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Income Tax
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2012 (11) TMI 23
Re-opening of assessment - Held that:- The assessment has been re-opened within four years from the end of the assessment year and further the return filed by the assessee had been processed earlier only u/s. 143(1) - no simultaneous action u/s 154 and also u/s 147 of the Act, as contended by the assessee, thus as decided in ACIT Versus Rajesh Jhaveri Stock Brokers P. Limited [2007 (5) TMI 197 - SUPREME COURT] so long as the ingredients of section 147 are fulfilled, AO is free to initiate proceeding u/s 147 and failure to take steps u/s 143(3) will not render the AO powerless to initiate reassessment proceedings even when intimation under section 143(1) - revenue's appeal is allowed Disallowance of deduction u/s. 80HHD - Held that:- As decided in assessee's own case relying on HOTEL AND ALLIED TRADES P. LTD. Versus DCIT (ASSESSMENT) [2007 (4) TMI 120 - HIGH COURT, KERALA] deduction u/s. 80HHD has to be computed with reference to the "profits and gains of the business as a whole" - Assessee not entitle for deduction by treating each unit separately - revenue's appeal is allowed. Deduction u/s. 80-IA - Held that:- AO has computed deduction u/s 80-IA on the amount of Gross total income as reduced by the deduction given u/s 80HHD whereas a combined reading of the provisions of sub sec. 7 of sec. 80-IA and sec. 80AB would suggest that the computation of deduction u/s 80-IA made by the AO would be correct only if the Gross total income consisted of, only income of that nature which is eligible for deduction u/s 80-IA. The aggregate amount of deductions under chapter VIA shall be restricted to the amount of Gross total income - as the break up details of the Gross total income is not borne out of record. Hence, the issue of computation of deduction u/s 80-IA requires fresh examination - in favour of assessee by way of remand. Interest u/s. 234C on the tax payable u/s. 115JA - Held that:- As decided in Jtc. I. T., Mumbai Versus M/s Rolta India Ltd. [2011 (1) TMI 5 - SUPREME COURT OF INDIA] the assessee is liable to pay interest for short payment of advance tax even on the income computed u/s 115JB - against assessee. Deduction of carry forward depreciation while computing book profit u/s 115JB - Held that:- First of all, clause (iii) of Explanation 1 to sec. 115JB, which is extracted above mandates that the deduction of amount of loss brought forward or unabsorbed depreciation whichever is less should be as per books of account. Hence the assessee was wrong in law in claiming deduction of carry forward depreciation, which was determined under the income tax Act. Secondly, the AO has given a specific finding that there is no carry forward loss as per the books of account, in which case, the assessee is not eligible to claim any deduction under clause (iii) in view of specific provisions contained in clause (b) of the Explanation given under the above said clause (iii) - against assessee.
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2012 (11) TMI 22
Addition of capital gain - conversion of the firm into company - CIT(A) deleted the addition - Held that:- As decided in ACIT, Mangalore v. Unity Care & Health Services [2005 (6) TMI 209 - ITAT BANGALORE-A] When a conversion of a firm into company takes place under the provisions of Companies Law, such conversion can be construed only as occasioned by operation of law. Hence, no controversy could arise on the application of that principle even for purposes of capital gains under section 45(4). By insertion of section 47(xiii), it cannot be said that the conversion of a firm into a company under part IX is to be first treated as dissolution of firm within the meaning of section 45(4) and only if condition as contained in section 47(iii) are complied with, the exemption will be available. Section 47(xiii) applies only to a case of transfer by sale, but there is no authority for capital gain at all in the absence of a transfer under Part IX of the Companies Act inasmuch as such conversions do not fall within the definition of ‘transfer’ under section 2(47). Where a firm becomes a limited company under Part IX of the Companies Act, 1956, section 45(4) is not attracted as the very first condition of transfer by way of distribution of capital asset is not satisfied.In the circumstances, latter part of section 45(4) which refers to computation of capital gains under section 48 by treating the fair market value of the asset on the date of transfer, does not apply - in favour of assessee.
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2012 (11) TMI 21
Revisionary powers used by CIT(A) - order of the A.O. was erroneous - allowance of set-off of unabsorbed depreciation by AO - Held that:- As decided in GENERAL MOTORS INDIA PVT. LTD Versus DEPUTY COMMISSIONER OF INCOME-TAX [2012 (8) TMI 714 - GUJARAT HIGH COURT] that any unabsorbed depreciation available to an assessee on 1st day of April 2002 (A.Y. 2002-03) will be dealt with in accordance with the provisions of section 32(2) as amended by Finance Act, 2001, thus once the Circular No.14 of 2001 clarified that the restriction of 8 years for carry forward and set off of unabsorbed depreciation had been dispensed with, the unabsorbed depreciation from A.Y.1997-98 upto the A.Y.2001-02 got carried forward to the assessment year 2002-03 and became part thereof, it came to be governed by the provisions of section 32(2) as amended by Finance Act, 2001 and were available for carry forward and set off against the profits and gains of subsequent years, without any limit whatsoever. CIT was not justified by passing order invoking Section 263 of the Act by holding that the unabsorbed depreciation of assessment year 1997- 98 and 1998-99 set off by the learned AO in the relevant assessment year is erroneous and prejudicial to the interest of the revenue and thereby canceling the assessment order passed u/s 143(3) - in favour of assessee.
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2012 (11) TMI 20
Contribution to gratuity fund - disallowance of payment as the said fund is not approved - Held that:- It is not rebutted by the Revenue that the assessee company has made application for seeking approval from the competent authority for Heubach Colour Ltd. Employees Group Gratuity-cum-life assurance (Cash Accumulation) Scheme & assessee has been making reminder to the concerned authorities but no response has been received under these circumstances, it would subserve the interest of justice if this issue is remitted back to the file of AO for fresh decision to verify the status of application of the assessee, in case, the concerned authority has accorded approval to the gratuity fund, the AO shall decide the issue afresh in accordance with law after providing reasonable opportunity of being heard to the assessee - in favour of assessee for statistical purposes.
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2012 (11) TMI 19
Depreciation - Disallowance as asset not put to use - business of assessee not in existence - Held that:- It is pertinent to note that the assessee had conducted business transactions by achieving a turnover of Rs.4,06,214/- and also incurred some business expenditure in order to achieve the same. Further it is not a pre-condition by any statute to incur expenditure for the purpose of conducting business or to establish the existence of any business activity. All the activities which revolve round the business may not result in fiscal expenditure. It appears from the above transaction that the assessee was in possession of soft-wares which he had sold during the year. There is nothing to establish that the assessee had not used the building and furniture during the previous year. Such inference cannot be made due to absence of electricity expenditure. It is evident from the profit & loss account of the assessee that the assessee had incurred expenditure such as office maintenance expenditure which clearly establishes that the office of the assessee was in operation, thus it can be fairly concluded that the assessee was in continuance of its business during the relevant previous year and, therefore, it is entitled to claim the depreciation - in favour of assessee
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2012 (11) TMI 18
Bad debts claim disallowed - the loan given does not find any mention in the list of loans and advances - CIT(A) allowed the claim - Held that:- CIT (A) has given a finding that assessee is an NBFC. However, from the material on record it is not clear that whether the assessee though being an NBFC has in fact advanced loans to parties as part of is business. The matter be remitted back to the file of A.O. with a direction to him to verify and pass an appropriate order as per law after considering the factual position in light of the decision of Apex Court in the case of T.R.F. LTD. Versus CIT (2010 (2) TMI 211 - SUPREME COURT) wherein held that 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 enough of the bad debt is written off as irrecoverable in the accounts of the assessee - in favour of revenue for statistical purpose.
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2012 (11) TMI 17
Penalty u/s 271(1)(c) - disallowance of adjustments in respect of international transactions - Held that:- It is an undisputed fact that the international transactions were reported by assessee in Form 3CEB. Transfer Pricing adjustments have been made only in relation to certain activities stated by Transfer Pricing Officer to be of international transactions. As per Explanation 7 to Sec. 271(1)(c) no penalty is leviable if the assessee proves that the price charged or paid in such transaction was computed in accordance with the provisions contained in Sec. 92C and in the manner prescribed under section in good faith and with due diligence - As in the present case the assessee has furnished all the required details called for from time to time. Assessee had also disclosed material facts before the A.O. The A.O. has not given any finding indicating that the assessee had failed to offer any information or the information provided was false. The assessee has not concealed any material fact and the information given by the assessee has not been found to be incorrect - in favour of assessee.
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2012 (11) TMI 16
Expenditure on Scientific Research - disallowance of 100% deprecation for transfer of machinery from production department to research & development department - Held that:- The assessee had purchased two machines namely Hot Setting Vaccum Plant and Plastic Injection Mounting Machine in the financial year 1994-95 for the purpose of manufacturing of its product. The machinery were installed and used for the purpose of production and the assessee claimed depreciation on it. In the year under appeal, assessee transferred the aforesaid machines from its production department to Research & Development (R & D) Department. The assessee could not furnish necessary evidence to support its contention that the machineries were actually transferred to the R & D Department from the Production Department and whether the machines were actually used for the purpose of stated research activity & also that the machineries were actually transferred to the R & D Department from the Production Department and the machines were actually used for the purpose of stated research activity. As under Section 35 what is allowable is “expenditure incurred” which means actual spending/paying of money as decided in Multi Metals Limited Versus CIT [2002 (2) TMI 98 - RAJASTHAN HIGH COURT] - against assessee.
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2012 (11) TMI 15
Unexplained Cash Credit – Held that:- In respect of fresh capital introduced by the partners, no addition can be made in the hands of the firm although the Revenue is at liberty to consider the said investment in the hands of the partners if he is not able to satisfy the source of investment - addition can be made in the hands of partners only - Appeal of assessee is allowed.
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2012 (11) TMI 14
Attachment of Property - Held that: Valuation of the property mentioned in Ext.P8 has not been done by any external agency, still going by the statements contained in Ext.P8, the property mentioned therein is worth Rs.2.95 crores. Therefore, there is no reason to continue the attachment covered by Ext.P6 once the petitioner furnishes adequate security to take care of the interest of the respondents. With this in mind writ petition is disposed off - petitioner shall deposit an amount of Rs.75,00,000/- within one month and the title deeds pertaining to the property - property is free from encumbrance and that they will not deal with the property in any manner until the appeal is decided and the documents are released - once the petitioner complies with the above directions, the attachment effected as per Ext.P6 will be lifted - Tribunal is directed to dispose of Ext.P5 appeal with notice to the parties concerned and as expeditiously as possible.
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2012 (11) TMI 13
Taxability of Income from insurance business - The dispute in this case is in adopting the amount of surplus or deficit as per actuarial valuation. - held that:- ‘actuarial valuation made in accordance with the Insurance Act, 1938’ do mean that the actuarial valuation done in accordance with the Insurance Act, 1938. The action of AO in relying on the IRDA Regulations is not according to the law. Assessee had submitted its accounts, which are in accordance with the Insurance Act, 1938. Instead of examining these statements, just because assessee has shown total surplus in the accounts in similarly named Form-I( under Regulation 8), AO wants to tax the amount which is after taking into account the transfer of assets by way of fresh capital from shareholder’s account. This in a way is taxing fresh capital infused into business indirectly which cannot be done as this is not business surplus but infusion of capital directly. The assessee working of actuarial surplus/ deficit is in accordance with Rule 2 of First Schedule. - Decided in favor of assessee. Disallowance u/s 14A - held that:- the provisions of section 14A are not applicable. - section 44 has overriding effect. Surplus of pension schemes - exemption u/s 10(23AAB) - AO did not allow the amounts on the reason that these incomes are part of income of life insurance business and it is included as income by the actuary, therefore, they cannot be exempted. - held that:- exemption under Sec 10 allowed. Taxability of incomes in Shareholder’s account - held that:- Capital gains or Income from other sources. - Being non-obstante clause, sec. 44 mandates that the profits and gains of insurance business shall be computed in accordance with the rules contained in First Schedule. - Therefore, the incomes in Shareholder’s account are to be taxed as part of life insurance business only, as they are part of same business and investments are made as part of solvency ratio of same business. - AO is directed to treat them as part of Life Insurance Business and tax them u/s 115B. Regarding the issue of treating negative reserve and disallowing the amount. - held that:- The mathematical reserve is part of Actuarial valuation and the surplus as discussed in Form-I under Regulation 4 takes into consideration this mathematical reserve also. Therefore the order of the CIT(A) is approve. Moreover the Assessing Officer has no power to modify the amount after actuarial valuation was done, which was the basis for assessment under Rule 2 of 1st Schedule r.w.s. 44 of the I.T. Act. Decided in favor of assessee and against the revenue.
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2012 (11) TMI 12
Reassessment - whether reasons recorded for reopening the assessment does not stand legal security. - held that:- We do not find any error of law in the order of the Tribunal in deleting the additions and on the same grounds we do not find any legal error in the order of the Tribunal in holding that the interest charged under Section 139 (8) and 215/217 was not sustainable.
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2012 (11) TMI 11
Block assessment - search - Presumption as to assets, books of account, etc u/s 292C - ITAT decided that seized documents alone were not sufficient to draw any definite conclusion regarding the existence of undisclosed income. - held that:- The phrase “in any proceeding under this Act” are important. They permit the Assessing Officer to invoke the presumption that the seized documents belonged to the person searched, that the contents of the seized documents/books of accounts are true and that the signature of every other part of the books of accounts or documents which purports to be in the handwriting of any particular person are in that person’s handwriting etc., even in the assessment proceedings. After the insertion of the section, the judgment of the Supreme Court in P.R. Metrani v. CIT [2006 (11) TMI 136 - SUPREME COURT] can no longer be called in aid to hold that the presumption is not available to the Assessing Officer in making the assessment. The Tribunal has reasoned that the seized papers are loose papers and not books of accounts. We are unable to appreciate the significance or sequitur of the statement made by the Tribunal. It is not necessary that the seized documents should be in the form of proper books of accounts so that they can be relied upon for the purpose of making additions. Unable to approve the approach adopted by the Tribunal. If it had found that there were procedural lapses on the part of the Assessing Officer while making the assessment, the proper course for it would be to not to invalidate the assessment or delete the additions but to remand the assessment to the Assessing Officer so that the procedural lapses which had prejudicially affected the assessee can be set right and the assessment be completed after duly complying with the rules of natural justice. - Order of tribunal set aside - matter remanded back.
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2012 (11) TMI 10
Reopening of assessment - escapement of income – change of opinion - AO issued notice under Section.148 on 31.03.08 to reopen the assessment - amendment to Explanation-1 to section 115JB was brought by the Finance (No.2) Act, 2009 with retrospective effect from 01.04.2001 - Held that:- Assessing Officer could not have reasons to believe on 31.03.08 that the income had escaped assessment on the ground that the provisions for bad and doubtful debts were not added back in computing the book profit under Section 115JB of the Act - on the date of issue of notice for reassessment on 31.03.08, there was no amendment to Explanation-1 to section 115JB - no fresh material available with the Assessing Officer on the basis of which he could have justifiable formed reasons to believe that any income chargeable to tax had escaped assessment in the instant case - initiation of reassessment proceedings in the instant case was bad in law and consequently the impugned order is liable to be cancelled - appeal of assessee is allowed
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2012 (11) TMI 9
Penalty u/s. 271(1)(c) - addition on account of unutilised Modvat Credit, depreciation on motor car and expenditure incurred on Research and Development – Held that:- Claim of any expenditure has to be proved by the assessee with corroborative evidence. Mere making of a claim is not sufficient. - Entries in the books of accounts or auditors reports or Board of Directors Meeting cannot take place of a piece of genuine evidence. - If assessee fails to produce the same, his claim also fails. In the case under consideration, the assessee has failed miserably to substantiate and support claim made by it - such transactions do not suffer from any deficiency as far as factum of 'going out' of sum is concerned. But in the case under consideration basic fact of spending of money for purchasing items for R&D purposes itself missing. As a result, penalty levied for filing inaccurate particulars and thus concealing the particular of income is confirmed - Appeal filed by the assessee is dismissed
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2012 (11) TMI 8
Disallowance under sec. 40(a)(ia) of the Act - credit for TDS is to be given in the case of the person in whose hands income is taxable and that too in the year in which the corresponding income is taxed - assessee entered into a consortium agreement with 12 other members who are travel agents for booking air tickets through the platform provided by M/s Amadeus Pvt. Ltd. – Held that:- Assessee did not claim the said amount as expenditure in its accounts, no tax was deducted at source by the assessee - no disallowance could be made in terms of provisions of sec. 40(a)(ia) of the Act - income accrues when the assessee acquires the right to receive the same. The terms of the consortium agreement do not reveal any such right in favour of the assessee - Since the assessee only distributed the income in terms of the agreement and this did not amount to incurring of an expenditure nor the assessee claimed any - disallowance deleted
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2012 (11) TMI 7
Addition u/s 68 of the Act – income from undisclosed sources – Held that:- Assessee files confirmations and affidavits and on the other hand the parties are not found at the addresses when the assessing officer issues summons to them - undated confirmations and affidavits must have been obtained by the assessee when pay orders were received from these entities. - Therefore, the contention of the assessee that share application money was genuinely received by the assessee is not proved - Since the creditworthiness and genuineness of the transaction have not been proved - AO was justified in making the addition u/s 68 of the Act – In favor of Revenue
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2012 (11) TMI 6
Interest on borrowed capital – alleged that the borrowed capital on which interest was paid by the assessee was diverted by the assessee for providing interest free advances to its sister concerns – Held that:- Onus which was on the department for making the disallowance by bringing on record some material to show nexus between interest free advance and interest bearing borrowed capital was not at all discharged by the Revenue - borrowed funds were utilized for the specific projects for which they were borrowed - it is not the case of the Revenue that interest bearing fund were diverted by the assessee for non-business purpose - in favor of assessee
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2012 (11) TMI 5
Addition out of interest expenses - alleged that appellant company has diverted borrowed funds for interest free advance/loans given to associate concerns and directors of the appellant company - assessee submitted that the assessee has Rs.2.13 crores as capital and sundry creditors (without interest) and advances to sister concern was Rs.49.47 lakhs only, and therefore, own funds available without interest with the assessee, were much more than the advance made to the sister concern – Held that:- Assessee has advanced a sum of Rs.49.47 lakhs to its sister concern without interest which is fully covered with the interest free capital and sundry creditors amount available with the assessee, and therefore, no addition/disallowance in this case is called for - in favour of the assessee Addition on account of salary paid to relative of the Directors – Held that:- Onus was on the assessee to prove that the salary was paid to the lady directors of the assesseecompany on account of services rendered by them. We find that the assessee could not produce any evidence in support of its case - In the absence of any evidence to prove that two lady directors have rendered some services to the assessee-company - disallowance made was justified
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2012 (11) TMI 3
Addition on account of low yield of oil from cotton seeds - suppression of sales proceeds – Held that:- Yield of oil from cotton seeds depends upon many factors and cannot be fixed, such as date of sowing and time of harvesting, quality of seeds, quality/type of extraction mill - Traditional Ghanis yields lower oil recovery than solvent extraction and yield also depends upon the fact that whether extraction is made from kohlu or through skilled or unskilled labour - he cannot certify the exact yield during the year under consideration - addition of Rs. 3 lakhs in this case will meet the ends of justice – in partly favor of revenue Addition on account of resale and manufacturing of cattle feed by applying low GP rate – Held that:- Assessee has shown to have sold almost the entire self manufactured feed in cash on varying rates - sale rates can still be higher or lower but he has picked up two instances of sales - Assessing Officer was not satisfied about the genuineness and correctness of the cattle feed manufacturing account, which was rejected - addition sustained by the CIT(A) at Rs. 2 lakhs is on lower side - addition of Rs. 3 lakhs on this count will meet the ends of justice. The Assessing Officer is directed to recompute the income of the assessee accordingly Disallowance of proportionate interest paid to the bank relevant to so called interest free advances made by the appellant – Held that:- These have been made out of CC A/c which carries interest rate of 15% - disallowance reduced
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2012 (11) TMI 2
Cancellation of Registration u/s. 12AA(3) of the Act – allegation relating to Contribution to Churches – Held that:- Merely a sum of RS. 22,500 was incurred in this regard - It is only information relating to assessee Hospital of the various facilities available along with timings for general OPD, free OPD, emergency services - Since these institutions approached the assessee, the advertisements were given to them - amount involved was very meager and it cannot be said that amount was meant for benefit of any particular community Cancellation of Registration u/s. 12AA(3) of the Act – Sale of medicines in the Pharmacy – Held that:- Activity of pharmacy is an integral part of the Hospital running activity which is not a commercial activity - The income is ploughed back for Hospital activity - It has been further been submitted that 50% margin is without considering salaries of pharmacy department, doctor's salary, contract employees payment, administrative over heads like electricity, maintenance, other utilities, depreciation etc. - this amount is ploughed back for the charitable activities of the Society - sale of medicine in the pharmacy is certainly a charitable activity Cancellation of Registration u/s. 12AA(3) of the Act – Smile Surgery Projects – Held that:- Smile Surgery Project is an International Charitable - Organization providing assistance to the children born cleft lips and platelet - Hospital doesn't charge the patients under this project. The cost incurred may be less than the amount reimbursed by the Smile Project or it may be more which has to be borne by the Hospital - There is no commercial or business element as alleged - Smile Project cannot be said to be commercial activity Cancellation of Registration u/s. 12AA(3) of the Act – Fun Fair Fund - assessee has submitted that the Fair is conducted by the employees of the Society wherein the employees of the Hospital participate and hold lucky draw – Held that:- Amount collected is used to make ex-gratia payment to the exNemployees on retirement, exigencies - income is reflected in the statement of total income of the respective years - activity cannot said to be commercial/business activity - employees are part and parcel of the society - Any activity undertaken to help them cannot be considered as non-charitable Cancellation of Registration u/s. 12AA(3) of the Act – Manufacturing of Medicines – Held that:- Assessee does not manufacture any medicines. The pharmacy undertakes only compounding, mixing and diluting the medicines already available with the assessee. This is done for reducing the strength of the medicine, making it cost effective when smaller doses are required or in case medicines are available in large proportions in the market it is made into smaller portions for patients - Hospital is running for the past 125 years and the Drug Controller conducts regular inspection of the Hospital - income resulting from medicines given to patients is again utilized for the Hospital activity - it cannot be said that assessee is indulging in the manufacturing activity of the medicines. Cancellation of Registration u/s. 12AA(3) of the Act – Withdrawal of exemption from Import Duty – Held that:- Duty exemption was withdrawn citing certain noncompliance, assessee has filed appeal before CESTAT challenging the order of withdrawal and that the assessee has complied with all the terms for exemption - machineries imported are used by the Hospital namely remote control X-ray system and whole body C.T. Scan. The exemption is with respect to duty under Customs Act and does not make the assessee non-charitable Cancellation of Registration u/s. 12AA(3) of the Act – Alteration in MOA - Communication with Revenue authorities – Held that:- Chart depicting the minor amendments carried out by the assessee has been submitted - change does not alter the basic object of medical relief - object of the assessee would remain the same before the amendment as well as after the amendment. Therefore, no adverse inference can be drawn against the assessee There is no reason for cancellation of registration u/s. 12AA(3) of the Act - appeal filed by the assessee is allowed.
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2012 (11) TMI 1
Disallowance of expenditure – arm's length price (ALP) - it is the case of the Revenue that assessee does not require to make any payment with regard to Second Line Support (SLS) obtained by it from its AE. As against that it is the case of the assessee that SLS services have been availed to minimum level where the assessee on its own is not able to resolve the problem as most of the problems have been resolved at the level of the assessee. - Held that:- it will be wrong to hold that the expenditure should be disallowed only on the ground that these expenses were not required to be incurred by the assessee. At the same time it has also to be seen that whether the price paid by the assessee is at arm's length The term 'arm's length price' has been defined in section 92F which means a price which is applied or proposed to be applied in the transactions between the persons other then Associate Enterprises in uncontrolled conditions. It is only because of that their Lordships in the aforementioned decision have observed that "the quantum of expenditure can no doubt be examined by the TPO as per law but in judging the allowability thereof as business expenditure, he has no authority to disallow the entire expenditure or a part thereof on the ground that the assessee has suffered continuous losses." Earlier to this they have observed that Revenue cannot disallow any expenditure on the ground that it was not necessary or prudent for the assessee to have incurred the same or that in the view of the Revenue the expenditure was unremunerative. Looking into observations of their Lordships, it has to be held that reasonableness of an expenditure has not been excluded from determination. Decision in CIT v. EKL Appliances Ltd. [2012 (4) TMI 346 - DELHI HIGH COURT] relied upon - Decided partly in favor of assessee.
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2012 (10) TMI 902
Refund u/s 237 - power of AO to investigate - Whether Petitioner is entitled to refund of Rs.1,70,691/- as claimed in its return filed on 01.09.2003 for the assessment year 2003-04 along with interest as provided under the Income Tax Act, 1961 – Following the decision of court in case of [Babu Ram Chandra Bhan v. ITO 1990 (9) TMI 34 - ALLAHABAD HIGH COURT] while considering the provision of Section 237 held that a person becomes entitled to refund only when he satisfies the Assessing Officer that a certain amount is due to him. This satisfaction necessarily involves an inquiry where there is a dispute as to the entitlement to the amount to be refunded. While there is no specific provision empowering the Income-tax Officer or the Assessing Officer to investigate such a claim, such a power is implicit and inherent in him as would be evident from section 237 of the Income-tax Act, 1961 - petitioner is directed to appear before opp. party no.1-Income Tax Officer, Ward-2(2), Cuttack within a period of four weeks from today to satisfy him with supporting documents about his entitlement to get refund in terms of Section 237 of the Income Tax Act, the Assessing Officer is directed to grant refund immediately along with interest in accordance with law - writ petition is disposed of.
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2012 (10) TMI 901
Whether prior year expenditure can be adjusted against the income of the subsequent year where the assessee is following the mercantile system of accounting as per Tribunal - Held that:- given the nature of deposit maintained by the assessee and the fact that the claims from the customers were settled after protracted litigation and arbitration, the crediting and debiting of the receipts and expenses as and when the claims settled were reported in the return, which apparently required an investigation into the claims of the assessee. If the relief on the merits of the claim could be considered only through the process of reasoning, given the limited scope of Section 143(1)(a) of the Income Tax Act, which is only a prima facie adjustment on a non-debatable issue Section 143(1)(a) - revenue's appeal is rejected and order of the Tribunal is confirmed - No costs.
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2012 (10) TMI 900
Disallowance u/s 14A - assessee contested that dividend income was only incidental was not tenable - Held that:- As decided in GODREJ AND BOYCE MFG. CO. LTD. Versus DEPUTY COMMISSIONER OF INCOME-TAX AND ANOTHER [2010 (8) TMI 77 - BOMBAY HIGH COURT] disallowance u/s 14A r.w.r. 8D is not retrospective and is applicable from Assessment Year 2008-09 and disallowance for earlier period to be determined on reasonable basis - as assessment year in appeal is 2007-08 the case is remitted back to the file of the AO with a direction to follow the decision of case - in favour of assessee for statistical purposes. Disallowance of payment of license fee u/s 40A(2) - Held that:- Revenue disallowed the entire expenditure excessive because it is paid to a director who is a common in both the companies but neither recorded as to how the payment was excessive compared to prevailing market rate for such payment nor has he brought out a comparable case on record to prove that the entire expenditure is excessive - restore this matter back to the file of the AO with a direction to pass a speaking order - in favour of assessee for statistical purposes.
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2012 (10) TMI 899
Penalty u/s 271(1)(c) - dis-allowance of interest on borrowed funds on the ground that funds were not utilized for the purpose of business - Held that:- It is undisputed that entire material was disclosed by the assessee in the return of income. AO had disallowed interest on borrowed funds on the ground that the funds were not utilized for the purpose of business. Merely because the disallowance has been made would not mean that the case of assessee falls into furnishing of inaccurate particulars of income. CIT(A) while deleting penalty has also held that the assessee had offered an explanation and was able to prove that the explanation was bona fide and all facts relating to the same had been disclosed. Since neither Part-A nor Part-B of Explanation was found to be applicable, in our considered opinion penalty u/s 271(1)(c) is not imposable - Decided in favor of assessee
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2012 (10) TMI 898
Penalty u/s 271(1)(c) - dis-allowances on account of excess depreciation on farm house and commercial flats - Held that:- On perusal of penalty order it is found that not even a whisper has been made in the penalty order as to which specific particulars were furnished inaccurate or were concealed. Mere erroneous claim in the absence of any concealment or furnishing of inaccurate particulars, is no ground for levying penalty, especially when there is nothing on record to show that the explanation offered by the assessee was not bona fide or any material particulars were concealed or furnished inaccurate. In the instant case, the assessee discharged the onus cast on it in terms of explanation 1 to sec. 271(1)(c) and there is nothing to suggest that the assessee furnished any inaccurate particulars or concealed the particulars. Admittedly, the claim for deduction of depreciation was there in the documents forwarded with the return. penalty is directed to be deleted - Decided in favor of assessee
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2012 (10) TMI 897
Transfer pricing - ALP - Disallowance of expenses - reduction in net profit ratio - alleged that turnover is decreased in comparison to last year but expenses increased significantly as compared to previous year figure – Held that:- Income of the assessee has been accepted by the learned TPO as being on arm's length basis - Assessing Officer has made the addition merely on estimates - Assessing Officer has first time confronted the assessee on 2nd of December, 2008. It was supposed to file reply by 10.12.2008. The assessee has filed the reply on 12.12.2008. Again the Assessing Officer raised the query on 24.12.2008 and directed the assessee to explain by 26.12.2008. In this short period, assessee could not submit the reply and the Assessing Officer accordingly passed the assessment order before 31.12.2012 - sufficient opportunity was not granted to the assessee by the Assessing Officer. He has just provided two days time for explaining its position – matter remanded to Assessing Officer for readjudication
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2012 (10) TMI 896
Expenditure on account of foreign visits - held that:- . We also fail to understand on what basis the Commissioner of Income Tax (Appeals) has allowed 50% we think it was completely guess work and it appears as if just because the Commissioner of Income Tax (Appeals) thinks that the aforesaid expenditure of disallowance should be granted and it was granted. Disallowance of depreciation - lease hold property – Held that:- There was no document to show whether it was a leasehold interest or otherwise - assessee is not the owner and the lessee - assessee is entitled to depreciation only on that portion of capital expenditure on construction of any structure brought about by the assessee and uses for the parties on business as it is clearly written under Explanation I to Section 32(1) - Since no agreement has been produced to substantiate that the assessee holds lease for more than 12 years therefore, the claim made by the assessee is not sustainable
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2012 (10) TMI 895
Denial of registration u/s.12A of the Act – alleged that the objects of the Assessee are not for the benefit of general public but for specific members – Held that:- Primary purpose for which the assessee was established was to promote commerce and trade in art silk, silk yarn - promotion of commerce and trade in art silk, etc., was an object of public utility not involving the carrying on of any activity for profit within the meaning of s. 2(15) of the Act Holding of conferences abroad would not make the activities of the Assessee being carried out outside India. The benefits of such conference will ultimate go to Assessee and its members. It cannot be said that the activities of the Assessee were carried on outside India - none of the reasons assigned by the DIT for rejecting the claim for registration can be sustained - appeal of the Assessee is allowed
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2012 (10) TMI 894
Survey u/s 133A - Addition on account of books of account of the assessee were found incomplete - appellant submitted that though the cash in hand was found to be Rs.30,40,000/- whereas unaccounted cash was to the tune of Rs.3,23,999/- only – Held that:- during the course of survey, the assessee was not able to offer any plausible explanation for the sum of Rs.30,40,000/- which was surrendered by the assessee. Further, during the course of survey, it was found that certain sale invoices were either not recorded in the books of account or were under invoiced. The assessee had also admitted certain notings in the diary and note books to be on account of sales which were unaccounted. In the light of the aforesaid findings, the contention of the assessee that the amount of Rs. 27,16,001/- could not be included as unaccounted cash and it was Rs.3,23,999/- only does not carry any weight and the plea of the assessee has rightly been dispelled by the authorities below. – against assessee
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2012 (10) TMI 893
Search and seizure operation u/s 132(1) – Rejection of books – gross profit rate – alleged that assessee has shown low gross profit – Held that:- Assessing Officer applied gross profit rate at 30% on the turnover resulting into addition as has been mentioned in the assessment order - books of accounts of the assessee were also not found reliable and the same were rightly rejected u/s 145(3) of the Act - it appropriate to apply the gross profit rate at 10% - appeals of the assessee are allowed in part
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2012 (10) TMI 892
Revenue or capital - expenditure incurred on installation of laser upgradation kit – AO observed that in respect of the claim of assessee that it is only current repairs, it is held that as there was no replacement to any existing spare parts, therefore, it cannot be claimed as current repairs and disallowed the claim of the expenditure of assessee. - Held that:- Expenditure incurred by the assessee by purchasing of upgradation kit was to carry out precision eye surgery by using advanced technology, which was the need of the time in the line of the business of the assessee - revenue in nature - decided in favor of assessee.
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2012 (10) TMI 891
Calculation of deduction under Section 80HHC of Income-tax Act - A.O. while calculating deduction under Section 80HHC of the Act, had excluded 90% of the job receipts from the eligible profits relying on Explanation (baa) - As per the assessee, expenses incurred for the purpose of earning such receipts should be deducted and only 90% of the balance ought to be excluded for the purpose of calculation of deduction under Section 80HHC of the Act – Held that:- Expenses incurred by the assessee for earning income of the type mentioned in Explanation (baa) to Section 80HHC of the Act, had to be set off and 90% of the balance alone could be considered for exclusion, while working out the deduction under Section 80HHC of the Act - issue requires re-working and a re-look by the A.O – matter remanded to the A.O.
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2012 (10) TMI 890
Disallowance u/s. 14A read with Rule 8D of the Act – alleged that borrowed funds utilized for investment in shares -contention of the assessee is that in the earlier Assessment Year 2006-07 where no dividend income was received by the assessee, no disallowance of expenditure can be made u/s. 14A of the Act - Held that:- Even in a year where no exempt income was earned or received by the assessee, disallowance u/s. 14A can be made – in favor of revenue Arm's length price - assessee has entered into international transaction with its associated enterprises, India Telecom Holdings Ltd., Mauritius by way of granting a loan – Held that:- it LIBOR rate which has to be considered while determining the arm's length interest rate in respect of the transaction between the assessee and the Associate Enterprises. As it is noticed that the average of the LIBOR rate for 1.4.05 to 31.3.06 is 4.42% and the assessee has charged interest at 6% which is higher than the LIBOR rate, we are of the view that no addition on this count is liable to be made in the hands of the assessee. In the circumstances, the addition as made by the Assessing Officer on this count is deleted Disallowance of TDS credit – Held that:- DRP has observed that in the submissions assessee has not given any basis for TDS claim made by it - TDS credit was not given for defective certificates - DRP directed the Assessing Officer to consider the claim as per law with respect to the claim of TDS – matter remanded to AO
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2012 (10) TMI 889
Denial of accumulation under section 11(2) of the Act – assessee Society is running educational institute - alleged that assessee did not specify the purpose of accumulation in Form 10B - Held that:- Assessee has accumulated income for the specific purpose and for which the funds have been used accordingly in subsequent years - assessee has applied the accumulation of funds as specified which were in accordance with the object of the trust – disallowance set aside – in favor of assessee
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2012 (10) TMI 888
Rejection of books of accounts - Disallowance u/s 40(a)(ia) for non deduction of TDS – on account of material purchases made from M/s Radhey Shyam Gupta India (P) Ltd. (RSGIPL) - Held that:- The work has been by converting into self execution work by an act of splitting of work into a transaction of purchase and sale. The provisions of law cannot be interpreted in such a manner to convert a possible task into impossible task by such interpretation. Once the books are held to be camouflaged and not representing the assessee's proper income, in that case the proper course is to reject the books of a/c and estimate the income. The action of the lower authorities has resulted into an impossible situation i.e. holding the entire road contract receipts as the income of the assessee. It will be arbitrary and unjust to hold assessee's entire receipts as income. Since the books of accounts are not reliable, they deserve to be rejected and in that case a reasonable estimate of income has to be made. In our view, ends of justice will be met if a fair and reasonable estimate is made in place of technicalities of applicability of sec. 40(a)(ia); the debate about words 'paid and payable' and the debate about revenue having not proceeded against the assessee u/s 201(1). To put rest to these technical debates, it will be in the interest of justice to make a reasonable estimate of assessee's income, when its work execution has not been questioned. - Income estimated at 6% i.e. 8% minus 2% for subletting. - Decided partly in favor of assessee.
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2012 (10) TMI 887
Failure to collect tax at source (TCS) u/s 206C - Proper notice - wrong mention of provision in the notice – Held that:- Details were called for from the assessee, but the assessee instead of giving complete details filed an evasive reply and adopted delaying tactics - In both the letters/notices referred to by the ld. counsel for the assessee, the AO proposed to take action against the assessee u/s. 206 C of the Act for not collecting the taxes as per the above provisions for the purpose of granting parking lots to various contractors - assessee attended the proceedings before the AO and was aware of the proceedings u/s. 206C being taken against him. Therefore, quoting wrong provision in the notice would be of no consequences and such contentions of the ld. counsel for the assessee have no merits and are liable to be rejected. Whether the assessee is liable for failure to collect tax at source – Held that:- Since the assessee failed to collect the taxes as per law, therefore, the assessee would be responsible to pay tax as per law along with interest - appeals of the assessee are dismissed
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2012 (10) TMI 886
Royalty payment – revenue or capital – lump sum payment - Held that:- assessee has acquired only a licence to use the brand name and trademarks of the foreign collaborator. A mere lience to use the other party's patent and knowledge have been considered as permissible revenue expenditure by the Apex Court in the I.A.E.C (Pumps) case [232 ITR 316]. However, at the same time, a portion of such expenses would also be in the nature of a capital expenditure to the extent that such expenses were to protect the advantage of using the foreign collaborator's brand name and trademarks. - 25% held as capital in nature and 75% held as revenue in nature. Disallowance u/s 14A read with Rule 8D - held that: - Assessing Officer directed to not to apply Rule 8D in the present case since the assessment year under appeal is 2005-06 and Rule 8D is applicable only from the assessment year 2008-09 – matter remanded Deduction under section 43B in respect of employees contribution to Provident Fund - Held that:- Omission of second proviso to section 43B of the Income Tax Act, 1961 by the Finance Act, 2003 operated retrospectively from 01.04.1988 and not prospectively from 01.04.2004 - Assessing Officer directed to verify as to whether this contribution paid by the assessee before the due date for filing of return - If the payments were made before the due date for filing of return, such contributions are to be allowed as deduction - issue is allowed for statistical purpose
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2012 (10) TMI 884
Transfer pricing – ALP – computation - TNMM method - selection of comparable - Held that:- there is no dispute that the transaction between the Assessee and its group companies in Germany whereby the Assessee provided services in the form of contract testing and research services was an international transaction attracting the provisions of Sec.92 of the Act Comparables chosen by the assessee on the basis of the contemporaneous data for A.Y 2006-07 gives an arithmetic mean of 18.97% which we have already mentioned. This is the highest arithmetic mean of the comparable chosen by the assessee - TPO has not given any reason whatsoever for rejecting these comparables - if TPO does not reject a comparable on the ground of functional incomparability then neither the AO or the revenue can take a plea of functional incomparability of the comparables chosen by the assessee in its TP Study - assessee's operative margin has to be held as within the range of 5% of the arithmetic mean of 18.97% of comparable companies and the same has to be accepted as ALP - addition made by the AO and confirmed by the DRP is directed to be deleted - the reasons given by the TPO does not anywhere mentioned as to how the comparables selected by the assessee were not functionally comparable. - decided in favor of assessee.
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2012 (10) TMI 883
Rejection of revision application u/s 264 - Notice - Penal interest under Sections 215 and 139(8) of the Act - On completion of the assessment of M/s K. and Company where the petitioner's share was determined assessee moved an application dated 16.7.1988 to respondent No.2 for passing the rectification order under Sections 154/155 of the Act – Held that:- Rectification order has been passed on an application of the assessee. He cannot complain against the order by reason only of the fact that there was no notice to him for levying the interest - assessee had himself filed the application and interest under Sections 215 and 139(8) of the Act for default in paying advance tax is mandatory and is imposable where the assessee is liable to pay advance tax - no separate notice under sub-section (3) of Section 154 of the Act was, thus, required to be issued and no benefit can be derived by him on that count. To conclude, the assessee could not escape from the liability to pay interest and no fault could be noticed in the order of the Commissioner rejecting the petition of the assessee filed under Section 264 of the Act - petition dismissed
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2012 (10) TMI 882
Disallowance u/s 14A – new issue in remand proceedings - held that:- there is no dispute that the issue raised by the ld. CIT(A) for disallowing the claim of exemption u/s 10 is a new issue which neither emanates from the assessment order nor from the order of the Tribunal, therefore, the ld. CIT(A) has not only crossed his jurisdiction but has also passed the order against the provisions of section 251 of the Act as he cannot go beyond the direction of the Tribunal to find out a new issue i.e. new source of income which had not been considered by the AO at all. - CIT(A) was not justified in enhancing the income by discovering a new source of income not considered by the AO. - Decided in favor of assessee. Section 14A versus Section 44 - overriding effect - Insurance business - Held that:- Sec. 44 creates a specific exception to the applicability of ss. 28 to 43B. Therefore, the purpose, object and purview of s. 14A has no applicability to the profits and gains of an insurance business. - in favour of the assessee
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Customs
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2012 (11) TMI 39
Whether CESTAT has discretionary power u/s 129A (5) to condone the delay caused in filing the appeal under Section 129D(3) - appeal by revenue in compliance of direction by the Committee of Chief Commissioners of Customs or Commissioner of Customs to pass certain orders - Held that:- From the plain language of Section 129D(4), it is clear that Section 129A has been incorporated in Section 129D. The applications made by the Commissioner under Section 129D(4) shall be heard as if they were appeals made against the decision or order of the adjudicating authority and the provisions relating to the appeals to the Tribunal shall be applicable in so far as they may be applicable. Consequentially, Section 129A(5) has become integral part of Section 129D(4) & if the Tribunal is satisfied that there was sufficient cause for not presenting the application under Section 129D(4) within prescribed period, it may condone the delay in making such application and hear the same. In the present case the provisions relating to the appeals to the Tribunal have been made applicable to an application made under Section 129D(4) and it has been further provided that such application shall be heard as if it was an appeal made against the decision or order of the adjudicating authority. Any delay in presentation of appeal under Section 129A is condonable by the Tribunal by virtue of sub-section (5) thereof. It is competent for the Tribunal to invoke Section 129A(5) where an application under Section 129D(4) has not been made within the prescribed time and condone the delay in making such application if it is satisfied that there was sufficient cause for not presenting it within that period.
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2012 (11) TMI 38
Benefit of exemption under Indo-Sri Lankan Free Trade Agreement - whether there is liability of the assessee to pay duty - determination of the rate of duty payable – Held that:- Question has to be adjudicated buy the Apex Court under Sec. 130(c) of the Customs Act, 1962 as it does not fall within the purview of Sec. 129 of the Act - appeals are rejected reserving liberty to the assessees to approach the Apex Court.
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2012 (11) TMI 37
Rebate claim – cenvat credit with DFIA Scheme - Held that:- The effect of retrospective legislation is that Notification No. 40/2006-Cus., dated 1-5-2006 never prohibited rebate on export of goods under DFIA Scheme, if the Cenvat Credit of duty paid on imported/procured raw material have been availed. No restriction in the said Notification No. 40/06-Cus., dated 1-5-2006, on claiming rebate of duty paid on exported goods and availment of Cenvat Credit - applicant has complied with all the provisions and procedure as laid down in Rule 18 of Central Excise Rules, 2002 and Notification No. 19/04-C.E. (N.T.), dated 6-9-2004 and there is no dispute about the export of duty paid goods, the rebate claim is admissible to the respondent – rebate claim allowed
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2012 (10) TMI 919
Interest on delayed payment of Refund – The refund claim of the petitioner had been rejected by the Department on the ground that the amount had been recovered from the petitioner for the breach of trust and that the claim had not been filed, within a period of six months from the date of the encashment of the bank guarantee. - Following the decision of Supreme court in case of [Sandvik Asia Limited Versus Commissioner Of Income-Tax And Others 2006 (1) TMI 55 - SUPREME COURT] Held that:- Department is solely responsible for the delayed payment, Interest of justice would be amply met if payment is made of simple interest at 9 per cent, per annum from the date it became payable till the date it is actually paid - the respondents are directed to pay the interest on the amount of Rs.6,60,000/- refunded to the petitioner, based on his refund claim, for the period, from December, 2004, to 26th of August, 2008, at the rate of 9% interest per annum, within a period of eight weeks from the date of receipt of a copy of this order - writ petition is disposed of with no costs - Consequently, connected miscellaneous petition is closed.
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2012 (10) TMI 918
Anti-Dumping Duty - Status of Domestic Industry - Appellant contended that they had concealed material information from the D.A. Even though they had stated that they had never imported the subject material from the subject country, they had actually imported the penultimate intermediate product namely Ceftriaxone Sodium (non-sterile) from there. They had also concealed their relationship with some of the Chinese exporters. The learned counsel for the appellants further states that for the purpose of injury analysis M/s. Orchid Chemicals has been wrongly excluded on the ground that it was a 100% EOU. Similarly, other domestic units have also been excluded from the consideration thereby restricting the domestic industry to comprise only the petitioners.Held that:- Domestic industry status granted by the D.A to the sole petitioner is justified. Market Economy Status - Appellant contended that one of the grounds taken by the D.A. that they are buying power from state controlled public utility is not a valid ground as the D.A. has taken no such objection in respect of some of the other anti-dumping cases. Market economy assessment is an overall assessment of the entity involved, covering several aspects and not an isolated examination of single parameter, which could give a decisive indication of the status of the entity. Held that:- Import prices at which the appellants are sourcing only about 5% of their raw material requirement internationally are quite low compared to the international import prices prevailing in India as per DGCIS data, which goes to indicate that the appellants are not operating in a Market Economy scenario. Determination of normal price - Held that:- Lower normal value calculated by the first method of construction adopting the average consumption norms of the cooperative exporters is required to be applied for the purpose of calculating the dumping margin and anti-dumping duty - Appeal is thus partly allowed by reducing the anti-dumping duty.
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2012 (10) TMI 917
Classification – Personal Digital Assistant (Data Processing Machine) - Revenue found the item to be “Pocket Surfer Device - revenue was of the view that the equipment has no capability for processing of data – Held that:- Device is of a kind used principally in data processing - device is covered by Chapter Note 5(B) - It is not explained which is the individual function, other than data processing which the device is capable of doing. Note 5(D) will apply in situations like that of a CNC machine or a machine used in testing of eyes which machine may be using a computer to program the device and analyse the data - Heading 84713090 is more appropriate than Heading 84798999 – in favor of assessee
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Corporate Laws
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2012 (11) TMI 36
Winding up - credit facilities granted by the appellant bank - cheques deposited by both the companies dishonoured - demand notice u/s 434 by bank followed by winding-up proceeding - Held that:- If we give a close look to the order particularly the operative portion, we would find, the learned Judge admitted the winding up petition for the exact amount that was found to be due and payable by the company to the creditor and asked the company to make payment of the said sum together with interest at that rate of 10% per annum on and from a date that would commensurate with the date of dishonour of relevant cheques along with costs as a condition precedent to stall the advertisement process that would make the winding up petition a representative one. In case the company would pay the amount they would be entitled to resist the process otherwise the process would continue which might culminate in a final order of winding up.If we give a close look to Section 434 a creditor having a claim more than a minimum amount prescribed therein would be entitled to maintain his petition. The test is whether the company would be able to resist the same by disputing the claim bona fide. As in the present case number of letters written by the company admitting their liability that would foreclose the scope of the company to dispute the claim. The company from time to time suggested repayment proposals. The correspondence predominantly suggests, the claim was never disputed - unable to accept the contention of the appellant that bank is not a secured creditor. Even if the provisions of Debt Recovery Act or SARFAESI Act would empower the Bank to recover their dues through special mode prescribed therein that would not operate as a bar to apply for winding up, thus no scope of interference. As the Bank already advertised the notice in newspaper and the winding up petition has already taken its representative character. Dismissal of these appeals would not preclude the company to make any proposal for the payment before the learned Company Judge and in case such proposal is made the learned Company Judge would be at liberty to deal with the same.
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2012 (11) TMI 35
Reduction of Capital Redemption Reserve - Held that:- The reduction of the Capital does not involve either diminution of liability in respect of the unpaid share capital or payment to any shareholder of any paid up Share Capital, and hence, there is no requirement to comply with Section 101 (2) of the Act. No objection has been received to the proposed reduction of Capital from any other party - Mr. Rajeev Vasudeva, Director and Authorized Signatory of the Petitioner Company has filed an affidavit dated 21.09.2012 confirming that no objection has been received by the Petitioner or their legal counsel pursuant to the notice of hearing published in the aforesaid newspapers. Thus considering the facts and circumstances of the present case, the Resolution dated 22.05.2012 and the Form of Minutes proposed at “Annexure K” to be registered under Section 103 (1) (b) for reduction of Capital Redemption Reserve of the Petitioner Company are approved.
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2012 (10) TMI 916
Scheme of Amalgamation & Arrangement - Held that:- That the Transferor Company does not have any employee, and accordingly, no clause has been included in the scheme with respect to transfer of employees of the Transferor Company to the Transferee Company - he scheme has been prepared in compliance with the Accounting Standard – 14 where Post merger, accounting aspects are as specified & the Transferee Company shall comply with the procedure prescribed under the Companies Act, 1956 for alteration of the Memorandum of Association of the Transferee Company. Neither the Petitioner Companies nor their counsels have received any objection pursuant to citations published in the newspapers & no objection has been received to the Scheme of Amalgamation & Arrangement from any other party, thus sanction is hereby granted to the Scheme of Amalgamation & Arrangement under Section 391 and 394 of the Companies Act, 1956 - Certified copy of the order be filed with the Registrar of Companies within 30 days from the date of receipt of the same - the whole or part of the undertaking, the property, rights and powers with all the liabilities and duties of the Transferor Companies be transferred to and vest in the Transferee Company without any further act or deed. Upon the Scheme coming into effect, the Transferor Companies 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 or permission/compliance with any other requirement which may be specifically required under any law.
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Service Tax
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2012 (11) TMI 44
Application for waiver of pre-deposit - non-compliance with Section 35F of the Central Excise Act – Held that:- Payment of over Rs. 32 lakhs prior to issue of show cause notice by appellant for which even their appeals, perhaps, would not have been dismissed for non-compliance with Section 35F of the Act, if reasonable opportunity of being heard was given - the pre-deposit of over Rs. 10 lakhs is found to be sufficient for the learned Commissioner (Appeals) to deal with the assessee s appeals on merits - Impugned order is set aside and request the Commissioner (Appeals) to dispose of the assessee s appeals on merits without insisting on any pre-deposit but after giving them a reasonable opportunity of being heard.
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2012 (11) TMI 43
CENVAT credit of the service tax paid on GTA service, tyre retreading service and shifting of household articles of employees – Held that:- As regards benefit of service tax paid for shifting of household goods of employees, issue is covered against assessee by the decision of this Tribunal and accordingly the demand for service tax is upheld - As regards tyre retreading service, it is part of vehicle maintenance and therefore the benefit of service tax credit has to be allowed - whether service tax credit is available in respect of vehicle maintenance has been decided by the Tribunal in their own case that vehicle maintenance is an 'input service'
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2012 (11) TMI 42
Valuation - inclusion of TDS amount in the value of services – alleged that appellant had calculated and discharged the Service tax liabilities excluding the Income tax Value which resulted in short payment of service tax – Held that:- Gross amount billed in terms of the above example is Rs. 100/- and TDS of Rs. 5/- was paid by Service receiver directly to the Income Tax Department. The gross amount billed and paid to the service provider abroad is only Rs. 100/- and thus in terms of the decisions by Hon’ble Tribunals the taxable value of service can only be in terms of contract/invoice raised which is only Rs. 100/- and not Rs. 100/- plus Rs. 5/- (TDS) - appellant had to pay service tax only on the amount billed and paid to the service provider abroad - appellant had discharged service tax on the amount billed and paid - appellant need not pay anything more than what they have paid already as no case is made against them - Appeal allowed
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2012 (11) TMI 33
CENVAT credit of service tax paid - Out-door Catering Services - Held that:- As decided in CCE, Nagpur Versus Ultratech Cement Ltd. [2010 (10) TMI 13 - BOMBAY HIGH COURT] that the service tax paid on outdoor catering services by the canteen located in the respondent's manufacturing premises has to be considered as an input service relating to business and that CENVAT credit is admissible in respect of the same. Thus the appellant is eligible for the benefit of service tax credit proportionate to the actual amount spent - matter is remanded back to original adjudicating authority for a limited purpose of verifying as to whether appellants have recovered any amount from the employees towards the catering services - in favour of assessee.
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2012 (10) TMI 922
Cenvat credit – input services - insurance policies - manufacture of aluminium - power plant located at some distance from the main unit of the appellant - alleged that since Renusagar Power Plant was located at different premises, it is a separate entity and it could not be termed captive power plant - appellant had wrongly availed Cenvat credit in respect of the services to be paid on the insurance policies pertaining to the power plant – Held that:- Renusagar Power Plant is a captive power plant of the Appellant’s manufacturing unit, the two have to be treated as one intergrated unit and therefore, the Cenvat credit of service tax paid on insurance policy for the power plant would be admissible
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2012 (10) TMI 913
Refund claim of service tax - denial as Terminal Handling Charges used in respect of goods exported - Held that:- The rejection has not been made on the ground that it is not Port Service but only on the ground that the Terminal Handling Charge was not specifically mentioned earlier. Since, there is no dispute nor there is any record or observation to show that service tax was not paid under the category of Port Service for Terminal Handling Charges and Port Services, admittedly are notified in the Notification No. 41/2007-ST, refund is admissible - in favour of assessee.
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2012 (10) TMI 912
Condonation of delay in filing an appeal before Commissioner (appeals) - Claim of exemption from the levy of service tax - As aggregate value of taxable service was less than Rs.10 Lakhs - delay in filing appeal - Held that:- Petitioner has stated that they had entrusted Ext.P5 order with their accountant & it was on account of his default that the appeal happened to be not filed. Considering the substance in what the petitioner says no reason to disbelieve that averment, there is no reason why the petitioner should be deprived of an opportunity to file an appeal against Ext.P5. Thus it will be open to the petitioner to file appeal against Ext.P5 within two weeks from today before the appellate Commissioner in which event, appellate Commissioner shall entertain the appeal and deal with the same along with Ext.P6 appeal, ignoring the delay that has occurred, in the meanwhile - in favour of assessee as directed.
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2012 (10) TMI 911
Demand of service tax – alleged that appellant has rendered the services of ‘clearing & forwarding agents’ - appellant submitted that they have provided only financial assistance in arranging supply of goods from Coal India Ltd. to their clients - They have not acted as the agents of the coal and in fact working as sub-agents of the agents of Coal India Ltd. - They have never physically dealt with principal goods - Held that:- Case were subsequently registered under the ‘business auxiliary service’ w.e.f. 1-9-2004, Revenue cannot contend that prior to said registration, they were providing clearing & forwarding agent services – in favor of assessee
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Central Excise
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2012 (11) TMI 34
Non payment of Duty - clearance of exempted goods without maintenance of separate accounts in respect of inputs used - demand for 8% of the value with interest & Penalty - Held that:- As decided in Alpha Drug India Ltd. v. CCE, Chandigarh [1999 (12) TMI 274 - CEGAT, NEW DELHI ] that the clearance under Chapter X or under bond is not the same thing as clearance of goods wholly exempt or goods chargeable to nil rate of duty. Therefore, the provisions of the Rule 57 C are not applicable - in favour of assessee.
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2012 (11) TMI 32
Imposition of penalty - CENVAT Credit on LSHS attributable to electricity used elsewhere other than factory - Held that:- Issue on non-availability of CENVAT Credit is finally settled in assessee's own case against them by relying on the decision of Hon'ble Supreme Court reported in CCE Versus M/s. Gujarat Narmada Fertilizers Co. Ltd. (2009 (8) TMI 15 - SUPREME COURT). As decided in assesse's own case wherein in view of the fact that Hon'ble High Court of Gujarat as well as the Tribunal had taken a view in their favour & when two views are possible and the Tribunal and Hon'ble High Court had taken a view in assessee's favour, it would be unfair to uphold the penalty imposed on the appellant in this case - thus penalty imposed is set aside, while upholding the demand for CENVAT Credit and interest thereon - partly in favour of assessee.
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2012 (11) TMI 31
Power of Commissioner (Appeals) to condone the delay – The appellant filed appeals after five years from the date of receipt of the orders. - Held that:- As per the provisions of Section 35 of the Central Excise Act, 1944, the Commissioner (Appeals) can not condone the delay - applications for condonation of delay are therefore dismissed.
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2012 (11) TMI 30
Restoration of appeal – Tribunal granted unconditional waiver of pre-deposit - applicants were under a bona fide belief that their appeal is pending before this Tribunal - enquiry was conducted by the Superintendent Preventive regarding the payment of penalty – Held that:- No notice of hearing order was sent to the applicant - order passed by this Tribunal is an order dismissing the appeal for non-prosecution - in the case of absence of appellant, the Tribunal is to pass the order on merits after going through the records available before it. In the case of Viral Laminates [1998 (4) TMI 136 - HIGH COURT OF GUJARATD] the Hon’ble High Court has held Rule 20 of CESTAT (Procedure) Rules as ultra vires. - applicant should be heard on merits - application for restoration of appeal allowed
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2012 (11) TMI 29
Condonation of delay - assessee submitted that order passed by the Commissioner (Appeals) is not one on merits – Held that:- In the case of Singh Enterprises (2007 (12) TMI 11 - SUPREME COURT OF INDIA) that an order of Commissioner (Appeals) dismissing an appeal on the ground that the appeal was filed beyond condonable period of delay was not liable to be interfered with by the Tribunal or a High Court. - Delay not condoned.
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2012 (11) TMI 28
Penalty under Section 11AC – alleged that suppression of fact regarding the valuation of goods under Section 4 of Central Excise Act - contention of the respondent is that they were not aware of the change in the provisions of law at the material time and there was no suppression of fact with intent to evade payment of duty on their part – Held that:- After the amendment, the provisions applicable to packages intended for retail sale, did not apply to packages containing quantity of more than 25 Kgs. or 25 Ltrs. However, from 14-1-2007 to 30-11-2007, the respondent continued paying duty on value of the goods on the basis of pre-amended provisions of law and the respondents have paid duty on 6-10-2009 and there was no suppression of fact with intent to evade duty - Revenue’s appeal dismissed.
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2012 (11) TMI 27
Refund claim – procedure to claim refund claim – Held that:- even though appellants wrote on 23-3-2009 that they were eligible for refund of the amount paid as per Commissioner (Appeals) order dated 3-10-2005 reply by the department did not treat it as a refund claim but told them that they had not preferred any refund claim. - he proper course for the department was to point out the omission rather than stating that no refund application has been filed. - the letter dated 21-3-2009 received by the department on 24-3-2009 should have been treated as a refund claim and considered and dealt with accordingly. - matter is remanded to the original adjudicating authority.
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2012 (11) TMI 26
Waiver of pre-deposit – cenvat credit - returned goods - Department submits that when goods received from outside were input and that did not undergo manufacturing process, there should be denial of Cenvat credit – Held that:- Rule 16(1) of Central Excise Rules, 2002, does not create any embargo to avail Cenvat credit in respect of finished goods consigned from a different unit to Bolpur Unit by fiction of law treating such finished goods as input. The finished goods were treated under law as input which need not undergo processing since accountability was only safe-guard measure provided to grant Cenvat credit. To such extent, applicant is correct to have bona fide belief of availing canvat credit - waiver of pre-deposit allowed
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2012 (11) TMI 25
Penalty – overvaluation – alleged that FOB value export is less than the value declared by the exporters – Held that:- FOB value declared by the appellant cannot be discarded in lighter manner - cost to manufacture is not relevant for arriving at the FOB value as manufacturer might make huge profit and only fact is the selling price of the manufacturer on the basis of which, the FOB value cannot be rejected - manufacturer’s selling price cannot be the price at which the goods are ordinarily sold in the wholesale market in India and in the absence of contemporaneous export, the Revenue’s contention cannot be acceptable - M/s. Rochees Watches has already given a bank guarantee of Rs. 1.10 crore – waiver of pre-deposit allowed
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2012 (11) TMI 24
SSI Exemption - Whether branded goods should be clubbed with unbranded goods for the purpose of implementation of mandate of Notification No. 8/02 – Held that:- Branded goods when differentiated from unbranded goods both are not in equal footing - In no uncertain terms it has been stated in the notification that branded goods should be excluded from computation of SSI limit - there are branded and unbranded goods manufactured by the respondent, SSI benefit claimed by the respondent should not be denied - Revenue’s appeal is dismissed.
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2012 (10) TMI 915
Refund of cenvat credit - Period of limitation - 100% EOU - accumulated CENVAT credit at the time of debonding – refund claim was rejected as time barred as the refund related to period from 1.4.2005 to 31.3.2007 and the claim having been received on 9.4.2008 – Held that:- Claim for refund of CENVAT credit relating to export should be made on a quarter basis is more for administrative convenience and this is to discourage the exporters to prefer too many claims leading to voluminous work at the divisional level. This does not specify any time limit for claiming the refund of credit - refund of CENVAT credit can be allowed only after the export has taken place - refund claimed in any quarter should relate to CENVAT credit on inputs contained in goods exported during that quarter or earlier quarters and not in respect of goods to be exported - refund claim has been rejected is not sustainable - matter is remanded to the original authority
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2012 (10) TMI 914
Denial of Cenvat Credit - Following the decision of court in case of [CCE V/s. Creative Enterprises 2008 (7) TMI 311 - GUJARAT HIGH COURT] Held that:- Once the duty on final products has been accepted by the department, CENVAT credit availed need not be reversed even if the activity does not amount to manufacture - appeal allowed with consequential relief, if any - stay application is also disposed of.
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2012 (10) TMI 910
Waiver of pre-deposit - manufacture of M.S Flats and M.S. Bars - demand on the ground that the applicants was showing higher consumption of electricity and the quantum of electric consumption during the two hours trial – Held that:- Contention of the applicant is that under the compounded levy scheme the applicant s annual capacity was fixed at 1187 MT per annum after due verification. As per the quantification of demand in the present proceedings the annual capacity of the mill comes to 8000 M.T. per annum which is not possible. This contention is not considered by the adjudicating authority though raised - pre-deposit waived - matter is remanded to the adjudicating authority for de novo adjudication
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2012 (10) TMI 909
Waiver of pre-deposit – demand of duty in respect of floor sweepings and defective cakes, which emerge during the process of manufacturing of their final products i.e. biscuits and cakes – Held that:- Floor sweepings, processed defective cakes etc. cannot be held to be excisable goods - defective cakes and floor sweepings which are sold in the market is nothing but waste and scrap and merely because they were being cleared as floor sweepings will not make them excisable goods - The same are not being manufactured by the appellant and emerged during the manufacturing of final products - these not are covered by Section 2(d) - there is no tariff heading in the Central Excise Tariff covering floor sweepings and defective cakes - pre-deposit waived
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2012 (10) TMI 908
Cenvat credit – removal of capital goods – reversal – Held that:- When capital goods are removed after being put to use, it cannot be considered that the goods are removed ‘as such’ and therefore, the provisions of Rule 3(5) of Cenvat Credit Rules, 2004 would not apply to such clearance and there is no need for reversing any Cenvat credit because they had actually used the capital goods in the manufacture of excisable goods - appellants have paid duty based on transaction value - appeal is allowed
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2012 (10) TMI 907
Cenvat credit on capital goods before registration - Held that:- Cenvat credit was availed of in the year 2006-07, when the assessee had not yet registered under Rule 9 of the Central Excise Rules, the assessee did not utilize the Cenvat credit - It is only after registration, in the subsequent year, they have utilized the entire Cenvat credit which was standing to their credit – cenvat credit allowed – in favor of assessee
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2012 (10) TMI 906
Demand along with interest and penalties - denial of benefit of exemption under Notification No.67/95-CE - Naphtha was cleared for home consumption on payment of Central Excise duty as well as at NIL rate of duty under the Notification No.67/95 for generation of electricity in their co-generation plant or Captive Power Plant (CPP) - Held that:- There was difference of opinion on the issue regarding the exemption on the quantity of Naphtha attributable to electricity generated in captive power plant/co-generation plant, used for allied activities like lighting in the artillery (sic) roads/yard, administrative building, canteen/cafeteria - Members having a difference of opinion; therefore the same is placed before the Hon'ble Vice President/HOD for appointing a 3 rd Member to decide the issue.
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2012 (10) TMI 905
LTU - Cenvat credit - single excise registration - alleged that original consent form did not mention the three units that came up after March 2006 and hence all the transfers of Cenvat credit from the newly set up unit to older units are without authority of law and should be paid back – Held that:- In all the returns filed and different correspondence with the Commissioner (LTU) they were disclosing the existence of the new units and in fact sought permissions for transfer of credit from new units to old units which were given - Revenue is trying to deny a substantial benefit for some flimsy reason - procedural flow involved is a curable defect and credit is not deniable adopting a hyper technical approach adopted by Revenue – stay granted.
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2012 (10) TMI 904
Rebate claim – export – respondent had cleared the goods from their factory for export describing the same as “menthol powder” – alleged that goods exported were not the same, which were cleared by the respondent from their factory after payment of duty – Held that:- Respondent have themselves prepared and signed the Commercial Invoice under which Menthol Powder-97% BP/USP were exported vide said Shipping Bill and Bill of Lading - respondent has not been able to meet the mandatory requirement of claiming rebate that the same goods which have been manufactured, suffered duty, have actually been exported - respondent has failed to establish that they have exported the very same duty paid goods vide shipping bill as cleared by ARE-1, hence, rebate claims not admissible
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2012 (10) TMI 903
Waiver of pre-deposit - manufacturer of cigarettes - cut tobacco is used for manufacture of cigarettes. During the course of manufacture of cigarettes using such cut tobacco, also the similar wastes occur – alleged that quantity of cut tobacco attributable to emergence of “tobacco refuse” would not be eligible for duty exemption under Notification No. 52/2002-C.E., - Held that:- Waste emerging cannot be treated as arising out of manufacture and cannot be treated as excisable goods - question of such refuse being treated as exempted product or as subject to nil rate of duty does not arise - exception contained in the Notification No. 52/2002-C.E. is not attracted - pre-deposit waived
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CST, VAT & Sales Tax
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2012 (10) TMI 921
Registration as dealer in Trading in live chicken - denial as one rented room for doing business is not enough to stock the commodity dealt with - Held that:- In Ext.P5, the order rejecting his application for registration there is no mention about the allegation regarding the inadequacy of the storage space mentioned in Ext.P3 moreover, the petitioner's contention that he proposes to sell live chicken to dealers in Mahi, is also not dealt with in Ext.P5. On the other hand Ext.P5 stated that since sale is proposed to be effected to dealers in Karnataka and Tamil Nadu where live chicken is a non-taxable item, first respondent again says that registration is unnecessary. Also a fresh allegation is made that the application made by the petitioner is only under Section 7(1) and not under Section 7 (1) & (2) of the CST Act. Not only there is non-consideration of the contentions, but also an allegation which was not put to the petitioner is relied on. These reasons render Ext.P5 vitiated and need to be set aside - first respondent directed to reconsider the matter with notice to the petitioner and pass orders on Ext.P3 - in favour of assessee.
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Wealth tax
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2012 (11) TMI 45
Right of user charges - Addition to wealth - property in question consisting of jewellery and silver vessels - Held that:- A.O. rightly denied the deduction towards Right of user of Rajal. Following the decision of the Tribunal in assessee’s own case in the earlier years, the view taken by the Commissioner of Wealth Tax (Appeals) is upheld subject to the rider that when the decision of the High Court in respect of the earlier years is available, the A.O. will apply the same in respect of all the assessment years under appeal - against assessee.
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Indian Laws
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2012 (11) TMI 41
Appointment of arbitrators - Arbitration and Conciliation Act, 1996 - procedure for appointment of arbitrator and the actual appointment of the arbitrator - held that:- Given the definition of the word ‘appointment’, in our view, section 11 does not say that the Chief Justice could alone exercise the general power of judicially determining whether the pre-conditions for such appointment have been fulfilled. To hold otherwise would, not only be contrary to the express language of the section, but it would also mean that the Chief Justice could by designation clothe any person or institution with the power to discharge judicial functions. the procedure that is being followed by the Calcutta High Court with regard to the consideration of the applications under Section 11 of the 1996 Act is legally impermissible. The piecemeal consideration of the application under Section 11 by the Designate Judge and another Designate Judge or the Chief Justice, as the case may be, is not contemplated by Section 11. The function of the Chief Justice or Designate Judge in consideration of the application under Section 11 is judicial and such application has to be dealt with in its entirety by either Chief Justice himself or the Designate Judge and not by both by making it a two-tier procedure as held in Modi Korea Telecommunications Ltd.. The distinction drawn by the Division Bench of Calcutta High Court in Modi Korea Telecommunications Ltd. between the procedure for appointment of arbitrator and the actual appointment of the arbitrator is not at all well founded. - matter restored to High Court for appropriate consideration. Orders passed by the Chief Justice or the Designate Judge under Section 11 of the 1996 Act which have attained finality and the awards pursuant to such orders shall remain unaffected insofar as the above aspect is concerned.
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2012 (11) TMI 40
Termination of tenancy rights - replacement of the tin-sheet by a concrete slab was undertaken by the tenant - is replacement in question took place in contrary to clauses (m), (o) and (p) of Section 108 of the Transfer of Property Act ? - Held that:- The use of the word ‘permanent’ in Section 108 (p) of the Transfer of Property Act, 1882 is meant to distinguish the structure from what is temporary. The term ‘permanent’ does not mean that the structure must last forever. A structure that lasts till the end of the tenancy can be treated as a permanent structure. The intention of the party putting up the structure is important, for determining whether it is permanent or temporary. The nature and extent of the structure is similarly an important circumstance for deciding whether the structure is permanent or temporary within the meaning of Section 108 (p) of the Act. Removability of the structure without causing any damage to the building is yet another test that can be applied while deciding the nature of the structure. Thus applying the above tests to the instant case the structure was not a temporary structure by any means. The kitchen and the storage space forming part of the demised premises was meant to be used till the tenancy in favour of the respondent-occupant subsisted. Removal of the roof and replacement thereof by a concrete slab was also meant to continue till the tenancy subsisted. The intention of the tenant while replacing the tin roof with concrete slab, obviously was not to make a temporary arrangement but to provide a permanent solution for the alleged failure of the landlord to repair the roof. The construction of the passage was also a permanent provision made by the tenant which too was intended to last till the subsistence of the lease. The concrete slab was a permanent feature of the demised premises and could not be easily removed without doing extensive damage to the remaining structure. Such being the position, the alteration made by the tenant fell within the mischief of Section 108 (p) of the Transfer of Property Act and, therefore, constituted a ground for his eviction in terms of Section 13(1)(b) of the West Bengal Premises Tenancy Act, 1956. Set aside the order passed by the High Court that any such replacement of the roof did not tantamount to violation of TPA Act and restore that of the trial Court & the tenant given one year’s time to vacate the premises in his occupation subject to his filing an undertaking further subject to the condition that the respondent shall either pay directly to the appellants or deposit in the trial Court compensation of the premises @ Rs.1500/- p.m. from 1st October, 2012 till the date of vacation to made by the 15th of every succeeding calendar month failing which the decree shall become executable by the Court.
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2012 (10) TMI 920
Levy sugar price - non-consideration of higher SAP - writ of prohibition against the respondents for acting on the basis of 1983 Order being contrary to Section 3 (3C) of U.P. Sugarcane Cess Act, 1956 - Held that:- Since the petitioners have raised a specific plea qua the importance of SAP being higher than the price fixed by the Central Government for procurement of sugarcane and that is an aspect which has been held to have a material bearing on the price fixation by the Central Government in view of the judgement of the Supreme Court in Mahalakshmi Sugar Mills Company Versus Commissioner of Income-Tax, Delhi (1980 (4) TMI 1 - SUPREME COURT), the petitioners cannot be precluded from raising this plea merely on the ground that other petitioners while challenging the pricing of 1982-83 had not raised this plea and the challenge having been repelled by the Hon‟ble Supreme Court, it is not open to the petitioners to raise such a plea. We are of the view that clearly all principles of sub silentio would apply (term used in the technical sense, when a particular point of law involved in a decision is not perceived by a court or present to its mind) No reason for the apprehension expressed on behalf of the respondents that such a course of action would open a Pandora’s Box as others would follow. However, if others have not raised this plea and apparently there are no other matters pending the benefit would only go to a party who has chosen to take such a plea from the beginning and whose petition is still pending. This is what was done in Mahalakshmi Sugar Mills case (supra) while granting relief only to petitioners therein. Thus, the effect of SAP would have to be examined by the Central Government in re-fixing the levy sugar price for the year 1982-83 at least qua the petitioners.
