TMI Tax Updates - e-Newsletter
November 21, 2012

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws Service Tax Central Excise CST, VAT & Sales Tax Indian Laws

TMI SMS

• IT Invoking Section 68 involves 3 ingredients, proof of identity of the share applicants, creditworthiness and the genuineness of the transaction as a whole -HC

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• TDS u/s 194J - the expression technical services takes colour from the expressions managerial services and consultancy services which involve a human element

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Articles

1. Learning from case of Price Waterhouse Coopers (P.) Ltd- avoid casual and careless approach- be more careful.

   By: DEVKUMAR KOTHARI

2. EXEMPTION TO RENTING OF AN IMMOVABLE PROPERTY

   By: Dr. Sanjiv Agarwal

3. JURISDICTION OF SEBI OVER HYBRIDS

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. World Bank Pledges Additional $37 Million for Himachal Pradesh Watershed Development Project

2. Export of Goods and Software - Realisation and Repatriation of Export Proceeds – Liberalisation

3. Commodity-Wise Freight Revenue by Railways goes up by 23.76 per Cent during April-October 2012

4. Eight Lakh E-BRCs issued in First three Months DGFT Writes to heads of Banks to Address E-BRC issues

5. RBI - ADB Conference on Managing Capital Flows: Management of capital flows a concern for both source as well as recipient countries; Merit in acting in coordinated manner in the event of excess capital flow volatility to maximise welfare

6. Auction for Sale (Re-issue) of ‘8.20 per cent Government Stock, 2025’

7. Auction for Sale (Re-issue) of ‘8.19 per cent Government Stock, 2020’

8. Auction for Sale of Government Stock

9. Union HRD Minister to Release NBT-NCAER Study on Reading Habits of the Literate Youth of North-East India

10. Computerisation programme for improving management of information about cases handled by CESTAT and also communication between CESTAT and litigants before CESTAT

Notifications

Central Excise

1. 39/2012 - dated 19-11-2012 - CE

Provide exemption to Project ASTRA by amending notification No. 64/95 -CE dt. 16/3/1995

Customs

2. 58/2012 - dated 19-11-2012 - Cus

Provide duty exemption to ASTRA by amending notification No. 39/96-cus dt. 23/7/1996

3. 105/2012 - dated 16-11-2012 - Cus (NT)

Amendment in Customs House Agents Licensing Regulations, 2004 – Regulation 11

4. 104/2012 - dated 16-11-2012 - Cus (NT)

Amendment in Handling of Cargo in Customs Areas Regulations, 2009

5. 101/2012 - dated 16-11-2012 - Cus (NT)

Appointment of Common Adjudicating Authority - M/s Havells India Ltd., QRG Towers 2D, Sector-126, Expressway Noida, U.P.,

6. 100/2012 - dated 16-11-2012 - Cus (NT)

Appointment of Common Adjudicating Authority - M/s Lambda Therapeutic Research Ltd., Near Gujarat High Court, S.G. Highway, Gota, Ahmedabad

7. 103/2012 - dated 5-11-2012 - Cus (NT)

Appointment of Common Adjudicating Authority - M/s KLJ Resources Ltd., KLJ House, 63 Rama Marg, Najafgarh Road, New Delhi

Circulars / Instructions / Orders

VAT - Delhi

1. 22 - dated 12-11-2012

Clarification regarding details to be filed online in Form Stock-1

2. F.4/Operation Cell/2006/1708-1718. - dated 30-9-2012

ARRANGEMENTS FOR RECIPT AND MOVEMENT OF QUARTERLY RETURNS FOR QUARTER ENDING 30.9.2012

FEMA

3. 52 - dated 20-11-2012

Export of Goods and Software – Realisation and Repatriation of export proceeds – Liberalisation

Customs

4. 28/2012 - dated 16-11-2012

Authorized Economic Operator (AEO) programme for implementation — Revised Guidelines.

Highlights / Catch Notes

Income Tax

• Agricultural land sale results in long-term capital loss, eligible for carry forward to offset future gains.

  Case-Laws - AT : Capital Gain – Agricultural land purchase for commercial use - It was definitely a business asset held as such in the books of the assessee hence, loss on sale of such land would constitute a long term capital loss and would be eligible for carry forward for set off to future years. - AT
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• Power Plant Operator Deemed Contractor, Not Eligible for Section 80-IA Industrial Undertaking Tax Benefits.

  Case-Laws - AT : Deduction u/s 80-IA - assessee has not set up any power plant but only operating and maintaining the power plant set up and is a contractor for the purpose of rendering services and hence the charges received by the assessee cannot be treated as profits derived from the industrial undertaking for the purpose of section 80-IA - AT
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• Taxpayers Lose Only Partial Exemption for Homes Over 1,000 Sq Ft u/s 80IB(10) of Income Tax Act.

  Case-Laws - AT : In case, some residential house have a built up area in excess of 1,000 sq.ft., the assessee would not lose the total exemption under section 80IB(10) in its entirety but will only lose the proportionate exemption, under section 80IB(10). - AT
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• Insurance, banking, and electricity companies classified similarly under Companies Act Sec 211; Sec 115JB provisions not applicable.

  Case-Laws - AT : When the insurance companies, banking companies and electricity generation and distributions companies are treated in the same class as per the provisions of sec. 211 of the Companies Act in preparing their final accounts, then these companies cannot be treated differently for the purpose of sec. 115JB and accordingly, the provisions of sec. 115JB are not applicable in the case of the assessee - AT
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• High Court upholds penalty for bogus deduction claim u/s 35CCA, affirms consequences for fraudulent tax practices.

  Case-Laws - HC : Penalty u/s 271(1)(c) - bogus claim of deduction under Section 35CCA - penalty under Section 271(1)(c) was rightly imposed - HC
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• Proving Identity, Creditworthiness, and Genuineness Essential to Invoke Section 68 for Share Transactions.

  Case-Laws - HC : Invoking Section 68 involves three ingredients, namely, the proof regarding identity of the share applicants, their creditworthiness to purchase the shares and the genuineness of the transaction as a whole. - HC
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• Depreciation Approved for BOOT Model Entity Managing Yamuna River Bridge in NOIDA.

  Case-Laws - HC : Depreciation on toll road/bridge - assessee establish, finance, design, construct, operate and maintains a NOIDA-Bridge across the river 'Yamuna' under the BOOT basis - Depreciation allowed - HC
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• Revision Order u/s 263 Overturned Due to New Ground Involving Deeming Fiction Not Addressed in Notice Stage.

  Case-Laws - AT : Revision Order u/s 263 - The revision has been done on an altogether different ground of deeming fiction u/s. 68 which was not even touched upon by the Commissioner at notice stage - revision order set aside - AT
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• "Technical Services" in Section 194J Needs Human Element; Interconnection Services Excluded Under Income Tax Act.

  Case-Laws - AT : FTS - TDS - the expression ‘technical services’ takes colour from the expressions ‘managerial services’ and ‘consultancy services’ which necessarily involve a human element or, what is now a days fashionably called, human interface. - the services rendered qua interconnection/port access do not involve any human interface and, therefore, the same cannot be regarded as ‘technical services’ as contemplated under section 194J of the said Act. - AT
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Customs

• Customs Notification Amended to Grant Duty Exemption to ASTRA for Financial Relief Under Notification No. 39/96-cus.

  Notifications : Provide duty exemption to ASTRA by amending notification No. 39/96-cus dt. 23/7/1996 - Notification
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FEMA

• FEMA Updates Ease Export Proceeds Repatriation: Streamlined Regulations for Faster Transactions and Reduced Compliance for Exporters.

  Circulars : Export of Goods and Software – Realisation and Repatriation of export proceeds – Liberalisation - Circular
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Corporate Law

• Appeals under Companies Act Section 10F on oppression and mismanagement restricted by Arbitration Act Section 37 limitations.

  Case-Laws - HC : Oppression and mismanagement - Section 10F provides for forum of appeal, provided an appeal is maintainable under Section 37 of the Arbitration and Conciliation Act, 1996. Therefore that all the aforesaid appeal filed under Section 10F of the Companies Act are not maintainable in view of bar under Section 37 of the Arbitration Act, 1996 - HC
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Service Tax

• Custodians Auctioning Abandoned Cargo Exempt from Service Tax if Tax Already Paid.

  Case-Laws - AT : Service Tax is not leviable on the activities of the custodian where he auctions abandoned cargo and ST/VAT is paid in respect of that cargo - AT
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• Court Rules Landlord Responsible for Retrospective Service Tax on Renting, Not Tenant.

  Case-Laws - HC : Recovery of service tax from the tenant - consequence of retrospective amendment for levy of service tax on renting - Winding up petition - Principally the Petitioner who had let out the premises was liable for such service tax and not the Respondent. - HC
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Central Excise

• Project ASTRA Receives Exemption via Amendment to Notification No. 64/95-CE Under Central Excise Rules.

  Notifications : Provide exemption to Project ASTRA by amending notification No. 64/95 -CE dt. 16/3/1995 - Notification
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• State-Owned Entity Not Equal to State Government for Legal and Tax Obligations.

  Case-Laws - AT : Merely because 100% capital is owned by State Government does not make it a body at par with the State Government. - AT
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Case Laws:

• Income Tax

• 2012 (11) TMI 595
  Addition u/s 68 - ingenuine share transactions - ITAT deleted the addition - reopening of assessment - Held that:- AO had examined the bank accounts and had deduced a pattern by which the bank accounts were used only as a conduit to receive the monies and pay them out on the same day. This pattern, coupled with the general admission made by Pradeep Kumar Jindal one of the directors of company admitted to providing accommodation entry to the assessee and the failure of the share applicants to produce the directors before the AO, all taken cumulatively, should have forced Tribunal necessitating a deeper probe into the matter. The Tribunal chose to rest its decision on the sole fact that the share applicants had established there identity by filing confirmation letters and copies of their income tax returns. This is hardly sufficient for the purpose of discharging the creditworthiness of the share applicants and the genuineness of the transactions. Invoking Section 68 involves three ingredients, namely, the proof regarding identity of the share applicants, their creditworthiness to purchase the shares and the genuineness of the transaction as a whole. The Tribunal failed to keep in mind these aspects of the matter and has chosen to dispose of the appeal on the limited question of the identity of the shareholders. The present case is one where there is enough material in the possession of the Assessing Officer which warrants explanation from the assessee regarding the nature and source of the share application monies - matter remitted back to ITAT for fresh decision - decided against the assessee

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• 2012 (11) TMI 594
  Offshore Installations – ship/ vessels engaged in drilling operations. - qualifying ships - held that:- Vessels were consistently registered under Section 407 of the Merchant Shipping Act and had a valid certificate which was produced for consideration by the appellate authority who sought remand report and vessel is a qualifying ship for sea in terms of clause (a) of Section 115VD. The Tribunal noticed that unlike in the case of offshore installations which are stationed at one place, the very nature of the activity in which the assessee engaged is to carry out operations in different places; necessarily, at least for a short duration the vessel has to be stationed at one place. In these circumstances, Revenue’s contentions that the vessel is nothing but “offshore installations” has no merit, in the case of Matdrills of the kind put to use by the assessee - reasoning and findings of the Appellate Commissioner and the Tribunal cannot be found fault with - substantial question of law is therefore answered in favour of the assessee and against the Revenue - appeals are consequently dismissed.

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• 2012 (11) TMI 593
  Undisclosed Stock – release of seized gold - one kg of gold already released - held that:- As Assessment proceedings are still not complete and one kilogram of gold has been released to the petitioner after this writ petition was filed and what is held by the Department is, according to the Department, insufficient to realise the probable demand. In such circumstances, the prayer sought in this writ petition, cannot be granted and therefore, the writ petition is dismissed. This shall be without prejudice to the right of the petitioner to seek appropriate orders once the assessment proceedings attained finality.

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• 2012 (11) TMI 592
  Claim u/s 43B - Contribution to provident fund – Following the judgement of court in case of [CIT versus Vinay Cement Ltd. 2007 (3) TMI 346 - SUPREME COURT OF INDIA] held that:- If employees' contribution is not deposited by the due date prescribed under the relevant Acts and is deposited late, the employer not only pays interest on delayed payment but can incur penalties also, for which specific provisions are made in the Provident Fund Act as well as the ESI Act. Therefore, the Act permits the employer to make the deposit with some delays, subject to the aforesaid consequences. In so far as the Income-tax Act is concerned, the assessee can get the benefit if the actual payment is made before the return is filed - no reason to deny the benefit of Section 43B, which starts with a non obstante clause and which clearly lays down that the assessee can take benefit of deduction of such contributions, if the same are paid before furnishing of the return - no merit in the appeal filed by the revenue, which is accordingly dismissed.

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• 2012 (11) TMI 591
  Deduction u/s 80P(2)(a)(i) - Held that:- Investment of funds by the banks including the non-reserves were part of the banking activities since no bank would like its reserve funds to remain idle and not earn any interest. This is not only prudent business management but is also a part of the activity of banking. Therefore, the interest earned on such deposits is directly attributable to the business of banking followed by decision of court in case of [Mehsana District Co-operative Bank Ltd. Versus Income-Tax Officer 2001 (8) TMI 15 - SUPREME COURT] decided in favour of the assessee and against the revenue and the present appeals are also dismissed.

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• 2012 (11) TMI 590
  Undervaluation - Difference between the circle rate and the purchase price of immoveable properties - ITAT deleted the addition - Held that:- The express provision of Section 50-C enabling the revenue to treat the value declared by an assessee for payment of stamp duty, cannot be a legitimate ground for concluding that there was undervaluation, in the acquisition of immovable property. The finding cannot start and conclude with the fact that such stamp duty value or basis is higher than the consideration mentioned in the deed. The compulsion for such higher value, is the mandate of the Stamp Act, and provisions which levy stamp duty at pre-determined or notified dates. In the present case, the revenue did not rely on any objective fact or circumstances, consequently, the Court holds that there is no infirmity in the approach of the lower authorities and the Tribunal, granting relief to the assessee - in favour of the assessee. Addition u/s 68 - CIT(A) deleted the addition - Held that:- The record reveal that the PAN number and material particulars of the Director (of the assessee) and his proprietorship concern, was made available, even the Income Tax Returns concerned, were filed. The CIT (A) scrutinized this aspect in detail, and held that the assessee had discharged its onus of proving that the funds were received, and revealed particulars of the source. This court finds no unreasonableness in regard to such findings, as to call for interference under Section 260-A of the Act - in favour of the assessee.

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• 2012 (11) TMI 589
  Penalty u/s 271(1)(c) - bogus claim of deduction under Section 35CCA - ITAT deleted the levy - Held that:- Both the CIT (Appeals) and the Tribunal have not examined the facts of the present case in the manner expected of them & has merely based its conclusion on certain previous orders without any discussion of the facts of the present case. The question of concealment of income and whether the revised return was filed voluntarily or not is a question of fact to be examined and decided upon the facts and circumstances of the each case and, therefore, it was not permissible to the Tribunal to merely rely on earlier orders where this issue was considered and penalties were cancelled. At best, those earlier cases could only have a persuasive value. Thus the Tribunal has committed an error in upholding the order of the CIT (Appeals) cancelling the penalties, without assigning any valid reason and without examining the facts. As the cash book did not contain the name of the donee, though an entry had been made regarding the donation. Even in the donation account appearing in the assessee’s ledger the name of the donee had not been entered when the survey was conducted on 06.10.1983 in the assessee’s premises. The survey of the assessee’s premises under Section 133A took place on 06.10.1983, two months prior to the date of filing the revised return. The survey itself was a result or as a follow up action to the searches and other inquiries conducted earlier. The proceeds of the donation cheque had already been taken out of the bank account which itself had been closed on 13.08.1982. In the light of these facts, the contention that the revised return was filed voluntarily is untenable. Reverse the order of the Tribunal and hold that the penalty under Section 271(1)(c) was rightly imposed - against the assessee.

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• 2012 (11) TMI 588
  Deduction u/s 80IB – Held that:- As the assessee had produced the completion certificate in respect of the projects Jains Sagarika, MRC Nagar, Chennai and Jains Swarnakamal, Vadapalani, Chennai and the projects at Velacherry, Chitlapakkam and Virugambakkam. As far as the projects at Manapakkam and Pallavaram are concerned, if the assessee had submitted certificates from sewerage and Electricity Board, which according to the Commissioner would not satisfy the requirement of the Rules, as already pointed out, in the absence of any requirement under Section 80IB(10)(a) of the Income Tax Act and going by the provision, as it stood during relevant assessment year, 2004-05, it is difficult to accept the contention of the Revenue that the claim for deduction rested on the assessee's production of completion certificates - appeal filed by the Revenue is rejected.

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• 2012 (11) TMI 587
  MAT - Deduction for gains on sale of investment - disallowance as profits from insurance business are to be taken to be balance of the profits as disclosed by annual accounts subject to the adjustments provided in clause 5(a) to (c) - Held that:- The assessee, being an Insurance Company is not required to prepare its accounts as per Part II & III of Schedule VI of the Companies Act 1956. The proviso to sub. Sec (2) of sec. 211 of the Companies Act creates an exemption of applicability of sub. Sec. (2) of sec 211 which requires that every P&L accounts of the Companies shall be prepared as per the requirement of Part II of Schedule VI inter-alia in respect of Insurance companies or banking companies or any other companies engaged in generation and supply of electricity for which a form of profit and loss account has been specified in or under the Act governing such class of company. Even if an Insurance Company does not disclose any matter in the Balance Sheet and P&L account because the same is not required to be disclosed by the Insurance Act shall not be treated non-disclosure of a true and fair view of the state of affairs of the company as the said condition has been relaxed by sub sec 5 of sec 211 of the Companies Act. Thus when the insurance companies, banking companies and electricity generation and distributions companies are treated in the same class as per the provisions of sec. 211 of the Companies Act in preparing their final accounts, then these companies cannot be treated differently for the purpose of sec. 115JB and accordingly, the provisions of sec. 115JB are not applicable in the case of the assessee - in favour of assessee.

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• 2012 (11) TMI 586
  Expenditure on improvement of lease hold premises - Revenue v/s Capital - Held that:- If the Revenue's request for remitting the matter for examination of the entire expenditure, including what was allowed by the AO himself, were to be acceded to the assessee would be worse off having regard to the fact that the AO himself has allowed its claim and permitted deduction of Rs. 70 odd lakhs. Thus as the Tribunal made a limited remand to the lower authorities to determine the exact nature and quantum of brick work which would entitle the assessee to the deduction claimed u/S 37 limited to Rs. 2.75 crores no substantial question of law arises - in favour of the assessee. Deduction u/s 10A - disallowance as services rendered by the assessee were not "computer software" - assessee granted the benefit of Section 80HHE - Held that:- The AO's order has alluded to the CBDT Circular dated 26.09.2000 which explains the services as including back-office, operations, call centres, content development or animation, data processing engineering and design, geographic information system services, human resource services, insurance claim processing, legal databases, medical transcription, pay roll, remote maintenance, revenue accounting, support centres, web-site services etc. It is apparent that the CBDT itself had interpreted the term "computer software" occurring in Explanation 2 to Section 10A in an expansive rather than a narrow manner as was done in the present case by the AO. In this case the materials placed by the assessee on record reveal that its "program management system" was nothing but a development of software which assisted in management services. The assessee's "program management services" which is a method of providing software to achieve a particular end cannot be said to be excluded from the term "computer software". This Court accordingly holds that the findings of the Tribunal are sound and do not require any interference - in favour of assessee. Disallowance of Bad debts - Held that:- Once the CIT (Appeals) after satisfying himself about the correctness of the findings by the AO, held that the latter had made additions wrongly by not actually seeing that the amount was written off, a finding that was endorsed by the Tribunal that finding of fact cannot be interfered with by the High Court exercising its jurisdiction under Section 260A. The Revenue's arguments cannot also be accepted as it would amount to accepting their position, plainly not permitted in an appeal to this Court under Section 260A, which his confined in its consideration to substantial question of law - in favour of assessee. Interest u/s 234D - Held that:- As decided in IT v. Jacabs Civil Incorporated, Mitsubishi Corpn. [2010 (8) TMI 37 - DELHI HIGH COURT] this provision came into force on 01.06.2003 and was applicable only from the assessment year 2004-05. Thus it could not have been applied as it was done by the AO in the present case - in favour of assessee.

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• 2012 (11) TMI 584
  Taxability of mobilization revenue attributable to the operation of the vessel beyond 200 nautical miles from the Indian costline. - Payments made to assessee outside India – Following the decision of court in case of [SEDCO FOREX INTERNATIONAL INC.(formerly known as Forex Neptune International Inc.) Versus CIT 2007 (9) TMI 196 - UTTARAKHAND HIGH COURT] held that:- Mobilization charges paid to assessee by ONGC had no nexus with the actual amount incurred by assessee for transportation of drilling units of rigs to India – thus, mobilization charges weren’t reimbursement of expenditure – in view of fictional taxing provision u/s 44BB, AO is justified in adding the amount received by assessee towards mobilization charges for the purpose of imposing income tax - grievance sought to be raised by the assessee is rejected - In the result, appeal filed by the assessee is dismissed.

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• 2012 (11) TMI 583
  Eligibility of prorata claim u/s.80IB(10) with reference to area of residential portion of housing project – Whether assessee’s housing project undisputedly including some residential units, which are of an area exceeding 1,000 sq.ft. (built-up),the whole of the profit of the housing project is not eligible for deduction under section 80IB(10)- Deduction under section 80IB(10) allowed earlier is hereby withdrawn. Since the assessee has furnished inaccurate particulars of income and concealed the particulars of income, the penalty proceedings are initiated under section 271(1)(c) for wrong claim of deduction under section 80IB(10). As decided by Tribunal that, in case, some residential house have a built up area in excess of 1,000 sq.ft., the assessee would not lose the total exemption under section 80IB(10) in its entirety but will only lose the proportionate exemption, under section 80IB(10). Hon'ble High Court has observed that when the local authority approved a plan as a housing project or a residential cum commercial project, the assessee would be entitled to claim for deduction under section 80IB(10)even if the project had commercial element in excess of 10%. section 80IB(10) allows deduction to the entire project approved by the local authority and not to a part of the project. If the conditions set out in section 80IB(10) are satisfied, then deduction is allowable on the entire project approved by the local authority and there is no question of allowing deduction to a part of the project.In the present case hold that assessee is entitled for deduction under section 80IB on pro-rata basis. The A.O. is therefore, directed to allow the deduction under section 80IB(10) on pro-rata basis as discussed above. This ground of appeal is allowed. In the result, Revenue’s appeal is dismissed. Rectification order – Court has specifically mentioned that the writ petition was misconceived and therefore liable to be dismissed. The ratio laid down by the High Court in the said case was that writ petition against order under s. 254(2) cannot be rejected on the ground of availability of alternate remedy. The Madras High Court has not considered anything concerning the merit of the issue that whether in the circumstances stated above the assessee could claim deduction under s.80IB(10) or not. the judicial result is the same that the High Court has upheld the reasonings and findings given by the Tribunal in its order. Lower authorities were not having advantage of above legal decision to apply to the facts of the assessee’s case to reach a conclusion. So in the interest of justice Order of the CIT(A)is set aside on the issue and restore the same to the Assessing Officer with a direction to decide the same as per fact and law after providing due opportunity to the assessee of being heard - both the appeals filed by the assessee are allowed for statistical purposes.

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• 2012 (11) TMI 582
  Condonation of delay in filling appeal – Delay of 86 days - CIT(A) has mainly dismissed the appeal on the point of limitation – Held that:- As the brother of assessee was under treatment for his accident at the relevant point of time so he could not file the appeal in time. It is possible that in case brother of assessee is fighting for his life after accident, his priority for filing the appeal in time may be disturbed. According to us, the assessee was prevented by reasonable cause in filing the appeal and so the delay is directed to be condoned. Issue remand back to AO - In favour of assessee Disallowance of petrol expenses of vehicle – Whether assessee can claim expense incurred in relation to income earned from partnership firm u/s 10(2A) - AO argued that there was absence of nexus of the expenditure with remunerations received by the assessee from partnership firm as a working partner – Assessee claim expense after deducting 20% of the vehicle expenses as personal expenses - Expenses on car are incurred u/s 37(1) for earning income in the form of remuneration and interest – Held that:- In such a situation, provision contained in section 14A will come into operation and any expenditure incurred in earning the share income will have to be disallowed. We find that the CIT(A) at relevant point of time was not having the benefit of the Special Bench decision in case of Shri Vishnu Anant Mahajan (2012 (6) TMI 297 - ITAT, AHMEDABAD). Issue Remand back to AO Disallowance of Depreciation on vehicle against income u/s 10(2A) – Held that:- Section 14A deals only with the expenditure and not any statutory allowance admissible to the assessee. A statutory allowance u/s 32 is not an expenditure, hence it cannot be subject matter of dis-allowance u/s 14A. Following the decision in case of Hoshang D. Nanavati (2011 (3) TMI 89 (Tri)) – Remand back to AO Addition on account of Agricultural Income – AO observed that books seems to have been written in one sitting, self-made bills – AO made reject agricultural income and consider the same as Income from other source - Held that:- The claim of the assessee has been rejected mainly on account that earning from the crops shown by the assessee were not tallying with the 7/12 extract which is the record of crop on the agricultural holding of the assessee. Thus, the assessee could not correlate the income from its agricultural holding by cogent reasoning. Addition justified. In favour of revenue

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• 2012 (11) TMI 581
  Deduction u/s 80-IA of the Income Tax Act, 1961 – industrial undertaking versus works contract - Held that:- Assessee did not satisfy the conditions prescribed under the said section as he has not set up any power plant but only operating and maintaining the power plant set up and is a contractor for the purpose of rendering services and hence the charges received by the assessee cannot be treated as profits derived from the industrial undertaking for the purpose of section 80-IA of the Act - Decision of Supreme Court in case of [A.M. Moosa vs. CIT 2007 (9) TMI 24 - SUPREME COURT OF INDIA] followed – Order of Commissioner of Income-tax (Appeals) is confirmed – appeal of assessee is dismissed. Whether Reserve created for plant maintenance expenditure is an application of Income - Held that:- Following the decision of court in case of [CIT v. Shiv Prakash Janak Raj And Co. Pvt. Ltd 1996 (9) TMI 5 - SUPREME COURT] Held that: - AO has not examined the contract agreement entered into by the assessee which is for a period of 15 years and has only considered the quantification of fee as for one year - therefore, in the interest of justice this issue needs detailed examination by the AO - Order passed by the learned CIT(A) is set aside and remit the matter back to the file of the AO to examine the entire issue de novo - appeal raised by the assessee is allowed for statistical purposes. Interest u/s 234 D – Following the decision of court in case of [CIT v. infrastructure Development Finance Co. Ltd.2011 (9) TMI 591 - MADRAS HIGH COURT] - Held that:- As Regular assessment had been completed on March 30, 2004 and section 234D came into operation on and from June 1, 2003, which was prior to the completion of the regular assessment, the assessee was liable to pay interest on the excess refund amount received as contemplated under section 234D of the Act. It is not the year of assessment that falls for consideration in such circumstances, but the date on which the regular assessment order has been passed - appeal raised by the assessee for the assessment year 2003- 04 is dismissed. Allowability of Bad debts - Held that:- Claim of bad debt amount claimed as bad was offered for earlier taxation - assessee is eligible to claim bad debt - order passed by the learned CIT(A) is set aside and remit the matter back to the AO with the direction to examine sec. 36(1)(vii) of the Act and decide the issue afresh in accordance with law – appeal allowed for statistical purposes.

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• 2012 (11) TMI 580
  Capital Gain – Agricultural land purchase for commercial use and sold without use, constitute capital asset or not - Assessee purchase land for setting up the power plant – Later on due to some constraints assessee sold part of land and incurred loss - AO argued that the concerned agricultural land not being a capital asset - Loss on the sale of the same would not result in any long term capital loss - No such loss would be permitted to be carried forward for purposes of set off in future years – Held that:- As the assessee purchased this land with no intention to use it for carrying out any agricultural operations, but to set up a power plant. Right from its acquisition and upto the date of its sale, no agricultural operations were carried out on this land by the assessee or by any person on behalf of the assessee. Consequently, as on the date of sale, the concerned land cannot be treated as an agricultural land. It was definitely a business asset held as such in the books of the assessee hence, loss on sale of such land would constitute a long term capital loss and would be eligible for carry forward for set off to future years. In favour of assessee Interest u/s 234D – Interest on excess refund - Assessee contended that the provisions of Sec. 234D came into force in June 2003 and cannot have the application in respect of the A.Y. 2003-04 – Held that:- Following the decision in case of Infrastructure Development Finance Co. Ltd. (2011 (9) TMI 591 - MADRAS HIGH COURT) that since the regular assessment had been completed on March 30, 2004 and section 234D came into operation on and from June 1, 2003, which was prior to the completion of the regular assessment, the assessee was liable to pay interest on the excess refund amount received as contemplated u/s 234D. It is not the year of assessment that falls for consideration in such circumstances, but the date on which the regular assessment order has been passed. In favour of revenue Recognition of income - Whether in case where receipt is uncertain and is subject to the outcome of the events in future, can be treated as accrued during the relevant period – Held that:- If a receipt is uncertain and is subject to the outcome of the events in future, it cannot be treated as having accrued during the relevant period. Since TNEB has refused to accept as its liability the start up fuel cost incurred by the assessee the income in respect of start up fuel cost based on the invoices raise by the assessee cannot be treated as having accrued to the company even it has been following mercantile system of accounting. In favour of assessee

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• 2012 (11) TMI 579
  CIT's revisionary powers u/s 263 - disallowance of privilege fee, Special privilege fee and special privilege fee as allowed by AO - Held that:- The amount of privilege fee is a balancing charge on the P&L account being variable and not based on quid pro quo. Also, only the amount that remains out of margins after deducing expenditure including income tax would be the sum to be paid as privilege fee. The amendments passed by the Andhra Pradesh Legislature on 16-04-2012 to the Andhra Pradesh Excise and Andhra Pradesh (Regulation of trade in Indian made foreign liquor, Foreign Liquor) Acts, (Amendment) Act, 2012(Andhra Pradesh Act No. 5 of 2012), has to be examined and analyzed with respect to newly inserted section 4C, it only reaffirms the fact that it is the profit that is sought to be appropriated. The new amendment to Excise Act, clearly establishes the fact that the entire income of the assessee is not that of the State and only the amounts specified as privilege fees is income of the State. With respect to newly inserted section 4A, the invoices raised by the assessee do not indicate separate amounts as privilege fee or special privilege fee or sports privilege fee. And with respect to the newly inserted section 4B, the manner of computation is not specified under 4B and the computation needs to be made u/s 23A and the implication of AS-22 is to be examined. As the CIT has no occasion to consider the amendments passed by the Andhra Pradesh Legislature on 16-04-2012 as the said amendments came after the CIT passed the order u/s 263 on 29/03/2011 the order of the CIT is to be set aside and restore the issue back to his file with a direction to decide the issue de-novo after examining the said amendments and in accordance with law - in favour of assessee for statistical purposes.

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• 2012 (11) TMI 578
  Revision of orders prejudicial to Revenue – Following the decision of court in case of [CIT vs. M/s. Sundeam Auto Ltd 2009 (9) TMI 633 - DELHI HIGH COURT] Held that:- Once there is any enquiry, may be inadequate inquiry, it cannot give an occasion to the Ld. CIT to pass order under section 263, merely because he has a different opinion in the matter. CIT is not justified in canceling the assessment made by the AO u/s 143(3) of the Act. The order of the Ld. CIT is, therefore, bad in law and is therefore, set aside. Thus, all the grounds of the assessee are allowed. Set off and carry forward of losses – Held that:- alternative plea taken by the assessee before the Ld. CIT that the assessee is having a carry forward loss and does not have any business income in coming years, is an alternative argument only, which was to claim the loss in the future years – in favour of assessee.

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• 2012 (11) TMI 577
  Registration u/s 12AA – Held that:- At the stage of processing application under section 12AA of the Act is limited to whether the activities are genuine and in consonance with the objects of the trust or institution and where education is being imparted as per the rules and the factum of the establishment and running of schools is not disputed, then the activity is said to be genuine activity and the enquiry regarding genuineness of the activities cannot be stretched beyond that. As regards Surplus of Trust nothing has been brought on record whether any surplus has been used for non charitable activities - CIT is directed to allow Registration to the assessee-trust under section 12AA(a) of the Act. Thus, all the grounds of the assessee are allowed.

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• 2012 (11) TMI 576
  Whether CIT(A) was justified in upholding the AO's action of curtailing deduction u/s 80HHC as claimed by assessee, on an erroneous interpretation of provisions of section 28(iiid)and section 80HHC – Held that:- Following the decision of court in case of [M/s Topman Exports Versus Commissioner of Income Tax, Mumbai 2012 (2) TMI 100 - SUPREME COURT OF INDIA] Entire amount received on sale of the Duty Entitlement Pass Book (DEPB) represents profit on transfer of DEPB for the purpose of the computation of deduction u/s 80HHC. DEPB has direct nexus with the cost of imports for manufacturing an export product, any amount realized by the assessees over and above the DEPB on transfer of the DEPB would represent profit on the transfer of DEPB and while the face value of the DEPB will fall under clause (iiib) of Section 28, difference between the sale value and the face value of the DEPB will fall under clause (iiid) of Section 28 and is taxable accordingly - Assessing Officer is directed to recompute deduction under section 80HHC of the Act in line with the directions of the Hon'ble Apex Court – In the result, appeal filed by the assessee are allowed for statistical purposes

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• 2012 (11) TMI 556
  Depreciation on toll road/bridge - assessee establish, finance, design, construct, operate and maintains a NOIDA-Bridge across the river 'Yamuna' under the BOOT basis - Held that:- As decided in Mysore Mineral Limited v. CIT [1999 (9) TMI 1 - SUPREME COURT] that any one in possession of property in his own title exercising such dominion over the property as would enable others being excluded there from and having the right to use and occupy the property and/or to enjoy its usufruct in his own right would be the owner of the buildings, though a formal deed of title may not have been executed and registered as contemplated by the Transfer of Property Act, the Registration Act etc. The person, who having acquired possession over the building in his own right, uses the same for the purposes of the business or profession though a legal title has not been conveyed to him, but nevertheless is entitled to hold the property to the exclusion of all others. With the insertion of the Explanation-I to Section 32 w.e.f. 1.4.1998 there is no doubt that where the assessee is the lessee of the building in which he carries on business which is not owned by him but in respect of which the assessee holds a lease or other right of occupancy and any capital expenditure is incurred by the assessee of any structure or doing of any work in or in relation to by way of renovation, extension or for improvement to the building, then the provisions of the Income Tax Act, will apply as if the said structure or work is a building owned by the assessee. Explanation-I may apply to renovation or extension or improvement to the building to extend the application of depreciation, if such buildings which are not owned by the assessee but in which the assessee holds a lease or other right of occupancy. The present case stands on a better footing, in which the land is held on lease and the road as capital asset has been built on it with exclusive ownership of the road, and the bridge in the assessee-company for the concession period, and which also includes the right to collect tolls and to regulate use of the bridge. Section 32 would, therefore, apply for the purpose of providing depreciation to be worked out in accordance with the law - in favour of assessee. The payment in connection of “take out assistance fee” for redemption of Deep Discount Bonds this Court has already decided the question between the same parties relating to the assessment year 2002- 03 in favour of the assessee.

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• 2012 (11) TMI 555
  Deletion of addition on account of Interest – Held that:- Addition due to Interest paid on purchase of securities by the assessee-company for the broken period as per DTAA be deleted as decided in assesses own case earlier - impugned order is upheld to this extent. This ground is, therefore, not allowed. Advisory fee/Commission - Accrual of Income - Following the decision of court in case of [Kerala Urban Development Finance Corporation Ltd. Versus Commissioner Of Income-Tax ,2002 (12) TMI 18 - KERALA HIGH COURT] Held that:- Income accrued to the assessee at the time of disbursal of loan and hence assessable to tax in the year in which the loan amount was disbursed. Income accrued at that very stage itself and could not have been deferred over the life of loan - CIT(A) was not justified in directing the spread over of the advisory fee over the period of loan - impugned order on this issue is vacated and restore the action taken by the A.O - In the result, the appeal of the assessee is allowed and that of the Revenue is partly allowed. Disallowance of Interest - Assessee in its appeal are similar to those for assessment year 2000-2001 but for change in the amount of Rs. 2,03,34,257 being the interest disallowed u/s 40(a)(i) and also charged to tax under Article 11 of the DTAA. Both the sides are in agreement that the facts and circumstances of the instant year are mutatis mutandis similar to those of the preceding year – in favour of assessee. Advisory Fee - Held that:- In reversing the order of the CIT(A) and restoring the action of the AO in bringing the entire amount to tax in the preceding year, the amount already voluntarily offered by the assessee for taxation in the current year, on the strength of its treatment as deferred income in earlier year, cannot be taxed once again, if the entire amount has been taxed in a year, then no part of the same can be charged to tax in the subsequent year - As the necessary facts in this regard are not available on record impugned order on this issue is set aside and remit the matter to the file of A.O. for examining as to whether the amount of Rs. 24.36 lakh taxed in the current year is part of the amount of advisory fee taxed in assessment year 2000-2001 - partly allowed for statistical purposes.

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• 2012 (11) TMI 554
  Transfer pricing adjustment and levy of interest under section 234B – Whether transfer pricing adjustment should be computed with respect to gross turnover of the assessee or should be limited to volume of transaction entered into with the associate enterprises – Held that:- Claim of the assessee is very reasonable as the adjustment has to be made only with respect to transactions with associate enterprises based on arms-length price and not with respect to total purchases/sales. This view is supported by several decisions of the Tribunal - issue restored to the file of AO/TPO for fresh computation of transfer pricing adjustment after necessary examination and after allowing opportunity of hearing to the assessee - In the result, appeal of the assessee is allowed for statistical purposes.

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• 2012 (11) TMI 553
  Revision Order u/s 263 - Following the decision of Bombay High Court in the case of [CIT vs. Gabriel India Ltd. 1993 (4) TMI 55 - BOMBAY HIGH COURT] Held that:- Unless commissioner comes to a categorical finding that the stand of the Assessing Officer is erroneous, he can not remit the matter back to the file of the Assessing Officer for fresh adjudication. in the instant case, the Commissioner himself, even after initiating proceedings for revision and hearing the assessee, could not say that the allowance of the claim of the assessee was erroneous and that the expenditure was not revenue expenditure but an expenditure of capital nature. He simply asked the ITO to re-examine the matter that, in our opinion, is not permissible. Further inquiry and/or fresh determination can be directed by the Commissioner only after coming to the conclusion that the earlier finding of the ITO was erroneous and prejudicial to the interests of the revenue. Without doing so, he does not get the power to set aside the assessment. The revision has been done on an altogether different ground of deeming fiction u/s. 68 which was not even touched upon by the Commissioner at notice stage - Impugned revision order is set aside - The assessee gets the relief accordingly - In the result the appeal filed by the assessee is allowed.

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• 2012 (11) TMI 552
  Referring matter to Valuation officer - Following the judgement of Supreme court in case of [Sargam Cinema V CIT, 2009 (10) TMI 569 - SUPREME COURT OF INDIA ] Held that:- Asessing authority could not have referred the matter to the Departmental Valuation Officer (DVO) without the books of account being rejected. Even if the books were not produced at least the Assessing Officer should have referred to the valuation officer. Even after that it was not done at atleast at the time when the ld. CIT(A) had forwarded the report for his remand he should have made some comments but nothing was done though it was contended by the ld. DR for the revenue that there was no remand report available but the ld. CIT(A) has given clear finding that report was forwarded to the Assessing Officer and the Assessing Officer in his report has not rebutted the same - order of the ld. CIT(A)is confirmed. Disallowance of Expenses in full or part – Held that:- Expenses debited to profit and loss account in respect of telephone expenses, charity and donation, car expenses, rebate and discount, printing and stationery, labour welfare & cartage, accounting charges, traveling expenses, entertainment and salary confirmed the disallowance to 25% of the expenses for non production of vouchers – order of CIT(A) is confirmed. Profit margin – Held that:- Although Fall in gross profit is only marginal but it has to be noted that the assessee has not made any compliance before the Assessing Officer and the Assessing Officer pointed out serious defects in the books. Therefore, considering overall circumstances of the case, trading addition should be made at Rs. 10,000/- Order of the ld. CIT(A) is set aside and direct the Assessing Officer to make addition on account of lower gross profit at Rs. 10.00 lakhs - In the result, appeal filed by the revenue is partly allowed

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• 2012 (11) TMI 551
  Write -off of Bad debts – revision u/s 263 - Held that:- Sum debited to the Profit (i) the order of the AO, sought to be revised is erroneous; and (ii) it is prejudicial to the interest of revenue. In the present case Assessee had paid interest to the bank and P.F.C. and had raised interest bearing loans and on the other hand, assessee had given interest free advances. The CIT recorded finding that AO had not made any investigation at the time of assessment proceedings in the matter regarding allowability of the claim made by the assessee - having regard to the entirety of the facts and circumstances of the case, speaks about the non-applicability of mind, and non investigation into the issue raised by the CIT - order passed by the CIT u/s 263 of the Act, on this issue is upheld - appeal is disposed of - In the result, appeal of the assessee is partly allowed.

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• 2012 (11) TMI 550
  Unexplained accretion in the capital account - CIT(A) deleted the addition - Held that:- Findings of the CIT(A) clearly demonstrate that requisite evidences were filed by the assessee in the form of copies of account and the movement of funds. The CIT(A) has examined the copies of account and relevant bank accounts and deleted the addition - no infirmity in the findings of the CIT(A) found - in favour of assessee. Unaccounted cash credit - Held that:- The evidences under Rule 46A filed by the assessee, deserve to be admitted, with a view to further the cause of justice and, hence, the same are admitted. Further, the submission filed by the appellant that the parties are existing assessee and evidences filed by the appellant are sufficient, to prove the case within the meaning of Section 68 are to be looked into by the CIT(A) - issue restored to the file of the CIT(A) for fresh adjudication in the light of fresh evidences - in favour of assessee for statistical purposes. Surrender of additional income - Additional income u/s 69B - Held that:- If at the time of survey an assessee himself concedes that the stocks are short and even comes to an agreement regarding the extent of shortage, unless it can be established that such consents or agreement was given or arrived at under threat, coercion, undue influence, misrepresentation or wrong understanding of facts or law, it would bring all efforts put in survey operations to nought if the assessees are allowed to retract from whatever they had stated or agreed to at the time of survey. Thus in view of the factual and legal position it is held that the additional income of Rs.30 Lakh declared by the appellant on account of unexplained investment in construction of factory building of M/s Oscar Remedies is to be taken as unexplained investment and accordingly is to be added to the income of the appellant. The action of the AO is therefore confirmed and ground of appeal is as such rejected - against assessee.

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• 2012 (11) TMI 549
  Interest on Advance against Sister Concern for Non - Business Purposes - Held that:- Addition of Rs. 16,510/- (12% of Rs.1,37,577/-) made on account of interest on amount outstanding against the sister concerns of the assesseee considering it advance for non business purposes has to be disallowed – Onus is on the assessee to prove the advance for Business purpose - appeal of the revenue is allowed. Disallowance of Rs.7,68,000/- made on account of interest not declared by the assessee on undisclosed investment of Rs.64 lacs not declared in the books of account - that the impugned addition is consequential in nature and hence, in view of the findings recorded by the ld. CIT(A) and decision of the ITAT in assessee's own case for assessment year 2006-07, the ground of appeal is dismissed. Addition of Rs.4,08,835/- on account of loss of stock - ssessee failed to prove genuineness of the claim - Held that:- Considering totality of circumstances in which claim of loss has been made does not point out to anything other than genuine business loss and therefore the same is allowed - deductible loss – Order of CIT(A) is confirmed. Addition of Rs.18,200/- made u/s 14A – Held that:- Having regard to the exigency of business and the non-optional investment to be made by the assessee on the direction of the Punjab government, the impugned addition cannot be made, as held by the CIT(A ) - ground of appeal of appeal of the revenue is dismissed. Addition of Rs.2,84,420/- made on account of interest capitalized on proportionate basis, pertaining to the pre-operative period - fund borrowed for the purchase of machinery – Held that:- following the decision on identical issue in assessee's own case, this ground of appeal of the revenue is dismissed. Assessee's claim worth Rs. 7,09,457/- in respect of reducing the income Valuation of Closing Stock - CIT(A) considered that if an addition on consistent application of method of accounting is made in any particular year, then allowance for depletion in closing stock worked out on the basis of some accounting method, deserves to be allowed. Accordingly, the claim of the assessee was allowed by the CIT(A) - No infirmity in the findings of the CIT(A), and therefore, the same are upheld. Ground of appeal of the revenue is dismissed - In the result, appeal of the revenue is partly allowed.

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• 2012 (11) TMI 548
  Whether rectification carried out under section 154 of the Act was both illegal and void, without serving any intimation under section 143(1) and also notice under section 154 of the Act and second grievance was that the issue being debatable was outside the purview of section 154 of the Act Held that:- Where any tax or interest was found due on the basis of return of income after allowing adjustment of tax paid, then an intimation shall be sent to the assessee specifying the same so payable and such intimation shall be deemed to be a notice of demand issued under section 156 and the provisions of the Act shall apply accordingly. Where any refund is due on the basis of such return, the same shall be granted to the assessee and and intimation to the effect shall be sent to the assessee provided that no intimation under sub-section shall be sent after the expiry of one year from the end of the financial year in which the return was made. Rectification under section 154 of the Act was carried out by the Assessing Officer suo motu on 26.3.2009 without any notice to the assessee whatsoever - no merit in the proceedings carried out by the Assessing Officer in this regard - appeal of assesse is allowed. In the interest of justice and in the entirety of the facts and circumstances, issue of adjudication of application moved by the assessee under section 154 of the Act vis-à-vis the claim of set off of brought forward losses for computing book profits under section 115JB of the Act and the tax thereof, restored to the file of the Assessing Officer after affording reasonable opportunity of hearing – appeal is allowed for statistical purposes.

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• 2012 (11) TMI 547
  Exemption u/s 10A - Freight/telecom/insurance/technical services - revision u/s 263 - Held that:- As the assessee was not engaged in the business of rendering technical services outside India. The foreign travel expenses incurred in foreign currency are not required to be excluded from the export turnover for the purpose of computing the deduction allowable u/s 10A. It was stated that the assessee was in fact engaged in carrying out call centre activities and back office operations and the same does not amount to rendering technical services outside India. Total turnover is the sum of the export turnover and domestic turnover. If the concerned charges do not form part of the export turnover as per the definition, then there is no scope to include such charges in the total turnover The CIT thereafter, proceeded to hold that there was non-application of mind by the AO on this aspect and therefore, the order of AO was erroneous and prejudicial to the interest of revenue. The CIT also held that what is excluded from the export turnover need not be excluded from the total turnover as contended by the assessee and set aside the order of the AO for fresh consideration by the AO on the aspects discussed by the CIT in his order u/s 263 . AO has taken a possible view and the CIT cannot in exercise of powers u/s 263 seek to substitute his view with that of the AO. On this basis order u/s 263 cannot be sustained and the same is quashed – Appeal of assessee is allowed.

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• 2012 (11) TMI 546
  Non deduction of TDS - payment for using the transmission lines of power owned by KPTCL and PGCIL - interest u/s. 201(1A) - Held that:- The words ‘managerial’ and ‘consultancy’ involve a human element. And, both, managerial service and consultancy service, are provided by humans. Consequently, applying the rule of noscitur a sociis, the word ‘technical’ as appearing in Expln. 2 to section 9(l)(viz) would also have to be construed as involving a human element. But, the facility provided by MTNL/other companies for interconnection/port access is one which is provided automatically by machines. It is independently provided by the use of technology and that too, sophisticated technology, but that does not mean that MTNL/other companies which provide such facilities are rendering any technical services as contemplated in Expln. 2 to section 9(1 )(vn) of the said Act. This is so because the expression ‘technical services’ takes colour from the expressions ‘managerial services’ and ‘consultancy services’ which necessarily involve a human element or, what is now a days fashionably called, human interface. In the facts of the present appeals, the services rendered qua interconnection/port access do not involve any human interface and, therefore, the same cannot be regarded as ‘technical services’ as contemplated under section 194J of the said Act. Respectfully following the decision of the Tribunal in the case of Bangalore Electricity Supply Co. Ltd. Versus Income Tax Officer (TDS), Ward 16(1), Bangalore [2012 (11) TMI 385 - ITAT BANGALORE] the applicability of Sec. 194J would come into effect only when by making payment of fee for technical services, assessee acquired certain skill/knowledge/intellect which can be further used by him for its own purpose/research. Where facility is provided by use of machine/robot or where sophisticated equipments are installed and operated with a view to earn income by allowing the customers to avail of the benefit by user of such equipment, the same does not result in the provision of technical service to the customer for a fee. Therefore, the assessee was not liable to deduct tax at source on payments of transmission charges to KPTCL as the provisions of Sec. 194J are not attracted thereon The order of the CIT(A) so far as it relates to transmission charges and reverse the order of the CIT(A) with reference to SLDC charges. In view of the above conclusion, the issues regarding levy of interest, the question whether (SLDC) was Government within the meaning of section 196 and the question whether the liability of the person making payment will stand extinguished on payment of taxes by the recipient of the payment and the question of period of levy of interest u/s. 201(1A) do not require any consideration - in favour of assessee

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• 2012 (11) TMI 545
  Unaccounted investment in property - search and seizure - Held that:- The consideration payable for the property was Rs.36 lacs cash over and above the consideration payable by cheque. The Assessee does not dispute this fact. The Assessee claims that the sum of Rs.36 lacs paid by cash was returned back by the seller to the Assessee. This plea of the Assessee has not been substantiated. The further plea of the Assessee was that the Assessee declared substantial income on account of unexplained investments cannot be accepted as the unexplained investment is in AY 03-04. The declaration of income in the subsequent AY can be explained as out of the amount declared in AY 03-04. In the case of the Assessee there has been no declaration of undisclosed income for AY 02-03, therefore the addition in AY 03-04 has to be made. No grounds to interfere with order of CIT(A) - against assessee. Undisclosed Investment in financial business - Held that:- Assessee pleaded that the disclosure made in the returns of income would be sufficient and no separate addition was called for is not acceptable as the disclosure made of Rs.23,77,949/- was specific and did not cover the undisclosed income evidenced by the seized document which is the basis of this addition. Therefore, we confirm the order of CIT(A) and dismiss ground raised by the Assessee - against assessee. Undisclosed Agriculture income - Held that:- The search had taken place on 28.12.2007. Even prior to the search, the order u/s.143(3) for AY 04-05 has been passed in which, out of Agricultural income declared by the Assessee a sum of Rs.1,04,190/- was treated as Income from other sources. Thus the very same addition cannot be made in assessment u/s.153A and doing so would amount to taxing the same income twice. Therefore direct that the addition so made be deleted - in favour of assessee. Difference in Chit Commission received - Held that:- Assessee who could not substantiate as to how a sum of Rs.69,000 was expenditure incurred in relation to chit commission income therefore confirm the order of CIT(A) and dismiss ground raised by the Assessee - against assessee. Excess cash found as undisclosed income - Held that:- CIT(A) was justified in rejecting the claim of the Assessee with regard to cash found at the time of search, as it was too general and vague. While working out the actual cash the AO has duly taken even expenditure not recorded in the books which would have been met in cash. Thus the action of the AO is very reasonable and the CIT(A) was right in confirming his action - against assessee.

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• 2012 (11) TMI 544
  Revenue expenditure versus capital expenditure - application of AS-11 - foreign exchange loss on conversion of rupee term into foreign currency loan - Held that:- Foreign Exchange Loan was taken in connection with conversion of a rupee term loan into a foreign currency loan. The purpose of the loan was for purchase of machinery which is on capital account. Therefore, the sum in question cannot be claimed as deduction. The sum in question cannot also be capitalised to the value of the machinery for the reason that the machinery has already been put to use - Decided against the assessee. The decision of the Hon’ble Supreme Court in the case of Woodward Governor India Pvt.Ltd. [2009 (4) TMI 4 - SUPREME COURT] would apply only in respect of exchange fluctuation on loans taken for revenue purposes.

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• 2012 (11) TMI 543
  Set off of Losses in case of Amalgamation – Following the decision of Supreme Court in the case of [Marshall Sons & co. (India) Ltd. v. ITO 1996 (11) TMI 6 - SUPREME COURT] Held that:- Amalgamation takes effect on the date of transfer specified in the scheme and not on the date of court’s order. The court further held that the income of the transferor company from the date of transfer would be the income of transferee company. Assessing Officer expressing doubts regarding the scheme of amalgamation being a device to avoid taxes are all without any basis and are in the realm of suspicion and surmises. With regard to the non-filing of revised return of income, provisions of section 72A are applicable, notwithstanding anything contained in other provisions of the Act and the set off of accumulated losses and unabsorbed depreciation of the amalgamating company is deemed to be the loss or unabsorbed depreciation of the amalgamated company for the previous year in which the amalgamation has taken effect. In the present case, amalgamation is deemed to have been effected on 31.03.2008 and consequently the claim of the assessee for set off had to be allowed. The objections of the revenue as projected in the grounds of appeal in this regard therefore are devoid of any merit. The fact that TAPL filed the return of income for A.Y. 2008-09 is also of no consequence - Order of the ld. CIT(A) does not call for any interference - appeal by the revenue is dismissed.

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• 2012 (11) TMI 542
  Disallowance of Bad debts – Whether claim for provision for bad and doubtful debts under section 36(1)(viia)(c) on its activity relating to providing infrastructure facility be allowed. Held that:- deduction under section 36(1)(vii) on the basis of write-off and provision under section.36(1)(viia) can both be claimed as long as there was no duplication. Since assessee here was not allowed its claim under section 36(1)(viia)(c) for the provision for bad and doubtful debts, there was no threat of any double deduction being availed by it. There is no dispute that for the amount claimed under section.36(1)(vii), there was an actual write off effected in its books. Claim of Revenue that there was violation of Rule 46A, is without any basis, since assessee has not been given the benefit of provision under section 36(1)(viia)(c) of the Act. Hence, the question of bifurcation of activities becomes redundant. It is to be noted that the assessee is not in appeal before us against disallowance of its claim for provision for bad and doubtful debts under section 36(1)(viia)(c). We therefore, do not find any reason to interfere with the order of the CIT(A). The appeals of the Revenue for all the three years stand dismissed - In the result, appeals filed by Revenue are dismissed.

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• 2012 (11) TMI 541
  Deferred revenue expenditure - Disallowance of expenditure on advertisement - AO found that expense was shown as a deferred revenue expenditure in the asset side of the Balance Sheet – And claim whole sum revenue expenditure in computing taxable income - Whether the benefit accrues in the same year itself or in the subsequent years, as long as the expenditure was incurred in the course of business and was expended in the current year, the same ought to be allowed in the current year – Held that:- As far as corporate advertisement expenses, exhibition expenses, public relation expenses, cultural programme expenses, quota expenses and sales promotion expenses were concerned, since said expenses did not result in creation of any tangible or intangible asset and, moreover, there was no evidence regarding accrual of any specific revenue in years under consideration or subsequently over a defined period with incurring of said expenditure, those expenses could be allowed entirely in year in which they were incurred. In the present case it is not the case of the Revenue that the assessee has not incurred the expenditure as followed in the case of Ashima Syntex Ltd. (2000 (8) TMI 22 - GUJARAT HIGH COURT). In favour of assessee

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• 2012 (11) TMI 540
  Tax deducted at source u/s 194C – Whether non deduction of tax at source from payments to the agents of the truck-owners resulted in the impugned disallowance under section 40(a)(ia) - Held that:- it is not even the case of the Assessing Officer that the assessee was a sub contractor, and rightly so because the assessee required these trucks on hire, from the middlemen or subcontractors, so as to fulfil the obligation of transporting the goods in the course of his business. The payments were not made for transporting the goods but for the hire of the trucks - at the material point of time, this tax withholding requirements did not extend to 'individuals' and that, it was only as a result of the amendment by the virtue of Finance Act 2008 w.e.f 1st June 2008, that individuals were imposed tax deduction obligations under section 194 C(1). so far as pre June 2008 position is concerned, tax withholding obligations under section 194 C in respect of an individual only in cases where the payments were made to a sub contractor for carrying out a part off work, or the work itself, undertaken by the assessee and that too when such individual's turnover from business or profession exceeded threshold specified in section 44AB. When it is not a case of sub contracting, it is wholly immaterial that assessee's turnover exceeded the specified threshold under section 44AB. - the assessee did not have any tax withholding obligation in respect of truck hire payments in the pre-amendment period. - Decided in favor of assessee.

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• 2012 (11) TMI 539
  Disallowance of interest – Assessee has granted interest free loan to a company - AO disallow the proportionate interest on the said amount of loan - Assessee contended that the amount advanced to its sister concern is on account of business expediency - Held that:- After examine the fact whether the sister concern has been supplying raw material to the assessee and the advance was made at free of interest in the course of business transaction needs to be verify. Issue remand back to AO Disallowance u/s 43B – Delay in deposit of Employees' Provident Funds – Held that:- Following the decision in case of AIMIL Limited (2009 (12) TMI 38 - DELHI HIGH COURT) that the employees' contribution is not deposited by the due date prescribed under the relevant Acts and is deposited thereafter, the employer not only pays interest on delayed payment but can incur penalties also, for which specific provisions are made in those Acts. In so far as the Income-tax Act, 1961, is concerned, the assessee can get the benefit of deduction of the payment, if the actual payment is made before the return is filed. In favour of assessee Disallowance of provision for warranty charges - Provisions towards warranty expenses at 10% of the total sales turnover - The Department has the objection that the liability in respect of warranty is contingent in nature – Held that:- It is not disputed that the warranty clause is part of the sale document and imposes a liability upon the assessed to discharge its obligations under that clause for the period of warranty. Once an assessed is maintaining his accounts on the mercantile system, a liability is accrued, though to be discharged at a future date, would be a proper deduction while working out the profits and gains of his business. Therefore contention of revenue not accepted that the warranty provision is contingent liability. Appeal decides in favour of assessee

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• 2012 (11) TMI 538
  Quantum of loans less than the investments made - Disallowance u/s 14A r.w.r. 8D is warranted - reopening of assessment - Held that:- AO had finalized assessment u/s 143(3) on 31.3.2005 wherein amount of loss claimed in return of Rs.3,73,69,044/- was modified to Rs.3,02,01,092/-. No doubt, in the assessment order, the issue of disallowance u/s.14A was not considered. However, the assessment was completed after considering assessee’s claim of Rs.1.55 crores as exempt u/s.10(33). The assessment finalized on 31.3.2005 was reopened by notice u/s 148 after more than five years from the end of relevant Asst. Year and it is evident that in the notice of reopening there is not even an iota of allegation that any income had escaped assessment attributable to failure on the part of the assessee in not disclosing full particulars. Thus except bald reference, there are no such reasons forthcoming in reopening notice. The notice was based on the assumption that on the opening and closing dates of balance sheet quantum of loans turned out to be less than the investments made & it suggested that loans were obtained for purpose of meeting and sustaining investments leading to exempt income but it cannot be accepted as it can be easily implied in such circumstances that the assessee had its own funds available for investment. Thus mere escape of income is insufficient to justify the initiation of action after the expiry of four years from the end of the assessment year - in favour of assessee.

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• 2012 (11) TMI 537
  Addition u/s 68 – Capitation fees – AO argued that any parent of the students was not traceable – Held that:- Out of 54 students, parents of 33 students have replied in affirmative confirming that they had given interest free refundable deposits to the assessee society. The majority of the parents have given testimony in support of the statements given by the assessee society. The reason that the remaining 11 parents have not given any confirmation, does not dilute the probative value of the material evidence available on record. Minority of the parents might not be available at that point of time at the addresses available on record and it might not be possible for them to give confirmation letters within the time frame given by the authorities. The Revenue fails in its appeal filed for the assessment year 2003-04. In favour of assessee Addition on account of receipt of capitation fee – AO argued that purported admissions made by the functionaries of the assessee society in the statements furnished – Held that:- As the statements have been subsequently, retracted. The retractions of those statements made by the functionaries of the society are well supported by the books of account maintained by the assessee with supporting documents and evidences. All the basic details are very much available before the assessing authority, himself. Issue decides in favour of assessee Addition on account of paper found in course of search - A sum of Rs. 23,52,000/- was stated to have been paid to the assessee – Held that:- The assessee explained that a sum of Rs.17,52,000/- had been received by cheque from Shri Amul John Jacob and it was not aware of any money received in cash. As already found in the appeal filed by the Revenue for the same assessment year 2006-07, the CIT(A) has deleted the addition of the said amount of Rs.17,52,000/- made by cheque. When the assessee had accounted for the amount received by cheque, there is no reason to go beyond, only for the reason that in the sheet of paper found in the course of search, the amount recorded was Rs.23,52,000/-. There is no direct nexus with the proposition made by the AO and the paper seized in the course of search. Therefore addition deleted. Issue in favour of assessee Addition on account of undisclosed income – AO on the ground that those receipts were not recorded by the assessee in the books of account – Held that:- As there are no materials available on record to show that the assessee society had received such amounts over and above what was recorded in its books of account. The AO has made a presumption that the assessee society might have received that much amount on the strength of students admitted for medical course. This is only an intelligent presumption. When there is no material available on record, it is not possible to presume that the assessee might have collected capitation fee for admitting students for medical course. In favour of assessee Whether in case of trust addition u/s 68, was taxable at Maximum Marginal Rate or consider as applied u/s 11 – Held that:- Assessee has applied its entire funds in running the Hospital, Medical College and other Educational Institutions. Therefore, the additional amounts covered by sec.68 are treated as part of assessee’s income, still the amounts cannot be brought to tax, as those amounts have been applied for charitable purposes. Issue in favour of assessee

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• Customs

• 2012 (11) TMI 610
  Notice of intimation of personal hearing - held that:- If it is a case of confiscation of goods, the same will be in terms of Section 124 of the Customs Act. The petitioner will have to establish in the proceedings, as against the goods under import, that there is no contravention. The question of release of goods is totally different from adjudication as in this case. Both cannot be clubbed together. If the goods are not released, petitioner has to work out his remedy independently. The show-cause notice proceedings cannot be stalled unless it is shown that the authority acted without jurisdiction or contrary to law. Further, Notice of intimation of personal hearing is an administrative letter and quashing that letter is of no consequence and hence the writ petition is misconceived without application of mind and is, therefore, liable to be dismissed - writ Petition is dismissed. No costs. Consequently, connected miscellaneous petitions are closed.

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• 2012 (11) TMI 609
  Refund in cash - Appellants imported goods and filed two Bills of Entry for home consumption dated 1-9-2005 - Customs EDI systems assessed the Bill of Entry showing Basic Customs Duty at the rate of 7.5%, the Appellants paid Custom duties on the said Bills of Entry based on such assessment - But actually the Customs duty was reduced from 7.5% to 3.75% vide Notification No. 79/2005 which came into force on 1st September 2005 i.e. the date of filing of the Bills of Entry – Held that:- This is a case of simple mistake in assessment on account of the fact that computer systems of Customs were not promptly updated. Quite often the notification issued on a day and effective from that day is available to officers outside the Ministry and the public only by evening of the day in the next few days - onus is on the appellants to prove that the incidence has not been passed on is not a heavy burden - appellants are eligible for the impugned refund in cash

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• 2012 (11) TMI 600
  Demand of duty - 100% EOU - re-import of the exported goods under Notification No. 52/2003, - appellant had given an undertaking to re-export the said capsules within six months from the date of re-import - due to short shelf life, the said capsules could not be marketed and, therefore, the appellant decided to destroy the goods – Held that:- Due to short shelf life of medicinal capsules, it has deteriorated and it has become unfit for marketing. Therefore, the duty can be demanded only on the value of the deteriorated goods which have to be determined in accordance with sub-section (3) of Section 22 of the Customs Act. It is for the appellant to establish that the goods which they have proposed to destroy has no commercial value whatsoever and no duty liability would be involved - matter remanded back to the original adjudicating authority - appeal is allowed by way of remand.

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• 2012 (11) TMI 599
  Classification - appellant imported - Memory Stick, SD Cards and Micro SD Cards are solid state non volatile storage devices, classifiable under sub-heading 8523 5100 - Departmental Representative emphasised that since the goods imported are not exclusively meant for external use with a computer or laptop as a plugin device and are also not exclusively meant for fitment inside CPU Housing/laptop body, the same are not covered by Sl. No. 17 of the table to the Notification No. 6/2006-C.E. – Held that:- Scope of the entry against Sl. No. 17(ii) of the table to the Notification as it stood during the period of dispute, cannot be interpreted on the basis of the wordings of the entry as the same stood w.e.f. 7-5-2010 - requirement of pre-deposit waived

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• 2012 (11) TMI 571
  Royalty to foreign collaborators towards transfer of Technical Know-How - direction for addition with the transaction value to arrive at the assessable value of the goods in importation - Held that:- Persuing the licence agreement entered into by the appellant with the foreign collaborator it is seen that the foreign collaborator (Licensor) grants the Licensee (the appellant) a non-exclusive, non-permissible license technology to manufacture and to sell or otherwise to supply the licenced products. In consideration thereof the appellant has to pay the royalty to the Licensor as the percentage of the net sale price of the licence products in the Indian market. Nowhere in the agreement is there any condition that the appellant is required to import any components from the licensor. In fact, in 7 of the agreements there is no condition at all with respect to import/purchase of any components from the foreign collaborator. The appellant is free to import the components either from the collaborator or from anybody else. If that be so, the condition that the payment of royalty is relatable to the imported goods and is a condition for sale of goods cannot be sustained in law. The appellant is liable to pay royalty to the foreign collaborator even when the appellant imports the components from anybody else and do not at all import the components from the foreign collaborator. Thus there is no nexus between the royalty payment and the import of components. There is no evidence which has been produced by the department indicating that the payment of royalty is a condition for the sale of imported components or it is relatable to the imported components. Thus the contention of the Revenue that the royalty amount is to be added with the transaction value to arrive at the assessable value of the goods in importation is rejected - in favour of assessee.

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• 2012 (11) TMI 570
  Revocation of CHA Licence - importer imported 43 consignments of ‘Hot Melt Glue Sticks’ - Out of 43 consignments, seven consignments have been sold by the importer on high seas to M/s. East India Trading Co. – alleged that they have not obtained the authorization from East India Trading Co. & C.S. Enterprises – Held that:- Import documents/declaration have been duly signed by the importer and the same were presented before the Customs authorities, and have not objected to the same and did not ask the appellants to produce authorisation from the importer – it is the joint responsibility of the proper officer and the CHA to obtain the authorisation from the importer and if it is not asked by the proper officer from the CHA to produce the authorization. Therefore, it is presumed that the authorisation is not required. Withdrawal of revocation of CHA licence ordered subject to forfeiture of the security amount of Rs.10,000/-

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• 2012 (11) TMI 569
  Refund claim – payment of excess duty - duty had been assessed for three packages against prior Bill of Entry and duty deposited in advance, but they received only two packages out of a lot of three packages – Held that:- In this case the goods were cleared after the examination as per Section 17 of the said Act and at the time of examination the short landing of the goods had been noticed. Therefore, at the material time itself, the assessment shows that duty payable is Rs. 21,972/- as against the duty deposited of Rs. 45, 982/- and, accordingly, the excess duty paid became refundable

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• Corporate Laws

• 2012 (11) TMI 608
  Scheme of Arrangement - Held that:- As there are 23 secured & 509 unsecured creditors of the transferor company their consent have not been obtained, thus a meeting is required to be held & in the case the Transferee Company have no secured creditors & there are 10 shareholders whose consent has also not been obtained. The aforenoted separate meetings of secured creditors and unsecured creditors of the Transferor Company and shareholders and unsecured creditors of the Transferee Company shall be held at Executive Club, 439, Village Shahoorpur, PO Fatehpur Beri, New Delhi 110074 will be held on 01.12.2012, Thursday as headed by the appointed Chairperson & Alternate Chairperson - if the Quorum is not present in the meetings, the meetings would be adjourned for 30 minutes and thereafter, the persons present in the meetings would be treated as proper quorum & for the purpose of computing the quorum the valid proxies shall also be considered. Both the Companies will publish advance notice of the aforesaid proposed meetings in “Business Standard” (English Delhi Edition) and “Dainik Bhaskar” (Hindi Delhi Edition) minimum 21 days in advance before the Scheduled date of meeting & Individual notice too to be sent by ordinary post minimum 21 days in advance - The Chairpersons/Alternate Chairpersons shall file their reports within two weeks of the conclusion of the respective meetings.

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• 2012 (11) TMI 607
  Oppression and mismanagement - whether against an order passed by the learned Single Judge of this Court in a civil suit terminating or refusing to terminate the civil suit because of the provisions of Section 8 of the Arbitration and Conciliation Act, an appeal under Clause 15 of the Letters Patent would lie or is barred by the provisions of Section 37 of the Arbitration and Conciliation Act - Held that:- As per the order in UOI Versus MOHINDRA SUPPLY COMPANY [1961 (9) TMI 41 - SUPREME COURT] Section 39 of Indian Arbitration Act is para materia to section 37 of the Arbitration Act, 1996. The qualifying expression “to the court authorised by law to hear appeals from original decrees of the Court passing the order” in Section 39(1) does not import the concept that the appellate court must be distinct and separate from the court passing the order or the decree. The clause merely indicates the forum of appeal. As under Code of Civil Procedure, 1908, right of appeal under the Letters Patent was saved both by Section 4 and the clause contained in Section 104(1), but by the Arbitration Act of 1940, the jurisdiction of the Court under any other law for the time being in force is not saved, the right of appeal can therefore, be exercised against orders in arbitration proceedings only under section 39, and no appeal (except an appeal to that Court) will lie from an appellate order. Conjoint reading of Section 5 with Section 37 of the Arbitration Act, 1996, it is clear that judicial authority is barred from intervening in any proceeding which are not otherwise provided in Part I of the Arbitration Act, 1996. The Arbitration Act, 1996 being a self-contained code and the order under Section 8 passed by the judicial authority or by the court is not appealable under Section 37, the present appeal under Section 10F is not maintainable. There is no merit in the submission of Mr. Dwarkadas, the Learned Senior Counsel that there is no bar under Section 37 from hearing appeal against any other order nor specifically mentioned in Sections 37(1) (a) and (b) and 37(2) (a) and (b). As from the expression used “and from no others”, it is clear beyond reasonable doubt that appeal is not maintainable against any other order other than what is mentioned in Section 37 (1) (a) and (b) and 37 (2) (a) and (b). There is clear bar under Section 37 restricting right of appeal only against specified orders set out therein and no other orders. Section 5 of the Arbitration Act, 1996 leave no room for doubt that judicial authorities and court is restrained from intervening in matters governing domestic arbitration “except where so provided”. Thus an order passed under Section 8 of the Arbitration Act, not having been provided as appealable order under under Section 37, recourse to Section 10F of the Companies Act is not permissible. Thus on interpreting Section 5 of the Arbitration Act, 1996, it is clear that the remedy of an appeal to an appellate court would be permissible only if so expressed, specifically or by necessary implication, in Part I of the Arbitration Act, 1996, and not otherwise. Section 10F provides for forum of appeal, provided an appeal is maintainable under Section 37 of the Arbitration and Conciliation Act, 1996. Therefore that all the aforesaid appeal filed under Section 10F of the Companies Act are not maintainable in view of bar under Section 37 of the Arbitration Act, 1996 and are dismissed.

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• 2012 (11) TMI 567
  Misfeasance of Directors – application for recovery from the director - respondent No. 3, it is contended that he is a Non-Residential Indian Director who was not engaged in the day-to-day affairs of the company and cannot be held liable – Held that:- Therefore, in a circumstance whereby the earlier report the observations made by the Statutory Auditors have been relied on by the Chartered Accountant, such observation by the very same Statutory Auditors for the subsequent years to indicate that the amount in fact had not been passed onto the Sister concern cannot be brushed aside, Therefore, if these aspects are kept in view, it cannot be said that there is deliberate attempt on behalf of the respondents to make unlawful gain unto themselves when it is not established that there was loss caused to the applicant-company by such provision in the balance sheet with regard to the marketing strategy of the applicant-company. When the element of misfeasance and there being wilful conduct on the respondents to make gain unto themselves to the detriment of the applicant-company is not made out, in any event this Court need not go into the question as to whether the claim itself was time-barred or not. - Application of the liquidator rejected.

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• Service Tax

• 2012 (11) TMI 613
  Status after upholding of Constitutional validity of levy of Service Tax - Renting of Immovable Property - the amount available in deposit with the 8th respondent Bank to be paid over to the 6th respondent (Department) - Following the decision of court in case of [Retailers Association of India V. Union of India 2011 (8) TMI 58 - BOMBAY HIGH COURT]held that:- Writ petition is disposed of directing the 8th respondent to verify the relevant records, ascertain the exact amount deposited by the petitioner and thereupon, the amount along with the accruals thereon should be paid over to the 6th respondent. This the 8th respondent shall do as expeditiously as possible and at any rate within 4 weeks from today.

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• 2012 (11) TMI 612
  Waiver of pre-deposit - Service Tax demands - appellant was running a container freight station and was functioning as custodian of the bonded warehouses under the provisions of the Customs Act - In respect of unclear cargo, they had undertaken auction of the goods - The demand of Service Tax is on the income received from the sale of uncleared cargo after meeting the various expenses incurred under the category of "Cargo Handling Services" and "Storage & Warehousing Services" – Held that:- Board Circular No.11/1/2002-TRU dated 01/08/2002 has clarified that Service Tax is not leviable on the activities of the custodian where he auctions abandoned cargo and ST/VAT is paid in respect of that cargo - pre-deposit waived

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• 2012 (11) TMI 611
  Erection, Commissioning or Installation Service – appellants are registered as Government Civil Contractor and engaged in the activity of providing, lowering and laying of sewerage and water supply pipeline including construction of chambers, operation, maintenance and repair work to water supply distribution network, underground drainage work etc. to various Government bodies - Held that:- Water supply project is an infrastructure facility and a civic amenity which the State provides in public interest and not an activity of commerce or industry. Therefore, the appellants are not covered under the category of Erection, Commissioning or Installation Services Regarding GTA service - as per the Notification No. 32/04 the appellants are entitlement for seventy five per cent abatement received under GTA services - they have already paid the service tax on twenty five per cent of the amount paid as GTA service by claiming abatement as per Notification No. 32/2004

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• 2012 (11) TMI 602
  Demand – assessee provided taxable services as well as exempted services – non- maintenance of separate accounts of inputs services and capital goods used - they were entitled to utilise only 20% of the credit - excess utilisation of Cenvat credit – Held that:- Restriction to use 20% of the credit in case of non-maintenance of separate Cenvat accounts for taxable and exempted services is only in respect of inputs service credit - matter remanded to original adjudicating authority for verification of the records and to restrict the credit utilisation only in respect of inputs service credit.

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• 2012 (11) TMI 575
  CENVAT credit on CHA service - place of removal when goods removed for export but destroyed before export - Held that:- When the goods are removed from the factory for export purposes and the goods are destroyed due to unavoidable reasons, accident caused to the lorry, then in such a circumstances the goods are not deemed to have been removed from the factory gate in terms of Section 5 of the CST Act as sale has not been completed. Section 4(3)(c) of C.E. Act clearly explains that the place of removal is the premises from where excisable goods are to be sold after their clearance from the factory. In the present case, the goods were exported and when export documents are presented to the Customs office, then that is the place of removal as per Section 5 of C.E. Act. The same finding has been rendered by this bench in the case of Koeleman India Pvt. Ltd. v. CC, Bangalore [2005 (4) TMI 228 - CESTAT, BANGALORE]. Thus no reason to take a different view from the same - in favour of assessee.

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• 2012 (11) TMI 574
  Input services - rule 2(l) - interpretation of the expression "used for providing a output service" - appellant engaged in providing taxable services falling under category of renting of immovable property services – Held that:- Immovable property is neither subjected to central excise duty nor to service tax and input credit of service tax can be taken only if the output is a service liable to service tax or a goods liable to central excise duty. Following the decision in Vandana Global Ltd. v. CCE [2010 (4) TMI 133 - CESTAT, NEW DELHI (LB)], decided against the assessee.

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• 2012 (11) TMI 573
  Condonation of delay - delay of 88 days in filing the appeal – Held that:- Appeal before the Commissioner (Appeals) can be filed within 90 days of the communication of the order impugned and the period can be further extended for another three months if sufficient cause has been shown to the Commissioner (Appeals) for delay - there is a delay of 88 days only, which is also within the extended period of condonation where the Commissioner (Appeals) is having discretionary power to condone the delay on his satisfaction of the explanation shown by the appellant for causing the delay - delay condoned – matter remanded back to the Commissioner (Appeals)

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• 2012 (11) TMI 568
  Recovery of service tax from the tenant - consequence of retrospective amendment for levy of service tax on renting - Winding up petition - Circumstances in which a company may be wound up - Held that:- . The service tax is not a direct tax. It is an indirect tax. The party in a given case, therefore, may agree to pay the service tax as per the terms and conditions of the agreement. Admittedly, there was no such specific agreement with regard to the payment of the service tax. Principally the Petitioner who had let out the premises was liable for such service tax and not the Respondent. As decided in IBA Health (I) (P.) Ltd. Versus Info-Drive Systems Sdn. Bhd. [2010 (9) TMI 229 - SUPREME COURT OF INDIA] while dealing with the concept of bonafide dispute referring to winding up Petition under the Companies Act the amount due and payable should be clear and outstanding on the date of the demand. If any amount, though crystallized, liable to be paid subject to contingencies and/or certain conditions, that just cannot be stated to be the amount due and payable by the Company. Thus it is sufficient to dismiss the Petition as there are disputed questions of facts and the law though revolving around the documents referred and relied by the Petitioner which in no way can assist to settle and/ or crystallize the amount of service tax as claimed from the Respondent.

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• Central Excise

• 2012 (11) TMI 606
  Benefit of the Notification No. 74/93-CE dated 28.2.1993 denied - manufacture of PSC poles - Held that:- The Notification lays down twin conditions, and unless both the conditions are satisfied exemption cannot be claimed. Admittedly, Chhattisgarh State Electricity Board is not a Department of the Government. Merely because 100% capital is owned by State Government does not make it a body at par with the State Government. Hence the PCC poles manufactured in the factories which admittedly belong to the Electricity Board does not qualify for exemption. That apart, the intended or actual user of the poles also being the Board itself, and not any Department of the State Government, the other condition is also not fulfilled - against assessee. Penalty under Rule 25 - Held that:- As prior to the decision of Larger Bench of the Tribunal there are divergent views on the issue it is not a case for imposition of penalty hence deleted.

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• 2012 (11) TMI 605
  Determination of Liability to pay Excise Duty - Following the decision of court in case of [New Horizons Ltd. and Anr. vs. Union of India and Others, 1994 (11) TMI 203 - SUPREME COURT OF INDIA] held that:- Doctrine of lifting veil, piercing the veil, peeping or seeing through the veil is invoked when the corporate personality is found to be opposed to justice, convenience or interest of Revenue and agree with him that Courts come to rescue of Revenue where subterfuge to it is caused inside corporate veil. In the present case GTC was controlling KCPL and JKCL beginning from manufacture till marketing of the goods. Such finding alone was enough to hold that GTC had gained at the cost of Revenue controlling the MRP and realised sale proceeds over and above the MRP declared - appellant was duty bound to deposit the amount of excise duty determined by CESTAT within a period of three months from the 25.04.2011, if it was interested in pursuing the present appeals - Since the appellant has failed to do so, the inevitably result of such failure is the dismissal of these appeals - grievance cannot be gone into by this Court, since the entire controversy has been settled by the Supreme Court as is evident from the above extract - appeals are accordingly disposed of.

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• 2012 (11) TMI 604
  Refund – Held that:- No dispute about the eligibility of refund on merits - refund claim was filed by the appellant within the period of limitation - protest letter was filed by the appellant at the time of original payment of duty by the manufacturer of the goods - denial of refund claim is not at all warranted – refund allowed

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• 2012 (11) TMI 603
  Extended period of limitation - SCN - allegations about willfull suppression of the facts of manufacture and clearance of branded manufactured tobacco and roasted cut Supari - contention raised by learned counsel for the petitioners that before deciding the objections raised in reply to the earlier show cause notice dated 19.08.2011 (Annexure P8), the impugned show cause notice dated 6.01.2012 could not have been issued by the first respondent is wholly misconceived – Held that:- It is not a case of prejudging of the issue and that it is not a case of the show cause notice being without jurisdiction - writ petition deserves to be and is hereby dismissed in limine.

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• 2012 (11) TMI 601
  Cenvat credit - input service – Held that:- Appellant has used the vehicles owned by them either for transportation of their employees or for transportation of goods which is an integral part of the business of appellant-firm. Therefore, the service tax paid on the insurance premium of such vehicles is an 'input service' as defined under Rule 2(l) - insurance of vehicle is in relation to the maintenance of the vehicles and is eligible for credit as input service

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• 2012 (11) TMI 598
  Waiver of pre-deposit - fulfilment of condition for availing exemption - use of fly ash of the percentage prescribed under Notification No. 6/2002-C.E. - alleged that more than 10,000 MTs of fly ash was not supplied by the said Santhosh Kumar, has not adduced any evidence to show that assessee has procured and used any other substitute raw material to produce the quantity of asbestos cement sheets accounted as manufactured and cleared by the assessee - Held that:- Condition relates to use of minimum of 25% by weight fly ash/phosphor-gypsum - person duly authorized by the assessee having failed to produce the necessary evidence - assessee has chosen to record the disputed quantity also as having been procured only from MTPS though the alleged supplier Shri Santhosh Kumar has failed to produce any reliable evidence in this regard - assessee (the first applicant) has not, prima facie, established the use of minimum percentage of fly ash prescribed under Notification No. 6/2002 and thus has not made out a prima facie case for waiver - second applicant, without any evidence for procurement from third parties has prepared documents showing additional supply of fly ash and therefore abetted 1st applicant in wrongly availing the exemption – both the appellants directed to make pre-deposit

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• 2012 (11) TMI 597
  Denial of SSI exemption – Held that:- Just because the brand name NITCO is being used by other group companies, the appellant firm cannot be denied the benefit of SSI exemption. The show cause notices do not disclose any evidence in support of the allegation that other group companies of NITCO group are owned by the appellant firm or its partners - there is no basis for clubbing the clearance of the appellant firm with the clearance of other group companies for determining their eligibility for SSI exemption

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• 2012 (11) TMI 596
  MRP Valuation - Settlement Commission - MRP was being worked out was from 19-4-2007 to 15-2-2008 - At the relevant point of time, the Central Excise Rules, 2008 were not in existence. But at the same time, instead of going as per the provisions of the law the notional price revision of 10% for subsequent period, for arriving at MRP for the relevant period, and in the name of practical approach for the subsequent period, has made reduction in the weighted average MRP by the factor of 10% - Held that:- Policy adopted by the Settlement Commission is neither legal nor in any manner conducive to the object of the Act and as the same is challenged by both the sides and as fallacy of reasoning had been well made out - entire basis cannot be sustained – matter remanded to Settlement Commission

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• 2012 (11) TMI 585
  Cut flowers cleared to DTA - flowers grown by 100% EOU - Held that:- From reading of para 3(a) of the Notification No. 126/94-CUS. as existed during the period of dispute it is clear that the notification contained a machinery provision for determining, the Custom Duty chargeable on the inputs used in the production of non-excisable goods cleared to DTA and as per this machinery provision, the duty was to be in an amount equal to the Custom Duty chargeable on the finished goods, as if imported, as such. However, after the amendment of this Notification w.e.f. 18-5-01, the duty on the inputs used in the production of non-excisable goods cleared to the DTA was to be calculated on actual basis. The amendment to the Notification No. 126/94-CUS. w.e.f. 18-5-01 by the Notification No. 56/01 can have only prospective effect and it cannot be given retrospective effect. In view of this, during the period of dispute, Customs duty on the inputs used in the production of cut-flowers cleared to DTA has to be calculated as per the provisions of the Notification, as it existed during that period. Thus the Custom Duty has been correctly charged in respect of DTA clearances of the cut-flowers - against assessee.

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• 2012 (11) TMI 566
  CENVAT credit on Business Auxiliary Service - period in question from April 2005 to June 2007 - Held that:- The claim of assessee is fully supported by the very definition of input service under Rule 2(l) of the CCR, 2004. Sales promotion expressly figure in the inclusion part of the definition. It is not even the Revenue's case that the appellant was not paying commission for sales promotion. Where a particular activity is expressly mentioned in the inclusion part of the definition, one need not bother to examine whether it has satisfied the ingredients of the main part of the definition as decided in CCE, Nagpur Versus Ultratech Cement Ltd. [2010 (10) TMI 13 - BOMBAY HIGH COURT]. Board s Circular No. 943/4/2011-CX dated 29.4.2011 (S. No. 5) wherein it was clarified that credit was admissible on the services of sale of dutiable goods on commission basis - in favour of assessee.

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• 2012 (11) TMI 565
  Non payment of duty on MS Ingots - Held that:- Show-cause notice has been issued to the applicant on the basis of statements of Shri Ketan Shah and Shri G.S. Rajpurohit of M/s Vishnu Steel but they were nor cross examined. After waiving the pre-deposit the case back is remanded to the original authority for de novo adjudication after allowing the cross-examination of the third party on whose statement demand was confirmed.

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• 2012 (11) TMI 564
  CENVAT Credit of Service Tax on Outdoor Catering Services - denial - demand of predeposit - Held that:- The adjudication order show that the amount of Rs.35,49,150/- has been recovered from the employees with regard to canteen services. It is the contention of the applicant that though the amount has been recovered from the employees, the applicant has paid the entire Service Tax amount and no Service Tax has been recovered from the employees. The figures submitted by the applicant in the written submissions need verification by the adjudicating authority, particularly when the applicant has not produced invoices issued by the service provider. Also the amount recovered from the employees is whether cum tax amount need to be verified - remand the case back to the original authority for de novo adjudication after waiving the pre-deposit.

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• 2012 (11) TMI 563
  Dismissal of appeal as barred by limitation - Held that:- Commissioner (Appeals) dismissed the appeal drawing a presumption that order in original sent to the assessee through speed post must have been delivered to the appellant as it was not received back undelivered. On perusal of the photocopy of postal receipt pertaining to the dispatch of order in original it is found that it does not contain complete address of the appellant. That being the case, it cannot be concluded that the order in original was actually sent at the correct address of the appellant - remand the matter back to the Commissioner (Appeals) to decide afresh.

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• 2012 (11) TMI 562
  Demand of duty – alleged that Credit had been availed on the basis of invoices issued by the 1st and 2nd stage dealers and not on the basis of commercial invoices issued by M/s. Darmin Steel Suppliers under whose delivery challan and commercial invoices, the payments were made - Held that:- Even though the Rules had undergone modifications, the principles underlying availment of Cenvat credit remained the same - there was no dispute that the appellant before it did purchase the goods and there was absolutely no evidence to show that even one transaction out of several was not genuine and the goods had not been received but only the bills had been raised - demand set aside

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• 2012 (11) TMI 561
  Benefit of Notification No. 1/2011-C.E. (N.T.) - benefit under this notification shall not be admissible unless the unit claiming benefit in terms of this notification reverse the input credit, if any, taken in respect of inputs used in manufacture of such goods on which the said duty of excise was not levied - goods were not manufactured at the site of the construction for use in the construction work at the said site – Held that:- Delhi Metro Rail Corporation Ltd. had contracted and called upon the respondent-assessees to construct pre-fabricated components of different segments to be used in elevated viaducts or manufacture of rings for the tunnel, launching girders and trusses in respect of a project of the said Corporation at Delhi - casting yard itself constitutes the construction site. From the said construction site components have been moved to the different locations where elevated viaducts of the tunnel were being constructed - construction was done virtually all over Delhi and construction sites were interconnected, it cannot be said that any substantial question of law arises – in favor of assesse

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• 2012 (11) TMI 560
  Waiver of pre-deposit – alleged that capital goods were used in the manufacture of non-excisable goods i.e. fractionated pure/impure spirit, which has been further used for manufacture of rectified spirit and as such, they were not entitled to credit on duty paid of said capital goods – Held that:- If the manufacturing processes involved a number of stages and exempted dutiable products came into existence, it cannot be said that capital goods were used in the manufacture of only exempted goods. The entire process is to be taken into consideration and not only the final stage, which may involve only mixing of two products - capital goods cannot held to be exclusively used in the manufacture of exempted intermediate product so as to deny the benefit of modvat credit - pre-deposit waived

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• 2012 (11) TMI 559
  Demand of duty – job work - appellant engaged in the manufacture of various components and tractor on job work basis - raw material was being sent by M/s. HMT on challans issued in terms of the said notification and the goods were being returned to HMT on the basis of very same challans - Tractors became exempt from payment of duty w.e.f. 9-7-2004, with the result that the goods manufactured by the appellant on job work basis were required to discharge duty liability – Held that:- Job worker cannot be expected to ascertain the fact of nature of final product being dutiable or exempted - principal filed declaration with their Jurisdictional Central Excise Authorities and kept on clearing the raw material under job work challan, is sufficient for the job worker to entertain a reasonable belief that the goods being manufactured on job work basis are being used by the principal in the manufacture of dutiable products - Failure on the part of M/s. HMT cannot be taken as a ground to reflect on the mala fide on the part of job worker i.e. the appellant - demand raised after a period of 4-5 years is barred by limitation - same is accordingly set aside and appeal allowed

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• 2012 (11) TMI 558
  Waiver of pre-deposit - financial hardship – demand of duty and penalty - petitioner is a company engaged in manufacturing of textile goods and is 100% Export Oriented Unit - irregularities committed by the petitioners – Held that:- There is no manufacturing or other activity being undertaken by the company and with each successive year, accumulated loss swell - net profit of the company is in negative since long - petitioners have no means of fulfilling the pre-deposit condition - they are not seeking any stay against the duty and penalty demands, but requesting for the appeal being heard on merits without any pre-deposit - pre-deposit waived

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• 2012 (11) TMI 557
  Enhancement of assessable value on the ground that the contract price of transformers manufactured is on F.O.R destination basis therefore the freight is a part of transaction value - Held that:- Purchase order clearly shows ex-factory price - customers will pay certain amount towards freight and the respondents were showing the said freight amount in the invoices and also recovered the same from the customers as per the agreement irrespective of actual transportation charges incurred by the respondents - place of removal in the instant case is factory though the place of delivery is the stores of the Electricity Board and, therefore, the cost of transportation from the place of removal to the place of delivery cannot be included in the assessable value of the goods – in favor of assessee

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• CST, VAT & Sales Tax

• 2012 (11) TMI 614
  Release of Goods detained – e – transit pass - held that:- All the documents clearly show that the goods are consigned from the State of Tamil Nadu to another State covered by valid documents under Section 69 of the TNVAT Act 2006 including transit pass as required was caused to be delivered at the time of crossing the last check post or barrier. In this case, the petitioner has caused to deliver the e-transit pass which is valid for transit on or before 3.11.2012 at 1.57 pm and hence the rule is complied. Therefore, the authority is bound to consider the same for release of the goods detained once the requirement of Section 70(2) of the TNVAT Act 2006 and the Rule has been complied. Since the petitioner in this case has submitted the required documents issued by a competent authority, there is no manner of doubt that the Detention Notice has no force in law and liable to be set aside and accordingly, the same is set aside - Consequently, the proceedings under Section 72 of the TNVAT Act 2006 for composition of offence has no legs to stand as it is a consequential order. Hence, the Notice of Composition is also set aside - In the result, the impugned order in both the writ petitions are set aside. The Writ Petitions are allowed. No costs. Consequently, connected miscellaneous petitions are closed.

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• Indian Laws

• 2012 (11) TMI 572
  Suit filled by non registered Partnership firm - whether suit barred u/s 69 of Indian Partnership Act, 1932 - Whether partnership fir is in existence or not - petitioner claimed that a partnership agreement was entered into between the petitioner and respondents - respondents denied the existence of partnership firm / agreement - land development agreement - Held that:- Considering the Deed of Partnership dated 11th August, 1986 as annexed by Plaintiffs it shows that Defendant No.1 has only 9 per cent share in the profits/losses of the Partnership Firm. The suit property is purchased by the Partnership Firm-Laxmi Developers under an agreement for sale dated 31st August, 1986. The Agreement for Sale is signed by the Plaintiff No.4 on behalf of the Firm. Titles of the said M/s. Laxmi Developers in respect of the captioned property are clear and marketable and free from reasonable doubts and encumbrances” Apart from the fact that Plaintiff Nos. 2 and 3 have submitted that their signatures are neither fabricated nor forged, an independent professional i.e. the Chartered Accountant of the Partnership Firm has certified that all the Plaintiffs as well as Defendant Nos. 1, 2 and 3 had signed the Partnership Deed in his presence. Plaintiffs have made out a prima facie case for grant of interim relief in their favour - against the Defendants.

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