TMI Tax Updates - e-Newsletter
November 8, 2012

Case Laws in this Newsletter:

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

TMI SMS

• Examination of Balance Sheets by RoCs - Circular

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• Appointment of Cost Auditor by Companies - Circular

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• Reversal of cenvat credit -clearance of old & used capital goods -not required to reverse if removed after the ten years of its use - Tri

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Articles

1. DEDUCTION UNDER SECTION 80-IA OF INCOME TAX ACT, 1961 IS NOT ALLOWED IN RESPECT OF THE PROFITS DERIVED FROM BUSINESS OF TRADING GOODS

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Second Quarter Review of Monetary Policy 2012-13 Press Statement by Dr. D. Subbarao, Governor, Reserve Bank of India

2. National Telecom Policy, 2012- Migration of current version of Internet Protocol IPv4 to IPv6

3. International Advisory Board of SEBI meets at Mumbai

4. CCI finds no contravention of Competition Act by Yash Raj Films

5. Auction for Sale of Government Stocks

Circulars / Instructions / Orders

FEMA

1. 48 - dated 6-11-2012

External Commercial Borrowings (ECB) Policy – ECB by Small Industries Development Bank of India (SIDBI)

Companies Law

2. 37/2012 - dated 6-11-2012

Examination of Balance Sheets by RoCs

3. 36/2012 - dated 6-11-2012

Appointment of Cost Auditor by Companies

Highlights / Catch Notes

Income Tax

• Rent and amenities payments not classified as technical services fees under Income Tax Act Sections 194-I or 194J.

  Case-Laws - AT : TDS u/s 194-I or 194J - Amount paid towards Rent and amenities would not fall in the category of Fee for technical services - AT
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• Sections 10AA and 80IAB classified as 'deduction provisions'; SEZ-related expenses excluded from section 14A disallowances.

  Case-Laws - AT : Since sections 10AA and 80IAB are 'deduction provisions' and not 'exemption provisions', the investment or expenses incurred to earn income from SEZ do not merit reckoning in computing disallowance u/s 14A - AT
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• Director Liability in Company Liquidation: No Evidence of Gross Negligence u/ss 179 and 156; No Recovery from Director.

  Case-Laws - HC : Liability of directors of private company in liquidation - Section 179 v/s 156 - Nothing came to be stated by him regarding the gross negligence on part of the petitioner due to which the tax dues from the company could not be recovered. - no recovery from the director - HC
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• Excise Duty Refund Recognized as Non-Taxable Capital Receipt for Assessee.

  Case-Laws - AT : Excise Duty refund is to be treated as ‘capital receipt’ in the hands of the assessee and not liable to be taxed. - AT
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• Court Orders Revenue Department to Refund Excess Tax Deducted with 9% Interest to Taxpayer.

  Case-Laws - HC : Denial of Refund of excess tax deducted by source - Revenue directed to refund the excess amount with simple interest at the rate of 9% - HC
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• Resale Price Method: Preferred Approach for Transfer Pricing in Distribution and Marketing Per OECD Guidelines.

  Case-Laws - AT : TP - ALP - RPM (resale price method) is one of the standard method and OECD guidelines also states that in case of distribution and marketing activities when the goods are purchased from AEs which are sold to unrelated parties, RPM is the most appropriate method - AT
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• Section 80G(5)(vi) Exemption Renewal: Existing Approval Automatically Extended Indefinitely Unless Specifically Withdrawn Post-Expiry.

  Case-Laws - AT : Renewal of exemption u/s 80G(5)(vi) - existing approval shall be deemed to have been extended in perpetuity unless specifically withdrawn, after expiry - AT
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FEMA

• SIDBI Updates ECB Policy under FEMA to Help Small Industries Access Foreign Capital Efficiently and Compliantly.

  Circulars : External Commercial Borrowings (ECB) Policy – ECB by Small Industries Development Bank of India (SIDBI) - Circular
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Corporate Law

• Registrars to Scrutinize Company Balance Sheets for Compliance and Transparency Under Company Law, Highlighting Tax Implications

  Circulars : Examination of Balance Sheets by RoCs - Circular
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• Company Board Must Appoint Cost Auditor in 180 Days; Report Filing Required Within 30 Days After Completion.

  Circulars : Appointment of Cost Auditor by Companies - Circular
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Central Excise

• No Cenvat Credit Reversal Needed for Old Capital Goods Removed After 10 Years of Use.

  Case-Laws - AT : Reversal of cenvat credit - clearance of capital goods i.e. old and used forged hammer - not required to reverse if removed after the ten years of its use in his factory premises - AT
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Case Laws:

• Income Tax

• 2012 (11) TMI 235
  Entitlement to exemption under section 11 - construction activity of World Trade Center, Centre 1 and IDBI Centre - denial of claim as the transaction was one of sale of lease-hold rights of use of space and not of leasing - Held that:- The Department sought and received from the assessee particulars of the expenditure incurred by the assessee towards scientific research & the details furnished in the table speak for themselves - hardly any expenditure worth mentioning was incurred on research and development. The assessee's reliance upon section 2(15) is of no assistance to it. The only object of general public utility that can be claimed by the assessee is on account of its main object in the Memorandum of Association. The assessee never engaged itself in any activity connected to the main object viz. to organize, sponsor, promote, establish, conduct or undertake the scientific research in any way or by any means whatsoever and in any area or field. Mr. Andhyarujina fairly stated that the lease transactions were the only business of the assessee. The income therefore, was entirely from the assessee's business unrelated to any charitable purposes whatsoever. An assessee that engages itself only or predominantly in activities relating to its ancillary or incidental objects which do not relate to any charitable purpose and does not carry on any activity relating to its main object which pertains to a charitable purpose is not entitled to an exemption under Section 11. The assessee's claim for exemption fails the first test viz. in establishing that its income was derived from the property held under trust wholly for the alleged charitable purposes. The assessee's claim for exemption under section 11 also fails the second test under section 11(1)(a). It has not been able to establish that such income was applied to such purposes viz. charitable or religious purposes. The assessee's claim is also not maintainable as it has not been established that the work in connection with the assessee's business is mainly carried on by the beneficiaries of the institution - against assessee. Whether only 1/60th of the advance can be assessed as its income for the year as the tribunal had rightly held it as transaction of lease and not of sale ? - Held that:- In the agreements, where the rent was divided into three components, the basis rent and parking space rent were to be paid in advance before execution of the lease in installments similar to those under the first set of agreements. Thus under both the agreements, substantial "rent" was payable in advance - the doctrine of diversion of income by over-riding title does not operate in the assessee's favour. The mere use of the term 'sinking fund' and the manner in which the assessee treats the same in its accounts is not decisive of the matter. The assessee is not a co-operative society in which case the question may well be answered entirely differently depending upon the facts of the case. The fact that depreciation has been claimed by the assessee in respect of the plant and machinery and other equipment required for extending the facilities indicates that the sinking fund was utilized for acquiring and maintaining the same for the benefit of the assessee. The income was, therefore, used by the assessee and for the assessee and the assessee retained the benefit arising therefrom - against assessee. Standard rent fixed by the Municipal Authorities as the annual value v/s - actual rent realized by the assessee - Held that:- The additional question for the assessment year 1990-91 is, accordingly, answered in favour of the assessee viz. that the Tribunal has itself held that the said income is to be taxed as income from "Profits and gains of business or profession". The issue of consideration received in respect of the transactions for the assessment year 1990-91 under the head "income from property" does not survive in view of the remand report made by the Tribunal in which it is expressly held that the same has to be assessed under the head "Profits and gains of business or profession" - in favour of assessee.

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• 2012 (11) TMI 234
  Deduction u/s 80IB - Disallowance on non fulfillment of prescribed conditions - CIT(A) alloowed the claim - Held that:- On consideration of the relevant documents & development agreements it can be fairly concluded that the assessee had acquired dominance over the land and the land was under the possession of the assessee. The assessee firm was de-facto land owner for all practical purposes and has also developed housing project by incurring all the expenses and taking all the risk involved therein. Thus, the assessee firm was not merely contractor of the land owner for fixed remuneration. He further found that land owners were to get only the price of land fixed by the development agreement and not to get any profit of the project. Therefore, the assessee had fulfilled all the conditions as laid down u/s 80IB(10) - in favour of assessee.

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• 2012 (11) TMI 233
  Unexplained cash credit - CIT(A) deleted the addition relying on additional evidence u/r 46A - Held that:- The appellant had filed confirmation report before the A.O. during the course of assessment proceeding as evident from the remand report. The CIT(A) also given fresh opportunity to the A.O. which has been availed by the A.O thus no point of violation of rule 46A arises - As the appellant had discharged her burden of prove by filing the confirmation, PAN No., copy of return and explanation of source of cash creditors, the order of the CIT(A) is hereby confirmed - The loans were advanced for business acquisition, advances were given from own interest free borrowings/fund and during the year no loan was advanced by the appellant.The interests were paid on bank loan, which was utilized for business purposes. No interference in the order of the CIT(A) is warranted - in favour of assessee. Depreciation on electrical installation and fitting in the hotel building - @ 25% OR 15% allowable as per IT Rules - Held that:- As per appellant this was the depreciation on telephone, Air Conditioner, Television and Water Heater & further disallowance made from the telephone expenses was claimed to be on higher side. As these facts had not been made out by the A.O. in assessment order, it is required to be re-adjudicated by the A.O - in favour of assessee for statistical purposes.

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• 2012 (11) TMI 232
  G. P. Addition - gross profit of 26.73% in this year as against the gross profit of 30.28% in the immediately preceding assessment year - CIT(A) deleted the addition - Held that:- The gross profit of the assessee in last 5 years was in the range of 25% to 27% with the exception of assessment year 2005-06 where the gross profit was 30.28% followed by a reason on account of order of a particular item which had higher margin and the same was not repeated in the year under consideration. This factual aspect has not been controverted by the revenue by bringing any contrary material on record. Further, during the year under consideration, increase in diesel price and power also contributed to fall in gross profit. The learned CIT(A) has given a finding that the assessee has declared process loss of 10% to 11% consistently - CIT(A) has given a finding that the assessee had maintained day to day stock registers as found during the course of survey proceedings. These factual aspects have also not been controverted by the revenue by bringing any contrary material on record - decided against revenue. Addition on freight and octroi charges - CIT(A) deleted the addition - Held that:- As decided in assessee's own case wherein CIT(A) has distinguished the nature of expenditure with the nature of expenditure which was covered by the agreement with the holding company & the findings given by the CIT(A) that the freight and octroi expenditure claimed by the assessee were incurred on purchase of consumables and stores materials cannot be disturbed - in favour of assessee. Suppressed conversion charges - CIT(A) deleted the addition - Held that:- The issue cannot be decided without complete data as the parties have not furnished the industry-wise loss or the history of the loss for last 4/5 years, the loss incurred during various process, percentage of loss in each process, comparison of such loss in difference processes industrywise and various assessment year-wise & other comparative instances and factors like type of machinery used, claim of manufacturer of machines as to the amount of loss likely to occur when work is done on their machines - restored the matter to the file of the Assessing Officer to affirm the correctness of the assessee’s claim of loss - in favour of revenue for statistical purposes.

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• 2012 (11) TMI 231
  Deduction u/s. 80IB - disallowance as activity cannot be considered to be manufacturing - Held that:- The business of assessee relates to cutting and polishing of marbles stone who procures rough marble blocks, which is first cut or chiseled using a hammer and a chisel. Thereafter the block is cut into the form of slabs. Thereafter, these slabs are placed under a polishing machine to make the surfaces smooth. Then edges of the tiles are cut using saw blades, therefore, for this purpose the assessee is entitled to deduction under section 80IB following the judgment in the case of ITO vs. Arihant Tiles and Marbles Pvt. Ltd.[2007 (5) TMI 132 - HIGH COURT, RAJASTHAN]. As in earlier year the matter was restored to the file of A.O. for the verification of calculation. In the current year also the A.O. had disallowed the deduction u/s. 80IB at initial point and had not checked the calculation of deduction - restore the matter to the file of AO with a direction to verify the working of calculation and allow the deduction.

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• 2012 (11) TMI 230
  Disallowance u/s. 14A - CIT(A) allowed the claim - Held that:- No dispute to the fact that the assessee has raised the loan of Rs.297.75 crores up to 97-98 and majority of investment has been made before 97-98 and the assessee had been claimed deduction u/s. 80M. The A.O. in this year had made a disallowance of the interest expenses incurred for the earning the dividend. Whereas the CIT (A) and the Tribunal in particular up to 1996-97 had deleted the disallowance so made along with the deduction u/s.80M on the gross dividend receipt - Though in such a situation, the interest bearing fund are bound to merge that the assessee in capital which is non interest bearing fund. There is no dispute to the fact that the assessee having non interest bearing fund. As decided in Maruti Udhyog Ltd. Vs. DCIT [2004 (10) TMI 278 - ITAT DELHI-A] Nexus between the borrowed funds and investments can be said to be established only where it is shown that interest free funds are not available with the assessee. In the present case, there is no nexus of such kind proved by the A.O. thus as per the past history of the assessee, the Department has been taking the view that no expenses including the interest had been attributed to dividend for computing the deduction u/s. 80M - the assessee having non interest bearing fund as mentioned hereinabove and no nexus between borrowed fund and the investment having been established by the Department cannot help the Revenue - in favour of assessee. Long Term Capital gain - share transaction not routed through stock exchange - CIT(A) deleted the addition - Held that:- The A.O. had not brought on record any evidence or instruction which prohibits the off market transaction of shares. The assessee has routed these transactions from demat account. There is no prohibition in Income Tax law on such transfers of share. The shares were transferred at the market price on the date of transaction. There was no objection from the transferee that off market transaction is prohibited by the law. It is immaterial whether assessee has paid STT on these transactions or not but capital gain has to be calculated as per the provisions of Income Tax Act. The appellant had sold shares of GSFC to GSIL as per the agreement dated 07th March, 2005. Therefore, the transfer of capital assets had taken place on account of sale - The appellant had received consideration of Rs.69,51,87,840/- & further, the shares were transferred to the depository UTI Security to the buyer. These shares were reflected in the demat account of the buyer. The appellant sold these shares to GSIL which is not a subsidiary company of the appellant. The common factor is that both the appellant as well as GSIL are owned by the Gujarat Government. But as per Company law, both the companies are having legal status under the Companies Act - CIT(A) was correct to delete the addition - in favour of assessee. Inclusion of service charges to income - Held that:- While filing the return of income for the assessment year 05-06, the appellant suo moto disallowed the amount towards reversal of service charges income. The claim for deduction of such sum had already been placed for A.Y.04-05. In A.Y. 05-06, this claim has been rejected by the A.O., which was confirmed by the CIT(A) in A.Y. 05-06 because the adjustments have been made in the books for the period of pertaining for A.Y. 05-06 - as similar income has been allowed to be reduced on the basis of real income theory, thus the order of the CIT(A) is confirmed - against assessee. Application of Rule 8D - Held that:- As decided in Godrej and Boyce Mfg. Co. Ltd. vs. DCIT [2010 (8) TMI 77 - BOMBAY HIGH COURT] Rule 8D is not retrospective and applies from A.Y. 08- 09 and investment in question has not been changed during the year. The A.O. has not brought on record any material / evidence which shows that the investment position has been changed in case of appellant during the year from A.Y. 97-98, when during the year no investment has been made by the appellant - in favour of assessee.

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• 2012 (11) TMI 229
  Non deduction of TDS - disallowance of freight charges - Held that:- The provisos of sub-section 3 under clause (i) of 194C is to be fulfilled by the assessee i.e. he has to obtain 15-I form from the sub-contractor while making the payments to them, form no.15-J is to file before the concern Commissioner on or before 30th June of following financial year and payment above Rs.50,000/- is made to the single sub-contractor in full year to deduct the TDS. But it was held when the appellant has obtained 15-I form then second proviso would be applicable. Therefore, it is not required to deduct tax. It was held that when form no.15-I had been obtained from the sub-contractor whose contents were not disputed or whose genuineness was not doubted then the assessee is not liable to deduct tax from the payment made to sub-contractor. Once, the assessee is not liable to deduct tax u/s.194C then the addition u/s. 40(a)(ia) cannot be made - in favour of assessee.

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• 2012 (11) TMI 228
  Non deduction of TDS - disallowance u/s 40(a)(ia) - Held that:- For the part amount of Rs.32,18,58,199/- TDS was deposited by the assessee in the Government account latest by 24.08.2005 which is before the due date for filing the return of income and as per the judgment of COMMISSIONER OF INCOME TAX, KOL-XI, KOL Versus VIRGIN CREATIONS (2011 (11) TMI 348 - CALCUTTA HIGH COURT) amendment in section 40(a)(ia) was held as retrospective and therefore, no disallowance is called for TDS deposited by the assessee in the government account before the due date for filing of return of income - in favour of assessee. For the rest part as decided in Merilyn Shipping & Transports Versus ACIT, Range-1, Visakhapatnam [2012 (4) TMI 290 - ITAT VISAKHAPATNAM] section 40(a)(ia) is applicable only to expenditure which is payable as on 31st March of every year and cannot be invoked to disallow the amounts which are already been paid during the previous year, without deducting tax at source – Decided in favor of assessee - confirm the disallowance of only Rs.2,30,59,781/- being the amount payable by the assessee to the creditors for labour work as on 31.03.2005 - partly in favour of assessee.

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• 2012 (11) TMI 227
  Unaccounted income - excess stock - surrender of income of 14 lacs however retracted the same during assessment proceedings - Held that:- Assessee has claimed that the total stock found at the time of survey was Rs. 38,33,000/-. Against this figure the value of closing stock computing as per the trading account at the time of survey was amounting to Rs. 24,35,000/-. Remaining amount of Rs. 14 lacs was surrendered. Statement of account for the period 12.12.98 to 31.3.1999 was prepared by taking the opening stock Rs. 38,35,000/- and according to this statement assessee suffered a gross loss of Rs. 3,85,193/-. As per the assessee he has earned gross profit for the period 1.4.98 to 11.12.98 amounting to Rs. 1875712/- Assessee has further suffered gross loss for the period 12.12.98 to 31.3.1999 amounting to Rs. 385193/-. As a result of the above, the gross profit during the entire period came to Rs. 1490519/-. This aspect of the assessee, suffering of loss during a part of the financial year has not been discussed and examined by the authorities below. Therefore, matter is remitted to the file of the AO - Appeal of assessee allowed for statistical purposes.

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• 2012 (11) TMI 226
  Penalty levied u/s 271(1)(c) against income from undisclosed sources as bogus gift – assessee before CIT(A) has surrendered the above amounts on the condition that no penalty should be imposed. – Held that:- assessee has submitted various documents in support of the gifts. It is not the case of the Revenue that the documents submitted in this regard are false. It is also a fact that during the appellate proceedings the assessee has himself agreed to surrender the above amounts. Under the circumstances, in our considered opinion, when the Revenue has not been able to find any fault in the documents submitted by the assessee in this regard, in our considered opinion, the penalty u/s. 271(1)(c) is not justified. - Decision in favour of assessee.

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• 2012 (11) TMI 225
  Validity of reopening of assessment u/s 147/148, earlier framed u/s 143(3), after expiry of four years from end of relevant AY – alleged that investment in land was not disclosed in balance sheet based on incriminating document found during search – assessee contended that fact of purchase of plot was disclosed in return on Income and reasons has been selectively recorded so as to increase the time limit from 4 years to 6 years – Held that:- When the assessee has recorded a transaction in its books of accounts as evident from balance sheet at year end of 2000 and 2001 and the assessment is completed u/s 143(3), the assessee has disclosed primary facts relating to the transaction. The assessee’s original assessment having been completed u/s 143(3), no action of reassessment can be taken after the expiry of 4 years from the end of the relevant AY unless any income chargeable to tax has escaped on the part of the failure of the assessee to disclose fully and truly all material facts necessary for the assessment. Assessing Officer has recorded the reasons in a manner to attract time limit of 6 years by recording an erroneous reason that this transaction has been kept outside the books of accounts by the assessee. It implies that the reasons recorded lack bona fide in terms of recording the correct facts. Since the reasons have been recorded without application of mind and proper bona fides, they are not tenable. Thus, the reassessment proceedings initiated on the basis of untenable reasons are ab initio void and are quashed accordingly – Decided in favor of assessee.

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• 2012 (11) TMI 224
  Addition on account of capital gain u/s 45 - Can assessee holds two portfolios for investment & trading for dealing in shares – Book business income from trading portfolio & capital gains from investment portfolio – AO treat capital gain as business income – Held that:- As per CBDT stated in circular and confirm possibility for a tax payer to have two separate portfolios. Where an appellant has two portfolios and have income under both heads i.e. capital gains as well as business income. Whereas assessee’s separate activities in share are further supported and endorsed by the fact that separate demat accounts, bank accounts are being maintained and separate trading account and investment accounts are maintained in the books. The department has earlier accepted the assessee’s practice and treatment under heads of capital gains and business. Appeal decides in favour of assessee.

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• 2012 (11) TMI 223
  Discrepancy and Duplication in the stock – at time of survey and the closing stock as recorded in the books of accounts - Held that:- except stating that the valuation of stock is arbitrary, the assessee has not produced any evidence to substantiate its claim. - As valuation has been done in the premises of the assessee with the assistance of the staff of the assessee and the assessee has never raised any objections about the valuation till the assessment stage - difference in the valuation is not properly explained by the assessee – no infirmity in order of the CIT(A) in confirming the addition on account of excess stock made but however gave relief to the extent of Rs.11,48,950/- on account of duplication of the stock at pages 5 and 8 of the inventory of stock made at the time of survey - In the result, the appeal filed by the Revenue as well as the assessee are dismissed.

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• 2012 (11) TMI 222
  Disallowance u/s. 40(a)(ia) of the Act for non-deduction of TDS - Held that:- Amount paid towards “Rent and amenities” would not fall in the category of “Fee for technical services - in the interest of natural justice, issue of determining the market value of “Rent and amenities” is set aside to the file of the AO subject to the provisions of sec.194-I, and exclude the same from the purview of sec. 194J of the Act - In the result, the appeal filed by the assessee is treated as allowed for statistical purposes.

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• 2012 (11) TMI 221
  Penalty u/s 271(1)(c) – Concealment of Income - Following the decision of court in case of [CIT vs Reliance Petroproducts Ltd, 2010 (3) TMI 80 - SUPREME COURT ] held that:- Assessee cannot be held guilty of furnishing inaccurate particulars – making an incorrect claim in law cannot tantamount to furnishing of inaccurate particulars- Merely because the assessee claimed deduction u/s 80IB which has not been accepted by the Revenue, penalty under s.271(1)(c) is not attracted – If the contention of the revenue is accepted, the assessee would be liable for penalty under s.271(1)(c) in every case where the claim made by the assessee is not accepted by the AO for any reason – That is clearly not the intendment of the legislature - no infirmity in the orders of ld. CIT(A) - In the result the appeal of the revenue is dismissed.

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• 2012 (11) TMI 220
  Recalculation of Tax and Interest u/s 201(1A) – assessee in default - Held that:- Following the decision of court in case of [R. Giridhar Vs. CIT, 1981 (4) TMI 58 - KARNATAKA HIGH COURT] It would be appropriate if the ITO affixes his signature after the computation of tax is made and below such computation also if it is made separately- Assessing Officer’s order is not a speaking order and the CIT(A) has merely directed the Assessing Officer to recalculate the tax payable u/s 201(1) without considering the fact that the order of the Assessing Officer is cryptic - order of the CIT(A) is set aside and restore the issue to the file of the Assessing Officer directing him to pass a speaking order - In the result, appeal of the assessee is allowed for statistical purposes.

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• 2012 (11) TMI 219
  Addition on account of expenditure under the head Discount - No Books of account and supporting documents had been produced by the assessee during the assessment proceedings – Held that:- Discount is an expenditure, which can either be reduced from sales or it can be charged to Profit & Loss Account - Evidence and details filed by the assessee, has not been confronted to the AO, within the meaning of Rule 46A of the Income Tax Rules, 1962 - issue is restored to the file of the AO, to adjudicate the issue afresh, as per law, after affording reasonable opportunity to the assessee - ground of appeal of the revenue is allowed for statistical purposes. Addition made by the AO in trade account - Held that:- No books of account and supporting details were produced – AO applied 11% GP and made the impugned addition - Held that:- end of justice would be served,if GP is taken at 10% - ground of appeal of the revenue is partly allowed. Addition as income from Undisclosed sources – Held that:- AO has made addition on certain misconception, which needs to be reconciled, at his level. Therefore, the issue is restored back to AO to adjudicate the issue properly, in accordance with provisions of law and in terms of established accounting norms - grounds of appeal of the revenue are allowed for statistical purposes. Assessee's appeal for assessment year 2006-07 Disallowance of Interest – Held that:- Since these advances are for non-business activity and no supporting evidence has been furnished - interest @ 12% on these advances making addition of Rs.1,26,000 is disallowed - AO should afford reasonable and proper opportunity to the assessee, while adjudicating the issue afresh and the assessee is also directed to render necessary cooperation in the matter - ground of appeal of the assessee is allowed for statistical purposes.

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• 2012 (11) TMI 218
  Disallowance u/s 14A - held that:- Disallowance u/s 14A is contemplated in respect of exempt income and not which is eligible for deduction under any relevant provision. It is impermissible to mix both the deduction and exemption provisions and then take them in one stride for computing disallowance u/s 14A. Therefore, the authorities below were not justified in placing the exemption provision and deduction provision on one platform for the purpose of making disallowance under this section. Since sections 10AA and 80IAB are 'deduction provisions' and not 'exemption provisions', the investment or expenses incurred to earn income from SEZ do not merit reckoning in computing disallowance u/s 14A - Impugned order on this count is set aside and remit the matter to the file of A.O. for making disallowance u/s 14A on some reasonable basis - In the result, the appeal is partly allowed for statistical purposes.

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• 2012 (11) TMI 217
  Cancelation of Registration u/s. 12AA – Held that:- Condition precedent to cancellation of registration u/s. 12AA(3) of the Act are not satisfied because once registration is granted, Ld. CIT can cancel registration only if he satisfies that the activities of such Trust or institution are not genuine or are not been carried out in accordance with the objects of the Trust or institution - Merely because some amount has been spent by assessee society which is not in accordance with its aims and objects, at the time of giving exemption u/s. 11 & 12 of the Act, benefit of exemption could be denied to assessee for the said claim but it could not be the basis for cancellation of registration of assessee society - reasons given by Ld. CIT in the impugned order for cancellation of registration is not in accordance with law - cancellation of registration of assessee set aside.

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• 2012 (11) TMI 216
  Addition made to the arm's length price - alleged that value of assessee's international transactions with Associated Enterprises (AE) was in excess of Rs. 5 Crores - Assessee's submission was that Comparable Uncontrolled Price (CUP) method could not be applied since materials purchased from AE and from unrelated entities were technically different – Held that:- Assessee has to be given an opportunity to explain what adjustments it would like to carry out to the prices determined under CUP method so as to adjust such differences and make it fit for comparison as stipulated in sub-rule (2) of rule 10B - matter requires re-visit by the TPO for correctly assessing the prices that could be adopted under CUP method for comparison after carrying out the adjustment required - TNM method could not have been adopted in the circumstances of the case, we remit the matter back to TPO and Assessing Officer for determining the arm's length price under CUP method after making required adjustment stipulated in law. Assessee has to substantiate with sufficient evidence the adjustments that are reasonably required to be made for rendering the prices comparable - ground taken by the assessee relating to determination of arm's length price, is allowed for statistical purposes.

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• 2012 (11) TMI 215
  Additional Depreciation on the windmill - disallowance as the assessee is not involved in manufacturing of any goods - Held that:- As decided in N.T.P.C. Limited, Versus Deputy Commissioner of I.T. [2012 (5) TMI 127 - ITAT DELHI] generation of electricity is akin to manufacturing of a new product. CST Vs. Madhya Pradesh Electricity Board [1968 (11) TMI 85 - SUPREME COURT OF INDIA] as held that electricity falls within the definition of goods under the provisions of Sale of Goods Act, 1930. Thus the assessee is involved in the manufacturing activity and fulfills the conditions as laid down under section 32(1)(iia). The Government vide Finance Act, 2012 has amended the provisions of section 32(1)(iia) to include the business of generation or generation and distribution of power, eligible for benefit under section 32(1)(iia). Although the said amendment is with effect from 1.4.2013 but it gives impetus to the view that generation of electricity is a manufacturing process and qualifies for the benefits under section 32(1)(iia) - in favour of assessee.

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• 2012 (11) TMI 214
  Exemption u/s 10(10C) – Voluntary retirement scheme - Assessee received ex-gratia on VRS and claim exemption u/s 10(10C) on said amount – AO not allow the claim on basis of violation of condition laid down under rule 2BA – Held that:- Following the decision in case of Pandya Vinodchandra Bhogilal (2010 (7) TMI 796) that the provisions of section 10(10C) are to be interpreted liberally in a manner which is beneficial to retired employees. If AO had any doubt about the scheme he could have enquired from the employer. Assessee employee cannot be penalized and tax will be levied on him on the assumption that the scheme framed by employer is not in accordance with rule 2BA. In favour of assessee

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• 2012 (11) TMI 194
  Deduction u/s. 80IC - rejection of claim - whether geographically assessee is located with the notified area contemplated in sub-clause (ii) of sec. 80IC(2)(a) or (2) (b)- CIT(A) deleted the addition - Held that:- AO while observing that more than 93% of manufacturing activities is carried out at Kannouj and at Bhimtal, a very negligible activity has been carried out has failed to appreciate the true nature of the controversy. If distilled oil is similar to that of fragrance, fragrant compound, attar and floral water then AO may be justified to say that major activities have been carried out at Kannouj but that is not the case. The end product manufactured by the assessee and sold is altogether different from distilled oil. Distilled oil is one of the raw material for producing fragrant, fragrant compound or attar. The main stress of the Assessing Officer is that it should boost economy of the State but in the present case, assessee had made purchases out of Uttrakhand State. Its major activities were carried out in UP. We find that this reference is altogether irrelevant. Assessing Officer was required to look into whether assessee has an industrial undertaking. It is situated within notified area as contemplated in section 80IC(2)(a)(ii) of the Act. Whether it is manufacturing any article or thing. Negligible expenses shown by the assessee - AO observed that by incurring a sum of Rs.7013 only, turnover of more than Rs. 3 crores cannot be achieved - Held that:- The assessee in the audited P & L account has shown fuel charges at Rs.1,56,320, freight Rs.52,663, manufacturing expenses Rs.15,132, water and electricity expenses Rs.7715 and packing material of Rs.50,853. Apart from these expenses, assessee has shown purchase of raw material at Rs.2.39 crores. Thus, it can be fairly concluded that AO has made this comparison in isolation. Assessee has placed on record the material exhibiting transportation of the raw material, purchase bills and Vat certificate. It is registered with the Central Excise Department w.e.f. Ist of September, 2006. Thus the assessee has demonstrated that it is engaged in the manufacturing of article and things fulfilling all the essential conditions for availing deduction under sec. 80IC - in favour of assessee.

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• 2012 (11) TMI 193
  Unaccounted share application money - CIT(A) deleted the addition - Held that:- The AO did not leave any stone unturned to test and check the identity and creditworthiness of alleged share applicant’s office and the genuineness of the transaction but except the self contradictory confirmations in the form of affidavit wherein it has been stated that the amounts in question have been given as “unsecured loans”. The assessee did not furnish any document or evidence which could be submitted in the form of PAN No., Income tax returns, bank statement, share subscription application, share transfer register etc. thus, the findings of the AO for making addition of Rs. 15 lakh made u/s 68 was based on justified and reasonable grounds & CIT(A) was wrong in holding that the assessee has discharged the initial onus of establishing the identity of the subscribers and the genuineness of the transaction - in favour of revenue. Commission paid to the persons who arranged transaction - CIT(A) deleted the addition - Held that:- The AO had made this addition on hyper technical approach on the basis of presumption, therefore, its deletion by the impugned order is held justified - in favour of assessee.

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• 2012 (11) TMI 192
  Power Purchase Price payable to UPPCL - Held that:- It is mentioned that the question of differential rate, that is the difference between the rate stipulated in the agreement and charged by UPSEB in the bills and the rate recommended by independent authority was in dispute and the said dispute was not resolved during the relevant year. Therefore, the contractual liability on account of such differential rate is not a liability in praesenti. There is a possibility of reduction or extinction of the liability, therefore, it cannot be regarded as an ascertained liability. In this view, the appeals were decided in favour of the revenue - The report was submitted by the Nair Committee much after the close of the previous year - in favour of revenue. Credit of advance tax and self assessment tax paid by the assessee company be allowed after due verification of tax deposit vouchers and tax levied on the assessee - restore this issue to the file of the AO - in favour of assessee for statistical purposes. Interest under sections 234B and 234C - Held that:- As decided in Jtc. I. T., Mumbai Versus M/s Rolta India Ltd [2011 (1) TMI 5 - SUPREME COURT OF INDIA ] for the purpose of levy of interest u/s 234B the term “assessed tax” means the assessed or regular assessment, thus what is applicable in respect of section 234B of the Act is also applicable in respect of Section 234C of the Act even when assessment is made u/s 115JA - in favour of revenue.

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• 2012 (11) TMI 191
  Penalty u/s 271(1)(c) - disallowance of setting off of the loss of erstwhile partnership firm against the income of the assessee - Held that:- Having regard to the facts, the ultimate disallowance was on account of Section 170(1) which in fact is the applicable provision as regards the succession was not even reflected in the orders of the lower authorities as well as the Tribunal in either round of litigation, i.e. quantum and penalty. AO in this case, as also the CIT(A) was under the misapprehension that the assessee was not a successor but this Court has conclusively ruled that the assessee was in fact a successor but not entitled by virtue of Section 170(1) to lay claim to the adjustment of the loss of the erstwhile firm. Such being the case, lack of clarity by the income tax authorities right upto the ITAT itself, in the opinion of the Court. It is a justifiable ground for the assessee to say that the point was debatable. Such being the case, the upholding of the quantum proceedings by the Court could not have been the only basis for the imposing of the penalty - in favor of the assessee.

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• 2012 (11) TMI 190
  Valuing of closing stock - exclusion or inclusion of excise duty - Held that:- As decided in Asstt. CIT v. Narmada Chematur Petrochemicals Ltd [2010 (8) TMI 263 - GUJARAT HIGH COURT] Excise duty not includible in valuation of closing stock of finished goods at end of accounting period. Excise duty payable estimated on finished goods held in factory are neither included in expenditure nor valued in such stocks but are accounted for on clearance of goods from factory this accounting treatment however has no impact on the profit for the year as decided in CIT v. Shri Ram Honda Power Equipment Ltd. [2012 (10) TMI 150 - SUPREME COURT] - in favour of assessee.

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• 2012 (11) TMI 189
  Liability of directors of private company in liquidation - Section 179 v/s 156 - Penalty u/s 271(1)(c) - Held that:- Comparing the language used in section 179(1) with that of section 156 i.e. Notice of demand, it emerges that in section 179, the term used is 'tax due' where as in section 156 which is a recovery provision refers to a notice of demand which would specify the sum payable. The sum payable may as provided in the section itself include tax, interest, penalty fine or any other sum which is payable in consequence of any order under the Act. Section 220 pertains to "when tax payable and when assessee deemed to be in default". Section 220(2) provides that if the amount so specified is not paid within such time, the assessee shall be liable to pay interest. Such interest thus would be on the entire sum payable which may include the tax, interest and penalty or any other source found payable. It would therefore, not be possible to stretch the language of section 179(1) to include interest and penalty also in the expression 'tax due' as decided in Ratanlall Murarka And Others Versus Income-Tax Officer, 'a' Ward, Companies Circle, Ernakulam, And Others [1980 (7) TMI 60 - KERALA HIGH COURT]. Thus it can be stated here that authority completely failed to appreciate in proper perspective the requirement of section 179(1). Once it is shown that there is a private company whose tax dues have remained outstanding and same cannot be recovered, any person who was a director of such a company at the relevant time would be liable to pay such dues but in the present case the petitioner had putforth a strong representation to the proposal of recovery of tax from him under section 179. In such representation, he had detailed the steps taken by him and the circumstances due to which non recovery of tax cannot be attributed to his gross neglect. It was this representation and the factors which the petitioner had putforth before the Assistant Commissioner which had to be taken into account before the order could be passed. It is not even the case of the department that the petitioner paid the dues of other creditors of the company in preference to the tax dues of the department or petitioner negligently frittered away the assets of the company due to which the dues of the department could not be recovered. To suggest that the petitioner did not oppose the GSFC's auction sale is begging the question. GSFC had sold the property after several attempts through auction. It is not the case of the department that proper price was not fetched. Also the Assistant Commissioner has referred to several factors, dates and events which, according to him, established gross negligence on part of the petitioner without even putting the petitioner to notice about such factors and events. Therefore, quite apart from our conclusion that the Assistant Commissioner did not record that the petitioner failed to prove that non recovery of tax from the company could not be attributed to his gross neglect, misfeasance or breach of duty, such findings were also based on materials relied upon by the Assistant Commissioner without notice to the petitioner.

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• 2012 (11) TMI 188
  Whether Provisions for Computation of deduction u/s 80HHC are also applicable u/s 80HHF -90% exclusion of net interest/rent or gross interest/rent Following the decision of Court in case of [M/s ACG Associated Capsules Pvt. Ltd. (Formerly M/s Associated Capsules Pvt. Ltd.) & Others Versus The Commissioner of Income Tax, Central-IV, Mumbai & Others2012 (2) TMI 101 - SUPREME COURT OF INDIA] - Held that:- Ninety per cent of not the gross interest/rent but only the net interest/rent, which has been included in the profits of the business of the assessee as computed under the heads ‘PGBP’ is to be deducted under clause (1) of Explanation (baa) to Section 80HHC for determining the profits of the business. Matter referred to High Court to work out the deductions within a period of three months from today.

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• 2012 (11) TMI 187
  Whether assessee would be entitled to any deduction u/s 80HHC on the mercantile basis in the year of export or in the current assessment year in respect of cash incentive and IPRS received by the assessee, even if assessee follow cash/receipt system – Held that:- Following the decision in case of B. Desraj (2008 (5) TMI 285) - SUPREME COURT) that assessee was maintaining his accounts under the cash system and had exported goods in the accounting year relevant to assessment year 1988-89 and 1989-90 and had received cash compensatory allowance and duty draw back therefor in the assessment year 1992-93. Though, the assessee had not done any export business during the assessment year 1992- 93, yet the assessee was held entitled to deduction u/s 80HHCin relation to those items during the assessment year 1992-93. Therefore the assessee is entitled to the deduction u/s 80HHC by taking the export turnover and the total turnover of the year in relation to which the export incentive has been received. Appeal decides in favour of assessee

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• 2012 (11) TMI 186
  Taxability of amount received for providing amenities and facilities under separate agreement other than the rent agreement under 'Income from House Property' or 'Income from other sources - services being provided under the service agreement are in the nature of staircase of the building, lift, common entrance, main road leading to the building through the compound, drainage facilities, open space in/around the building, air condition facility etc - Held that:- It is found that there are concurrent findings of fact by the CIT(Appeals) as well as the Tribunal that no services are being provided by the respondent to the occupants of its property and that the service charges have to be included as a part of its rental income. The test to determine whether the service agreement was different from the rent agreement would be whether the service agreement could stand independently of the rent agreement. In this case the service agreement is dependent upon the rent agreement as in the absence of the rent agreement there could be no service agreement. Since, these services cannot be separately provided but go alongwith the occupation of the property, therefore, the amounts received as service charges are to be considered as a part of the rent received and subjected to tax under the head 'Income from House Property' - Decided in favor of assessee

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• 2012 (11) TMI 185
  Refund of TDS u/s 195 - Whether any latter amendment in the instructions issued by the CBDT can be the ground for declining the claim of the assessee - Whereas grounds of the assessee’s case duly covered under the circular prior to amendment - Held that:- The petitioner had already made an application on 20.9.1999 giving details of the refund claim. The respondents did not respond to such an application for a considerable period of time despite reminders from the petitioner. More than six months passed before the application of the petitioner was even attended to. If later on the rule position changed by virtue of the subsequent circular issued by the Board, the petitioner can hardly be penalized by withholding the refund claim which was covered under the earlier circular dated 6.8.1998. Therefore revenue has erred in applying subsequent circular dated 20.4.2000 on this case. Appeal disposed accordingly – in favour of assessee

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• 2012 (11) TMI 184
  Denial of Refund of excess tax deducted by source - the same payment of technical fees to the foreign company is made twice - Held that:- The petitioner at the time of making the provision for technical assessment fees, payable to the foreign company deducted an amount of Rs. 19,49,400/as TDS and also deposited such sum with the Government of India on 1.6.1998. When the fees for technical assistance were actually remitted, the petitioner once again deducted a sum of Rs. 21,82,500/- towards tax at source and also deposited the sum with the Government of India on 18.8.1998. Failure to see how the case of the petitioner was not covered under clause(i)(c) of para.(1) of circular no.769 dated 6.8.1998 i.e. the tax deducted at source is found to be in excess of tax deductible for any other reason. Said provision was sufficiently wide and would cover variety of cases of refund of excess tax deducted by source. The petitioner deposited the amount of tax twice for the same payment only due to oversight. Such overpayment was required to be refunded and the case of the petitioner was required to be considered under circular dated 6.8.1998 which was prevailing when the application was filed. Any subsequent change made long thereafter, could not be applied in case of the petitioner - The respondents shall refund sum of Rs. 19,49,400/with simple interest at the rate of 9% for the period after expiry of four months from the date of receipt of the application dated 2.11.1998 till actual payment - in favour of assessee.

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• 2012 (11) TMI 183
  Disallowance u/s 14A r.w.r. 8D - Demand raised - CIT(A) rejecting the Petitioner's application for stay of demand - Held that:- As the officers are bound to apply Rule 8D for the purposes of arriving at expenditure to be disallowed u/s 14A . Therefore, no fault could be found with the order passed by the Authorities. As very fairly stated that the department will not commence any recovery proceedings against the Petitioner in respect of the present demand till the disposal of its appeal by the ITAT it would be appropriate for the Petitioner to pursue its remedy of appeal before the ITAT.

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• 2012 (11) TMI 182
  Deduction u/s 80IB - Whether amount of excise refund and interest subsidy received by the appellants is a capital receipt and, thus, not liable to tax under the provisions of the Act, or revenue receipt and if revenue receipts whether eligible for deduction u/s 80IB – Held that:- Incentives provided to Industrial establishment are for the purpose of Eradication of the social problem of unemployment in the State by acceleration of the industrial development and removing backwardness of the area that lagged behind in industrial development, which is certainly a purpose in the public interest, the incentives provided by the office memorandum and statutory notifications issued in this behalf, to the appellants-assessees, cannot be construed as mere production and trade incentives, as held by the Tribunal. Excise Duty refund is to be treated as ‘capital receipt’ in the hands of the assessee and not liable to be taxed. - In the result, both the appeals of the Revenue are dismissed.

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• 2012 (11) TMI 181
  Diversion of income by overriding title - Whether interest income received by the assessee from investment of the share capital money received from the Government which was deposited in fixed deposit, can be treated to be the income of the assessee or that of the Government – Held that:- Government of Gujarat, as a promoter of the assessee company, had paid a sum of Rs.6 crores as contribution towards the share capital. Such sum was invested by the assessee in short term deposits earning interest thereon. Subsequently, pursuant to the directive issued by the Government, the assessee paid such interest earned by it to the Government. It was in this background that the Tribunal held that this was a case of diversion of income by overriding title. The Government was free to impose conditions regarding the payment of interest earned, until it gave permission for the issue of share capital, which was done later. The Tribunal held that the mere fact that the amount was shown in the balance sheet of the assessee was also not relevant. The interest earned could not, therefore, be considered to be the income of the assessee. Mere fact that in the earlier year, the assessee had treated such income differently, or that in the year under consideration, initially had paid advance tax on such basis, would not be conclusive of the nature of the income. Income was of the Government of Gujarat and not of assessee, therefore, it cannot be taxed in the hands of the assessee - In the result, the appeal is allowed. The judgement of the Tribunal dated 16.12.1999 is set aside to that extent - in favour of the assessee and against the revenue.

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• 2012 (11) TMI 180
  Amalgamation - carry forward and set off of business loss/unabsorbed depreciation relating to earlier assessment years – alleged that sole idea of amalgamation was not the revival of the amalgamating company but was only to take the benefit of carry forward losses - returned income was shown Nil by the assessee company after setting off brought forward losses - A.O. held that such business loss was not eligible for carry forward and set off in subsequent years as the revised return i.e. return for merged entity was filed beyond the statutory limit, hence, violation of provisions of section 80 of the Act. Held that:- Assessee cannot be expected to do an impossible thing i.e. filing of return of amalgamated entity before it is coming into legal existence and, therefore, such return should relate back to the original returns filed by these companies individually. It is not in dispute that original returns have been filed within the time specified u/s 139(1) - there is no default of provisions of section 80 as held by the Assessing Officer - Once the scheme of amalgamation had been sanctioned with effect from a particular date, it is binding on every one including the statutory authorities and the only course open to the Revenue would be to act as per the scheme sanctioned, the tax authorities are bound to take note of the state of affairs of the applicant as on the effective date i.e. Ist Jan 2004 and a revised return filed reflecting the same cannot be ignored on the strength of s. 139(5) - appeals of the Revenue are dismissed-

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• 2012 (11) TMI 179
  Sale of agricultural land – alleged that agricultural land sold by the assessee on 28.1.2005 was liable for capital gains in accordance with the provisions of section 2(14)(iii) of the Act as it was located within the municipal limits of Bommanahalli municipality – Held that:- In the view of Central Government Notification No.9447/F.No. 164/3/87/ITA-I dt.6.1.1994 in which it is seen that Bommanahalli Municipal Corporation is not a notified corporation and by the certificate dt.4.10.2010 issued by the Gram Panchayat which states that the distance from the village in which the agricultural land is situated is more than 8 kms from the BBMP limits - in favour of the assessee

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• 2012 (11) TMI 178
  Penalty under section 271(1)(c) of the Income-tax Act - addition made to ‘book profits’ under Section 115JB of the Act – Held that:- Provision for bad and doubtful debts which has been disallowed by the Assessing Officer on the ground that the same was contingent in nature - assessee has pointed out that it was under bonafide belief that the Provision for bad and doubtful debts debited in the Profit and Loss Account is not a provision for liability but a diminution in the value of assets and therefore it was allowable while computing ‘book profits’ as per Section 115JB of the Act - no default within the meaning of 271(1)(c) of the Act can be attributed to the assessee - at the time of filing of return the issue in question was debatable where two view were possible and therefore such a claim made in return of income, though found untenable by the Assessing Officer, cannot be construed as furnishing of inaccurate particulars of income within the meaning of Section 271(1)(c) of the Act – in favor of assessee

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• 2012 (11) TMI 177
  Sales Promotion Expenses – alleged that assessee could not furnish any details to prove the business expediency and could not discharge its onus to prove that it was incurred for business purposes, the expenses was disallowed – Held that:- Assessee is engaged in the business of advertising agency. The assessee has incurred the expenses is not in dispute - since the expenses have been incurred for the purpose of business the expenses should be allowed as deduction - for verification matter remitted back to the file of the A.O Disallowance of Prior Period Expenses for commission – alleged that the bills pertain to F.Y. 2006-07 – Held that:- liability for commission crystallized during the F.Y. 2007-08 - debit note issued by Mr. Ravindra Raja is dated 10-5-2007, the payment has been made in the current year and TDS thereof has also been deducted before making the payment - expenses pertains to the current year and are therefore, allowable. - addition deleted – In favor of assessee Disallowance of prior period expenses for commission out of commission paid to Shri S. Hussain – assessee submitted that due to clerical error at the time of making data entry the period mentioned in the ledger was F.Y. 2006-07 instead of F.Y. 2007-08 – Held that:- Payment was made during the current year and TDS was also deducted before making the payment - expenses pertains to the assessment year under consideration and the same should accordingly be allowed - addition deleted – In favor of assessee Disallowance of expenses - addition made on account of electricity charges, generator hire charges, maintenance charges for bus shelters and salary to staff of Hyderabad – Held that:- Method of accounting adopted by the assessee is undisputed and its acceptance by the department is also undisputed - assessee has been consistently following the method of accounting of debiting the expenses from March to February. It is not the case of the Revenue that by following this method the profits are understated. All these expenses are of routine in nature and is paid month after month - disallowance is not called for Disallowance of municipal taxes – alleged that expense was for the period upto July, 2008 – Held that:- Amount was paid towards Municipal taxes and was covered by the provisions of section 43B of the Act - Since the amount has been paid during the current F.Y. same be allowed - addition deleted Disallowance - payment for maintenance charges - contravention of the provision of Section 40A (3) – Held that:-As per section 40A (3), expenses are to be disallowed, if the payment over Rs.20,000/- is made in cash. In the present case, the payments comprises of various purchases from different parties and are in the nature of reimbursement. The only payment of Rs.18,520/- is to Mr. Shamim, Choudhary and Roy Associates that too is within the limits prescribed u/s. 40A(3) - no disallowance is called for

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• 2012 (11) TMI 176
  Deduction under S.80IB of the Act - sale of flats at semi-finished condition of the flat – Held that:- Circular of the CBDT dated 30.6.2009 makes it very clear that deduction under S.80IB(10) of the Act can be claimed on year to year basis, where the assessee is showing the profits from partial completion of the project in each year - project was not completed within four years, the deduction granted to the assessee in earlier years shall be withdrawn - When the developer is offering profits under percentage completion method, the estimated profits that the developer will have on completion of the project is spread over the earlier years and offered every year a percentage of that profit based on percentage of project completed that years - except in the last year, the assessee will be offering income even though the project (and in the individual flats) would not have been completed. As clarified in the Circular such profits offered are also entitled relief u/s 80IB – matter remanded to the file of the AO Estimation of profits - AO considered 5% to be too low in this line of business – AO found that certain expenditure were not completely verifiable and not all details were available in respect of expenditure, therefore, adopted rate of 8% for estimating profit as against 5% adopted by the assessee – Held that:- Appellant has adopted the rate of profit at 5% without any basis - In respect of turnover of up to Rs. 40 lakhs net profit is presumed to be @ 8% u/s 44AD - profit to be estimated at 8% - appeal of the assessee is dismissed Business expenditure u/s 37(1) - construction of a temple in the housing project – Held that:- Construction of temple is for welfare of the employees to instill spirituality to lead peaceful life, therefore, the expenditure incurred towards construction of temple is a part of the housing project, which is allowable as capital expenditure – In favor of revenue Disallowance towards cost of lift – alleged that bill was raised on dated 23/03/2005 not related to the assessment year under consideration – Held that:- Assessee failed to substantiate its claim by producing the bills raised by the supplier in AY 2004-05 and other evidence to prove that the expenditure is relating to AY 2004-05 - matter remanded to AO

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• 2012 (11) TMI 175
  Deduction u/s. 37(1) of the Income tax Act - expenditure incurred on advertisement under the head Media-Technical – Held that:- Expenditure was incurred in respect of promoting ongoing products of the assessee and, therefore, the expenditure is for promotion of the products of the assessee which is revenue in nature - expenditure has been incurred by the assessee for production of 'ad-films', advertisement in electronic and print media, in respect of promotion of its 'on-going products' - expenditure has rightly been treated as revenue in nature by CIT(A), which was incurred by the assessee wholly and exclusively for the purpose of its business – deduction allowed Determination of arm’s length prices - resale price method (RPM) – alleged that appellant is consistently incurring losses in India and hence the pricing policy is not at arm's length – whether to determine ALP in respect of business activity relating to distribution segment of the assessee with the AE is to be considered by RPM or TNMM. – Held that:- Order of TPO in the preceding assessment years substantiate that RPM is the most appropriate method to determine ALP - RPM is one of the standard method and OECD guidelines also states that in case of distribution and marketing activities when the goods are purchased from AEs which are sold to unrelated parties, RPM is the most appropriate method - the assessee buys products from its AEs and sells to unrelated parties without any further processing. - assessee has also produced certificates from its AEs that margin earned by AEs on supplies to the assessee is 2% to 4% or even less. - TPO's contention that AEs have earned higher profit is not based on facts - margin of profit earned by AEs themselves is also reasonable and, therefore, it could not be said that there is shift of profits by the assessee to its AEs at overseas – addition deleted Addition – assessee is in receipt of services and benefit from its Associative Enterprises in lieu of the marketing fee payments – Revenue submitted that ld CIT(A) has considered additional documents which were produced before him without seeking Remand Report from the Assessing Officer. He submitted that TPO has categorically stated that the assessee could not furnish evidence to justify that the assessee has received any benefit from the cost sharing arrangement and, therefore, in ALP study determined the same at Nil – Held that:- Fresh documents were submitted by the assessee before ld CIT(A) which were considered while allowing the claim of the assessee and deleting the disallowance made by the AO - matter remanded to the file of the AO to examine whether the assessee has received any benefit under cost sharing arrangement for which assessee made the said payment - appeal filed by the department is partly allowed for statistical purposes.

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• 2012 (11) TMI 174
  Computation of arm's length price – ALP - working capital adjustment – selection of comparable - Held that:- Price charged by the assessee varies by more than 5% from the Arm's Length Price - adjustment is to be made to the income of the assessee, being the difference between the arm's length price and the price charged by the assessee from it's A.Es for export services - assessee has given the relevant details but these details have neither been looked into by the learned TPO nor by the Dispute Resolution Panel - TPO has not asked any further details after this letter otherwise assessee could have submitted any other details if required – matter remitted it to the Assessing Officer for a limited purpose i.e. learned Assessing Officer shall investigate the issue about granting working capital adjustment to the assessee - appeal of the assessee is partly allowed.

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• 2012 (11) TMI 173
  Condonation of delay – penalty – Held that:- Manager (A/c) who has deposed that he had received the penalty order well in time but he put the order in his drawer and it slipped from his mind to take further action - there was some negligence on the part of Manager(A/c) in not making the arrangements for taking further action on the penalty order, can that negligence should cost the assessee a penalty - It will not gain anything by filing the appeal against a penalty order after expiry of limitation. There is no deliberate attempt at the end of assessee to make it appeal time barred - delay in filing the appeal condoned - remit the issue relating to penalty to the file of Learned First Appellate Authority for adjudication on merit - appeal filed by the assessee is allowed for statistical purposes.

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• 2012 (11) TMI 172
  Application for renewal of exemption u/s 80G(5)(vi) of Income-tax Act - Indian Plumbing Association is a society registered under the Society Registration Act - association is registered u/s 12A of the Income Tax Act - Held that;- As assessee’s existing approval was expiring on or after the 1st day of October, 2009, the same shall be deemed to have been extended in perpetuity unless specifically withdrawn - there is no material on record according to which it can be said that the approval granted to the assessee u/s 80G (5) was specifically withdrawn - approval granted to the assessee u/s 80G will act in perpetuity unless it is specifically withdrawn - appeal filed by the assessee is allowed. Decision in the case of Babu Hargovind Dayal Trust vs. ITAT [2011 (2) TMI 1199 - ALLAHABAD HIGH COURT] followed.

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• 2012 (11) TMI 171
  Penalty u/s 271(1)(c) of the Income Tax Act - concealment of income – Held that:- Nothing has been brought on record to show that any expenditure had been incurred either directly or indirectly, for earning the exempted income - no details filed by the assessee have been found to be incorrect or erroneous or false. A mere making of a claim which is not sustainable in law, by itself, would not amount to furnishing inaccurate particulars regarding the income of the assessee and such claim made in the return cannot amount to inaccurate particulars. Therefore, penalty on this aspect was also not leviable - explanation offered by the assessee has not been shown to be not a bona fide explanation. Such explanation, as observed, was neither found to be false nor incorrect nor unreasonable – in favor of assessee

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• Customs

• 2012 (11) TMI 249
  Goods cleared from SEZ to DTA - Whether testing, packing and checking would amount to manufacture – Held that:- Definition in the SEZ Act of manufacture has to be construed widely and not narrowly. Instead of dwelling into the merits of the case, the matter can be disposed on the point of limitation itself. Therefore no reason to conclude that the imports were not to be subjected to or are not subjected to manufacture and are thus imports of Complete Consumer Goods, not permissible to be imported. there was no mis-declaration as applicant had filed bills of entry with officers, who after assessing the said bills of entry allowed the appellant to clear the goods from SEZ. It is also his submission that the officers were fully aware as to the process undertaken by the appellant The process (A) the bland allegations of deodorant cans to be finished goods would not be sufficient to hold so. Invoking Extended period of Limtation - It is the submission that the entire show-cause notice is hit by limitation as the show-cause notice is issued on 21/06/2010, while the demands are for the period from February, 2006 to December, 2009. It is his submission that the extended time beyond the period of 6 months cannot be invoked in this case as the appellant has made out a case on limitation; we hold that show-cause notice demanding of duty in this case being beyond the period of 6 months, and there being no act of suppression of facts or mis-declaration etc., with intent to evade duty, the adjudication order confirming such demand with interest, and imposing penalties on both the appellants is in-sustainable and is liable to be set-aside and we do so - Both the appeals are allowed and the impugned order is set-aside.

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• 2012 (11) TMI 248
  Confiscation and penalty - Mis-declaration - clearance of the imported goods declared as “Old & Used Electrical Transformer without Oil” - bill of entry covered four containers - container was found to be “Secondary/Defective CRGO Electrical Grade Steel Strips in regular Shape & Size” - appellant wrote a letter to the customs indicating that as per their information one container was interchanged with the container of another importer M/s. Dynamo Stamping Industries at Bombay – Held that:- Interchange of containers has taken place at the hands of the supplier, without any involvement of the appellant. The mis-declaration of the goods, if at all is only a technical lapse on the part of the importer, who without even knowing about such interchange has declared the goods as per the orders placed by him - He cannot be held guilty of any mala fide mis-declaration so as to attract confiscation or penalty

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• 2012 (11) TMI 247
  Rejection of rebate claim - exports made under DEEC Advance License for annual requirement under Notification No. 94/2004-Cus., - Held that:- Since non-availment of rebate under Rule 18 of the Central Excise Rules, 2002 is mentioned as condition under Customs Notification, the appellate authority has rightly rejected the rebate claim as per law in view of the exclusion of rebate under Rule 18 of Central Excise Rules, 2002 vide condition No. ‘8’ of Notification, 94/04-Cus., - no infirmity in the orders-in-appeal – appeal dismissed

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• 2012 (11) TMI 209
  Duty Free Import Authorization – inflation in CIF value - Import of Printing Ink-Intaglio - alleged that Optically Variable Ink (OVI) imported by the respondent was a distinct product, used exclusively for printing of the currency notes by the subsidiaries of Reserve Bank of India and the respondent had imported such highly valued item against DFIA issued for import of printing ink used for printing on bags/sacks used for export of rice, thereby evading huge amount of customs duty – allegation of the Revenue that the DFIAs have been obtained fraudulently – Held that:- Obviously, there appears to be a contradiction between the notification and the paragraph. Nevertheless, in such a situation what is required to be taken into account is the provisions in the exemption notification issued under Customs Act, 1962 and the Notification No. 40/2006 is very clear. Because the notification clearly says that in respect of resultant products specified in paragraph 4.55.3, the imported materials should be of the same quality, technical characteristics and specifications as the materials used in the resultant product. Having allowed export of motors with input specifications as bearing upto 50 mm bore, it may not be appropriate for the customs authorities to insist on technical specifications at the time of import of bearings. Fraud - in this case Shri. Lalit Jain, the broker, is seen to have used some forged letters for transferring the license from the exporter to the importer through the medium of shell firms, though the exporter does not appear to be complaining about it. The adjudicating authority has held that this issue is to be decided under laws other than Customs Act, it is not a matter to be adjudicated under the Customs Act. Such matter arises when agitated by any of the affected parties. He has held that the interest of Revenue has not been prejudiced by such impugned actions. We also note that DGFT which is concerned with the transfer of licenses has not taken cognizance of this matter. So we agree with the finding of the adjudicating officer. Revenue is directed to refund the amount and release the bank guarantee and bond to the respondents within four weeks of the communication of this order.

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• 2012 (11) TMI 208
  EXIM Policy - door mats, floor mats - denial of benefit of DEPB Scheme – alleged that product did not satisfy the description of the Entry 547; ‘Rubber Compounded Sheets’ – Held that:- These products which are also manufactured out of compound rubber, are separately included in the Public Notice, whereas floor mats and doormats are not so included, demonstrates that it was never the intention of the policy makers to extend the DEPB benefits to floor mats, door mats etc., exported by the petitioners - DEPB benefits, being product specific, products such as floor mats, doormats etc., are not items covered by the entry “Rubber Compounded Sheets” and that to deny DEPB benefit to such products, an amendment of the Public Notice, requiring the issue of another Public Notice is unnecessary - door mats, floor mats, etc., are ineligible for DEPB benefits under the EXIM Policy

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• Corporate Laws

• 2012 (11) TMI 246
  Revival of the company in liquidation - Recall the order of winding up - Held that:- In the commercial matters monetary claims can be settled at any stage. The dues of the Creditors and/or Workers of the Respondent if paid and settled, there is no question to continue with the order of winding up. The Court, in such a situation, can dispose off the Petition as it is settled out of the Court The Applicant is willing to settle the matter claims and dues in all respects and accordingly filed an additional affidavit and also brought in the Court the requisite Demand Drafts to be paid to the concerned. The report so filed on record is in no way sufficient to deny the case of recalling the order of winding up as they are concerned with the requisite payments to be made and/or paid to cover the liability and/or due/claim as recorded in the Official Liquidator's report. The Applicants, as recorded above, are willing to fulfill the same. The learned Counsel and all the parties concerned have accepted the Cheque and/or Demand Draft and have no objection of any kind, as the matter is settled. So far claim of Security Guard is concerned, as raised by the Official Liquidator, pursuance to the demand made by the concerned Agency at the relevant time, has been settled out of the Court. An Affidavit is filed accordingly. Thus a case is made out to recall the order of winding up as passed in the year 1999

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• 2012 (11) TMI 207
  Scheme of Arrangement - Held that:- As there are nil secured creditors of the Transferee Company, therefore, the requirement of convening the meeting of secured creditors does not arise. As only six unsecured creditors representing 26.33% of the total unsecured debt have given the Board Resolutions along with the said consents. Consequently the meeting of the unsecured creditors of the Transferee Company be held on December 07, 2012 at 10:30 AM at India Habitat Centre, Lodhi Road, New Delhi 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 205
  Writ petition - constitutional validity of the Tamil Nadu Protection of Interests of Depositors Act - appellant submitted that said Act is beyond the legislative competence of the State Legislature as it falls within entries 43, 44 and 45 of List I of the Seventh Schedule to the Constitution – Held that:- Tamil Nadu Act enacted by the State Legislature is not in pith and substance referable to the legislative heads contained in List I of the Seventh Schedule to the Constitution though there may be some overlapping - The doctrine of pith and substance means that an enactment which substantially falls within the powers expressly conferred by the Constitution upon a Legislature which enacted it cannot be held to be invalid merely because it incidentally encroaches on matters assigned to another legislature Tamil Nadu Act was enacted to find out a solution for the problem of the depositors who were deceived on a large scale by the fraudulent activities of certain financial establishments. There was a disastrous consequence both in the economic as well as social life of such depositors who were exploited by false promise of high return of interest - Reserve Bank of India Act, the Banking Regulation Act and the Companies Act do not occupy the field which the impugned Tamil Nadu Act occupies, though the latter may incidentally trench upon the former. The main object of the Tamil Nadu Act is to provide a solution to wipe out the tears of several lakhs of depositors to realize their dues effectively and speedily from the fraudulent financial establishments which duped them or their vendees, without dragging them in a legal battle from pillar to post - there is no merit in this petition -The impugned Tamil Nadu Act is constitutionally valid.

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• Service Tax

• 2012 (11) TMI 252
  Renting out of Immovable Property Services - assessee claimed benefit of SSI exemption Notification No 6/2005-ST dated 01.3.2005 - application for waiver of predeposit - Held that:- Notification No 6/2005-ST as amended vide Notification No 8/2008-ST dated 01.3.2008, grants the benefit of exemption of service tax per year, provided that the assessee has not crossed the threshold limit of rupees ten lakhs in the preceding financial year - the aggregate value of the taxable services rendered should be considered for the purpose of exemption and in the present case if individually all the appellants be considered as provider of such service, their aggregate value does not exceed the threshold limit. the appellants have made out a case for waiver of pre-deposit of amounts involved and recoveries thereof stayed till disposal of appeals - in favour of assessee.

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• 2012 (11) TMI 251
  Demand of Service Tax with Interest and Penalty - Held that:- Supply of ordinary buses (not tourist vehicles) to other tour operators as well as commercial or non-commercial concerns on rent basis i.e. activity under BRA appellants are liable to service tax on that activity but providing their buses on rent to ITDC who is a tour operator and discharging service tax liability under the category of tour operator service tax cannot be levied - In absence of clarity, the issue being interpretative in nature Penalty imposed on the appellants are waived - in favour of appellant.

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• 2012 (11) TMI 250
  Demand under the Head Scientific and Technical Consultancy Services - extended period of limitation – Held that:- Appellant was engaged in the Breeding and Development, in India, of the crop seeds received from the German Company and supplying the results to the said company, for which the appellant was receiving consideration in foreign currency - activity involves export of services, and therefore the appellant was not liable to pay service tax by virtue of the exemption available to export of services under the Export of Services Rules 2005 - technology owned by the German company might have been imported by the appellant into India, but that was an independent transaction - appellant paid Service tax on the royalty connected with the import of the technology in the reverse charge mechanism - stay granted

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• 2012 (11) TMI 212
  Waiver of pre-deposit of Service tax liability,interest and Penalty - Renting out of Immovable Property - Benefit of SSI Exemption Notification No.6/2005-ST dated 01.3.2005 - Held that:- Assessee has not crossed the threshold limit of rupees ten lakhs about the aggregate value of the taxable services rendered in the preceding financial year and in this case individually all the appellants be considered as provider of such service - applications for waiver of pre-deposit of amounts are allowed and recoveries thereof stayed till disposal of appeals.

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• 2012 (11) TMI 211
  Waiver of pre-deposit and stay of recovery of duty and penalty - Following the decision of Court in case of [JUBILANT LIFE SCIENCES LTD. Versus COMMISSIONER OF CENTRAL EXCISE, NOIDA 011 (11) TMI 421 - CESTAT, NEW DELHI] Held that:- Services of lead managers to the issue and underwritings and other banking & financial services had been received by the Appellant from offshore services provider - and, therefore, the appellants being service recipients are liable to pay service tax in respect of the same - The services provided by the underwriters is taxable under Section 65(105)(z) read with Section 65(116) & 65(117) of the Finance Act, 1994 as taxable services of Underwriter's Services and Merchant Banker' Services - applicant is therefore directed to deposit an amount of Rs. 50,00,000/- (Rupees fifty lakhs only) within a period of eight weeks and report compliance later on. On compliance there shall be stay of recovery of the balance amount of service tax, interest and penalty till disposal of the appeal.

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• 2012 (11) TMI 199
  Demand of service tax - whether the services rendered by the foreign agents is classifiable as “Clearing and Forwarding Services” or as “Business Auxiliary Service” – Held that:- There is no responsibility cast on the foreign agents for promoting the sale of goods produced by the Appellants - no other activity mentioned in the contract which will fit into one of the entries at Sr. No. (i) to (vi) of the definition under Section 65(19). Therefore the mere fact that they are following up the payments will not prima facie make the service classifiable as Business Auxiliary Service - service is classifiable as Clearing and Forwarding Service - no liability on the Appellants to pay service tax on activity of this type performed entirely outside India - pre-deposit waived

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• Central Excise

• 2012 (11) TMI 245
  Removal of scrap and waste - denial of benefit of Rule 4 (5) (a) of the Cenvat Credit Rules, 2004 - application seeking waiver of pre-deposit with interest and equal amount of penalty - Held that:- The issue raised in this appeal is interpretation of Cenvat Credit Rule 4 (5) (a) of the Cenvat Credit Rules, 2004, which requires serious consideration. Otherwise also even if the argument of the respondent department is accepted, the entire exercise is Revenue neutral as the job worker would have been entitled to avail Cenvat credit of the duty paid by him and the appellant would also be entitled to Cenvat credit of duty paid on the brass wire manufactured by the job worker and returned to the appellant. Thus appellant has a prima facie case for waiver of condition of pre-deposit. Stay application is, therefore, allowed and condition of pre-deposit of duty demands, interest and penalty is waived, for hearing of the appeal and recovery thereof is stayed till the disposal of the appeal - in favour of assessee.

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• 2012 (11) TMI 244
  CENVAT credit on Special Additional Duty of Customs - Held that:- The object and purpose of levy of special additional duty under section 3(5) of the Customs Tariff Act was to provide a level playing field for domestic units. That objective will be completely negative, if the said duty is not available as credit for procurement from EOUs vis-à-vis imports. The Cenvat Credit scheme is not intended to create distortions in the market place and the law also should not be interpreted in such a way so as to create a distortion. Under sub-section (1), an additional duty of customs is levied which is equal to the excise duty levied on like articles produced in India. Under sub-section (5), another additional duty of customs is levied at a rate not exceeding four per cent of the value of the imported article so as to counterbalance the sales tax/value added tax or any other charges on a like article on its sale, purchase or transportation in India. Both the levies are “additional duty of customs” and therefore, there is no warrant to restrict the scope of the term additional duty of customs occurring in the formula to only the additional duty leviable under sub-section (1) of section 3 and not to the additional duty leviable under sub section (5) thereof - in favour of assessee.

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• 2012 (11) TMI 243
  Application for waiver of pre-deposit – Duty, interest & penalty – Credit of service tax has been taken on rent paid of the premises of the job worker – Held that:- As the job worker is not paying duty and he is working under the Notification and hence we find prima facie the applicant has not made out a case of waiver of total duty. The activity relating which the assessee wants to take credit was in relation to the business and in respect of the premises of the manufacturer. The present case as the rent is in respect of the premises of the job worker, who is an independent manufacturer and not paying duty, therefore, ratio of the decision are not applicable to the facts of the present case. In view of the above applicant failed to make out a case for total waiver of duty. Directed to deposit 25% of the duty - Stay Granted

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• 2012 (11) TMI 242
  Condonation of delay in filing of appeal u/s 35 E(4) – Delay of 63 days – Whether there is a provision to condone the delay in filing of appeal u/s 35E(4) with Tribunal - The review order u/s 35E(1) passed on 31/5/2011 was within the limitation period of 3 months u/s 35 E(3) – There was delay in filing of appeal on the basis of review order u/s 35 E(4) – Held that:- Following the decision in case of AZO DYE CHEM (2000 (7) TMI 107 - CEGAT, COURT NO. III, NEW DELHI) that Revenue's application having been filed u/s 35 E(4) after expiry of period of one month from the date of communication of the review order, is not maintainable and can not be admitted as an appeal as there is no provision for condoning the delay in filing of this review appeal u/s 35 E(4). Issue decides in favour of assessee

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• 2012 (11) TMI 241
  Waiver of pre-deposit – cenvat credit - credit in respect of the service tax paid on maintenance and repairs of windmill which is situated outside the factory – Held that:- Applicants are entitled for credit in respect of the service tax paid for maintenance and repairs of the windmill situated outside the factory as the electricity produced is used in the factory of production - applicants' own case held in favour of the applicants - requirement of pre-deposit waived – in favor of assessee

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• 2012 (11) TMI 240
  Penalty under Rule 96ZQ(5)(ii) of Central Excise Rules - Compounded Levy Scheme for man made fabrics - clandestine removal and delayed payment of duty – Held that:- Rule 96ZQ(5)(ii) was not invoked in the Show Cause Notice - if the nature of offence and the liability to penalty is explained, mere quoting of a wrong rule does not vitiate the proceedings - Respondents cannot be found fault with, if they presume that they are not being penalized for delayed payment of Excise duty in the month of July 2009, in the absence of proposal for penalty under Rule 96ZQ(5)(ii) - In the absence’ of specific charge, original adjudicating authority could not have and should not have imposed said penalty - appeal filed by the Revenue is rejected

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• 2012 (11) TMI 239
  Recall of stay - appellant submits that subsequently the order was received by them on 18-9-2009 vide which the appeals itself were disposed of. Inasmuch as the hearing was concluded on the stay petition, and the appellants were not informed about the disposal of the appeals, at the time of hearing on 15/17-7-2009, they challenged the said final order – Held that:- Since the Final order dated 4-9-2009 is a combined order waiving pre-deposit and rejecting the appeals, and since even according to the applicants only stay petitions were heard and no orders were passed on the same - with the recall of the order dated 4-9-2009, the stay petitions are required to be disposed of first as the order waiving the requirement of pre-deposit also stands recalled

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• 2012 (11) TMI 238
  Demand of duty - 100% EOU - exemption under Notification No. 4/97-C.E., - exemption was available if such yarn was for use on handlooms - alleged that they had sold such yarn for use in powerloom units and the said exemption was misused – Held that:- Duty amount demanded from them was in full discharge of the duty due from them. Demand for the balance amount was dropped and also penalty imposed on them was set aside

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• 2012 (11) TMI 237
  Cash refund of the accumulated cenvat credit – appellant’s clearances of Tannin were only for the export, they were not in a position to utilize the cenvat credit in respect of the drums - Held that:- Since the definition of ‘input’ as given in Rule 2(k) of the Cenvat Credit Rules cover the goods used as packing material, there is no doubt about the admissibility of cenvat credit in respect of HDPE drums used for packing of the final products - appellant were eligible for cash refund of the accumulated cenvat credit under the provisions of Rule 5 of the Cenvat Credit Rules

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• 2012 (11) TMI 236
  Cenvat credit - defective CPTs - earlier been cleared on payment of duty, had been received back in the factory for being re-made in the terms of the provisions of Rule 16 of the Central Excise Rules - department was of the view that since in the re-making of the CPTs some Cenvat credit availed parts/inputs are used and since re-making does not amount to manufacture, they would not be entitled to Cenvat credit in respect of the fresh parts used for re-making of the CPTs - Held that:- Fresh CPTs made had been cleared on payment of duty - appellant had disclosed the process undertaken by them as early as in the month of May, 2001 in respect of the defective CPTs received from their customers and hence, the department cannot allege suppression of facts saying that the appellant had not disclosed that they were taking Cenvat credit on the inputs used in re-making of the goods - pre-deposit waived - stay application is allowed.

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• 2012 (11) TMI 204
  Stay - as interim stay of recovery - quantification of demand - Held that:- Commissioner (Appeals) should have required the original authority to quantify the revised demand. - Range Superintendent appears to have, on his own accord, done the exercise of requantification of duty. The aforesaid letter was issued to demand such duty. After considering all aspects of this case, the demand worked out by the Superintendent without concurrence of the original authority should not be enforced during the pendency of this appeal. In this view of the matter, the prayer for interim stay of recovery is granted.

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• 2012 (11) TMI 203
  Reversal of cenvat credit - clearance of capital goods i.e. old and used forged hammer having capacity of 3 ton without payment of duty - demand, interest thereon and penalty - Held that:- Second proviso to sub rule 5 of Rule 3 of the Cenvat Credit Rules, 2004 states that if the capital goods are removed after being used, manufacturer shall pay an amount equivalent to the cenvat credit taken on the capital goods after reducing the same by 2.5% every quarter of a year or part thereof. The said provisions has to be applied on the date of clearance of the capital goods. If the second proviso to sub rule 5 of Rule 3 of the Cenvat Credit Rules is brought in to play by 31.03.04, the entire cenvat credit taken by the appellant would be 'nil'. This would mean that the appellant is not required to reverse any cenvat credit, if the appellant removes the capital goods on which cenvat credit is taken and is in use, after the ten years of its use in his factory premises. Thus finding strong force on the contentions raised by the ld. counsel assessee and also find it from records that when the appellant cleared the said capital goods on 18.03.09, he had specifically mentioned that it is "old and used forged hammer, capacity 3 ton". If that be so, the question of reversal of cenvat credit taken on the said capital goods will not arise - in favour of assessee.

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• 2012 (11) TMI 202
  Refund claim - Area based exemption by way of refund – industrial units situated in north-east area - Held that:- Notification No.32/99-CE dated 08.07.1999 is meant for encouraging industrial growth as well as expansion of existing industrial units in the north-eastern sector. Therefore, the Notification No.32/99-CE deserves to be interpreted liberally so as to give effect to its objective and purpose. For calculating the refund amount as per the said Notification No.32/99-CE dated 08.07.1999 the value of the complete tube is relevant but not the bare tube excluding the value of caps. - refund of the duty paid through PLA during the relevant period had not been disputed in the present case. - for the subsequent period, the adjudicating authority on de novo adjudication of order-in-original on a remand from this Tribunal had accepted the interpretation that for extending the benefit of Notification No.32/99-CE dated 08.07.1999, the value of caps ought to be included in the total value of Lamitubes. - refund to be allowed.

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• 2012 (11) TMI 201
  Cenvat Credit on capital goods – Assessee has taken and utilised the Cenvat credit in respect of the structural items such as MS Plates, Channels, MR Coils, HR coils – Held that:- The said goods, fall within the definition of the 'capital goods'. The Tribunals have been consistently holding that the impugned items are entitled for Cenvat credit. In those circumstances, it is not correct to charge the assessee with suppression of facts, fraud, and collusion with intent to evade duty. Therefore, both on merit as well as on bar of limitation, the appeal filed by the Revenue came to be dismissed. No substantial question of law arises for consideration in this appeal. In favour of assessee

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• 2012 (11) TMI 200
  Cenvat credit - MS Plates, Beams, Angles, Channels are used of fabrication of supporting structures in the sugar mill - Held that:- Cenvat credit in respect of these items used for fabrication of supporting structures is not admissible as Cenvat credit to the assessee Penalty under Section 11AC - prior to the issue of the Vandana Global decision, there were decisions in favour of the respondents under which the Cenvat credit on the inputs was admissible to the respondent and some of these decisions were relied upon by the C.C.E. (Appeals) in the impugned order - since the matter pertained to interpretation of the Cenvat Credit Rules, there is no reason for imposition of penalty even in respect of MS Plates, Beams, Angles, Channels used for fabrication of supporting - Revenue appeal in respect of imposition of penalty is rejected

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• 2012 (11) TMI 198
  Time bar – Condonation of delay - condonation of delay application requesting to condone the delay of 25 days in filing the appeal – Held that:- Commissioner (Appeals) only indicate gross negligence on the part of the appellant and the reasons mentioned may not be accepted as sufficient and reasonable cause, declined to condone the delay of 25 days in filing the appeal and accordingly, rejected the appeal on time bar - Commissioner (Appeals) directed to condone the delay - order is set aside and the appeal is remanded to the Commissioner (Appeals)

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• 2012 (11) TMI 197
  Restoration of appeal - non-compliance of stay order – Held that:- Appeal was dismissed for non-production of proof of deposit of penalty and it turned out in an application for restoration of such an appeal that the amount had already been deposited within the time granted but for some reason the same could not be reported or brought to the notice of the Tribunal before the appeal came to be dismissed - Such a construction would obviously defeat the ends of justice because it would amount to taking too technical a view of the matter just because there is absence of a positive provision authorising the Tribunal to restore such an appeal – appeal restored.

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• 2012 (11) TMI 196
  Cenvat credit - empty chlorine cylinder - capital goods - cylinders was used for transport as well as storage tank – Held that:- Appellants cannot be found fault with if they entertain a bona fide belief that credit was admissible to them. Therefore extended period could not have been invoked - on limitation as well as on merits - denial of cenvat credit not justified. Penalty under Section 11AC - appellants had admitted their liability and did not contest the same before the Tribunal – Held that:- Appellants have paid the duty as well as the interest without dispute, I find that this is a fit case for invoking the provisions of Section 11A(2B) of Central Excise Act, 1944 - no penalty is imposable on the appellant

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• 2012 (11) TMI 195
  Cenvat credit – input service Held that:- Sending samples to the customers and correspondence with head office from the factory are definitely activities relatable to manufacture and therefore clearly the courier service falls under the definition of category of input services - What is required is nexus with the manufacture and when the service is clearly identifiable to show that the same has not been received after the place of removal, credit cannot be denied

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• CST, VAT & Sales Tax

• 2012 (11) TMI 253
  A. P. General Sales Tax Act - Interest under section 33F – Held that:- Principal amount of the tax deferment benefit availed of by the petitioner was deposited - No steps were taken thereafter by the Revenue to recover the amount of interest allegedly due from the petitioner on the belated payment of the sales tax deferment liability - Such discovery was not made even when the principal amount was refunded to the petitioner on February 28, 2012 and after the filing of the writ petition. It is only when the petitioner was pleading for payment of the interest enjoined by section 33F of the 1957 Act that the Revenue appear to have discovered that the petitioner was liable to pay interest in respect of another transaction - conduct of the respondent was unfair and arbitrary - writ petition is allowed

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• 2012 (11) TMI 213
  Kerala General Sales Tax Act - realising the sales tax at two different stages, that is at the first point of sale and the last point of sale - petitioner purchased rubber from the third respondent - case of the petitioner that he suffered a huge loss and had to sell the commodity for a lesser price - petitioner was not a registered dealer at the time of transaction – Held that:- Inspite of granting an opportunity to file objection, the said opportunity was not availed of by the petitioner. It was accordingly that order was finalised by the assessing authority which is not assailable under any circumstances, either on facts or in law. Order was passed by the concerned authority as early as on May 3, 2004, whereas the petitioner chose to approach this court nearly after two years. On this count also, interference is not possible. Under such circumstances, this court finds that the writ petition is devoid of any merit and the same is dismissed accordingly. The petitioner is permitted to clear the outstanding liability by way of "three" equal monthly instalments - if any default is committed by the petitioner in satisfying the liability as above, it will be open for the respondents to proceed with further steps for realising the due amounts in a lump.

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• Indian Laws

• 2012 (11) TMI 206
  Attachment of properties acquired by Pondicherry Nidhi Ltd - challenge powers conferred under the Pondicherry Protection of Interests of Depositors in Financial Establishments Act, 2004 - Held that:- Clause (1) of Article 254 provides that when there are two laws enacted by the Parliament and the State Legislature in which certain inconsistencies occur, then subject to the provisions of clause (2), the law made by the Parliament would prevail and the law made by the State Legislature to the extent it is repugnant to the Central law, shall be void. Clause (2), however, also provides that in a given situation where a law of a State is in conflict with the law made by Parliament, the law so made by the State Legislature shall, if it has received the assent of the President, prevail in that State. In the instant case, the Pondicherry Act had received the assent of the President attracting the provisions of Article 254(2) of the Constitution. The power to enact the Pondicherry Act could be traced to Entries 1, 8, 13 and 21 of the Concurrent List. Although, it has been argued by Mr. Ganguli (Advocate for Appellant) that the provisions of the Companies Act would not be attracted, cannot be overlooked that the amendment to the definition of financial establishment included in the Tamil Nadu Act and as defined in the Pondicherry Act. The definition of the expression financial establishment in Section 2(d) of the Pondicherry Act includes any person or group of individuals or a firm carrying on business of accepting deposits under any scheme or arrangement or in any other manner, but does not include a Corporation or a cooperative society owned or controlled by either the Central Government or the State Government or a banking company as defined under Section 5 of the Banking Regulation Act, 1949. Thus the expression any person is wide enough to cover both a natural person as also a juristic person, which would also include a Company incorporated under the Companies Act, 1956. In that view of the matter, the definition in Section 2(d) of the Pondicherry Act would also include a Company such as the Appellant Mill, which accepts deposits from investors, not as shareholders of such Company, but merely as investors for the purpose of making profit. In this regard, reference may also be made to Section 11 of the Indian Penal Code which defines a person to include a Company or Association or body of persons, whether incorporated or not. Accordingly, we are inclined to accept Mr. Venkataramani s submissions that the expression person in the Pondicherry Act includes both incorporated as well as unincorporated companies. As observed that in the instant case although an attempt has been made on behalf of the Appellant to state that it was not the Appellant Company which had accepted the deposits, but M/s PNL Nidhi Ltd., which had changed its name five times, such an argument is one of desperation and cannot prima facie be accepted. This appears to be one of such cases where funds have been collected from the gullible public to invest in projects other than those indicated by the front company. It is in fact the specific case of the Respondents that the funds collected by way of deposits were diverted to create the assets of the Appellant Mill. In such circumstances, the submissions made by Mr. Ganguli cannot be accepted as there is little difference between the provisions of the Tamil Nadu Act and the Pondicherry Act, which is to protect the interests of depositors who stand to lose their investments on account of the diversion of the funds collected by M/s PNL Nidhi Ltd. for the benefit of the Appellant Mill, which is privately owned by Shri V. Kannan and Shri V. Baskaran, who are also Directors of M/s PNL Nidhi Ltd - appeals dismissed with costs assessed at Rs. 1,00,000/-.

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