - rejection of the assessees’ refund claims - submission of the assessee that against the impugned orders challenged in the present appeals, the assessee preferred Writ Petition which stood dismissed on the ground of availability of alternative remedy before the Tribunal, they submit that the delay was not deliberate but only due to above reasons – Held that:- Assessee has not put forth bona fide reasons for condonation of delay and further the delay could easily be avoided by the assessee acting with normal care and caution - sufficient cause has not been made out for condoning the delay - COD applications dismissed
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2012 (10) TMI 818
Duty liability – alleged that though the Government of India has issued a letter converting Levy Sugar Sale into Free Sale Sugar on 29-11-1999, the respondents discharged the duty liability almost one year and nine months after the order was issued by the Government of India – Held that:- Order of the Government of India issued in October, 1997 for supply of the sugar on loan basis under levy quota and the order dated 29-11-1999 converting the said supply into free sale sugar quota was known to the department inasmuch as copies of these orders have been endorsed to the department. Therefore, the department cannot allege suppression on the part of the respondent assessee Penalty – Held that:- Department was in the knowledge of the whole transaction inasmuch as the Government of India’s orders have been communicated to the department - question of imposition of penalty under Section 11AC does not arise - reduction of penalty cannot be faulted
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2012 (10) TMI 769
Demand of duty - Clearance without warehousing certificate – SCN has been issued for clandestinely removal of said goods with intent to evade payment of duty leviable thereon – Held that:- The jurisdictional officer in charge of the warehouse has duly signed the AR3-A and certified for having received the said goods and for having accounted for in the Bonded Register. Further the goods were cleared under valid CT-3 Certificate issued by the competent authority and the clearance of goods from EOU to another EOU, the Project Authority s certificate was also produced before the Adjudicating Authority and the same was also produced before Appellate Authority. On such a clinching evidence on receipt of goods at EOU and accepted by in-charge of the EOU, the Revenue’s appeal is devoid of merits as the grounds of appeal does not contradict the fact of signature of P.O. and nor it is claimed as forged. Appeal decides in favour of assessee
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2012 (10) TMI 768
Waiver of pre-deposit of Duty along with interest and penalty - appellant has under valued their finished products cleared from the factory premises by not following the procedure of provisions of Section 4A of the Central Excise Act - Held that:- As first appellate authority has dismissed/ rejected the appeals only for non compliance - pre-deposit of amount of Rs. 10 Lakhs is sufficient deposit to hear and dispose the appeals.Impugned orders is set aside and directed the first appellate authority to consider the appeals filed by the appellants on merits of the case and take up the matters for disposal after following the principles of natural justice and without insisting on further pre-deposit - Appeals are allowed by way of remand to the first appellate authority.
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2012 (10) TMI 766
Restoration of appeals - applicants have not complied with the order of pre-deposit – Held that:- Applications for restoration have been filed belatedly - applications for restoration are filed almost after four years after the appeals were dismissed by the Bench - there are series of decisions that indicate that restoration application should have been filed within three months from the date of dismissal of the appeal. In this case, it is not so - applications are dismissed
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Indian Laws
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2012 (10) TMI 805
Interest on accumulated amount of arrears - promotion of assessee employee - period from August 1987 to March 2006 - Held that:- Since the amount, paid to the plaintiff was not a charity, but it was his right to claim the same as a consequence of his promotion in service from time to time, therefore, he is entitled to get interest on the delayed payment, as awarded by the first Appellate Court. Since the arrears of salary were not given to the employee within time, therefore, he was entitled to interest at the rate of 12% per annum.
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2012 (10) TMI 792
Permission for Dismantling and beach of ship - Held that:- Concerned authorities are directed to allow the ship in question to beach and to permit the ship owner to proceed with the dismantling of the ship, after complying with all the requirements of the Gujarat Maritime Board, the Gujarat Pollution Control Board and Atomic Energy Regulatory Board, if any toxic wastes embedded in the ship structure are discovered during its dismantling, the concerned authorities shall take immediate steps for their disposal at the cost of the owner of the vessel, M/s. Best Oasis Ltd., or its nominee or nominees. further, in all future cases of a similar nature, the concerned authorities shall strictly comply with the norms laid down in the Basel Convention or any other subsequent provisions that may be adopted by the Central Government in aid of a clean and pollution free maritime environment, before permitting entry of any vessel suspected to be carrying toxic and hazardous material into Indian territorial waters - no order as to costs.
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