TMI Tax Updates - e-Newsletter
December 21, 2012

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws FEMA Service Tax Central Excise

TMI SMS

• Cenvat credit - Final rejection of centralized registration cannot be held to be a justifiable reason for denial of the credit. - Tri

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• Deduction u/s 80IC -interest awarded in an arbitration proceeding for delayed payments to be recorded as business income and not as income from other source -HC

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Articles

1. FURNISHING OF INVALID PERMANENT ACCOUNT NUMBER IN RETURNS

   By: DR.MARIAPPAN GOVINDARAJAN

2. RAJIV GANDHI EQUITY SAVINGS SCHEME, 2012

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Production of Coir Fibre

2. Erroneous Trading Cases in NSE

3. Priority Sector Lending Norms for Foreign Banks

4. Electronic Payment System in Towns and Villages

5. Variation in Rate of interest by Different Banks

6. No Proposal to Reimpose Estate Tax again in Future

7. Public Investment Board

8. Complaints on Ponzi Schemes

9. Cartelization in Steel Sector

10. Marketing of Iron Ore by NMDC

11. Quality Standard on Import of Steel

12. Rise in Rural Steel Consumption

13. Exchange Rate of Foreign Currency Relating to imported and Export Goods Notified

14. Opening Statement by Prime Minister at Plenary Session of India-ASEAN Commemorative Summit

15. Telecom Regulatory Authority of India has today Released a Pre-Consultation Paper on ‘Review of Tariff for National Roaming’

16. Broadband on Demand - Migration from IPv4 to IPv6

17. Migrating to CTS 2010 standard - Submission of compliance report

18. Know Your Customer (KYC) norms /Anti-Money Laundering (AML) Standards/Combating of Financing of Terrorism (CFT)/Obligation of banks under Prevention of Money Laundering Act (PMLA), 2002

19. Bilateral Trade between India and EU

20. Contribution of States in Exports

21. Under-Recovery on Diesel Effective 16.12.2012 goes remains high level of Rs 9.28 per litre OMCs Incurring Under-Recoveries of Rs 411 Crore per day Daily Crude Oil Price for Indian Basket falls to US$ 106.39 per barrel on 14.12.2012

22. Global crude oil price of Indian Basket Rises to 107.18 US$ /bbl on 18.12.2012

23. Concession to Senior Citizens

24. Spectrum Charges from Merged Companies

25. Manufacturing of Telecom Equipments

26. Change in Land Usage Policy of Non-Processing Zones of SEZs

27. Decline in Exports

28. Salient Features of the Companies Bill 2011

29. Government for Stable Tax Regime, says the Finance Minister

30. Proposal by Coffee Board to Increase Subsidy Limits

31. Contribution of States in Exports

Notifications

Companies Law

1. G.S.R. 906(E) - dated 19-12-2012 - Co. Law

Amend the Companies(Central Government's) General Rules and Forms,1956

Customs

2. 61/2012-Customs - dated 18-12-2012 - Cus

Amend in notification No 10/2008 – Customs, dated 15th January 2008, so as to further deepen the tariff concessions in respect of goods imported from Singapore under the Comprehensive Economic Cooperation Agreement (CECA) between India and Singapore.

3. 111/2012 - dated 20-12-2012 - Cus (NT)

Rate of exchange of conversion of each of the foreign currency with effect from 21st December, 2012

4. 110/2012 - dated 14-12-2012 - Cus (NT)

Amends Notification No. 62/1994-Custom (N. T.) - Customs ports — Appointment for specified purposes.

Income Tax

5. 54/2012 - dated 17-12-2012 - IT

Double taxation agreement - Agreement with foreign countries or specified territories - Notified 'Specified Territory'

Circulars / Instructions / Orders

VAT - Delhi

1. 26 OF 2012-13 - dated 14-12-2012

Clarification regarding payment of tax on monthly basis by Quarterly Dealers whose tax liability exceeds one lakh rupees.

Income Tax

2. F. No. 19-Ad(ATD)/2012 - dated 13-12-2012

Instructions - E-Payment of Tribunal Fees the respective Challans are to be counter signed by the concerned bank manager or attested by the authorized Representatives or assessees themselves

FEMA

3. 62 - dated 18-12-2012

Exim Bank's Line of Credit of USD 16.88 million to the Government of the Republic of Gambia

DGFT

4. 39 (RE-2012)/2009-2014 - dated 19-12-2012

Allocation of 10,000 MTs of white sugar for the year 2012-13 (October, 2012- September, 2013) for export to EU under CXL Quota.

Companies Law

5. 41/2012 - dated 18-12-2012

Filling of Balance Sheet and Profit and Loss Account in extensible Business Reporting Language (XBRL) mode for the financial year commencing on or after 01.04.2011- Corrigendum to General Circular No. 39/2012.

Highlights / Catch Notes

Income Tax

• Section 194A: Partnership Act's Legal Framework vs. TDS Obligations on Partner's Interest Payments to Firm.

  Case-Laws - AT : TDS u/s 194A - payment of interest by the partner to the partnership firm - the position of legal relationship as prevailing under the Partnership Act should not be applied in abstract, only to the provisions of sec. 194A of the Act. - AT
  Visit to Get Source

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• NOSTRO Interest: Mutuality Principle Applies to Transactions with Own Head Office/Branches, Not with External Entities.

  Case-Laws - AT : There is a clear distinction between the NOSTRO interest earned/paid by the assessee from/to its own Head office/overseas branches and NOSTRO interest paid/earned to/from other than assessee's own Head office or branches. Whereas in the first situation, the principle of mutuality will apply and in the later case it will not. - AT
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• Trust's Fund Misuse Violates Section 13(1)(c), Revenue's Appeal Approved for Charitable Purpose Non-Compliance.

  Case-Laws - AT : Violation of sec. 13(1)(c) - As the assessee has failed to prove that application of fund by the trust was for charitable purpose appeal of revenue allowed. - AT
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• "Any Expenditure" in Section 37 Includes Both Expenses and Losses, Even Without Actual Payment by Taxpayer.

  Case-Laws - AT : The expression “any expenditure” used in section 37 is to cover both “expenses incurred”as well as an amount,which is really a “loss”,even though such amount has not gone out from the pocket of the assessee the advance written off by the assessee as irrecoverable is allowable as business loss - AT
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• Immunity Granted: Section 271AAA(2) Protects Assessee from Penalty Despite Delayed Tax Payments.

  Case-Laws - AT : Penalty u/s 271AAA - the assessee could not be denied the immunity u/s 271AAA(2) only because entire tax, along with interest, was not paid before filing of income tax return or, for that purpose, before concluding the assessment proceedings - AT
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• E-Payment of Tribunal Fees Needs Challans to be Countersigned by Bank Manager or Attested by Authorized Representatives.

  Circulars : Instructions - E-Payment of Tribunal Fees the respective Challans are to be counter signed by the concerned bank manager or attested by the authorized Representatives or assessees themselves - Order-Instruction
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• New Double Taxation Agreement Designates 'Specified Territories' to Prevent Double Taxation and Facilitate International Financial Transactions.

  Notifications : Double taxation agreement - Agreement with foreign countries or specified territories - Notified 'Specified Territory' - Notification
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• Statute Bars Assessment Officer from Reassessing Income for 1998-2001; Past Accumulated Income Year Set for Taxing.

  Case-Laws - HC : Reassessment - The statute having thus fixed the assessment year in which the entire past accumulated income falls to be taxed, it is impermissible in law for the assessing officer to entertain a reason to believe that income chargeable to tax for the assessment years 1998-99 to 2000-01 had escaped assessment. - HC
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• Land in Special Zone Remains Agricultural Without Infrastructure or Non-Agricultural Use Proof.

  Case-Laws - AT : Mere inclusion of land in the special zone without any infrastructure development thereupon or without establishing and proving that the land was put into use for non-agricultural purposes does not and cannot convert the agricultural land into non-agricultural land. - AT
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• Netting Principle: Linking Sale Proceeds Delay with Borrowing Repayment Delay, Impacting Interest Income and Liability.

  Case-Laws - HC : Principle of netting or set off - The delay in payment of the sale proceeds and the delay in repayment of the borrowing are both intertwined; one gives rise to interest income and the other gives rise to interest liability. - HC
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• Section 54E Tax Benefit Applies to Sale of Depreciable Assets, Regardless of Capital Gains Computation Method.

  Case-Laws - HC : Exemption u/s 54EC - sale of depreciable assets - the benefit of Section 54E will be available to the assessee irrespective of the fact that the computation of capital gains is done either u/s. 48 and 49 or u/s. 50. - HC
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• Tax Deduction at Source Doesn't Automatically Make a Receipt Taxable: Understanding Mutuality Principle.

  Case-Laws - AT : Concept of mutuality - mere deduction of tax at source by person making the payment in our humble understanding, cannot lead to the conclusion that receipt was taxable in nature - AT
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• High Court Rules Arbitration Interest for Delayed Payments as Business Income for Section 80IC Tax Deduction Purposes.

  Case-Laws - HC : Deduction u/s 80IC - interest awarded in an arbitration proceeding for delayed payments under a contract was to be recorded as business income and could not be treated as "income from other source" - HC
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Customs

• India-Singapore Trade Boost: Tariff Concessions Enhanced Under CECA for Specified Imports via Amended Customs Notification No 10/2008.

  Notifications : Amend in notification No 10/2008 – Customs, dated 15th January 2008, so as to further deepen the tariff concessions in respect of goods imported from Singapore under the Comprehensive Economic Cooperation Agreement (CECA) between India and Singapore. - Notification
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FEMA

• Exim Bank Grants $16.88 Million Credit Line to Gambia for Economic Development and Infrastructure Projects.

  Circulars : Exim Bank's Line of Credit of USD 16.88 million to the Government of the Republic of Gambia - Circular
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Corporate Law

• Businesses Must File Balance Sheet & Profit and Loss in XBRL Mode for FYs Starting April 1, 2011.

  Circulars : Filling of Balance Sheet and Profit and Loss Account in extensible Business Reporting Language (XBRL) mode for the financial year commencing on or after 01.04.2011- Corrigendum to General Circular No. 39/2012. - Circular
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Service Tax

• Services Within Factory Premises Exempt from Service Tax on Cargo Handling.

  Case-Laws - AT : Cargo Handling Service – Demand of Service Tax - any services provided within the factory premises would not come under the definition of Cargo Handling Services. - AT
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• Cenvat Credit Denial Invalid if Based Only on Centralized Registration Rejection; Focus on Substantive Compliance.

  Case-Laws - AT : Cenvat credit - Final rejection of centralized registration cannot be held to be a justifiable reason for denial of the credit. - AT
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Central Excise

• Manufacturing Activities Liable for Excise Duty Despite Service Tax Payments on Installation Services.

  Case-Laws - AT : Manufacture - Service Tax - where an activity amounts to manufacture assessee can not escape from excise liability on the ground of payment of service tax under the category of Installation and commissioning services - AT
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VAT

• Quarterly dealers with over Rs. 1 lakh tax liability must switch to monthly payments for better compliance.

  Circulars : Clarification regarding payment of tax on monthly basis by Quarterly Dealers whose tax liability exceeds one lakh rupees. - Circular
  Visit to Get Source

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Case Laws:

• Income Tax

• 2012 (12) TMI 641
  TDS u/s 194A - payment of interest by the partner to the partnership firm - held that:- The Act does not provide exemption to the interest paid/credited by a partner to his firm. - the Act treats a partner and a firm as different 'Person', - the position of legal relationship between a partner and his firm loses its importance/significance under the Income tax Act. - the position of legal relationship as prevailing under the Partnership Act should not be applied in abstract, only to the provisions of sec. 194A of the Act. - Decided against the assessee. Assessee in default - interest and penalty u/s 201(1) and 201(1A) - held that:- Let us consider about exigibility of interest u/s 201(1A) of the Act under the peculiar conditions prevailing in the instant cases, wherein the recipient of interest viz., the partnership firms have declared losses even after accounting for the interest paid by the assessees herein. Even if the assessees herein deduct and remit the TDS amount on the interest paid to the partnership firms, the same is liable to be refunded to the said partnership firms, as there is no tax liability in their respective hands. Under this situation, can it be said that the Government is deprived of the funds due to it or any loss is caused to the Government. It may be noted that the prevailing rate of interest chargeable/payable u/s 201(1A)/244A are different, i.e., the rate of interest payable u/s 244A is lesser than the interest chargeable u/s 201(1A) of the Act. Due to this disparity, a question may arise as to the correctness of the view taken by us in the preceding paragraphs. In our view, the rate of interest is prescribed by the Government on the basis of various factors. The main principle considered by us is that pronounced by the Hon'ble Courts, viz., that, interest is compensatory in nature for depriving funds belonging to the revenue/assessee. Hence the disparity in the rate of interest shall not have any effect on the said principle. On the issue of levy of interest u/s 201(1A) matter restored to DCIT(TDS) to verify whether or not the recipients of the interest income, viz., the partnership firms were liable to pay tax on that income and then take appropriate decision about the chargeability of interest u/s 201(1A) of the Act in the hands of the assessees herein in accordance with the principles discussed by us in the preceding paragraphs.

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• 2012 (12) TMI 640
  Interest income on NOSTRO and overseas placements maintained with branches outside India - deduction towards interest expenditure on such accounts. - interest income u/s 9(1)(v) - held that:- Tribunal in the case of ABN Amro Bank NV v. Asstt. DIT [2005 (8) TMI 294 - ITAT CALCUTTA-E] (SB) has held that the branch of the assessee bank cannot be treated as a separate entity. The transactions between the Head office and branch resulting into interest income or interest expenditure are to be viewed as transaction with self. On the basis of mutuality, it has been held that there can be neither any income in respect of interest earned from its overseas branches, nor there can be deduction for interest expenditure paid by the Indian branch to Head office or the other overseas branches. - the interest income of Rs. 4.88 crore which has resulted only from the assessee's dealings with its Head office or overseas branches cannot be charged to tax on the principle of mutuality will apply. Accordingly no tax can be levied on the interest earned by the assessee from its Head office or overseas branches. There is a clear distinction between the NOSTRO interest earned/paid by the assessee from/to its own Head office/overseas branches and NOSTRO interest paid/earned to/from other than assessee's own Head office or branches. Whereas in the first situation, the principle of mutuality will apply and in the later case it will not. No deduction on account of interest expenditure can be allowed which has been incurred by the assessee in relation to its own Head office and overseas branches. Both the grounds of assessee and revenue allowed.

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• 2012 (12) TMI 639
  Inadequate drawings - CIT(A) deleted the addition - Held that:- No reason to interfere with the findings of the CIT(A) as no evidence was brought on record by the Revenue in support of the addition made in the assessment order towards inadequate drawings. No material was found during the course of search to indicate any suppression of drawings and the drawings admitted by the assessee are reasonable - against revenue. Unexplained investment/expenditure u/s 69B/ 69C - CIT(A)directed to treat as income from other sources - Held that:- No material was placed on record suggesting that the assessee has made payment over and above the documentary value for purchase of the property as alleged in the assessment order the order of the CIT (A) in holding that the amounts offered by the assessee voluntarily in his return of income should be assessed as income from other sources - There being no good reason to interfere with the findings of the CIT(A) that the amounts offered by the assessee are to be assessed as income from other sources and not to be treated as an addition made under section 69B/69C as assessee is not the owner of the asset and he has not paid any amount more than the registered sale price - against revenue. Unexplained Cash - Held that:- Department had seized Rs..8.00 lakhs in assessee’s premises in the course of search. It is also not in dispute that an amount of Rs..6.00 lakhs was seized from assessee’s mother Smt. K. Rajeshwari. The Department having seized the cash of Rs. 14.00 lakhs, it has to give credit for such seized cash either in the hands of the assessee individual or in the hands of Shri V. Sankar (HUF) or mother of the assessee Smt. K. Rajeshwari. In the circumstances, no infirmity in the direction given by the CIT (A) in directing the AO to grant credit for a sum of Rs..14.00 lakhs in the hands of the assessee and in case, if credit is given for such cash seized in the hands of Shri V. Sankar (HUF) and Smt. K. Rajeshwari, the credit given in the hands of the assessee has to be withdrawn - against revenue. De novo assessment made under section 153(A) - Held that:- As per provisions of section 153A to 153C it provides for fresh assessments for six years preceding the year of search and assessments need not be confined to issues based on the materials found during the course of search Levy of Interest - Since levy of interest under section 234B is only consequential, no force in the ground taken by the assessee.

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• 2012 (12) TMI 638
  Inadequate Drawings - Held that:- In the absence of any finding of fact that the appellant had infact “incurred” the estimated expenditure on drawings, during the relevant financial years, the addition made towards drawings u/s 69C is bad in law - thus pursuing the materials available on record there is no evidence on record for making these additions. No material was found during the course of search to indicate any suppression of drawings and the drawings admitted by the assessee are unreasonable - no evidence brought on record by the Revenue in support of the addition made in the assessment order towards inadequate drawings - against revenue. Unexplained Income - CIT(A) directing the AO to assess income under the head ‘other sources’ as against u/s 69B - Held that:- The order of the CIT (A) needs no interfere as he has recorded the finding of fact that the AO had only assessed whatever was offered by the assessee and such sum was not detected by the AO. As no material was placed on record suggesting that the assessee has made payment over and above the documentary value for purchase of the property as alleged in the assessment order the order of the CIT (A) in holding that the amounts offered by the assessee voluntarily in his return of income should be assessed as income from other sources and not be assessed as unexplained investment under section 69B is confirmed - against revenue. Unexplained Cash - Held that:- The cash seized in the course of search at the residence of the assessee is out of cash balance available in the books of account of M/s. Everbright Exports, which is the proprietory concern of the assessee. The Everbright Export had been regularly assessed before the Assessing Officer at Vellore. It is located at Satyamangalam on the Chennai-Bangalore Highway and in the premises of this concern, books were maintained and were also subjected to audit under section 44AB. This concern exists right from 2004 and it is not an afterthought of the assessee later to the date of search. Therefore, CIT (A) deleted the addition made u/s 69 - against revenue. De novo assessment made under section 153(A) - Held that:- As per provisions of section 153A to 153C it provides for fresh assessments for six years preceding the year of search and assessments need not be confined to issues based on the materials found during the course of search Levy of Interest - Since levy of interest under section 234B is only consequential, no force in the ground taken by the assessee. Deduction under section 10B - Delay in filing returns - Held that:- When the assessee is making a claim for the first time before the CIT(A) it is not proper and correct in rejecting the assessee’s claim on the ground that there is no claim made in the return of income when such claim is otherwise allowable - CIT(A) should have entertained the claim of the assessee on merits without rejecting the additional ground stating that no claim is made in the returns.

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• 2012 (12) TMI 637
  Violation of sec. 13(1)(c) - non application of Funds of Trust for Charitable purposes - diversion of funds - CIT(A) allowed the claim - Held that:- The claim of purchase of computers and equipments by the assessee could not have been accepted on its face value when it was not reflected in the books of accounts. Even the balance sheet forming part of the final accounts audited by a Chartered Accountant does not show the computers and other equipments as asset. A lapse of such magnitude cannot be wished away light heartedly as an oversight of the accountant. More so, when the assessee claims itself to be a trust promoted by the Government. The invoices raised by M/s Silicon Graphics (India) Pvt. Ltd., towards sale of computers and equipments were also in the name of Govt., of AP, Disaster Management Unit, Planning Deptt., and not in the name of assessee. These facts have not at all been examined by the CIT (A) while deciding the appeal. As decided in CIT vs. Durga Prasad More (1971 (8) TMI 17 - SUPREME COURT) that though apparent must be considered to be real until it is proved to be otherwise, a party who relies on a recital in a deed has to establish the trust of those recitals. The taxing authorities were entitled to look into the surrounding circumstances to find out the reality of the recitals made in the document. As the assessee has failed to prove that application of fund by the trust was for charitable purpose appeal of revenue allowed.

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• 2012 (12) TMI 636
  Rejection of books of account - income estimation @ 8% on gross receipts - Sub-contract work - Held that:- AO did not have any incriminating material before him which was found as a result of search on the basis of which he could have come to a conclusion that the books of accounts maintained by the assessee were not correct. In the absence of any incriminating material, the AO is not justified in rejecting the books of account and estimate income in proceedings initiated u/s 153A, when regular assessment has been completed accepting the books of accounts. Unexplained Investment - Held that:- On perusal of materials available on record, it is seen that the assessee has explained that the amount of Rs.55 lakhs given as advance to the prospective seller of the land was pooled together from different persons by his father and the entire amount was paid by his father i.e. Rs. 25 lakhs by cheque from the joint account held with the assessee and balance amount of Rs.30 lakhs by way of cash by his father to the prospective seller Sri Saibabaiah. It is also a fact available on record that the receipt was executed by Sri Saibabaiah in the name of the assessee’s father, Sri N. Ramanaa Reddy. However, the source of this amount of Rs.55 lakhs stated to have been pooled together from different persons, have not been properly enquired into. No material has been brought on record with regard to the fact that the persons who stated to have advanced the amounts were having sufficient source of income or not as this fact has neither been examined by the AO nor the CIT (A) it is proper to restore the matter back to the file of AO who shall make proper enquiry to find out the source of Rs.55 lakhs given as advance for purchase of the land.

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• 2012 (12) TMI 635
  Cost of generator and transformer - miscellaneous structures v/s electrical equipment – CIT(A) deleted the addition - Held that:- The CBDT vide Instruction No. 3 of 2011 dated 9.2.2011 has revised the monitory limit for filing the appeals by the Department before the ITAT as raised to Rs. 3 lakhs

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• 2012 (12) TMI 634
  Deduction u/s 10A - whether exchange fluctuation gains to be included as part of export turnover - Held that:- Considering the judgment of ACIT v. Inautix Technologies India (P) Ltd [2012 (12) TMI 615 - ITAT CHENNAI] Fluctuation is part of export turnover for the purpose of computation of deduction under section 10A. Engineering and design charges - Held that:- As per CBDT notification No. 890(E) dated 26.09.2000 specifying that engineering and design services are information technology enabled products entitled to be treated as software and when transmitted to foreign countries, they have to be treated as exports for the purpose of deduction under section 10A – in favour of assessee.

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• 2012 (12) TMI 633
  Trade advance written off - CIT(A) deleted the addition - Held that:- Trade advance in question was given during the course of business and the assessee has written-off the same in its books of account during the year. Since the assessee has filed evidence before the Revenue authorities to demonstrated the fact that these advances have, in fact, become bad,consequently, it was decided not to interfere with the findings of the Commissioner (Appeals) and hereby uphold the same - against revenue. As decided in CIT v. CIT v. WoodWard Governor India P. Ltd. [2009 (4) TMI 4 - SUPREME COURT] the expression “any expenditure” used in section 37 is to cover both “expenses incurred”as well as an amount,which is really a “loss”,even though such amount has not gone out from the pocket of the assessee the advance written off by the assessee as irrecoverable is allowable as business loss under section 28 of the Act - Order of the Commissioner of Income Tax (Appeals)in allowing the claim of the assessee is sustained - against revenue

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• 2012 (12) TMI 632
  Jurisdiction power u/s 263 by CIT(A) - interest on electricity duties, water charges and electricity duty for the AY 2006-07 & for the AY 2007-08 also considered the issue with respect to amounts charged to accounts pending finalization of the payment of salary/wages - Held that:- The issue being subjudice the assessee being governed by the Accounting Standard under the Companies Act was burdened to provide for the accrued liability when the assessee has pointed out that there was no contingent liability provided in the impugned AYs. Provision for the pay revision is provided on the basis of labourers executing the work and labour Union in the Industrial Sectors. The enhanced pay bill which will be assigned to them later can be provided for by the assessee in view of it not being contingent but accrued on the basis of services rendered by the recipients. The change or credit arisen out of a contingency which at the time of occurrence could not be estimated correctly shall not construe the correction or error and change of asset and as such, such item shall not be treated as disallowable u/s.37. The Revenue cannot take both the stands for declining to allow the prior period expenses in the impugned AYs nor consider crystallization of the liabilities provided in the impugned AYs for the AYs just because pay revision occurs every five years applicable to the respective years in accordance with the price index. Therefore, the considered view that the issues raised by the CIT have either dealt with by us in assessee’s own case or the AO in the impugned AYs against which no loss to the revenue has been pointed out on a view of the CIT alone can be considered for assuming jurisdiction u/s.263. Mere change of opinion by the CIT has to have basis of an error having been committed coupled with the fact that it was prejudicial to the interest of revenue - the orders of the CIT passed u/s.263 quashed for the impugned AYs under consideration - in favour of assessee.

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• 2012 (12) TMI 631
  Denial of deduction u/s 80IB – Held that:- Claim of deduction u/s.80IB would be available only on the basis of obtaining the completion certificate from the local authorities in view of the fact when the housing project is approved by the local authorities on or after 1.4.2004 was to be completed within four years irrespective of the claim of deduction either on the basis of project completion method or on the basis of percentage completion method - as assessee has agreed to the proposition above AO is directed to allow the deduction as and when the certificate from the local authority for the project completion has been obtained by assessee - appeal allowed for statistical purposes. Application of AS-7 vs. AS-9 - Held that:- The projects, which completed as and when approval is sought has to be rendered income claiming deduction u/s.80IB which computation cannot be faulted. This indicates that the work-in-progress held as an asset by the assessee has already reduced the income for that year on account of project remaining incomplete. AO sought to tax @6.84% on Rs.3.82 Crores does not bear any correctness to the fact that the income as arisen to the impugned Assessment Year on incomplete projects when the majority of the projects were sold for more than the very turnover for the impugned Assessment Year. CIT(A) also confined himself to adoption of AS-7 as noted by AO without actually addressing the issue in the practical aspects of the business conducted, advance received, income on percentage on the advance to be considered and loss but not the least that the work-in-progress is a closing stock when the expenses have been allowed cannot be reduced on a percentage basis to find profit therein - Finding no merit in the bringing to tax the percentage of work-in-progress,thus direct deletion of the addition.

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• 2012 (12) TMI 630
  Interest and Service charges incurred for acquisition of share - Capital or Revenue – Held that:- The assessee is a limited Company claiming income from capital gains of Rs. 8,40,047 when the AO tried to bring down the cost of acquisition @ Rs. 67 per share to Rs. 62 per share was to be deriving income of Rs. 11,71,834 under the head “capital gains” when the difference being Rs. 3,31,787 was brought to tax by the AO was purely an imaginary figure having no basis whatsoever either in the books of account for the purpose of computation of capital gains nor for the purpose of disallowance of expenditure on the purported earning of dividend income under the provisions of Section 14A r.w.r. 8DD of the I.T.Rules - the expenditure incurred through the Portfolio Manager to acquire share, is a capital expenditure and attributable to cost of acquisition of share. In view of the matter, at no point of time can it be said that the assessee was to make an extra income of Rs. 3,31,787 which was a total imaginary figure brought to tax by the AO. When two imaginary figures could overlap for disallowance to taxation and it was only the case of the AO to disallow expenditure which has been legitimately claimed capitalised by the assessee which stands otherwise disclosed in the P & L account could not become a hypothetical figure on assumption and presumption when computation of Capital Gains has to necessarily include cost of acquisition also. This makes the addition fit for deletion - appeal of the assessee is allowed.

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• 2012 (12) TMI 629
  Penalty u/s 271AAA - Undisclosed Income – Enhancement in value of House Constructed and Trucks purchased - Held that:- No definition could be given to the “specified manner” insofar as the very statement on oath u/s.132(4) specifies the manner on which the assessee is prepared to pay tax thereon. As assessee has made disclosure for the respective amounts but failed to specify the manner in which such income had been derived a there is no prescribed method to indicate the manner in which income was generated when the definition of “undisclosed income” has been defined in the Act itself when no income of the specified previous year represented “either wholly or partly” which onus lay upon the assessee stood discharged - As decided in DCIT Versus Pioneer Marbles & Interiors Pvt Ltd [2012 (2) TMI 261 - ITAT, KOLKATA] wherein entire tax and interest has been duly paid well within the time limit for payment of notice of demand u/s 156 and well before the penalty proceedings were concluded, the assessee could not be denied the immunity u/s 271AAA(2) only because entire tax, along with interest, was not paid before filing of income tax return or, for that purpose, before concluding the assessment proceedings - Levy of penalty u/s.271AAA in the instant cases are not justified - penalty so levied cancelled - in favour of assessee.

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• 2012 (12) TMI 628
  Jurisdiction power u/s 263 by CIT(A) - Stock Shortages - Held that:- The assessee before us demonstrated that the purchases have been accepted by the AO and the amount was shown in the closing stock being held by the Government authorities on the basis of billing by the assessee when the sale price remains determined by them only - Thus assessee on demonstrating that the issues were dealt with by the AO in his order u/s.143(3) when he took note of the survey proceedings on 17.1.2008 for the impugned AY when the financial year closed on 31.3.2008. The gross profit is estimated at the time of survey which gross profit was on the basis of sales up to 31.3.2008. Moreover, it has been submitted that the valuation becomes erroneous to the extent that the purchases having been accepted, sales having been accepted and closing stock having been accepted, by no stretch of imagination can the amount be brought to tax being the stock difference in the middle of the year can be re-verified on assuming jurisdiction u/s.263 would be an exercise in futility. CIT(A) has again directed to verify the assuming of estimating of gross profit rate which could neither be an error or loss to the Revenue being prejudicial to the interest of Revenue, thus this issue could not be dealt with by the CIT u/s.263. Unexplained investment in construction of factory building - Held that:- Valuation here again on assumption or presumption was predominantly in the mind of the learned CIT. After verifying or observing the error, the learned CIT deleted the issue for reconsideration rightly noted that the revisionary power cannot be extended to the issue - no direction to the Assessing Officer by holding a different view alone on which revisionary power can be extended to. Disallowance of expenses - Held that:- Unable to satisfy with the contention of the CIT-DR that details of various accounts were to be called for when the details of unsecured loans, sundry debtors, purchases etc., which are grossly interconnected to the extent that the CIT himself does not know as to what would be done on calling the details thereof. The CIT was to assume jurisdiction u/s.263 when on the basis of assessment record he has found errors committed by the Assessing Officer prejudicial to the interest of Revenue. He cannot ask the Assessing Officer for roving enquiry based on a view which has also not been specified by him in his order.

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• 2012 (12) TMI 627
  Development fees and Corpus fund - Whether a part of the admission fees - Held that:- It was part of the admission fee and needed no separate treatment. Hence it is added to the income expenditure statement as income. The development fees received later on was from students was to be identified by the assessee over and above the corpus funds when the students were made aware that they are contributing the amount apart from development fees, tuition fees, bus fees and other annual charges. The assessee has submitted that the development fees was received to contribute to the building when the committee seeking such funds made it voluntary was therefore directly held as a liability to identify with the general fund when the major portion was from the students and the remaining was contributed by the managing committee - in favour of assessee. Corpus fund – whether Gift of land made by the Mg. trustee to the trust itself would not be assessable as unexplained investment - Corpus fund is the property of the Trust. The donors contributed the donations therefore could not form part of the income & expenditure account as prescribed by law. Assessing Officer misdirected himself to hold a view that Vidya Jyoti Trust was not the school which was seeking corpus funds or voluntary contribution in the form of building or general fund when all the property of the Trust has been created for the purpose it was registered u/s.12AA. Therefore, the contention of the CIT-DR is on the effort to identify the trust Vidya Jyoti Trust as different from the educational institution it runs for which purpose the CIT granted registration. The assessee has stated that the two donors corrected themselves to submit that it was school to which they applied for the corpus fund therefore negates the CIT(A) finding that the amounts be confirmed u/s.68, was declared as fund by the Trust who runs the School - Cross objection by the assessee-Respondent is bound to be allowed and appeal of the Revenue is dismissed.

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• 2012 (12) TMI 626
  Disallowance on account of bogus trade creditors - Assessee submit computer generated ledger copy, copy of bank statement of the assessee in which payments made and copy of sales tax assessment order of creditor by Assistant Commissioner (CT) FAC, for A.Y. 2006-07 – Held that:- As the AO has accepted the purchases effected from this party and the trading results have not been disturbed and addition has been made on the closing balance as on 31.3.2007. The AO has not found these transactions to be non-genuine with the help of evidence. The assessee produced the copies of bills, bank statement and the sales tax order. Therefore, respectfully following the order of the Tribunal in assessee’s own case and deleting the addition. Appeal decides in favour of assessee

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• 2012 (12) TMI 625
  Exemption u/s 10A & 10B - Development of Software - disallowance as said product was not manufactured at the premises of the assessee - CIT(A) allowed the claim - Held that:- Outsourcing is part and parcel of the manufacturing activity and helpful in producing product or article or thing. Assessee company is considered to have actually carried on the business of IT enable services being maintenance of website of the foreign client Technics, INC, USA through certain consultants on contract basis under the direct supervision and control of the assessee company in India land also in coordination with the personnel of the foreign client. The direct contract of the consultants engaged by the Indian company with foreign clients could not lead to the conclusion that such clients engaged by the Indian company are hired by the foreign company or they were under the contractual obligation to perform specified works directed by the foreign client. For all practical purposes the Indian company was under contractual obligation to the foreign client. And it was at freedom to get the export order executed by its own employees or by outsourcing the work to certain consultants or third parties. Hence the actual export of computer software programme of the maintenance of the website for the foreign clients cannot be considered to be bogus or fictitious, if the Assessing officer had any doubt regarding the possible collusion between the foreign client and India company for any over estimation of export proceeds or understating of Indian expenses necessary incriminating evidence should have been brought on record to prove such points. On the contrary a reference made by the AO to the transfer pricing authority at Hyderabad u/s. 92 of the Income Tax Act, 1961, it has been officially held by the concerned authority that the export proceeds shown by the assessee company for IT enabled services rendered comprising of wave maintenance for the foreign client could be taken as a correct reflection of the exports proceeds - appeal by revenue is dismissed.

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• 2012 (12) TMI 624
  Disallowance of traveling and conveyance expenditure – Held that:- Even though the assessee has explained before the CIT(A) that the expenses are meant for the purpose of business and are properly vouched and properly spent, accounted and paid by the company, the reasons elaborating the deficiencies in the vouchers and bills produced by the assessee, pointed out by the AO in the impugned assessment orders cannot be totally ignored - the disallowance worked out applying a straight rate 25% is excessive and unreasonable, thus a token disallowance of Rs.1.5 lakhs as against disallowance of Rs.12,28,516 made by the AO for AY 2004-05 and Rs.50,000 as against Rs.3,85,150 for AY 2005-06, would meet the ends of justice. Revenue’s grounds partly allowed. Professional services rendered outside India - Non deduction of TDS - Held that:- It is not the case of the Revenue that the payments were made form any office situated in India & also not on record that the foreign agents have any permanent establishment in India in that situation, the payments made by the branch office or the assessee situated outside India to agents outside the country may not fall within the provisions of sec.195(1) - against revenue. Subsidy receipt - revenue v/s capital - Held that:- Going through the STPI Scheme the issue whether the subsidy received by the assessee in the form of duty waiver on the import of capital goods, casting export obligations on the assessee, has to be re-examined in the light of the STPI Scheme as a whole, a copy of which is now filed before us. AO needs to conduct purpose test of the said subsidy on the one hand, in the light of the cited judgments, and the details of actual capital asset, in respect of which the assessee enjoyed the waiver of the duty on the other, before arriving at proper and legally sustainable decision in the matter. AO should also examine the applicability of the provisions of S.43(1) with its relevant Explanations before reaching any conclusions on the issue by passing a speaking order - thus restore the matter to the file AO for fresh consideration - in favour of assessee by way of remand.

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• 2012 (12) TMI 623
  Estimation of profit of manufacturing division - Held that:- Action of the CIT(A) in enhancing percentage of profit from civil contract works at 8% as against 5% estimated by the assessing officer and accepted by the assessee without giving any opportunity to the assessee is against the provisions of law and has to be rectified - store the matter to his file for readjudicating on this issue. Disallowance of expenditure - Non deduction of TDS - Held that:- Issue restored to file of CIT(A) to re-examine in accordance with law and after giving reasonable opportunity of hearing to the assessee whether expenditure is payable as on 31st March of every year have already been paid during the previous year without deducting tax at source and accordingly redetermine the amount of expenditure - appeal decided in favour of assessee by way of remand.

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• 2012 (12) TMI 615
  Deduction u/s 10A - whether exchange fluctuation gains to be included as part of export turnover - Held that:- Held that:- Section 10A prescribes a formula for the arithmetic computation of deduction provides for the deduction in respect of profits derived by the undertaking from the export of articles or things or computer software - the Explanation to section 10A has defined the term export turnover refers to amount of sale proceeds received in foreign exchange. It also defines what are the items that are to be excluded from such definition. It is important to highlight that section 10A does not provide for exclusion of any item, including foreign exchange gain for the purpose of computing the eligible profits The Statement of Work & Invoice as submitted by assessee are such pieces of evidence which support her contention that the assessee-company is engaged in the development of software. To crown this fact, the evidence in the form of Transfer Pricing Order for assessment year 2002-03 dated 14.12.2005, in which the assessee-company has been treated as doing ‘software development’ cannot be ignored. Therefore, the exclusion of these expenses from export turnover is not correct. The decision of ITAT Chennai Special Bench in the case of Zylog Systems [2010 (11) TMI 76 - ITAT, CHENNAI] also supports the contention - in favour of assessee. If the expenses are excluded from the export turnover these should also be excluded from the total turnover as decided in Commissioner of Income-Tax Versus Lakshmi Machine Works [2007 (4) TMI 202 - SUPREME COURT] - there has to be parity between the export turnover and total turnover. Interest u/s 234B - Held that:- Direct the Assessing Officer to recalculate the interest consequent upon the sustained addition. Inclusion of refunds from Central Sales Tax(CST) in eligible profits for deduction u/s 10A - Held that:- The assessee is entitled to a refund of the CST from the STPI Authorities on the basis of a ‘periodic statement’ detailing the indigenous purchases made. Thus, such a refund so generated has a direct nexus and connectivity with the eligible undertaking making it entitled for the deduction u/s 10A. In this regard, the decision rendered in the case of Dy. CIT vs Aarti Industries [2005 (2) TMI 428 - ITAT AHMEDABAD-C] also supports the above view - in favour of the assessee Provision of workstations - assessee has treated as loss from other sources - Held that:- Income from leasing activity cannot be considered as part of total turnover because this activity by itself cannot be considered as part of assessee’s business activity in the regular course. Therefore, no adjustment to the profits of eligible undertaking or to the total turnover is necessitated for the purpose of computing deduction u/s 10A - in favour of the assessee. Exclusion of expenditure incurred in foreign currency from export turnover for computing deduction u/s 10A - Held that:- The exclusion effected by the AO is not in accordance with the provisions of the Statute. The definition of ‘export turnover’ requires expenses included in export turnover to be excluded. Going through assessee’s paper book it can be concluded that the assessee is engaged in the business of ‘software development’ and not in providing ‘technical services’. The decision of ITAT, Special Bench, Chennai, in the case of Zylog Systems [2010 (11) TMI 76 - ITAT, CHENNAI] is directly on the issue and supports the claim of the assessee. Unyielding of revenue from export turnover - Held that:- The assessee has been consistently following Accounting Standard 9 issued by the ICAI and in case the action of the AO is endorsed the figure of total turnover will get reduced to a figure lower that the export turnover. Therefore, the ingredients that go to make up the export turnover should also be the same for the total turnover.

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• 2012 (12) TMI 611
  Reassessment - Can the assessing officer, to reopen an assessment, entertain a “reason to believe” which is contrary to the statute? - Exemption u/s 10(21) - Accumulation of income u/s 11(2) - - held that:- Two important conditions for the applicability of section 147 are (a) income chargeable to tax must have escaped assessment and (b) assessing officer must have reason to believe so. When section 11(3) treats the accumulated income of the past year of the petitioner as income of the assessment year 2001-02, there can be no question of any income escaping assessment in the past assessment years i.e. the assessment years 1998-99 to 2000-01. It follows that the assessing officer cannot entertain any reason to believe that income chargeable to tax for those years had escaped assessment. Even assuming that there was breach of any statutory conditions under which the exemption was granted to the petitioner under section 10(21), the entire accumulated income of the earlier years cannot be taxed in those years by reopening the assessments for those years. Section 11(3), which is made applicable to section 10(21), itself provides that the entire accumulated income shall be deemed to be the income of the assessee of the previous year in which the breach of the conditions or the contingency occurs. The statute having thus fixed the assessment year in which the entire past accumulated income falls to be taxed, it is impermissible in law for the assessing officer to entertain a reason to believe that income chargeable to tax for the assessment years 1998-99 to 2000-01 had escaped assessment. Notice issued u/s 148 quashed. - Decided in favor of assessee.

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• 2012 (12) TMI 610
  Sale of land - whether a land is agricultural land or not - CIT(A) assumed that once the land fall within the limits of the Hyderabad Airport Development Authority (HADA) constituted under A.P. Urban Areas (Development) Act it is a 'municipality' under section 2(14)(iii) of the Income Tax Act, 1961. - the land in question is classified in the Revenue records as agricultural land - assessee has not applied for conversion of this agricultural land for non-agricultural purposes and the assessee has not put the land to any purposes other than agricultural purposes. Held that:- HADA was formed by the notification under Urban Area (Development) Act, 1975 with a view to promoting and securing planned development of the area in and around the proposed international Airport at Shamshabad. - HADA is basically and essentially a creation of the Act of State Legislature consisting of persons appointed by the State Government on salary basis. The Board Members are not elected by the people and there is no element of people choice being represented in any manner in the constitution of the Board. The Board functions strictly under the supervision and control of the State Government and does not hold or possess a "local fund". Being so, HADA cannot be called as a local authority. - HADA cannot be treated as a 'Municipality' and as such the agricultural lands situated within the jurisdiction of HADA do not constitute capital asset. - Decision in the case of Commissioner of Income-tax v. Murali Lodge [1991 (6) TMI 38 - KERALA HIGH COURT] followed. Mere inclusion of land in the special zone without any infrastructure development thereupon or without establishing and proving that the land was put into use for non-agricultural purposes does not and cannot convert the agricultural land into non-agricultural land. In the instant case, at the relevant point of sale of the land in question, the surrounding area was totally undeveloped and except mere future possibility to put the land into use for non-agricultural purposes would not change the character of the agricultural land into non-agricultural land at the relevant point of time when the land was sold by the assessee. The agricultural land of the assessee is outside the Municipal Limits of Hyderabad Municipality and that also 8 km away from the outer limits of this Municipality, assessee's land does not come within the purview of section 2(14)(iii) either under sub clause (a) or (b) of the Act, hence the same cannot be considered as capital asset within the meaning of this section. Hence, no capital gain tax can be charged on the sale transaction of this land entered by the assessee. When the land which does not fall under the provisions of section 2(14)(iii) of the IT Act and an assessee who is engaged in agricultural operations in such agricultural land and also being specified as agricultural land in Revenue records, the land is not subjected to any conversion as non-agricultural land by the assessee or any other concerned person, transfers such agricultural land as it is and where it is basis, and also it is not the transfer of any share in the right in the development of such land through any joint development agreement, in such circumstances, in our opinion, such transfer like the case before us cannot be considered as a transfer of capital asset.

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• 2012 (12) TMI 609
  Reassessment - "fees for technical services" within the meaning of Section 9(1)(vii) - interest-free loan - interest under Section 9(1)(b) of the Act as well as under Article 11 of the Agreement for the Avoidance of Double Taxation entered into between India and USA. - business connection - held that:- where the existence of a business connection was held to depend on the facts of each case, we are of the view that there was prima facie material in the possession of the Assessing Officer to form a tentative belief that Section 9(1)(i) was attracted. This reason by itself constituted a relevant ground to reopen the petitioner's assessments. The assessing officer was justified in taking the prima facie view that CISPL constituted the petitioner's permanent establishment in India. - So far as the assessability of the interest under Section 9(1)(v) is concerned it would appear that clause (b) of Section 9(1)(v) is applicable. Writ petition against the issuance of notice u/s 148 dismissed with a cost of Rs. 75,000 - Decided against the assessee.

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• 2012 (12) TMI 608
  Exemption u/s 10(13A) - deduction from salary - payment of rent for residential accommodation - held that:- The ground on which the claim for exemption under Section 10(13A) was rejected by the assessing officer was that the salary receipts by the assessee from M/s Sahara India Mass Communication cannot be assessed under the head “salary”, but should be assessed under the head “income from other sources”. The assessing officer has however not brought any material to show that the relationship between the M/s Sahara India Mass Communication and the assessee was not that of a master and servant. - Deduction allowed - Decided in favor of assessee. Principle of netting or set off - Addition on account of interest paid by the assessee on loan taken for purchase of an exempted asset - held that:- The right to receive the interest and the liability to pay interest arose in respect of the same period and out of the same event i.e. non-payment of the sale proceeds in time. The delay in payment of the sale proceeds and the delay in repayment of the borrowing are both intertwined; one gives rise to interest income and the other gives rise to interest liability. We are of the view that this affords sufficient nexus between the two so as to justify the applicability of the principle of netting. Judgment of the Supreme Court in CIT vs. Dr.V.P.Gopinathan (2001 (2) TMI 10 - SUPREME COURT) is against the claim of the assessee but a closer look at the facts shows that the judgment of the Supreme Court in Keshavji Ravji & Co. vs. CIT (1990 (2) TMI 1 - SUPREME COURT) is closer to the assessee's case on principle. - The netting principle was adopted in CIT vs. Shri Ram Honda (2007 (1) TMI 86 - HIGH COURT, DELHI). Decided in favor of assessee.

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• 2012 (12) TMI 607
  Exemption u/s 54EC - Capital gain on depreciable assets being short term capital gain - held that:- the assessee cannot be denied exemption under section 54E, because, firstly, there is nothing in Section 50 to suggest that the fiction created in Section 50 is not only restricted to Section 48 and 49 but also applies to other provisions. On the contrary, Section 50 makes it explicitly clear that the deemed fiction created in sub-sections (1) and (2) of Section 50 is restricted only to the mode of computation of capital gains contained in section 48 and 49. Secondly, it is well established in law that a fiction created by the Legislature has to be confined to the purpose for which it is created. It is true that Section 50 is enacted with the object of denying multiple benefits to the owners of depreciable assets. However, that restriction is limited to the computation of capital gains and not to the exemption provisions. In the other words, where the long term capital assets has availed of depreciation, then the capital gain has to be competed in the manner prescribed under section 50 and the capital gains tax will be charged as if such capital gains has arisen out of a short-term capital asset but if such capital gain is invested in the manner prescribed in section 54E, then the capital gain shall not be charged under section 45 of the Income-tax Act. To put it simply the benefit of Section 54E will be available to the assessee irrespective of the fact that the computation of capital gains is done either u/s. 48 and 49 or u/s. 50. - Decided in favor of assessee.

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• 2012 (12) TMI 606
  Transfer pricing - Arm's length price - TNMM method versus CUP method - comparables - held that:- if the composite income is taken into consideration then the assessee has earned more in contrast to the rates to which earlier third party has charged. While applying CUP Method, there could be internal CUP or external CUP. - The internal CUP could be available if the assessee or one of its group entities entered into comparable transaction with an unrelated party where the goods or services under consideration are same or similar. - On the other hand, in an external CUP, transaction between two independent enterprises involved comparable goods or services under comparable conditions. Here, in this case, the internal CUP, 'ANL Singapore' cannot be applied as it is an AE having related party transactions. There are also no external CUP for making any comparison in the relevant year as the earlier agency agreement with the third party CMAPL had expired prior to September, 2003 and rates which were applicable in the earlier years cannot be made applicable in this year. Thus, the rates of the earlier agreement will not be appropriate parameter for determining the ALP for the international transaction undertaken by the assessee with its AE in the current assessment year. In these circumstances, the CUP Method fails in this case for benchmarking the ALP. Both the parties have agreed that TNMM Method should be most appropriate method for benchmarking the ALP. - TPO has neither examined the comparables nor the application of TNMM Method for benchmarking the ALP in relation to the international transactions. Even the CIT(A) has not called for any remand report from the TPO or the AO asking for any comment upon the comparables shortlisted by the assessee. The comparables have to be examined objectively and the TPO should be given an opportunity to rebut the same. - Matter remanded back to TPO, who will require the assessee to furnish comparables into similar line of business and activities and examine the same for benchmarking the ALP. Decided partly in favor of revenue.

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• 2012 (12) TMI 605
  Concept of mutuality - held that:- there is no finding by any of the authorities below that services are rendered to non-members. - As long as services are rendered to the members, even for a remuneration, the same will be covered by the principles of mutuality. As far the allegation that members have deducted at source from payments to the assessee and for this reason, the receipt is to be taken as taxable receipt, it is only elementary that conduct on the part of the person making payment cannot determine character of receipt in the hand of recipient. The mere deduction of tax at source by person making the payment in our humble understanding, cannot lead to the conclusion that receipt was taxable in nature. - The plea of the assessee for tax exemption on the ground of mutuality, therefore, must succeed. - Decided in favor of assessee.

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• 2012 (12) TMI 604
  Estimation of gross profit - rejection of books of accounts - held that:- Undisputedly, if the books are duly audited and if they are produced before the AO, the burden lies upon the Revenue to show that the books are defective or incomplete, in order to estimate reasonable income from turnover. However, in the instant case the assessee has not furnished relevant details and nowhere in the assessment order it is indicated that the assessee has furnished the books of account. - the contention of the assessee that no addition can be made in the event of not giving a specific finding with regard to the defect in the nature of books, deserves to be rejected. - Decided against the assessee. Rate of GP - Since itemised details were not furnished the learned CIT(A), based on the available material, accepted the GP sheet as prepared by the assessee and while arriving at the GP ratio at 22.22% the gross loss works out to Rs.2.09 crores. It is well settled that while estimating the income it is difficult to maintain exactitude. So long as the estimate is reasonable, based on the facts available on record, the appellate authorities should not interfere with the estimate made by the lower authorities. In the instant case no fresh material was furnished before us to indicate that even the CIT(A) has committed an error in restricting the GP ratio (loss) to 22.22%. - Decided against the assessee.

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• 2012 (12) TMI 603
  Deduction u/s 80IC - income derived from industrial undertaking - nature of interest income - held that:- In Govinda Choudhury's case (1992 (4) TMI 8 - SUPREME COURT) the Hon'ble Apex Court held that the interest awarded to the respondent-assessee therein in an arbitration proceeding for delayed payments under a contract executed by him was to be recorded as business income and could not be treated as "income from other source". - Decided against the revenue.

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• 2012 (12) TMI 602
  Penalty u/s 271(1)(c) – AO made addition of expense incurred to earn exempt income u/s 14A – Impose penalty u/s 271(1)(c) on said addition – Held that:- Following the decision in case of Sunash Investment Co.(2006 (12) TMI 266 - ITAT MUMBAI) that no penalty u/s 271(1)(c) can be levied on account of disallowance of pro-rata interest expenditure by invoking the provisions of sec.14A. No contrary view has been brought on record by the learned Departmental Representative. Therefore delete the penalty. Issue decides in favour of assessee Penalty u/s 271(1)(c) - Income voluntarily offered to tax – AO included the said amount in the total income and impose penalty u/s 271(1)(c) thereon – Held that:- As similar income was offered for taxation in earlier AY on which the AO chose not to impose penalty u/s 271(1)(c). AO could not place any material on record to show that the assessee came forward to offer the said income for taxation only due to his corner in this regard. There is nothing in assessment order to divulge that the assessee offered income pursuant to any detection by the Revenue. Rather it is suo moto offering by the assessee. Issue decides in favour of assessee Penalty u/s 271(1)(c) - Imposed on disallowance of depreciation on the Ozone grant – During course of proceedings the assessee surrendered its claim of depreciation on capitalization of grant – Held that:- Mere fact that the assessee agreed not to claim depreciation on the amount of Ozone subsidy during the course of assessment proceedings cannot be a good ground for imposition of penalty. The initial view of the assessee that it was entitled to depreciation, based on the judgment of the Hon’ble Supreme Court), can be found fault with. Thus, it cannot be said that the assessee made a mala fide claim in the shape of depreciation on the Ozone grant received from the State Government. Issue decides in favour of assessee

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• 2012 (12) TMI 601
  Disallowance for non-deduction of Tax u/s 40(a)(i) – Assessee utilizes the internet search engine to buy space in advertising on the internet on behalf of its clients - The search engine renders this service outside India through internet – AO made addition considering the same as technical services - Held that:- As the hosting services did not involve use or right to use by the assessee any industrial, commercial or scientific equipment and no such use was actually granted to assessee. Uploading and display of banner advertisement on its portal was entirely the responsibility of the service provider. Therefore payment was not in the nature of royalty or technical service but the same was in the nature of business profit and in the absence of any PE in India, it was not chargeable to tax in India following the decision in case of Yahoo India (P.) Ltd(2011 (6) TMI 162 - ITAT, MUMBAI). Appeal decide in favour of assessee

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• 2012 (12) TMI 600
  Penalty for concealment of income u/s 271(1)(c) - Assessee claim 100% depreciation in the concerned assessment year without noticing the amendment for the year - AO had initiated penalty u/s 271(1)(b) - CIT issued notice u/s 263 since the AO had failed to initiate penalty proceedings u/s 271(1)(c) - CIT has set aside the assessment to the AO for fresh consideration - Held that :- As the AO had taken a conscious decision not to levy penalty under section 271(1)(c) and the contention raised had not been properly addressed by the CIT. W.e.f 01/06/2002 CIT is authorized to initiate and levy penalty under section 271(1) and therefore, there was no necessity to set aside the assessment for fresh consideration. Case remand back to CIT.

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• 2012 (12) TMI 599
  Disallowance u/s 14A r.w. Rule 8D of expenditure incurred on earning exempt income – Held that:- Total expenditure debited by the assessee in its P&L account for the year ended 31.3.2008 is only Rs.1,68,385 and out which, assessee itself disallowed a sum of Rs.1,06,897 while computing its income leaving a balance sum of Rs.61,488 which was duly explained in respect of taxable income. Therefore no such disallowance shall be allowed. Appeal decides in favour of assessee Sale of share taxable as capital gain or business income - Assessee has only four scripts of shares and out of which scripts of shares of three companies were purchased in the preceding assessment year and only share of one company was purchased during the year - Assessee sold the said shares of all four companies in the assessment year under consideration - Held that:- Neither the frequency nor volume of transaction could be said to be very high and the period of holding is also substantial. Therefore, the income of the assessee from purchase and sale of share transactions is to be assessed under the head “capital gain” and not under the head “business income”. issue decides in favour of assessee

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• 2012 (12) TMI 598
  Deduction u/s 80HHC - AO to recompute the deduction u/s 80 HHC by reducing the 90% of the net amount and not gross amount of interest & rent income – Held that:- Following the decision in case of ACG Capsules (P) Ltd. (2012 (2) TMI 101 - SUPREME COURT OF INDIA) wherein it has been held that ninety percent of not the gross rent or gross interest but only the net interest or net rent, which had been included in the profits of business of the assessee as computed under the head “PGBP”, was to be deducted under clause (1) of Explanation (baa) to section 80 HHC for determining the profits of the business. Appeal allow in favour of assessee & issue remand back to AO Adjustment in Profit for claiming deduction u/s 80HHC – Whether insurance claim received by the assessee on stock in trade is liable to be reduced to the extent of 90% received while calculating the eligible profits – Held that:- As the insurance claim received on damage of goods/raw material and has direct nexus with the business income. Therefore, insurance claim received by the assessee on stock in trade is not liable to be reduced to the extent of 90% received while calculating the eligible profits. Issue decides in favour of assessee. Adjustment of VAT refund in computing eligible profit u/s 80HHC – Whether Sales Tax remission/refund has been included as business profits it is eligible for deduction u/s 80 HHC - VAT refund received are on revenue account and routed through profit and loss account – Held that:- Following the decision in case of Alfa Laval India Ltd. (2003 (9) TMI 43 - BOMBAY HIGH COURT) The expenses on these accounts have earlier inflated the cost of purchases / production cost and, therefore, these receipts are nothing but abatement of purchase / production cost and is thus integral part of the manufacturing operations and has to be assessed under the head PGBP. Appeal decides in favour of assessee.

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• 2012 (12) TMI 597
  Addition u/s 41(1) of sundry creditors - No purchases and sales were made during the year under consideration - Said amount was taken by the assessee as an advance for sale in earlier years – Held that:- The assessee has filed a copy of account of the said party, according to which, the payments have already been made to the said party. The payments have been shown to be debited to the bank account of the assessee and copies of bank accounts are also filed. Issue decides in favour of assessee Applicability of notification - Derivative transaction treated as speculative transaction – AO notice that transactions entered into by the assessee before 29th December 2005 covered under u/s 43(5)(d) – CBDT notified on 25th January 2006 regarding exclusion of derivative transaction from Sec 43(5) - Held that:- Following the decision in case of Claris Lifesciences (2008 (8) TMI 579 - GUJARAT HIGH COURT) once the approval is granted in the relevant previous year, and in the absence of anything indicated to the contrary, the approval has to be taken as effective from the beginning of the relevant year. Hence the derivate transactions, entered into by the assessee at the recognized stock exchanges even prior to the date of notification in the relevant previous year, are to be treated as covered by the exclusion clause set out in Sec. 43(5)(d). Issue decides in favour of assessee

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• 2012 (12) TMI 596
  Income from sale of Land - Capital Gain or business income – Whether land sold by assessee was agricultural land or capital asset – AO argued that the distance between Village and Municipal Corporation is less than 8 km - Held that:- As concluding from the fact of the case AO is not justified in treating the assessee’s solitary transaction of sale of part of its land holdings on ‘as it is and where it is’ basis without recording it as its stock-in-trade as assessee’s business income. Assessee’s land can be held as agricultural land situated beyond 8 kms outside the Gurgaon Municipal limits and that the area population of residents of the village Fazilpur Jharsa being below 10000, the assessee’s asset is outside the purview of capital asset. In favour of assessee Undisclosed Income – AO made addition as undisclosed income, instead of agricultural income as claimed by the assessee – AO argued that land was not cultivated and also the party to whom the agricultural produce was claimed to have been sold was nonexistent – Held that:- As the assessee had furnished a copy of Girdwari & certificate issued by the Sarpnach. As per these documentary evidences, the assessee had discharged its onus. Therefore, AO was not justified in rejecting assessee’s contention with regard to the said agricultural income. In favour of assessee

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• 2012 (12) TMI 595
  Addition u/s 68 as cash credit – Share application money – AO has instituted enquiry u/s 133(6) from the share applicant’s - Held that:- Following the decision in case of Orissa Corporation Pvt. Limited (1986 (3) TMI 3 - SUPREME COURT) that AO did not pursue the matter further with the share applicants nor required the assessee to produce them or further material in that regard, it has to be accepted that the appellant has discharged the burden that lay upon him u/s 68. Issue decides in favour of assessee Prior period expense – Disallowance of expenses relating to earlier years – Held that:- Any reference to the return of income or computation filed with the return of income showing claim made for deduction of expenses in the impugned year nor did he make verification of the facts himself. Therefore issue remand back to AO

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• 2012 (12) TMI 594
  Deduction u/s.80-O - Deduction in respect of royalties, etc., from certain foreign enterprises - Whether the consideration received by the assessee was for use outside India of patent, invention, design or registered trade mark – Assessee enter into no. of agreements from dated 11.10.91 to 23.10.1998 – Held that:- the appellant is in no position to “allow use” of the designs and that Bosch is free to use the designs, in any case. In the circumstances, it cannot be held that the fees received from outside India were for use of the designs but can only be considered as fees for services rendered. Assessee has attempted to camouflage its claim for deduction u/s.80-O of the Act for AY 2001-02, so as to be in conformity with the amended provisions of law, though the nature of services remained the same as it existed prior to AY 98-99. Therefore, Assessee has failed to establish its claim for deduction on the basis of the conditions contemplated by the amended provisions of law. In favour of revenue Levy of interest u/s 220(2) - Assessee contended that notice of demand u/s 156 was not issued and served - therefore the very levy of interest u/s 220(2) was not warranted – Held that:- Following the decision in case of Central Provinces Manganese Ore (1986 (5) TMI 3 - SUPREME COURT) that appeal against levy of interest in the present case would be maintainable. Therefore direct the AO to consider the claim of the assessee afresh in the light of the submissions made before us challenging the levy of interest. Issue remand back to AO

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• 2012 (12) TMI 593
  Disallowance of 50% unmarked sales promotion expenses – AO made addition due to absence of bills and vouchers - Expenditure includes commission on number of cases sold and lifted - Incentive to increase sales by the depots located at various parts of the country – Held that:- As the assessee rightly contended the fact that such expenses are necessary and part of the business. The only factor which goes against the assessee is the absence of bills and vouchers. In the given facts and circumstances, restrict the disallowance of sales promotion expenses to 25% of unmarked sales promotion expenses. Issue partly allowed in favour of assessee Disallowance of the employees contribution to ESI and PF – Deposit beyond the due date but before filling of ROI – Held that:- Following the decision in case of AIMIL Limited (2009 (12) TMI 38 - DELHI HIGH COURT) that Sec.43B extended to employees’ contribution as well which are paid after the due date under the PF law but before the due date for filing the return. Allow deduction. In favour of assessee Disallowance of interest u/s 14A – Expense in relation to earn exempt income - Whether interest expenses relatable to borrowed funds which are used for making investment in the share capital of a firm can be said to be expenditure incurred for earning income not includible in the total income – Held that:- The intend of the assessee not to earn tax free income in the form of share of profits from the firm. Once it is found that the provisions of Sec.14-A are applicable then irrespective of the fact that there was no receipt of share of profits from the firm in the present year or the argument that the disallowance cannot exceed the amount of share of profits received from the firm, cannot be accepted. Therefore, disallowance has to be sustained. In favour of revenue

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• 2012 (12) TMI 592
  Transfer Pricing – Interest free advance to foreign associated enterprises – Held that:- As the TP adjustment is possible only in cases where comparable uncontrolled transactions entered into between two enterprises are established. Unless such an uncontrolled transaction is identified, no ALP adjustment is possible. The interest determined AO and confirmed by DRP is not an arms length rate determined in comparable uncontrolled transaction and therefore order be set aside in conformity with the Tribunal’s findings in the assessee’s own case for earlier years. In favour of assessee Disallowance of expenditure u/s 14A – AO disallow 5% of the dividend as expense incurred in relation to earn exempt income – AO argued that other expenses on corporate establishment should also be considered u/s 14A - Held that:- The disallowance u/s. 14A of the Act in the present case is restricted only to indirect expenses. The Assessee’s calculation is based on the time spent by the functionaries responsible for making investment of cash surpluses. Therefore, the quantum of disallowance estimated at 5% is on the higher side. An estimate of 2.5% of the dividend income in our view would be just, fair and reasonable. Issue partly allowed Set Off of losses – STP units claim deduction u/s 10A – Whether loss incurred by STP/SEZ unit is set off against income from Non STP/SEZ unit for same assessment year – Held that:- Following the decision of Tribunal in assessee’s own case in favour of the assessee. Set-off of loss allowed. In favour of assessee Contribution to Trust - Payment of such contributions as deferred compensation to the employee-director who separated from the Company is a payment by the trust on behalf of the assessee and hence eligible for deduction u/s 37(1) – Held that:- As the specific prohibition in Sec.40A(9) and keeping in mind the principle that when there are specific provisions governing a deduction then the general deduction allowable u/s.37(1), cannot be invoked, the disallowance made by the Revenue authorities had to be sustained. In favour of revenue Alternative claim of the Assessee that in the event of the disallowance being sustained, the action of the AO in allocating the aforesaid expenses to the profits of the units eligible for deduction u/s.10A which had gone to reduce the profits eligible for deduction u/s.10A cannot be sustained. The AO is therefore directed to computed the enhanced profits on which eligible deduction u/s.10A should be allowed. In favour of assessee Allocation of common expense – Expenses incurred by HO allocate to units which are eligible for deduction u/s.10A – Held that:- Following the decision in assessee’s own case for earlier years that when direct expenses of rates and taxes were known in respect of unit whose income is deductible u/s 10A then otherwise allocation cannot be made. The allocation of common expenditure cannot be made on the basis of revenue generated. Hence, direct expenditure disallowed by the AO is confirmed and disallow of 20% of common expenditure. In favour of assessee Deduction u/s 10A - AO refused to allow deduction u/s.10A on profits generated by overseas software development - AO was of the view that the revenue generated by the above Software Development Centers abroad are included in the revenues shown by the STP / SEZ units – Held that:- The issue requires to be remitted back to the AO and accordingly do so with a direction to the AO to follow the decision of Tribunal. Issue remand back to AO Exclusion from income while allowing deduction u/s 10A - AO excluded interest income, income generated from sale of scrap and exchange fluctuation – Held that:- Following the decision in case of assessee’s own case for earlier years that, as the amount received from the sale of scrap cannot be excluded for the purpose of computing deduction u/s 10A, foreign exchange gain due to fluctuation in the rate of rupee is to be included in the profit of the undertaking and is to be considered as eligible for deduction u/s 10A. And in respect of interest income AO has not treated the interest income as income from Other sources or has not held that such income does not belong to the undertaking to which section 10A is applicable. In favour of assessee Deduction u/s 10A – Whether deemed export is also part of export sale for the purpose of calculating the deduction u/s 10A – Held that:- Following the decision in assessee’s own case on identical issue and decided the issue against the assessee. In favour of revenue Computation of total turnover for claiming deduction u/s 10A – AO excludes the Foreign taxes (VAT/GST) from the total turnover while computing deduction u/s.10A – Held that:- Following the decision in assessee’s own case for earlier years that once this sum is not included in export turnover, then the same cannot be included in the total turnover. In favour of revenue

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• 2012 (12) TMI 591
  Rejection of books – Adoption of higher net profit rate @ 12% by AO - Assessee is a partnership firm engaged in the construction of roads – CIT(A) reduce net profit rate to 8% - Held that:- Following the decision in assessee’s own case there must be valid ground with revenue to enhance the net profit rate to 12%. In absence of these, addition cannot be sustained. In favour of assessee Addition on account of interest income - Assessee has not shown bank interest, whereas TDS was claimed as per TDS certificate - Assessee contended that interest figure debited to the P&L account is the net figure – Held that:- Since the assessee has not produced books of account and failed to establish his case for setting off of interest paid against the interest income, which is assessable u/s 56. Following the decision in case of Dr. V. P. Gopinathan (2001 (2) TMI 10 - SUPREME COURT) that where an assessee had invested money in a fixed deposit, in a bank, on interest and had taken loan, on the security of that deposit from the same bank, on interest, the interest paid by the assessee, on the loan would not go to diminish his income from interest, on the fixed deposit, paid by the bank. In favour of revenue Addition on account of margin on sub-contract works – To the tune of 6% which was half of net profit - Assessee claimed that value of sub-let work be reduced from its gross receipts - AO was of the opinion that the assessee had not produced books of account and he would definitely retain some profit margin – Held that:- Following the decision in case of Pran Nath Gupta (2009 (11) TMI 53 - PUNJAB AND HARYANA HIGH COURT) that the payment made to subcontractors is to be deducted from Gross receipt. In favour of assessee

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• Customs

• 2012 (12) TMI 622
  Customs House Agents Licence - Held that:- As decided in SUNIL KOHLI & ORS Versus UNION OF INDIA & ORS [2012 (10) TMI 638 - SUPREME COURT] who had cleared the examinations under the regulations issued in the year, 1984, would be eligible for the grant of licence, subject to their fulfilling the other conditions of eligibility, as the actions already taken under the earlier regulations issued in the year, 1984, had been saved by the new regulations issued in the year 2004. There is no dispute that the petitioner had passed the written, as well as the oral examination under Regulation 9 of the Customs House Agents Licensing Regulations, 1984, which were existing prior to the coming into force of the new regulations in the year, 2004. Thus in such circumstances, this Court finds it appropriate to direct the department to issue the necessary certificate granting the Customs House Agents Licence to the petitioner, as per Regulation 9 of the Customs House Agents Licencing Regulations, 2004, within a period of eight weeks from the date of receipt of a copy of this order.

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• 2012 (12) TMI 589
  Initiation of proceedings under CHALR 2004 - actively engaged in High Sea Sales and diversion of goods Held that:- High Sea Sales agreement at the time of clearance was examined by the officers who cleared the goods and there is no allegation that the said agreement is fabricated one entered by the parties to the contract. Further, the High Sea Sales agreement have been executed prior to imports, therefore, proceedings under CHALR 2004 cannot be initiated for this act of the appellant. Appellant was not in the knowledge of the diversion of goods by the importer. Moreover, the appellant has arranged the transportation of the goods and goods have been handed over to the representative of the importer at Kalamboli Weigh Bridge where the appellant had asked to deliver the goods to the importer. This fact has been confirmed by the transporter during the course of their statement recorded, therefore, the allegation that appellant was actively involved in the diversion of the goods is not sustainable - allegation leveled against the appellant for violation of Regulation 13(d), (e) and (n) of CHALR 2004 is not sustainable - in favour of assessee.

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• Corporate Laws

• 2012 (12) TMI 621
  Scheme of arrangement - reduction of capital or a scheme of arrangement or both - provisions of Article of Association - Utilizing a part of the share premium for payment of Dividend, does it amount to payment of paid up capital to the shareholders - conditions stipulated in section 390 to 394A - held that:- The court ought not, usually, to require that a reserve be set aside indefinitely to safeguard the interests of future creditors and shareholders. Anyone who gives credit to or acquires shares in the company after the reduction takes effect is, prima facie, adequately protected by existing statutory safeguards. (Grosvenor Press Plc. In Re (supra)). It is unnecessary, therefore, to set apart any further sums in the "special reserve". Instead of directing publication, of the causes and the reasons for reduction of capital, in the newspapers I consider it appropriate to direct the petitioner to add to its name, as its last words, the words "and reduced" for the period upto and until the end of the financial year 2012-13, and in the balance sheet, the profit and loss account, and the annexures thereto for the said year. Such usage would suffice to protect the interests of prospective investors and would safeguard public interest. All that this Court is required to do, in an application seeking its sanction for a scheme of arrangement involving reduction of capital, is to ensure that the statutory provisions have been complied with, and the scheme as a whole is fair and reasonable. The wisdom or otherwise of the scheme is for the shareholders to decide and, since all the shareholders, all the secured creditors, and around 80% of the unsecured creditors, who attended the respective meetings, have supported the scheme, it is not for this Court to go into the merits of the scheme or to sit in judgment over the wisdom of the shareholders of the company in seeking reduction of capital. Scheme of arragment involving reduction of capital allowed. Subject to conditions.

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• 2012 (12) TMI 620
  Right of the creditors for winding up petition - held that:- There is no dispute as to the claim of the petitioning creditor against the company. The claim is founded on dishonored cheques and even the primary basis of the claim stands admitted. The company did not reply to the statutory notice and has not indicated anything that would make the debt disputed or that would detract from the presumption of the company's inability to pay that arises under Section 434(1)(a) of the Companies Act. That the company has suffered an injunction in the Bombay High Court is of no consequence since the company cannot demonstrate that the injunction amounts to a security of value equal to or in excess of the petitioner's unimpeachable money claim. The order of injunction subsisting on the guarantors and the undertakings furnished by the guarantors pursuant to the order of the Bombay High Court are matters not relevant for assessing the company's inability to pay. As to the decisions cited by the company that a petitioning creditor's claim must be quantified, it must be appreciated that the petitioner has quantified its claim both in the statuary notice and in the petition; and it is only the company's assertion that since the value of the properties covered by the Bombay injunction against the company cannot be conveniently made, the quantified claim put forth by the petitioner should be regarded as an unascertained claim. Such argument does not appeal and is rejected. If the company pays off the entire amount, inclusive of interest and costs assessed at 3000 GM, within six weeks from date, the petition will remain permanently stayed.

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• 2012 (12) TMI 588
  Company in liquidation - liquidator rejected the part of claim made by the bank - held that:- the Official Liquidator cannot be said to have committed any illegality in declining to admit the claim in relation to the interest from 19.10.2002 to 31.04.2009, being the period after the date of the order of the winding up; and in relation to the other expenditure as incurred without taking permission from the Court or approval of the Official Liquidator. Of course, the Official Liquidator would be making final payment in accordance with law after the adjudication of all the claims.

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• 2012 (12) TMI 587
  Loss of shares - request for 'stop transfer' is received by the company/STA from the previous registered holder - Rectify the register of members by substituting the name of respondent No. 1 in place of respondent No.3 qua 100 shares - Held that:- The appellant company was duty bound not to transfer these shares once it was brought to its notice that the shares had been lost and a proper NCR had been lodged with the police. It was incumbent upon the company to give notice to the last holder i.e. respondent No. 3 to surrender his share certificates within 21 days mentioning the details of the claim made by the previous registered holder. These guidelines/ Instructions which were binding upon the company have not been adhered to. Submission of the appellant that respondent No. 1 had slept over his right for this intervening period of two years i.e. 13.11.2006 up to February, 2008 appears to be a mis-directed submission as appellant company had itself on 27.02.2008 notified respondent No.1 that the transfer deeds for the said shares had been produced by one Lalit Kumar Goyal for which the objections had been sought from respondent No. 1 which were duly replied on 11.03.2008 and at the cost of repetition, a second set of documents including the NCR complaint was again filed along with this letter. The letter of 27.02.2008 had asked for a copy of the FIR regarding the loss of shares/injunction order for stop transfer, the SEBI Regulations postulate that either the FIR/copy or an acknowledged police complaint or a copy of the injunction order for stop payment had to be furnished. The requisite document i.e. copy of the acknowledged police complaint of 11.05.2006 was already with the company but it was again sent on 11.03.2008 with a request to stop the transfer up to 30.04.2008 (which was even otherwise not an unreasonably long period) to obtain the other necessary documents to establish the claim of the petitioner. Ths in this background, the impugned order holding that the appellant company is at fault and guilty of a wrong transfer suffers from no infirmity. Appeal is without any merit.

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• FEMA

• 2012 (12) TMI 590
  Remittance out of India without having imported any goods on the basis of the forged bogus documents. - allegation based on statement - held that:- the Adjudicating authority has in her order very clearly rerecorded as a fact that there is no retraction on record. In case, there has been any retraction the appellant would have challenged the same and produced the retraction before the Tribunal or called upon the respondents to produce the retraction which according to him was in possession of the respondent. However, no such exercise or even an attempt to the same appears to have been carried out before the Tribunal. Order of tribunal directing the appellant to pre deposit 50% of the penalty amount i.e. Rs. 25 lacs out of Rs. 50 lacs imposed by the Adjudicating authority sustained.

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• Service Tax

• 2012 (12) TMI 644
  Demand of Service Tax - Assessee is a co-operative society - Assessee has set up a common effluent plant for providing effluent treatment to the units of the member industries – Held that:- Sec. 145 a retrospective exemption is granted in respect of the common facility set up for treatment and recycling of effluents and solid wastes, which is set up with the financial assistance of the CG. Reading of SCN that the assessee has set up the effluent plant with the aid of the Maharashtra State Government, the service provided by assessee is exempted under the retrospective exemption.

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• 2012 (12) TMI 643
  Delay in duty payment - penalty under Rule 27 or Rule 25 - seeking Waiver of penalty u/s 11AC – Held that:- As no intention on the part of the respondent assessee to evade any payment of duty and as soon as liquidity was available, duty was paid along with interest, thus following the decision in case of COMMISSIONER OF C. EX. & CUSTOMS Versus SAURASHTRA CEMENT LTD. [2010 (9) TMI 422 - GUJARAT HIGH COURT] penalty could not be levied under Rule 25 of the Rules and for the alleged default, the penalty was restricted to Rs. 5,000/- under Rule 27 of the Rules.

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• 2012 (12) TMI 642
  Non payment of service tax to the government - invoking extended period of limitation - Held that:- Assessee cannot escape the responsibility of ensuring that records are maintained in accordance with law and credits are availed and utilized properly. He did not made effort to find out even at any stage as to whether the service providers were in existence and whether they had paid service tax collected from them to the government. Thus failure on part of appellant proved the invocation of extended time limit for demand in this case is sustainable. Further, for the same reasons, the first appellant is liable to penalty also. Cenvat credit - denial as services used for both exempted and non exempted goods - Held that:- Admittedly the first appellant was engaged in the manufacture of animal feed which is exempted and was also engaged in trading activity & was obliged by law to maintain separate records failing which reverse the credit relatable to the trading activity. In fact there is no proposal for demanding 8%/10% on the exempted goods and therefore one has to take it that it is their case that the demand is on the ground that appellant was engaged in the manufacture of excisable goods and trading of other goods. Once the assessee is considered to be aware of statutory provisions relating to availment of credit and his activities, the normal conclusion of a ordinary prudent person is that the assessee had deliberately avoided reversing the credit attributable to trading activity and thereby suppressing/mis-declaring the fact of availment of credit to the department. Therefore the conclusions of the lower authorities to confirm the demand with interest and imposition of penalty has to be upheld - appeal filed by the first appellant has no merits and accordingly is rejected. Penalty on second appellant – Held that:- Shri Javed Shaikh, second appellant being an employee cannot be said that he derived any extra benefit because of the lapses it has not been shown that there was any motive on his part. Since penalty has been imposed on the first appellant penalty imposed on is set aside.

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• 2012 (12) TMI 614
  Waiver of pre-deposit, interest & penalty – Scientific and Technical Consultancy Services u/s 65(92) - Held that:- Prior to May, 2008 service tax is payable on receipt basis. Assessee has not received any amount towards rendered service at all although they have made entries in their books of account. Stay granted.

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• 2012 (12) TMI 613
  Cargo Handling Service – Demand of Service Tax - Assessee being an individual rendering services to M/s. J.M. Baxi & Co. as regards loading & unloading of cargo – Held that:- If an individual is undertaking activity of loading and unloading of cargo, it would not come under the purview of service tax as Cargo Handling Services. Following the decision in case of MODI CONSTRUCTION COMPANY (2011 (4) TMI 598 - JHARKHAND HIGH COURT) held that any services provided within the factory premises would not come under the definition of Cargo Handling Services. In favour of assessee

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• 2012 (12) TMI 612
  Cenvat credit denied - application for inclusion of GTA service in the centralized registration pending - Held that:- Final rejection of centralized registration cannot be held to be a justifiable reason for denial of the credit. Apart from the fact that during the said period, the application was pending in the office of Deputy Commissioner, without their being any decision taken by him on the same, there is otherwise no dispute about the availability of the credit to the appellant. The substantial benefit, if otherwise available, cannot be denied on the technical and procedural grounds - appellant was otherwise entitled to the benefit of Cenvat credit of Service Tax paid on GTA services, so received by them, the denial of the same on the ground that the credit was availed on the basis of invoices raised by their head office is neither justifiable nor warranted. Tax paid on the freight for dutiable transportation of the goods from the depots is also admissible as credit considering the earlier decision of the Tribunal in the case of appellants own case, vide Order dated 15.12.11 - in favour of assessee.

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• Central Excise

• 2012 (12) TMI 619
  Non payment of Duty - aluminium dross and skimmings - Waiver of pre-deposit of dues - Held that:- As decided in KEC International Ltd. vs. CCE, Jaipur-I (2012 (12) TMI 426 - CESTAT, NEW DELHI) aluminium dross and skimmings are liable to duty whereas on the contrary the Tribunal in the case of Vishal Pipes Vs CCE, Noida [2010 (4) TMI 314 - CESTAT, NEW DELHI] that same are not liable to duty. In view of the contrary decisions on the same issue, the pre-deposit of the dues is waived for hearing of the appeal and the Registry is directed to list this appeal on 6.12.2012 for hearing.

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• 2012 (12) TMI 618
  Shortage in consignment of waste paper - difference in invoice and bills of entry - Waiver of pre-deposit of duty, interest and penalty - Held that:- In some consignments there is a shortage of 5.61 MT, 15.810 MT and 84 MT respectively, thus in view of these huge shortages received in respect of the goods on which credit has been availed applicants have not made out a case for total waiver of duty - No financial hardship is pleaded - The applicants are directed to pre deposit an amount of Rs.4,00,000/- within eight weeks from order date.

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• 2012 (12) TMI 617
  Abatement on MRP value denied - cannot be applied to physician samples - seeking waiver of pre-deposit of duty and interest - Held that:- As the duty has been paid on MRP basis and the Revenue is not denying, therefore, the abatement cannot be denied. In view of this, pre-deposit is waived for hearing of the appeal - stay allowed.

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• 2012 (12) TMI 616
  Rectification of Mistake - no finding of the penalty imposed by the adjudicating authority in the final order - Held that:- As in the final order in the last para, it has been specifically held that penalty imposed under section (sic) 173Q and under Rule 25 of the Central Excise Rules is set aside. Thus it appears that the application is filed without reading the final order. In view of this, frivolous application is dismissed. Another miscellaneous application filed by the Commissioner of Customs praying that he may be permitted to sign the application for rectification of mistake dismissed as the ROM application is dismissed.

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• 2012 (12) TMI 586
  Confiscation of goods - Held that:- The finding of the Tribunal that the goods found in the factory are confiscated has not been challenged by the respondent before this Court. Therefore, no decision is called for in this regard. Redemption fine reduced by Tribunal - Held that:- Reasons provided by the Tribunal as to the facts and circumstances which had led it to reduce redemption fine from Rs.2 lakhs to Rs.50,000/- only is not provided - Tribunal is required to reconsider the issue of imposition of redemption fine. Duty Demand - 9120 kgs. of Sikandar Gutka of printed laminated flexible film rolls found in the godown of the transporter - Tribunal allowed the appeal - Held that:- The Tribunal has failed to consider that the adjudicating authority had in his order recorded a finding that the respondent were not recording production in production slips/records so as to evade payment of excise duty. However, the order of the Commissioner (Appeals) placing reliance upon the statement of an employee of the respondent to the effect that the only factory in Mahad area, manufacturing printed laminated film rolls was that of the respondent No.1. Further the statement of the respondent No.3 and his employee were ignored by the Tribunal merely on the ground that their statement in the absence of corroboration by any independent evidence cannot be accepted. There is no analysis of why the orders of the lower authorities holding the "Sikandar Gutka" printed laminated flexible film rolls were liable for confiscation and that respondent No.1 is liable to pay excise duty of Rs.2.57 lakhs is bad in law - restore the matter to the file of the Tribunal for fresh consideration - appeal in favour of Revenue.

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• 2012 (12) TMI 585
  Manufacture - immovability - assembly botorized blinds - stay - held that:- the fabric is fixed to the Aluminum tubes in the factory and besides this, in the case of motorized blinds, the motor is also fixed in these tubes at this stage. Therefore, the blinds which are chargeable to duty under Tariff sub-heading 39252000, 630300 and 70199000 came into existence in the factory premises and these blinds are installed at site. Prima facie, we are also of the view that since these blinds can be shifted, though in dismantled condition, the same cannot be said to be part of immovable property. Though the appellant plead that during the period of dispute they were registered with the central excise authority for payment of service tax, earlier under Heading "installation services" and subsequently under "work contract services", it is not known as to whether their activity of assembly of roller/vertical blinds had been disclosed by them from the central excise authorities. In any case, the question of limitation being a mixed question of law and facts can be examined only at the time of final hearing. Thus this is not a case of granting un-conditional waiver from the provisions of Section 35F and as such, the amount of Rs.15 Lakh paid by the appellant, during investigation, is not sufficient for safeguarding the interests of revenue. Though the appellant pleaded that they have paid the service tax of Rs.14 Lakhs, this service tax is obviously on the service component. The appellant company is, therefore, directed to deposit an amount of Rs.7 lakhs within a period of 8 weeks from the date of this order on deposit of this amount the requirement of pre-deposit of balance amount of duty demand, interest thereon and penalty and the requirement of pre-deposit of penalty by General Manager of the Appellant company shall stand waived.

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• 2012 (12) TMI 584
  DTA clearance by 100% EOU - Whether assessee would be eligible for concessional rate of duty under notification no.23/03-CE in respect of the DTA sales for which there was no permission from the Development Commissioner - DTA sales made by assessee were in excess of the permitted DTA sales upto 31.3.2008 - On the payment of duty at the concessional rate under Notification No.23/03-CE – Further, the assessee made DTA clearances from 1.4.08 to 31.09.2008, without the permission from the Development Commissioner at concessional rate of duty - Revenue contended that, DTA sales made in excess of the permitted value and without approval were not eligible for concessional rate – Held that:- For the period 2007 -2008, the DTA clearances made by the appellant were in excess of the permitted clearances by an amount and the same cannot be said to be in accordance with the provisions of para 6.8 of the Foreign Trade Policy and hence, would not be eligible for concessional rate of duty The period 1.4.2008 to 30.09.2008, the assessee not produced any letter from the Development Commissioner permitting the DTA clearances for this period. In absence of the Development's letter, it cannot be said that during this period the appellant had achieved positive NFE or that DTA clearances were within 50% of the FOB value of the exports. In view of this, we are of the prima facie view that for this period also, the appellant would not be eligible for concessional rate of duty under Notification No.23/03-CE. In favour of revenue

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• 2012 (12) TMI 583
  Non obtaining Central Excise registration - whether the fabrication of miter bends, reducers of iron & steel from the duty paid pipes would amount to manufacture? - Held that:- Appellant had been awarded a contract of water supply project of supply of water to Amerli district consisting the work of fabrication, supply, laying and jointing water transmission main from Botad in Bhavnagar district in Chavda in Amreli district on turn key basis with all civil, mechanical and instrumentation work by Government of Gujarat vide letter dated 24.09.99 - for execution of such project, appellant was given a site wherein appellant procured duty paid pipes and used the same for execution of pipe line project and the said miter bends, reducers of iron & steel were fabricated from duty paid pipes at their work shop situated at the site at Botad. Demand on the appellant on these miter bends and reducers confirmed only on the ground that it was done so at their work shop and removed from work shop to the site for further use in the laying of pipe line for water project but this stand of the lower authorities seems to be incorrect, as the address as well as the show cause notice specifically talks about the reducers and the bends being fabricated at their site at Botad. Thus the fabrication of these items at site for the use at site is not liable for duty as has been held in the case of DODSAL PVT. LTD. Versus COMMISSIONER OF CENTRAL EXCISE, BANGALORE [2005 (10) TMI 118 - CESTAT, MUMBAI] - in favour of the appellant.

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