TMI Tax Updates - e-Newsletter
December 24, 2012
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
Highlights / Catch Notes
Income Tax
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Unaccounted Cash Credit - the assessee is a HUF which claims that Rs.2.15 lakhs was given as loan by the wife of the Kartha to the HUF. - Addition confirmed - HC
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The allowability or otherwise of deduction under section 80 IB(10) is not dependent upon the manner in which the profit has been distributed among the members of AOP but it depend upon the fulfillment of the conditions laid down in that section - AT
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Transfer of Asset – whether covered by the word “otherwise” contained in section 45(4) -Once the assets have been removed from the capital account of the partners and have been credited to the current account, the partners are free to withdraw the said amount as and when they require. Therefore, it is a clear cut case of transfer of capital assets by way of distribution which is covered by the word “otherwise” contained in section 45(4). - AT
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Deduction u/s 80IA - whether the assessee is entitled to deduction u/s 80IA of the Act on the net interest income on employees loans & advances, interest on margin money and interest income on dues towards income tax refund - held no - AT
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Disallowance u/s 43-B - amounts deposited in (PLA) - For the purpose of claiming benefit of deduction of the sum paid against the liability of tax, duty, cess, fee, etc., the year of payment is relevant and is only to be taken into account - in favour of assessee. - HC
Customs
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Seeks to levy Safeguard Duty on Import of Carbon Black From China - Notification
FEMA
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External Commercial Borrowings (ECB) for Micro Finance Institutions (MFIs) and Non-Government Organizations (NGOs) - engaged in micro finance activities under Automatic Route - Circular
Corporate Law
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Filing of Form 68 for rectification of mistakes in Form 1, Form 1A and Form 44-regarding. - Circular
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Recognition of MCX Stock Exchange Ltd - Notification
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Delegation of Powers U/s 388 B, 388C, 388E to RBI (Banking Regulation Act) - Notification
Indian Laws
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Passage of the new Companies Bill by Lok Sabha and introduction of the Competition Commission of India (Amendment) Bill 2012 in the Parliament are the highlights of the achievements of the Ministry of Corporate Affairs during 2012
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ALLOWABILITY OF PRIOR PERIOD EXPENSES - Article
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2012 (12) TMI 701
Delay in filing appeal - disallowance of foreign travel expenses and levy of penalty u/s 271(1)(c) - Held that:- The assessee seems to be quite negligent by not taking the necessary steps for filing the appeal within the time prescribed by the statute. The conduct of the assessee reveals that the assessee takes the condonation of delay provision as granted. The assessee did not care to submit any request for condonation of delay, even when it was brought specifically to his notice at the time of filing of appeal itself. As decided in the case of Ramlal v. Rewa Coalfields Ltd. [1961 (5) TMI 54 - SUPREME COURT] the cause for the delay in filing the appeal, which by due care and attention, could have been avoided, cannot be a sufficient cause within the meaning of the limitation provision. The rule of limitation also contains a rule of justice, especially where a person chooses not to take up requisite legal remedies for an inordinate length of time and without reasonable cause, the Tribunal should apply the rule of limitation. Seekers of justice must come with clean hands. In the instant case, no reasonable cause is found for condoning the delay for a period of more than 902 days after the impugned order was served upon the delay. As the appeal is barred by limitation, it deserves to be rejected on this ground alone - against assessee.
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2012 (12) TMI 700
Unexplained creditors, fixed assets and advances - CIT(A) deleted the addition - Held that :- CIT(A) had failed to observe the procedure as laid down under Rule 46A of ITR 1962 as AO who has to be allowed reasonable opportunity to examine the additional evidences as well as, where deemed fit, cross-examine the witness(es) produced by the appellant. In view of the foregoing, it is fit and proper to restore the matter back to the file of the AO for the consideration of the evidences/materials furnished by the assessee before the CIT(A) for the first time. The scope of the examination by the AO would be the same as that defined under rule 46A of the Rules with placing no fetters or restriction on either party in the ensuing proceedings. See Tin Box Co. v. CIT [2001 (2) TMI 13 - SUPREME COURT ] - Revenue's appeal is allowed for statistical purposes.
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2012 (12) TMI 699
Reopening of assessment - Eligibility of deduction u/s 54/54F - Held that:- On examination of the agreement dated 14.4.2002 and also the affirmation letter dated 21.4.2004, it appears that the AO has arrived at the belief that the capital gains would be assessable in the assessment years 2003-04 to 2005-06. These discussions would show that the AO had enough reasons to draw a belief of escapement of income in these three years. As stated earlier, it cannot be said that the AO had reached firm conclusion on the issue of year of assessment of the capital gains at the time of issuing notice u/s 148, hence dismissal of grounds raised with regard to the validity of the notice issued u/s 148 for the year under consideration. Validity of assessment of capital gains - Selection of year of assessment - Held that:- On a careful reading of the agreement dated 14.4.2002 entered between the assessee and the builder, it is noticed that the said agreement is a development agreement, under which the builder has agreed for the development of the schedule property into multi storied residential building by name "Nikunjam Apartments" - the builder shall commence construction within 30 days from the date of entering the schedule property for the purpose of construction (clause 6.1). Further it is the responsibility of the builder to obtain necessary approvals. It is also mentioned in clause 2 of the agreement that the assessee has executed a registered general power of attorney in favour of the builder on the very same date, i.e., on 14.4.2002 - CIT(A) was right in law in confirming the action of the assessing officer in assessing the capital gain in the assessment year 2003-04, since the development agreement was entered into on 14.4.2002. As assessee already declared capital gains in the assessment years 2005-06 and 2006-07 and hence the sale consideration declared in those years are required to be excluded in the assessment year 2003-04 - the right course for the assessee would be to approach the tax authorities for exclusion of the income, which was wrongly offered by him in the subsequent assessment years Deduction u/s 54/54F - Held that:- The assessee is urging this plea for the first time set aside this matter to the file of the AO with the direction to examine the claim of the assessee - appeal of the assessee as partly allowed for statistical purposes.
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2012 (12) TMI 698
Transactions as principal to principal - direction to get his books of accounts audited under section 44AB - kachha arahtia or pacca arahtia - the assessee being only a commission agent (buying agent) - Held that:- As in a case of agent whose position is similar to that of a kachha arahtia, the turnover is only the commission. However, in the case of pacca arahtia, the commission as well as other turnover shall be taken into account for applicability of provisions of section 44AB. The prescribed rate of commission a 2.5% for kachha arahtia and rate of 1% (variable) for pacca arahtia There is no dispute to the fact that the appellant is registered as pacca arahtia with the market committee, Palwal & has charged commission at the rate of 1% only on the sales. The appellant has sold good to the constituents after purchasing them from kachha arahtias after paying commission of 2.5%. Also the appellant has made payments to the kachha arahtias on his own account and received payment from the buyers on his own account. The transactions of purchases and sales as well as payments are duly recorded and routed through the books of accounts of the appellant. The appellant has nowhere been able to demonstrate that the goods sold to outside parties were in fact belonged to or owned by the principals or farmers. Rather, the appellant has sold the goods to outside parties after purchasing them on his own account from the kachha arahtia and the domain over the goods sold was that of appellant. Thus once the status of appellant is established to be so, the entire receipts including commission are to be considered for the purpose of applicability of section 44AB. Admittedly, the receipts of the appellant far exceed the limits prescribed u/s 44AB and the appellant was liable to get his books of accounts audited u/s 44AB. The turnover of Rs.1,46,27,433/- as shown in the sales tax return has to be considered as turnover of the appellant and not the commission of Rs.1,33,270/- only - against assessee. Invoking the provisions of section 194H making him liable for TDS from commission payments and invoking the provisions of section 40 (a)(ia) - Held that:- As concluded by the Hon’ble High Court, there is no res judicata, as regards assessment orders, and assessments for one year may not bind the officer for the next year. Since in the preceding year, no such facts ,as have been revealed in the year under consideration, emerge from the records, considering the totality of facts and circumstances of the case, especially when the assessee on behalf of the assessee did not place any material before us that the assessee was only a kutcha arahtia even while being registered and acting as pucca arahtia, there is no basis to interfere with the findings of the CIT(A). Moreover, the CIT(A) upheld the findings of the AO that the commission exceeding Rs.2,500/- in each case aggregated to Rs.3,04,511/ - and the provisions of sec. 194H are applicable in the case - against assessee.
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2012 (12) TMI 697
Withdrawal of revision petition - rejecting of request as the petitioner had filed a Revision Petition waiving his right to file a first appeal before the CIT (A) - Held that:- As decided in CIT Versus D. Lakshminarayanapathi [1998 (12) TMI 12 - MADRAS HIGH COURT] filing of a Revision Petition cannot be a bar for the filing of an Appeal, by the assessee, before the appropriate authority, as per the relevant provisions of law. In such circumstances, this Court finds it appropriate to set aside the impugned order of the first respondent, dated 24.7.2012. Accordingly, the writ petition stands allowed. It is made clear that it would be open to the petitioner to file an appeal, before the CIT (A), challenging the order of the assessing officer, relating to the assessment year 2009-2010, if so advised, in the manner known to law.
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2012 (12) TMI 696
Unaccounted Cash Credit - the assessee is a HUF which claims that Rs.2.15 lakhs was given as loan by the wife of the Kartha to the HUF. She claimed that she was given Rs.1.00 lakh each by her father and mother, that her father has Ac.3.30 cts. of agricultural land and her mother Ac.2.20 cts. of agricultural land which had allegedly been converted into fish ponds and granted on lease and therefore she was in a position to give a loan of Rs.2.00 lakhs to the HUF Held that:- Admittedly she was a government servant and under the applicable Conduct Rules, receipt of any gifts beyond a particular limit have to be intimated to the State Government and can be received only after obtaining permission from the State Government. There is no evidence that the wife of the Kartha of the HUF had sought permission or intimated to the State Government about the alleged gifts. Although the assessee was able to prove the identity of the creditor i.e the wife of the Kartha, it cannot be said that the assessee was able to prove the creditworthiness of the creditor or the genuineness of the transaction of loan. - Addition confirmed - Decided against the assessee.
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2012 (12) TMI 695
Reopening of assessment - beyond the period of 4 years - no mention of inclusion/ exclusion of excise duty paid on raw materials purchased and consumed - Held that:- Persuing the return filed by the petitioner he had disclosed sales (including Sales Tax and Excise Duty) of Rs.15.46 crores (rounded off) & Schedule H mentioning that there are certain loans and advances, one of which was of Rs.84.58 lakhs pertaining to balance lying with the Excise Authorities. Such balance, it is a common ground, pertains to MODVAT Credit. Thus as the petitioner had made necessary disclosure and had excluded such amount from the computation of income. Even in the reasons recorded, Assessing Officer has stated that “ on verification of the case records, it is noticed that ....” Thus, the material which the Assessing Officer relied in the reasons recorded, emanates from the record itself - no reason to reopen the assessment - in favour of assessee.
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2012 (12) TMI 694
Denying liability to deduct tax at source - appeals u/s 248 - Held that:- The assessee has entered into contracts of repairs for its imported machinery with the foreign suppliers i.e. in Germany of the machinery. From the copy of the purchase order and the invoices it is found that the Germany Company is required to carry out the services through which the machinery has to be repaired and not to be modified or 'improved'. As decided in the case of Lufthansa Air Cargo (2004 (6) TMI 273 - ITAT DELHI-B) it was considered whether repair work carried out in the normal course of its business in Germany without any involvement or participation of the assessee's personnel can be said to be of any managerial or technical or consultancy services and it was held that the payments made by the assessee to the non-resident workshops outside India do not constitute payment of fees for managerial, consultancy or technical services as defined in Explanation 2 to sec. 9(1)(vii). As in the present case facts are very much similar to the facts of the case of Lufthansa Air Cargo (cited Supra) the payments to the recipients in Germany do not come within the purview of fees for technical services. This, therefore, cannot be treated as FTS but is business income of the nonresident company. As per the law in force, business income of a nonresident recipient is chargeable to tax in India only if it is arising or accruing or deemed to arise or accrue in India provided that they have permanent establishment in India. As it is not disputed that the non-resident recipients of the remittances have no PE in India, their business income is not chargeable to tax in India. Since the very nature of income has been decided to be business income and not fees for technical services, the payments do not require withholding of tax at source u/s 195. In the result, the assessee is not under an obligation to withhold tax leave alone @ 20% u/s 206AA and the issue of grossing up would not arise. Assistance in analyzing and solving technical problem and disfunctions - providing telephonic advice analysis and assistance to the operator - Held that:- The services are not mere repairs but are towards preventive maintenance which clearly show that the recipients are providing technical assistance and services to the assessee in India. Therefore the assessee is liable to withhold tax from the payment of fees for technical services - the assessee's are non-residents and admittedly the income exceeds the taxable limit prescribed by the relevant Finance Act. In the circumstances, the recipients are bound and are under an obligation to obtain the PAN No. and furnish the same to the assessee. For failure to do so, the assessee is liable to withhold tax at the higher of rates prescribed u/s 206AA i.e. 20% and the CIT(A) has rightly held that the provision of sec. 206AA are applicable to the assessee. Grossing up u/s 195A - financial year in which such income is payable OR 20% as specified u/s 206AA - Held that:- Considering the provisions of Sec 195A & GE India Technology (2010 (9) TMI 7 - SUPREME COURT OF INDIA) the income shall be increased to such amount as would after deduction of tax thereto at the rate in force for the financial year in which such income is payable, be equal to the net amount payable under such agreement or arrangement. Thus the grossing up of the amount is to be done at the rates in force for the financial year in which such income is payable and not at 20% as specified u/s 206AA of the Act.
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2012 (12) TMI 693
Jurisdiction power u/s 263 by CIT(A) - non preparation of accounts on the basis of clause 7 of the AOP agreement dated 29.04.2003 - deduction under Section 801B(10) - Held that:- According to clause-7 of the agreement SPPL is entitled to 35% share of the gross sale proceeds of the units inclusive of the value of the land. According to distribution in the account of the assessee SPPL has received Rs.15.11 crore which is 35% of gross sale proceeds of the unit amounting to Rs.43.17 crores. A sum of Rs.11.62 crore is credited to the account of SPPL on account of land etc. and Rs.3.49 crore is considered as profit share of SPPL. Out of balance 65%, after including the MSEB and incidental charges and reducing the developmental charges a sum of Rs. 10.76 crore has been considered as profit share of RRKC. Therefore, the distribution of profit made by the assessee between its members is in accordance with clause 7 of the agreement. The interpretation of clause-7 sought to be adopted by CIT will be against the very intent and purpose for which the assessee AOP has been formed and if such interpretation is adopted it will tantamount to denial of existence of AOP which is not even the case of CIT. The assessee AOP in the present case has been assessed as AOP and found to have fulfilled the condition laid down in section 80 IB(10) and has been held to be eligible for such deduction. The quantum of deduction under section 80 IB (10) will depend on the income earned from eligible project. The quantum of deduction will not depend upon the mode of distribution of shares amongst the members of AOP as income of AOP is taxable at maximum marginal rate. Therefore, manner in which the AOP distribute its project has no bearing over eligible quantum of deduction under section u/s. 80IB (10) as the eligible quantum will be gross receipts from the project reduced by expenses incurred on the project. Distribution of revenue in the account of the assessee is inappropriate and has been benefited by larger deduction - Held that:- Such observations of CIT are incorrect, firstly, on the ground that even distribution of revenue in the books of account of the assessee cannot be said to be contrary to the purpose and intent described in clause-7 of the agreement. Secondly, the allowability or otherwise of deduction under section 80 IB(10) is not dependent upon the manner in which the profit has been distributed among the members of AOP but it depend upon the fulfillment of the conditions laid down in that section and also the deduction is available to an undertaking and not to the individual constituent of an undertaking - the impugned assessment order is neither erroneous nor prejudicial to the interest of revenue on account of allocation of profit between members as per accounts of the assessee as allocation of profit in the accounts of the assessee is in accordance with clause-7 of the agreement and manner of allocation of profit in the account cannot alter the quantum of deduction available to AOP under section 80 IB(10). Doctrine of merger - held that:- As per Oil India Ltd. vs. CIT [1981 (9) TMI 64 - CALCUTTA HIGH COURT] if an assessment is subject matter of appeal then any ground which was held in favour of asssee can also be held against him though the appeal was preferred by the assessee. Such jurisdiction of AAC is undisputable and once the appeal has been preferred before the AAC on any aspect of the quantum, the Ld. CIT cannot assume jurisdiction otherwise an anomalous position would arise - Thus as in the present case once deduction under section 80 IB(10) was subject matter of appeal before Ld. CIT(A), it covered all aspects of the matter relating to deduction under section 80 IB(10) and the order of AO on that issue had merged with the order of CIT(A). Therefore, according to clause (c) of Explanation to section263(1), Ld. CIT was debarred from exercising jurisdiction u/s.263 as the subject matter of the appeal was deduction under section 80 IB (10) - in favour of assessee.
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2012 (12) TMI 692
Payment of fee to the counsels appointed by CBDT - department representatives - Member explained that the admitted fee is being paid and the arrears towards the admitted fee arc expected to be cleared in the next two months. However, there appears to be some dispute of parameters which the Member says will be sorted out with the counsels themselves. The Member states that a quietus may be given to the issue as he has assured this court that there would be no laxity in the assistance rendered to the court in future. The matter already stands disposed of and hence need not be listed.
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2012 (12) TMI 691
TDS on commission paid to foreign agents - disallowance u/s 40(a)(i) - commission payments were deemed to have been received in India only because the telegraphic transfer of the remittances towards commission was made from a bank in India. - held that:- The provisions contained u/s 195 were not meant that the moment there is a remittance, the obligation to deduct TDS automatically arise. Considering the fact that the AO has not brought any material on record to show that the foreign agents have rendered any part of the services in India or have a permanent establishment and business connection in India, it cannot be said that any part of the commission payment made to them accrued or arisen in India requiring deduction of tax u/s 195(1) of the Act. - Deduction allowed - Decided in favor of assessee. Deduction u/s 80HHC - setting off of interest receipt against interest payment having nexus - held that:- 90% of the net interest and not the gross interest which has been included in the profits of the business of the assessee as computed under the head profits and gains of business or profession is to be deducted under clause (i) of Explanation (baa) to section 80HHC for determining the profits of business. - Decision of CIT(A) sustained - Decided in favor of assessee.
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2012 (12) TMI 690
Reassessment - valuation of closing stock u/s 145A - held that:- The whole raison 'de 'tre for reopening assessment is the escapement of income. From the above facts, it was established that in either method of accounting, the total income would not have changed and the final figure would have remained the same. There was, therefore, no question of any underassemment and consequently there was no escapement of income. The Assessing Officer did not apply his mind and overlooked the simple accounting principle. The centripetal condition that there has to be an escapement of income is not fulfilled. The justification for reopening therefore falls to the ground. Notice issued u/s 148 held as illegal and quashed. - Decided in favor of assessee.
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2012 (12) TMI 689
Exemption u/s 54F - investment in residential house - period of limitation of 3 years - Long term capital gain - held that:- It is the say of the assessee that the delay in the construction is attributable to the builder and the assessee cannot be penalized for something which is not in his hand. - We do not agree with this contention because as per the entries in the certificate of commencement, the approval was given on 7.9.2010 for 'C' Wing whereas the assessee has filed return on 22.2.2007 claiming full exemption u/s. 54F of the Act, when on that date neither the agreement for sale was entered nor the 'C' wing's 9th floor was approved by the local authority. The assessee has relied upon various judicial decisions claiming that the contiguous units are to be treated as one residential unit. - Exemption denied - Decided against assessee.
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2012 (12) TMI 688
Reassessment of an assessment within four years - Notice u/s 148 - capital assets u/s 2(14) - change of opinion - held that:- It is true that the impugned notice has been issued within a period of four years from the end of relevant assessment year. Therefore, the requirement that the income chargeable to tax should have escaped assessment for the reason of the failure on the part of the assessee to disclose truly and fully all material facts need not be established. However, as held by the Apex Court in case of Commissioner of Income-Tax Vs. (1) Kelvinator of India Ltd. (2) Eicher Ltd. (2010 (1) TMI 11 - SUPREME COURT OF INDIA) reopening even within four years would not be permissible on a mere change of opinion. Similarly in a recent decision Full Bench of Delhi High Court by a majority opinion in case of Commissioner of Income Tax Vs. Usha International Ltd. [2012 (9) TMI 767 - DELHI HIGH COURT] held that Reassessment proceedings will be invalid in case an issue or query is raised and answered by the assessee in original assessment proceedings but thereafter the AO does not make any addition in the assessment order. In such situations it should be accepted that the issue was examined but the AO did not find any ground or reason to make addition or reject the stand of the assessee. He forms an opinion. The reassessment will be invalid because the AO had formed an opinion in the original assessment, though he had not recorded his reasons. Notice quashed - Decided in favor of assessee.
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2012 (12) TMI 687
Re-opening of Assessment – reworked out the deduction u/s 80HHC and book profit u/s 115JB - Held that:- Considering the excessive claim of the assessee u/s. 80HHC while computing the Book Profit u/s 115JB AO initiated the reopening of assessment to bring the income to tax which is escaped from assessment. Being so, the reopening of assessment is valid - against the assessee. Deduction u/s.80HHC by adopting the book profit in place of the profits of the business while computing the chargeable book profit u/s. 115JB - Held that:- As decided in Ajanta Pharma Ltd v CIT [2010 (9) TMI 8 - SUPREME COURT] export profits computed under the provisions of sec. 80HHC based on 'profits of business or profession' cannot be substituted into the computation scheme as prescribed in sec. 115JB which is an alternative computation to the normal computation of income. The deduction under clause (iv) of Explanation for the export profits should not be phased out as provided in sub-section (1B) of sec. 80HHC because, 115JB is an independent code and it covers full export profits as the eligible profits for the purposes of book profits tax and no phasing is required to be carried out - in favour of assessee. Deferred tax provision pursuant to AS 22 - unascertained liability hence warrants adjustments by way of addition to the book profits - Held that:- After insertion of clause (h) in the Explanation-1 to section 115JB with retrospective effect vide Finance Act, 2008 with effect from 1.4.2001, this issue has to be decided against the assessee as in view this clause the book profit shown in the Profit and Loss Account in the relevant previous year prepared under subsection (2) of section 115JB to be increased, inter alia by the amount of deferred tax and the provisions therefor - against assessee. Reopening of assessment - excess grant of deduction u/s 80HHC - Held that:- Though the original assessments have been completed u/s 143(3) of the Act. The assessing officer has considered all the materials available on the record at the time of completing the original assessment and granted deduction u/s 80HHC. The AO is precluded to reconsider the same after four years from the expiry of the original assessment year to consider the same to bring the escaped income into taxation. Had it been within four years, the assessing officer could have reopened the assessment under clause (b) to explanation 2 to proviso 2 of Section 147 of the I.T. Act. In these assessment years, the assessment was reopened after four years, in our opinion, the reassessment is bad in law - in favour of assessee. Brought forward loss/ Unabsorbed Depreciation allowance of amalgamating companies - whether eligible for set off under sec. 72A while computing relief u/s 80HHC - Held that:- This ground doesn’t required adjudication as already held that the reopening is bad in law in these assessment years. Being so, we refrain ourselves from adjudicating this issue. Interest income - whether a part of business profits assessable u/s 28 to 44 - Held that:- The deposit made by the assessee in the bank and interest earned on it cannot be considered as income from business much less income from export earning, it cannot be considered as income from export earnings, as there is no nexus between export business and interest income. Interest income was earned from the deposits made by the assessee with the bank and not from export business - in favour of revenue. Conversion charges - whether eligible profits for computing deduction u/s 80HHC r.w. clause (iv) of Explanation to sec. 115JB - Held that:- As decided in CIT Versus K. RAVINDRANATHAN NAIR [2007 (11) TMI 10 - SUPREME COURT OF INDIA] 90% of conversion charges has to be reduced from the gross total income to arrive at the business profit and it has to be included in the total turnover in the formula of arriving at the business profit in terms of clause (baa) of the Explanation to section 80HHC(3) of the Act. Accordingly, the Assessing Officer is directed to recompute the deduction u/s. 80HHC - partly in favour of revenue. Sales tax and excise duty - whether deleted from total turnover for computing deduction u/s. 80HHC - Held that:- As decided in Commissioner of Income-Tax Versus Lakshmi Machine Works [2007 (4) TMI 202 - SUPREME COURT] just as interest, commission, etc., do not emanate from the “turnover” so also excise duty and sales tax do not emanate from such turnover. Since excise duty and sales tax did not involve any such turnover such taxes had to be excluded - against revenue. Interest relatable to an acquisition of capital asset - whether permissible deduction u/s 36(1)(iii)? Held that:- As decuided in DCIT vs. Core Health Care Ltd. [2008 (2) TMI 8 - SUPREME COURT OF INDIA] Section 36(1)(iii)it is a code by itself. It makes no distinction between money borrowed to acquire a capital asset or a revenue asset. All that the section requires is that the assessee must borrow capital and the purpose of the borrowing must be for business - in favour of assessee. Provisions for unascertained liabilities - Held that:- In view of the retrospective amendment vide Finance Act, 2009 wherein there is an insertion of clause (i) with retrospective amendment from 1.4.2001 wherein the amount or amounts set aside as provision for diminution in the value of revenue assets has to be added to the book profit. In view of this, this issue is decided against the assessee. DEPB benefits accrued - whether deducted for computing export profits both u/s 80HHC and clause (iv) of Explanation to sec. 115JB - Held that:- As decided in Topman Exports v CIT [2012 (2) TMI 100 - SUPREME COURT OF INDIA] the face value would be assessable under 28(iiib) and the profit under 28(iiid) and in case the exporter (having export turnover in excess of Rs. 10 crores) is unable to fulfil the conditions specified in Third Proviso it is only the profits earned on the sale of DEPB benefits to the extent of face value should be allowed to the assessee in terms of First proviso under subsection (3) without applying the conditions stipulated in Third Proviso - in favour of the assessee. Depreciation on demolished assets - Held that:- As decided in Natco Exports vs. DCIT [2002 (6) TMI 168 - ITAT HYDERABAD-A] as for discarded assets the adjustment required to be made under the concept of "block of assets" for the purposes of allowing depreciation is to reduce the monies receivable consequent to such discarding from the block. In the case of the assessee, as no money whatsoever was payable to him on handing over the ponds constructed on leased land to the owners of land, there can be no amount whatsoever that can be reduced from the block of assets. Hence, the block continues at its written down value - in favour of assessee. Addition of imported entitlements - Held that:- Agreeing with the findings of the CIT(A) that the import entitlements are contingent in nature and accrue only in the year of actual import of raw materials and real income to be taxed even though in book keeping, an entry is made about hypothetical income which doesn’t materialize - against revenue.
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2012 (12) TMI 686
Transfer of Asset – whether covered by the word “otherwise” contained in section 45(4) - Held that:- The assessee after getting the valuation done from the Registered Valuer had distributed the assets equally though on WDV equally amongst all the four partners by crediting the current capital account. Once the assets have been removed from the capital account of the partners and have been credited to the current account, the partners are free to withdraw the said amount as and when they require. Therefore, it is a clear cut case of transfer of capital assets by way of distribution which is covered by the word “otherwise” contained in section 45(4). Value in respect of residential house - value pertains to the building OR land - Held that:- The residential house can not be separate between land & building . The assessee had never objected to the value taken by the AO during assessment proceedings even after show cause was given to the assessee. The assessee did not exercise option for the fair market value as on 01.04.1981 or the cost of residential house as on 01.04.1981 during assessment proceedings inspite of the fact option given vide show cause letter dated 26.12.2008. Therefore, the value taken by the AO at Rs.18,00,000/- is correct. Value of showroom at Gulmarg Bagh taken by the AO as on 01.04.1981 was duly communicated to the assessee vide show cause dated 26.12.2008 and sufficient opportunity was given to opt either for book value or fair market value. But the same option was never exercised by the assessee during the assessment proceedings. Transfer with regard to the land at Gulmarg was a lease property and the land cannot be transferred without the prior approval of the authority - It was correctly observed by the AO that the lease of land was more than a period of 12 years and therefore, assessee is the deemed owner. The arguments of the assessee, therefore, cannot help the assessee. Regarding boundary wall, the same is also a capital asset, has rightly been observed by the A.O. Gulmarg Hut - same had been dismantled and construction of the hotel was going on when asset was transferred in the name of the partners - Held that:- As in this regard, it was submitted that the construction of hotel was being carried out through M/s. Manzoor Construction through whom an amount of Rs.19 lacs was advanced.As regards the order of the CIT(A), the same is not a speaking order and he has ignored the findings of the AO who has rightly taken the fair market value and after taking into consideration the indexed cost and has rightly computed the long term capital gain vide paras 12(a) to 12(d) of his order. Therefore,no infirmity in the order of the A.O. in this regard. Thus, all the grounds of the Revenue are allowed - appeal of the Revenue allowed.
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2012 (12) TMI 685
Bad debt claim - disallowance on no description as to why the debts had gone bad - Held that:- As decided in T.R.F. LTD. Versus CIT [2010 (2) TMI 211 - SUPREME COURT] after the amendment of section 36(1)(vii) w.e.f. 01.04.1989, in order to obtain a deduction in relation to bad debts, it is not necessary for the assessee to establish that the debt, in fact has become irrecoverable. It is enough of the bad debt is written off as irrecoverable in the accounts of the assessee - thus bad debts claim of the assessee as written off as bad in its books of account as irrecoverable is upheld - in favour of assessee. Leave Encashment – disallowance as not paid before the due date for filing of the return - Held that:- Following the decision in case of M/s Bharat Earth Movers Ltd. vs CIT [2000 (8) TMI 4 - SUPREME COURT] provision made for leave encashment cannot be taken as a contingent liability and hence it is an ascertained liability. However, the legislature by way of amendment restricts such deduction in the case of leave encashment unless it is actually paid in that particular financial year - order of the CIT(A) is set aside and restore the issue to the file of the AO to verify whether the amount has been paid before filing of the return or not - in favour of assessee for statistical purposes. LIC Group Gratuity Scheme payments – disallowance as payments not made to an irrecoverable trust for the exclusive benefit of the employees - Held that:- Following the decision of court in case of [Metal Box Company of India Ltd. Vs. Their Workmen 1968 (8) TMI 53 - SUPREME COURT an amount paid towards an unapproved gratuity fund can be deducted u/s 37 though not u/s 36(1)(v) - order of CIT(A) set aside and claim of deduction being the amount paid to the LIC towards LIC Group Gratuity Scheme is allowed - in favour of assessee. Remission of loan – Held that:- Provisions of sec. 41(1) do not apply to the facts of the case - CIT(A) ought to have held that the said sum does not represent the income of the appellant - restore this issue to the file of the CIT(A) for adjudication de-novo - appeal of the assessee allowed for statistical purposes.
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2012 (12) TMI 684
Revision u/s 263 – Deferment of sale consideration – Held that:- As per terms of the agreement consideration for sale of shares was agreed to be paid in two stages i.e. Rs.2.70 crores to be paid at the time of agreement whereas the deferred consideration to be paid in the subsequent years depending on the financial position of Unisol Infraservices Pvt. Ltd. in the subsequent four years upto 31st March, 2010 as per the formula given in the agreement. The amount of deferred consideration thus was uncertain and it was not possible to quantify the same. The aggregate consideration including initial and deferred consideration, however, was capped at Rs.20 crores less debt plus cash as per clause 3.2 of the agreement and thus maximum amount of consideration, in our opinion, was erroneously taken by the CIT as only the initial consideration of Rs.2.70 crores was certainly payable as consideration for sale of shares and that alone, could be taken into consideration and not the deferred consideration the receipt of which was neither certain nor the quantum thereof was ascertainable with any reasonable certainty - there was no error in the said assessments by AO as alleged by the CIT calling for revision u/s 263 - assessment orders made by the AO u/s 143(3) are restored - in favour of assessee.
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2012 (12) TMI 683
Computation of eligible income u/s 10A – Whether interest income on FD is eligible for deduction u/s 10A - interest income derived on account of temporary parking of business funds – Held that:- Following the decision in case of assessee’s own case for earlier assessment year Semantic Space Technologies Ltd.,(2012 (11) TMI 536 - ITAT HYDERABAD) held that the income by way of interest on fixed deposits is not eligible for special deduction u/s 10A. In favour of revenue Deduction u/s 10A - Whether export by HO to branch office is eligible for deduction u/s 10A – Held that:- Following the decision in case of assessee’s own case for earlier assessment year Semantic Space Technologies Ltd.,(2012 (11) TMI 536 - ITAT HYDERABAD) that the transfers between the HO and the Branch Office and vice versa with the approval of the STPI clubbed with satisfaction of other conditions like realization of proceeds in foreign exchange, constitutes exports for the purpose of the deduction under S.10A of the Act. Thus, without going into the other arguments raised by the learned counsel for the assessee, we find that the assessee must be given relief on this issue. In favour of assessee Disallowance u/s 40(a)(ia) - Whether remittance by HO on account of sub-contracted to its branch office abroad subject to TDS - Assessee had paid to its US Branch on account of work sub-contracted to them - AO was of the opinion that the said sub contract payments attracted TDS u/s 194C/section 195, as the US branch is a non-resident – Held that:- The status of the branch office of the assessee abroad is not ‘non-resident’. Therefore, the provisions of Sec 195 are inapplicable. Following the decision in case of assessee’s own case for earlier assessment year Semantic Space Technologies Ltd.,(2012 (11) TMI 536 - ITAT HYDERABAD) issue decides in favour of assessee TDS u/s 194C on leased line charges paid to BSNL - Disallowance u/s 40(a)(ia) – Held that:- Following the decision in case of USHODAYA ENTERPRISES PVT LTD (2012 (7) TMI 120 - ITAT HYDERABAD) held that payment made are akin to telephone lines and hence the provisions of section 194J is not attracted since BSNL is only providing the line and not any professional or technical services to the assessee. In favour of assessee Disallowance on non-deduction of TDS u/s 195 – Payment to Non-resident for due diligence services in USA – Assessee argued that expenditure provision was reversed and the expenditure never really incurred, the disallowance if upheld in the current year, a similar amount reversed in the next year, is liable to be deleted from the computation of total income - Held that:- As the payment having been made to a foreign entity was liable for disallowance if tax was deducted is not made. Therefore view taken by the CIT(A) is justified. In favour of revenue Computation of eligible income u/s 10A – Whether credit balance written back and notice period salary are part of eligible income u/s 10A – Held that:- Following the decision in case of assessee’s own case for earlier assessment year Semantic Space Technologies Ltd.,(2012 (11) TMI 536 - ITAT HYDERABAD) as the amount represents recovery of the business expenses earlier incurred by the assessee, therefore the income arising on account of such recovery also represents the business income of the assessee. In favour of assessee Deduction u/s 10A – Whether disallowed amount are eligible for calculation of deduction u/s 10A – Held that:- As the issue is squarely covered by the decision of the Tribunal in assessee’s own case Semantic Space Technologies Ltd.,(2012 (11) TMI 536 - ITAT HYDERABAD) for AY 2006-07 in favour of the assessee.
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2012 (12) TMI 682
Rural development expenses - disallowance - Held that:- Expenses incurred by the assessee on rural development in the villages near the assessee’s factory are disallowed as these expenses have no nexus with the business carried on by the assessee - in favour of Revenue. Provision for contractual liability towards 3rd party manufacturers/ convertors in relation to excise duty - disallowance - Held that:- Assessee was following mercantile system of accounting as per which contractual liability accrued on the date of its ascertainment and was allowable in the year of ascertainment. In this case, the liability was pending in dispute and therefore, the same had not been incurred during the year. Facts this year are identical and, therefore, respectfully following the decision of the Tribunal in the year 1994-95, order of CIT(A)disallowing the claim is confirmed - in favour of Revenue. Unexplained sale of milk fat - Held that:- There was nothing on record found during the survey to show that the assessee had made sale outside the books of account. The milk fat was subject to excise duty and it was recorded in the excise register. The assessee had given detailed breakup of the cans. Even if the weight of each can was taken as same i.e. 50Kg. the total weight of fat on basis of production log sheet was 417476 Kg and as per excise register the same was at 470674 Kg - as on the days the discrepancy was noted, there was no mention of milk fat cans produced in the production log sheet. Order of CIT(A)set aside and addition made is deleted - in favour of assessee. Interest paid to the Income tax department - disallowance - Held that:- Assessee had adjusted the interest paid against the interest received on refund. The interest paid to Income tax department is not allowable as deduction the view supported in the case of Dy. CIT vs. Sandvik Asia Ltd. [2011 (6) TMI 563 - ITAT, PUNE]. Inclusion of Miscellaneous income sales tax and excise duty refund in the total turnover - Held that:- Miscellaneous income which included trade discounts, miscellaneous sales, sales tax, excise duty etc. had to be included in the total turnover except the sales tax and excise duty which did not contain an element of turnover as decide in the case of CIT vs. Lakshmi Machine Works [2007 (11) TMI 29 - CESTAT, CHENNAI]- order of CIT(A) is confirmed except in relation to sales tax and excise duty which will be excluded from the total turnover. Reduction of 90% of interest from profit of business while computing deduction u/s 80HHC - Held that:- 90% of net interest income is required to be reduced after deducting expenses incurred having nexus with earning of interest income as held in M/s ACG Associated Capsules Pvt. Ltd. [2012 (2) TMI 101 - SUPREME COURT OF INDIA] - issue restored to AO for working out 90% of net interest income after allowing opportunity of hearing to the assessee. Computation of Capital Gain - sale of land and building - Held that:- Land and building has to be bifurcated for the purpose of computation of capital gain and since depreciation in some years has been allowed in respect of building portion, the capital gain in respect of building portion has to be computed as short term capital gain under section 50. The gain in respect of land portion has to be computed as long term capital gain as per method prescribed in the Act. Since assessee has invested the long term capital gain in NABARD Bonds, assessee would be entitled to deduction under section 54 EC even in respect of short term capital gain computed under section 50 in respect of building portion, if the same was held for more than three years - issue is thus restored to the file of AO. Disallowance of payment to consultants, gifts etc - Held that:- Expenditure incurred wholly and exclusively in connection with the business or on commercial expediency. The assessee has included Rs.1.50 lacs for deduction u/s 35DDA which means the deduction has been claimed over a period of time whereas the same could have been claimed and allowed under section 37 wholly in the relevant year. Therefore, making the claim in respect of payment to consultant under section 35 DDA does not adversely impact the revenue - in favour of assessee. Disallowance of repairs/renovation to the building - Held that:- Assessee has incurred an expenditure on redevelopment of Cadbury House and considering the smallness of the amount involved this could not be considered as expenditure on total renovation of the building therefore has to be allowed as expenditure on repair of the building. As regards canteen building, assessee had spent substantial amount of Rs.12,63,378/- on renovation of the building in assessment year 2001-02, thus considering the nature of building and substantial expenditure incurred it has to be considered as expenditure on total renovation and thus capital in nature & allowing depreciation of the same.
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2012 (12) TMI 671
Disallowance u/s 43-B - amounts deposited in the Excise Personal Ledger Account (PLA) - Held that:- In the present case, the assessee had no option, but to keep the account, in respect of each excisable product (evident from the mandate in Rule 173G that it "shall keep an account current"). The latter part of the main rule makes it clear beyond any doubt that the assessee has no choice in the obligation, and cannot remove the goods manufactured by it, unless sufficient amounts are kept in credit. As decided in CIT And Another Versus C. L. Gupta And Sons.[2002 (11) TMI 82 - ALLAHABAD HIGH COURT] section 43B in clear terms provides that the deduction claimed by the assessee in respect of any sum paid by way of tax, duty, cess or fee, shall be allowed only in computing the income referred to in Section 28 of that previous year in which it was actually paid, irrespective of the previous year in which the liability was incurred for the payment of such sum as per the method of accounting regularly employed by the assessee. For the purpose of claiming benefit of deduction of the sum paid against the liability of tax, duty, cess, fee, etc., the year of payment is relevant and is only to be taken into account - in favour of assessee. Disallowance of provision for warranties - Held that:- As decided in M/s. Rotork Controls India (P) Ltd. Versus CIT, Chennai [2009 (5) TMI 16 - SUPREME COURT OF INDIA] a provision is recognized when an enterprise has a present obligation as a result of a past event & it is probable that an outflow of resources will be required to settle the obligation with a reliable estimate can be made of the amount of the obligation - The principle is that if the historical trend indicates that a large number of sophisticated good were being manufactured in the past and the facts show that defects existed in some of the items manufactured and sold, then provision made for warranty in respect of such sophisticated goods would be entitled to deduction from the gross receipts under Section 37 - in favour of assessee.
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2012 (12) TMI 670
Deduction u/s 80IA - whether the assessee is entitled to deduction u/s 80IA of the Act on the net interest income on employees loans & advances, interest on margin money and interest income on dues towards income tax refund adjustment from Essar Project Ltd. - held that:- the issue is covered by the decision of Apex Court in the case of Liberty India [2009 (8) TMI 63 - SUPREME COURT] - assessee is not entitled to the deduction u/s 80IA of the Act on the interest - Decided against the assessee. Addition on account of provision for Income Tax Recoverable - reimbursement of income-tax - held that:- the amount paid by the power purchasers by way of tax on the amount of tariff charges received by the assessee can be treated as the income of the assessee. It cannot be overlooked that the said amount is nothing but a tax upon the payments received by the assessee. By virtue of the obligation undertaken by the power purchasers to reimburse the tax to the assessee does not mean that it is not the income in the hands of the assessee. - payment of tax received by the assessee is a part of tariff charges as per agreements and, hence, it is an income in the hands of the assessee and, therefore, the said amount without allowing any deduction is liable to be included in the income of the assessee. - Decided against the assessee. Minimum alternate tax - Addition to book profit - Section 115JB - held that:- There is no dispute that under clause (i) of Explanation 1 to section 115JB of the Act there is a retrospective amendment made by Finance (2) Act, 2009 w.e.f. 1-4-2001, therefore, the book profit has to be recomputed in accordance with the above clause (i) of Explanation 1 to section 115Jb of the Act. - matter remanded back on this issue.
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2012 (12) TMI 669
Penalty u/s 271(1)(c) or 271(1)(c) - unaccounted NRE account - Held that:- Shiv Prasad Jagat Ram Kala is the holder of the subject NRE account, wherefrom the money came to the assessee, and the same is evidenced by the Deed of Gift and the affidavit, both executed by the said Shiv Prasad Jagat Ram Kala. Shiv Prasad Jagat Ram Kala, or his family, could not be located at the address, which was furnished to the bank while the bank account was opened & in course of inquiry one family of Shiv Prasad Jagat Ram Kala located in a village who represented that Shiv Prasad Jagat Ram Kala, who is a member of their family, has no relationship with the assessee and held out that finance of Shiv Prasad Jagat Ram Kala could not permit him to make such a gift. Thus in the event, Shiv Prasad Jagat Ram Kala, whose address was given to the bank, and whose family was located at a village are different people, then, there is total failure on the part of the assessee to prove that Shiv Prasad Jagat Ram Kala, whose address was given to the bank, made the gift as the Deed of Gift and the affidavit alleged to have been signed by Shiv Prasad Jagat Ram Kala was not substantiated. The matter, therefore, squarely comes within the Explanation 1(B) to the Section and, accordingly, there is deemed concealment of the income by the assessee - set aside the order of the Commissioner and the Tribunal and restore the order of the AO - against assessee.
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2012 (12) TMI 668
Non deduction of TDS - perquisite value of stock options allotted to its employees covered under the employees Stock Option scheme - Held that:- Decision of a Division Bench of this Court, dated 23.12.2011, in a batch of cases confirming the orders passed by a single judge of this Court directing the refund of the amounts paid by the assessees, as tax, with the interest payable thereon, as per the provisions of the Income Tax Act, 1961. Set aside the impugned order of the first respondent, dated 19.1.2007. Consequently, the second and the third respondents are directed to refund the tax amount to the petitioner, within a period of eight weeks from the date of receipt of a copy of this order - in favour of assessee.
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2012 (12) TMI 667
Clause (2) to Explanation 5 to Section 271(1)(c) not applied - course of proceedings u/s 153A - Held that:- The said provision is available, not merely when the assessee, in his statement offers or surrenders, to tax the amount in question which is later assessed, but also complies with the other conditions, of having filed the return. The allusion to Section 139 (1) is significant in this regard, because a notice and consequent search assessment pursuant to Section 153A stands excluded, altogether, by virtue of the non-obstante clause to the latter (Section 153A) provision. Even if the other view, more favourable to the assessee were to be taken, and a return under Section 153A be assumed to be covered as one under Section 139 (1), the fact remains, that in this case, the assessee did not include it, pursuant to the notice issued, and instead chose to merely reiterate its return originally filed on 31-10-2005 The search, and the statement recorded under Section 132 (4), the assessee, on being issued with notice u/s 153A did not file any return. The notice under Section 153A was issued on 20-7-2006. It was only when assessment proceedings were taken up for consideration, did the assessee, by letter dated 14-8-2007, request, that its return, filed on 31-10-2005, be treated as its return filed in response to the notice under Section 153A. Much later, it sought to revise its computation, on 14-12-2007. Therefore, this Court is of the opinion that the “escape route”, provided by Clause (2) to Explanation 5 in this case, was not available to the assessee - the Tribunal did not commit any error of law appeal, being devoid of merits, is consequently dismissed.
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2012 (12) TMI 666
Deduction u/s.80JJA - manufacturing fuel briquettes from bagasse - Held that:- Bagasse is a waste of the sugar factory. This waste is a bio-degradeable waste and the same is collected on consideration by the assessee from the factory. There could be no universal definition of the word “waste” & has to be understood contextually i.e. place where it arises and the manner in which it arises during the processing of some article. The fact that sugar industry also regards Bagasse as waste is evident from Circular dated 4/2/2006 issued by the Sugar Commissioner, Maharashtra State, Pune. Besides the ITC classification of the Exim policy & CETA 1985 classifies bagasse as a waste of sugar industry under Chapter 23 Heading 23.20 thereof & Chapter 23 heading 23.01 respectively. Whether collection would mean collecting free of charge and not by purchasing the same. - held that:- The word “collecting” means to gather; to fetch. It is a neutral word and does not mean collection for consideration or collection without consideration. Thus it is an undisputed position that the assessee has collected bagasse from sugar factories after having made payment for the same. Therefore, the aforesaid requirement of collecting as provided under Section 80JJA is satisfied. It is a undisputed finding of fact that the collected bagasse has been used by the respondent-assessee to make briquettes for fuel as that indeed is the business of the respondent-assessee - in favour of assessee.
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2012 (12) TMI 665
Indo-USA DTAA - payment received from ERAPL(USA) for providing assistance in client coordination titrated as Royalty under Article 12 - Held that:- As seen that the ERAPL serves certain multinational clients in India who have principal offices located outside India and the appellant has agreed to serve EARPL to help to act as coordinating agency as required by such multinational clients. For this purpose, the ERAPL has to pay to the appellant certain amount of annual billings. For the communication channel between ERAPL and its clients the client coordination fees paid to the appellant cannot be termed as Royalty because it is not a consideration for the use of right or to use any of the specified terms mentioned in the definition of Royalty under Article 12 of Indo US DTAA. Since the appellant admittedly does not have a permanent establishment India, the question of taxability of the impugned amount in India would not arise in the absence PE, as provided for in Article 7 of DTAA. In view of these facts, this ground of appeal is decided in favour of the appellant. Lower rate of tax - fees for included services(FIS) - CIT(A)directing to tax @10% instead of @15% - Held that:- As per the Article 12(2)(b) the rate of 10% is applicable in the case of royalty referred to in sub-paragraph of 3(b) and fees for included services as defined under this article that are ancillary and subsidiary to the enjoyment of the property for which payment is received under Para 3(b) of Article. Since the amounts are not royalty being considered either 3(a) or 3(b), the rate of 10% on FIS is not correct. There is nothing on record that indicates that rate specified under Sub-Article (2)(b) is applicable and not (2)(a)(ii). Therefore, upholding the Revenue ground direct the AO to tax the above amounts confirmed by CIT(A) as FIS at 15% of the rate - in favour of revenue.
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2012 (12) TMI 664
Prior period of expenses - the expenditure incurred by the employees of the assessee on account of travel which are of very petty sums. Once the employees have submitted their bills to the assessee company, the same has to be reimbursed. Insofar as the assessee is concerned, as and when the bills were submitted, payments have been made and has been claimed as business expenditure. - held that:- Looking to the fact that the assessee has a substantial turnover, such reimbursement of expenditure cannot be disallowed simply on the ground that travelling by the employees have been undertaken in the earlier years and bills by them are submitted in this year. - Since they are directly related to business of the assessee, the same has to be allowed. - Decided in favor of assessee. Foreign travel expenditure - business purposes - AO disallowed the claim of expenditure holding that the expenditure incurred is not for business purpose as the assessee has no business transactions i.e., sale or purchase with these countries. - held that:- The assessee, being a global company, which has business interest all over the world, such kind of business trip by senior officials cannot be disallowed simply on the reason that the assessee does not have direct transactions of sale or purchase from such countries. Such a myopic perception cannot be upheld in this era, as there can be several reasons in relation to the business. The term “wholly and exclusively for the business purpose” has a very wide meaning and the assessee’s perception as to what is the business purpose has to be given importance. The only requirement is that the assessee has to prove that such expenditures are genuine and for its business purposes. - Decided in favor of assessee. Advertisement expenses - The Assessing Officer disallowed the claim of the assessee on the ground that the services have been rendered in earlier years and, therefore, the same cannot be allowed in this year even if the bills have been raised by these parties in this year. - held that:- Since both the authorities have not examined this issue properly, matter remanded back. Ad-hoc disallowance of expenses - held that:- It is now a settled proposition of law that the Appellate Tribunal under section 254(1) of the Act, had no power to take back the benefit conferred by the Assessing Officer or enhance the assessment. Once the matter has been restored by the Tribunal, the income cannot be enhanced from what was determined at the time of original assessment proceedings, which was the subject matter of dispute before the Tribunal. - the enhancement of assessment by making 100% disallowance in respect of free food allowance cannot be sustained and the same is restricted to 50%, as was made by the Assessing Officer in the original round of proceedings. - Decided in favor of assessee.
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2012 (12) TMI 663
Disallowance of Interest – Held that:- As AO has not given any finding that the interest free loans were given out of the borrowed funds on which interest was paid & has not examined the availability of surplus funds with the assessee which can justify interest free loans to the managing director no disallowance can be warranted - accepting the submission of the assessee that borrowed funds on which interest was paid had been utilized for the purpose of business of the assessee thus, the disallowance directed to be deleted - in favour of assessee. Business Promotion and Tour and Travelling expenditure - disallowance for want of sufficient proof – Held that:- As foreign travel is a necessary incident of the business of the Assessee but at the same time the inability of the Assessee to produce bills and purpose of foreign travel, calls for some disallowance - it would be just and fair to disallow 50% of the expenses claimed by the Assessee. Accordingly the disallowance is directed to be restricted to 50% of Rs.14,74,280/- - partly in favour of assessee.
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2012 (12) TMI 662
Prior period expenditure - Power Lines Service charges excluded in the valuation of the current assets - hand over of power lines to KEB free of cost - whether assessee can claim the expenditure incurred by it for the earlier assessment years as a deduction of expenditure of the relevant assessment year - Held that:- The assessee has earned income from the said power lines and the same has also been offered in the years of receipt. By treating the expenditure as work-in progress, the assessee in the year in which the power lines are to be handed over in K.E.B, free of cost, has to set off the work-in progress, from the profits of the relevant year as the assessee is no longer going to earn income out of the said power lines. By debiting the expenditure to profit and loss account and credibility the closing stock, it is clear that the assessee has not claimed this expenditure as deduction in the earlier years. As held by the Hon’ble Courts in CIT Vs. Standard Radiators Pvt. Ltd [2005 (12) TMI 70 - GUJARAT HIGH COURT] wherever there is a change of method of accounting, for genuine reasons, there is every chances of claim of double deduction arising during the year on change of accounting. The necessity and the crystallization of the liability during the relevant period is to be consider for allowing the expenditure. Thus as the assessee has not claimed the expenditure in the earlier years and there is no claim of double deduction in the relevant assessment year & the assessee who has changed the method of accounting due to genuine reason of having to hand over the power lines to KEB can claim the expenditure relating to earlier years in this year, even if it results in double deduction - in favour of assessee.
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2012 (12) TMI 661
Invoking of provisions of sec 154 and disallowance u/s 40(a)(ia)- Held that:- Provisions of Chapter XVII are relevant only for ascertaining the deductibility of the tax a source and not for the actual deduction and payment for attracting the provision of section 40(a)(ia). Since in the instant case, it is not in dispute that that the assessee deducted TDS which was not paid to the account of Central Govt. within the prescribed time, however, it was paid before the due date of filing the return specified in section 139(1), addition u/s. 40(a)(ia) cannot be made if the payment of tax deducted at source has been made before the due date of filing the return of income for the year under consideration. See CIT v. Virgin Creations [2011 (11) TMI 348 - CALCUTTA HIGH COURT ] Therefore, when the assessee‘s case was covered under the main provisions of existing law then there was no need to go to the issue of prospective or retrospective effect of the amendment in the provisions by the Finance Act, 2010 - in favour of assessee.
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2012 (12) TMI 660
Deduction u/s 80HHC & 80IB - income derived from DEPB, duty draw back and premium on sale of DEPB - Following the decision of Supreme Court in case of M/s Liberty India Versus Commissioner of Income Tax 2009 (8) TMI 63 - SUPREME COURT on the income derived from DEPB and duty draw back, deduction under section 80HHC and 80IB cannot be allowed - Duty drawback receipt/DEPB benefits do not form part of the net profits of eligible industrial undertaking for the purposes of Sections 80I/80-IA/80-IB of the 1961 Act. Penalty u/s 271(1)(c) - furnishing of inaccurate particulars – Held that:- Following the decision of Supreme court in case of COMMISSIONER OF INCOME-TAX Versus RELIANCE PETROPRODUCTS FVT. LTD. [2010 (3) TMI 80 - SUPREME COURT] mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding income of the assessee - No infirmity in the order of the CIT(A) - Merely because the assessee has a different perception of the situation than the Assessing Officer, even though, in the ultimate analysis, the stand of the Assessing Officer is to be upheld, it cannot be said that the assessee has concealed any particulars - in the result both the appeals of the Revenue are dismissed
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2012 (12) TMI 659
Ex-parte order - assessee contested against non allowing proper opportunity of being heard - Held that:- CIT(A) has given eight opportunities to the assessee commencing from 30/06/2005 to 14/01/2011 & the order was passed by the CIT(A) on 10/02/2011. However, the concept of natural justice cannot be extended to an absurd limit of affording endless opportunity, to an assessee, who is not willing to avail of such opportunities, thus the ground of appeal, raised by the assessee is without any merit. Unexplained Cash Credits - Held that:- Following the decision of Kale Khan Mohammad Hanif Versus Commissioner Of Income-Tax, M. P. And Bhopal (1963 (2) TMI 33 - SUPREME COURT) onus of proving the source of any sum found credited in the books of the assessee is upon the assessee - the sanctity of the affidavit, filed by the assessee, patently uncorroborated by any evidence, cannot be accepted as having any legal consequence as mere filing of confirmatory letter does not discharge the onus that lays on the assessee. The payment through cheque merely indicates movement of fund and not the creditworthiness and genuineness of the transaction - The assessee has failed to discharge the onus cast on him within the meaning of section 68 as also under the general law - the assessee himself admitted non-traceability of such cash creditors - against assessee. Disallowance of Staff Welfare Expenses – Held that:- This disallowance has been made in the computation of income without giving any finding, whatsoever by AO thus disallowance is founded on surmises and conjectures, as not been supported by any evidence - disallowance need to be deleted - in favour of assessee. Disallowance of car running expenses & depreciation – Held that:- AO has disallowed 1/4th of care running expenses & depreciation in respect of personal use of the car without bringing any material on record - in the interest of fairness and justice, the disallowance is reduced to 1/10th in each head - partly in favour of assessee.
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2012 (12) TMI 658
Undervaluation of closing stock - Rate of rice bran Held that:- In the remand report, AO did not brought any fresh material on the record to establish that the rate adopted by the assessee was not correct. The only basis of adopting enhanced rate of valuation was the report of Krishi Utpadan Mandi Samiti which cannot be considered as reasonable because these rates are determined in a particular manner which cannot be applied in all the circumstances and all the times for every quality of a particular product. The rates are dependent upon number of factors such as quality of produce, the prevailing rates in the market, content of moisture in the produce and demand in the market etc. Therefore, the observation of the A.O., that the rates fixed by Krishi Utpadan Mandi Samiti are reasonable and justified, do not have any rational or scientific basis. Thus the rate adopted by the AO is not justified - in favour of assessee.
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2012 (12) TMI 657
Jurisdiction power u/s 263 by CIT(A) – treatment to advance rent received – Held that:- As special audit report categorically admits that the assessee has maintained his accounts on mercantile system, thus once it is accepted that the assessee is following the mercantile system of accounting, then the advance of rent received by the assessee cannot be treated as rent receipt during the year. This is also because the assessee has offered the advance rent as his income during the relevant assessment year to which it relates and the same has also been accepted. In the circumstances, finding of CIT u/s. 263 is erroneous and unsustainable in law and his liable to be quashed as without jurisdiction provided by the show-cause notice - appeal of the assessee allowed.
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2012 (12) TMI 656
Unexplained Investment u/s 69 – Held that:- Profit arising from the sale of plots along with building is to be taxed under the head Capital Gain. Tribunal has taken into consideration the investment made in past year and held that the investment has been made from its books of account as all the entries are incorporated in books of account. No amount has been spent over and above recorded in the books of account. Therefore, there was no reason in not accepting the claim of the assessee. CIT (A) has also deleted the addition for the year under consideration following the order of Tribunal as all the facts have already been discussed by the Tribunal. Accordingly, Order of CIT (A) in this aspect as the issue has already been considered by the Tribunal while disposing the appeal for the assessment year 2005-06 is confirmed. Addition on account of interest on capital from partnership firm – Held that:- Where there is no tax effect of revenue, the authority would not fritter away its energy in fighting matters of this kind. The supplementary partnership deed has not provided any interest on capital to the partners. Accordingly the firm had not allowed interest on capital. If capital allowed by the firm is expenses of the firm and to that extent the income of the firm would reduce. The tax effect is hardly there. Therefore, the addition made by the AO is deleted - In the result, appeals of the department as well as cross objections of the assessee are dismissed.
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2012 (12) TMI 655
Validity of assessment u/s 147 – Notice u/s 148 was issued on the basis of sufficient material on record, including the order u/s 263 – Order u/s 263 had been cancelled by the ITAT - Assessee had claimed deduction u/s 80IA which was observed to be non - genuine and non- admissible by the AO – Assessee contended that the assessments have been framed without issue of notice u/s 143(2) – Held that:- As the said notices u/s 148 were issued within six years i.e. within stipulated period. Following the principles of natural justice we deem it fit to restore the present issues back to the file of the CIT (Appeals) to decide the same de - novo in accordance with law after affording reasonable opportunity of hearing to the assessee. Remand back to CIT(A)
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2012 (12) TMI 654
Unaccounted sales and purchases – Held that:- AO has estimated the additional purchases at Rs. 9,40,000/ - without bringing any material on record. At the same time, there is no satisfactory explanation on behalf of the assessee regarding the discrepancies pointed out by the AO in the books of account of the assessee. Thus considering the entire facts the addition of Rs. 85,000/ - will meet the ends of justice - addition sustained by the CIT(A) is on higher side - assessee gets a further relief of Rs. 3,85,000/ - on this count - appeals of assessee allowed partly. Addition on account of additional gross profit – Held that:- GP rate shown at Rs. 3,25,400/ - on the total sales of Rs. 50,05,936/ - is slightly on higher side when compared to GP rate of the preceding year . However, the fact remains that the assessee did not produce the books of account thus, the sales affected/shown are not subject to verification - thus considering the entire facts the addition reduced to Rs. 15,000/ - particularly when the sales affected/shown are not subject to verification - assessee gets a further relief of Rs. 15,000/ - on this account -appeals of assessee allowed partly. Addition u/s 68 - unsecured loan as non-genuine – Held that:- As in earlier year, the department has not doubted the credit worthiness of Shri Harbans Singh father of the assessee, who is regularly assessed to tax & considering the contention of the assessee that these funds were used by Shri Harbans Singh for purchasing demand drafts directly from the bank in favour of the supplier of the assessee to meet financial emergency of the assessee there is no merit in the contention of the DR that amount of Rs. 50,000/ - and Rs. 65,000/ - withdrawn by Shri Harbans Singh do not figure in the bank account of the assessee. In view of the above, the addition of Rs. 1,15,000/ - made by the Assessing Officer and confirmed the CIT(A) deserves to be deleted - in favour of assessee. Disallowance of expenses in part incurred for business – Held that:- The expenses in question relate to petrol , salaries, telephone etc. which are necessary for smooth running of a business. However, as per law, the assessee was required to produce supporting evidence to claim these expenses which are absent thus disallowance of certain amount is required to be made - ad hoc disallowance of Rs. 75,000/ - made by the AO is definitely on higher side, thus to meet the ends of justice the disallowance reduced to Rs. 50,000/ - - partly in favour of assessee.
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2012 (12) TMI 653
Computation of Deduction u/s 10B – Whether interest received/ receivable from its customers on the delayed payments is treated as part of eligible profit – Held that:- As the factum of the nature of interest income received needs verification by the AO. In case said interest is received/ receivable by the assessee from its customers on the delayed payments, relatable to the export sales, then such interest is to be included as part of the eligible profits, for computing the exemption u/s 10B. However, where such interest due from the parties is not so relatable to the export sales made by the undertaking, then the assessee is not entitled to the benefit of exemption u/s 10B on such other incomes. Remand back to AO Eligible profit u/s 10B – Whether interest received from employees on housing loans are includible in eligible profit – Held that:- Following the decision in case of Joyco India P.Ltd. (2008 (9) TMI 416 - ITAT DELHI-D) that the interest receivable from employees on housing loans advanced to them by the assessee undertaking, being linked to the business of the undertaking and such interest , being included as business is eligible for the aforesaid deduction. In favour of assessee Deduction u/s 10B – Whether provisions written back are eligible for deduction u/s 10B – Held that:- There is no dispute that the above categories of expenses have been incurred by the assessee during the course of carrying of the eligible business of its industrial undertaking. Such reduction of expenses may not constitute income derived from the industrial under taking but all the same since such expenses in the past have reduced the eligible profits of the industrial under taking as a consequence the reduction in such expenses, which is portrayed by the “Provision no longer required written back” deserves to be considered to compute profits of the industrial undertaking eligible for deduction. In favour of assessee Deduction u/s 80HHC - Computation of indirect cost of trading goods which are to be worked out for computing deduction u/s 80HHC – Assessee is preparing a consolidated statements of P&L account for export of its manufactured items and of traded items - Held that:- As per the assessee, the AO had excluded only proportionate expenses related to export while assessee had excluded all the expenses related to manufacturing i.e. domestic as well as exports and at located only expenses which were common for trading as well as manufacturing. Therefore issue remand back to AO Adjustment of deduction u/s 80HHC while calculate book profit u/s 115JB – AO, while computing the book profits u/s 115JB, had made certain adjustments by re-computing turnover of the business i.e. on account of the income to which Sec. 10B applies and hence, also excluded the profits eligible for deduction u/s 80HHC – Assessee while calculating the book profits u/s 115JB had appropriated the income and expenditure of Sec. 10B in the same ratio which was used to calculate the deduction u/s 10B and reducing there from 100% of the profits, eligible for deduction u/s 80HHC - Held that:- As concluded from the facts of the case we find no merit in the allocation made by the AO of different components of income with different total turnover. Therefore, direct AO to recompute the book profits u/s 115JB. Issue remand back to AO
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2012 (12) TMI 652
Doctrine of merger – Revision order passed by CIT u/s 263 – AO passed the order which is erroneous and prejudicial to the interest of the revenue –Assessee contended that re-assessment order got merged with the order of Tribunal because the Tribunal has allowed the full deduction which were denied during assessment proceedings and therefore, such order is not available for revision - Held that:- As the doctrine of merger would not be applicable because reassessment was confined only to the issue of deduction u/s 80HHC with and the assessment was not reopened for the purpose of examining the application of Sec. 80IB(13) r.w.s. 80IA(9) Validity of order u/s 263 - CIT argued that assessee had claimed deduction u/s 80IB as well as u/s 80HHC – Deduction u/s 80IB and 80HHC was allowed by the original assessment order dated 20.12.2005 – Held that:- Since the original assessment order has been passed on 20.12.2005 and therefore, the limitation would run from 1.4.2006 and expire on 31.3.2008 whereas the revision order has been passed on 23.3.2010 which is clearly barred by limitation. Appeal in favour of assessee
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Customs
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2012 (12) TMI 681
Seizure of imported automobile parts - appeal for Release the goods - Held that:- As decided in Jatin Ahuja (2012 (12) TMI 675 - DELHI HIGH COURT) that the effect of the statute, by virtue of Section 110 would be that on expiration of the total period of one year in the absence of a show cause notice the seized goods have to be released unconditionally. In this case the respondent urged that a show cause notice was in fact issued on 09.08.2012. However, there is no material on record to suggest that the proviso to Section 110(2) was taken recourse to and extension of the seizure order was made before the lapse of six months. In these circumstances and in the absence of any statutory guidelines in regard to the stopping of time, as it were, as alleged by the customs authorities it is not possible to hold that the time taken for adjudication of any issue has to be excluded while reckoning the six months period mandated by Section 110(2). Court is satisfied that the continued seizure by the customs authorities of the petitioner’s goods even after the order dated 19.07.2012 is unlawful. The goods so seized shall be released forthwith unconditionally.
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2012 (12) TMI 675
Re-seizure orders - whether after expiry of the period of one year, the seizure of the goods or articles would be deemed to lapse under Section 110? - Held that:- As decided in JAYANT HANSRAJ SHAH Versus UOI [2008 (2) TMI 293 - HIGH COURT BOMBAY] effect of expiry of one year period (six months, if no extension is granted) after the seizure of goods etc under Section 110 when there has been no show cause notice under sub-clause (2) is amply clear. Upon expiry of the one year period (or six months, as the case may be) the goods are returnable to the person from whose possession they were seized. There is nothing in Section 110-A to detract from this consequence. The public interest in injecting a sense of efficiency by mandating an outer limit to seizure orders, whenever the customs authorities contemplate an adjudication proceeding, is self-evident. In the case of goods with limited shelf life, or “fast moving” electronic articles, or even garments, which reflect the latest trends, even such limited seizure may result virtually in a confiscation, because they may be rendered worthless upon release. In the light of the above discussion, the Petition has to succeed. It is declared that the effect of non-issuance of show cause notice under Section 124 in this case, has resulted in the operation of Section 110(2) and the statutory dissolution of the seizure order made in the case of the Petitioner's car. The said vehicle – released provisionally and subject to conditions under Section 110-A – shall be deemed to have been unconditionally released. If the Maserati car has not been released, the same shall be released within two weeks and the superdarinama is hereby quashed. The writ petition is allowed in the above terms.
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2012 (12) TMI 651
Order of remand by the tribunal for de novo proceedings - whether in a remand order, an issue may be kept open or required to be concluded - held that:- since the Tribunal has remanded the matter for de-novo adjudication before the Adjudicating Authority, even the issue as to whether the First Secretary (Commerce) is a competent authority to furnish authentic trade information from ASEAN countries could have been kept open, so that the parties could have agitated this issue as well. Since that has not been done, we set aside that portion of the conclusion reached by the Tribunal and now direct the Adjudicating Authority to permit the Appellant to raise the aforesaid issue and after adjudication, pass a speaking order on the same.
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Corporate Laws
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2012 (12) TMI 680
Territorial jurisdiction of court - Whether the plaintiffs who themselves have invoked the jurisdiction of Israel court can re-agitate or re- ventilate their grievance before the Indian Courts, that too in the circumstances when they failed to succeed in securing a favourable order from the highest court of another sovereign state - Held that:- The plaintiffs cannot be allowed to continue two parallel remedies whether before two courts of the same country or the two courts of different counties and grant of any favourable relief to the plaintiffs will amount to overreaching the order passed by the Hon’ble Supreme Court of Israel which has already declined to grant interim relief as has been claimed by the plaintiffs in the present suit. Any indulgence by this court will result in causing serious interference with the process of justice of the foreign court. In fact passing of any order by this court can be in serious conflict with the orders passed by the Israel courts and such a situation would be in clear transgression of the principle of comity of courts and will result in creating anomalies and irreconcilable situation because of the continuation of two parallel proceedings before two competent courts of jurisdiction of two sovereign states. The case of the plaintiffs is a case of shifting stands as they have taken conflicting stands taken before this court and before the Israel court and thus the plea of the plaintiffs to lift the corporate veil of the defendant companies to unmask the core company which created the web of subsidiary companies for the purposes of tax evasion and also for the purpose of playing with the legitimate rights of their creditors including the plaintiffs, with whom they had entered into the First Consultancy Agreement dated 1.8.2005 and Share Entitlement Agreement dated 17.10.2006, cannot be appreciated as the only judicial forum which was available to the plaintiffs to raise such a plea was the Israel court where for the reasons best known to them they not only failed to implead defendants Nos. 3 to 5 but also failed to raise any such plea in that regard. Suppression of Facts - Held that:- The only disclosure made by the plaintiffs with regard to the order passed by Hon’ble Supreme Court of Israel is that plea of defendants was also accepted by the appellate court in Israel and it was observed by the said court that such an order cannot be passed by the Israel courts, more so when the foreign companies were not parties to the present suit. Counsel for the defendants however took a stand that these very plaintiffs themselves filed a copy of the said judgment before the District Court Israel on 26.10.2011 along with the application for return of the bank guarantee deposited and therefore they cannot take a plea that copy of the judgment of the Supreme Court was not available to them or they could not get the same translated into English language for such a long period of over two months. The question thus arises is that whether such half - hearted disclosure by the plaintiffs can be considered as fair and honest disclosure or whether it will amount to suppression of material facts. It is a settled legal position that the litigant who approaches the court is bound to disclose all material facts and produce all the documents which are relevant to the litigation and if he withholds a vital document in order to gain advantage then he would be guilty of playing fraud on the court as well as on the opposite party. Forum Shopping - The practise of choosing a particular forum by the plaintiffs for redressal of his grievances i.e choosing a place to sue which is convenient to him or a court which has an umbilical connection with the cause of action, etc is undeniably an unfettered right. This graphically described practice of forum hunting or forum shopping indubitably leads not only to the multiplicity of proceedings but also of the abuse of the process of the court. The courts have to discourage such practice with a heavy hand. The present suit filed by the plaintiffs is not only a classic case of forum shopping but also a case clearly impinging upon the well-established principle of comity of courts. The plaintiffs are also guilty of suppressing material facts from this court as discussed above. In the ultimate analysis, this court is not inclined to threadbare discuss the various other issues raised and also the judgments cited in support thereof by both the parties and hereby dismiss the present suit in the exercise of inherent powers vested in the court under Section 151, CPC so as to prevent the abuse of the process of the court and to secure the ends of justice.
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2012 (12) TMI 650
Repayment and restoration to the Company in liquidation - liquidation proceedings - arlier the name of Sh.GC Bhandari, who was one of the promoter director of M/s B.T. Conductors Pvt. Ltd was dropped being died during pendency of the proceedings - whether in the capacity of legal representative, she can be impleaded as a respondent in the original Company Application No.29/1993. Held that:- As already noticed, even after application came to be filed seeking deletion of the name of late GC Bhandari from the array of respondents, time was granted to the counsel to inform regarding legal representative of the deceased, if any but the counsel also shown his inability regarding the legal representative and even after best efforts made from the office of OL, it could not be traced out and by introducing O.22 R.10-A CPC, the legislative intention behind was that it is the duty of the pleader to communicate to the Court regarding death of a party and to subsist the contract between pleader and the deceased party for the purpose and in these circumstances, the decision taken by the Court on the application filed by the Official Liquidator deleting name of the deceased respondent late GC Bhandari on 05/12/2008, requires re-consideration. The order passed way back on 05/12/2008 deleting name of respondent No.1 late GC Bhandari, in these facts and circumstances, deserves to be recalled.
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Service Tax
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2012 (12) TMI 705
Writ of mandamus - prayer to direct the UOI to suitably amend Section 67(v) of the Finance Act, 1994 - valuation of taxable services u/s 67 - abatement in respect to reimbursement of statutory wages and levies and/or to allow an abatement equivalent to the reimbursement of statutory wages and levies - Held that:- no such direction can be issued to the Government to amend the law, therefore, the prayer outright rejected. Writ of mandamus has been sought by the petitioner against the Bharat Sanchar Nigam Limited (BSNL) - held that:- The petitioner has failed to show that there has been inaction on the part of the authority concerned, thus not inclined to issue a writ of mandamus against the respondent authorities. The writ petition being devoid of merit is liable to be dismissed outright at the threshold.
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2012 (12) TMI 704
Commercial or Industrial Construction Services - not discharging the correct service tax liability - Held that:- The correct way of calculating the amount of service tax liability on the appellant on the day when he renders the services and raise the bills and also for the adjustment of the amounts received as advance for mobilisation and service tax liability discharged on such advance amount. The calculations as has been worked out by the department seems to be relevant, considering the decision of Vigyan Gurukui [2011 (9) TMI 809 - CESTAT, NEW DELHI] but this decision does not consider the fact of mobilisation amount which has been received by the assessee and discharging the service tax liability thereon. All these issues need to be gone into detail which can be done only at the time of final disposal of appeal thus the appellant directed to deposit an amount of Rs. 1,00,000/- within a period of four Weeks from today and report compliance on 13.12.2012.
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2012 (12) TMI 703
Non payment of pre-deposit - Held that:- As directed to assessee in M/s AXIS BANK LTD. Versus COMMISSIONER OF SERVICE TAX, MUMBAI-I [2012 (11) TMI 211 - CESTAT MUMBAI] to deposit an amount of Rs. 50,00,000/- there is no compliance reported by the appellant - appeal dismissed for non-compliance with the provisions of Section 35F of the Central Excise Act, 1944 read with Section 83 of the Finance Act, 1994.
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2012 (12) TMI 702
Waiver of Pre-deposit – Service tax, interest and penalty – Certain taxable service were provided to SEZ by claiming benefit of N.No- 4/2004 – Revenue argued that assessee is not maintaining separate records of receipt and utilization of input services for providing both taxable services and exempted service – As per AO assessee entitled to utilize the credit only to the extent of 25% of the service tax on the taxable input service as per Rule 6(3) (c ) of the CCR, 2004 – Assessee argued that he had paid the duty in respect of the taxable services provided to SEZ unit – Held that:- As the assessee paid the duty in respect of taxable service provided to SEZ units and are not claiming the benefit of notification. Therefore, prima facie the applicants have made out a case for waiver. Pre-deposit of the dues is therefore waived for hearing of the appeal. Stay granted
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2012 (12) TMI 674
Sale of advertising space or time service - applicant is a Municipal corporation - seeking waiver of pre-deposit of demand of service tax and interest - Held that:- As per the provisions of Section 65(105) “taxable service means any service provided to any person by any other person in relation to sale of space or time for advertisement in any manner, but does not include “sale of space for advertisement in print media” and “sale of time slot by a broadcasting agency or organization”. In the present case, where the applicants are collecting taxes or license fee in respect of the permission granted for putting up advertisement boards on the private properties, the applicants have prima facie a strong case. In respect of advertising boards which were on the street light poles and in respect of the rent which is given to the advertising agency to set up advertising board, the applicants have not made out a case for total waiver of service tax. As the adjudicating authority by invoking the provision of Section 80 have waived the penalty, therefore, taking the demand in respect of the land which is given for setting up structures for advertising and in respect of advertisement on the street light on the poles for the normal period, the applicants are directed to deposit Rs.8.00 lakhs (Rupees Eight lakhs only) within eight weeks.
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2012 (12) TMI 673
Claim for Refund - Whether the Service Provider for providing space in their buses was eligible for refund in respect of Service paid under the category of Courier Agency Service – Held that:- As decided in Mafatlal Industries [1996 (12) TMI 50 - SUPREME COURT OF INDIA] refund is claimed on the ground that the provision of the Act under which it was levied is or has been held to be unconstitutional, such a claim, being a claim outside the purview of the enactment, can be made either by way of a suit or by way of a writ petition. This principle is, however, subject to an exception : where a person approaches the High Court or Supreme Court challenging the constitutional validity of a provision but fails, he cannot take advantage of the declaration of unconstitutionality obtained by another person on another ground; this is for the reason that so far as he is concerned, the decision has become final and cannot be re-opened on the basis of a decision on another person's case opined in Tilokchand Motichand case [1968 (11) TMI 86 - SUPREME COURT OF INDIA]. As assessee has filed the refund claim after three years from the date of payment. Therefore the refund claim filed by the assessee hit by time limit and not filed within time limit of one year as per section 11B of Central Excise Act, 1944, thus correctly rejected by the Adjudicating Authority - appeal filed by revenue is allowed.
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2012 (12) TMI 672
Business Auxiliary Service and Custom House Agent's services - denial of CENVAT Credit - Held that:- The appellant has been taking a plea before the authorities that the General Manager of the appellant was shown various heads of income, according to him which may not be for the services rendered. As against such an admission and also the evidence which is produced by the appellant it if found that the adjudicating authority has only considered all these incomes under the category of Business Auxiliary Service without classifying the same under which category services may fall as per the definition of Business Auxiliary Service prior to February 2007 and post February 2007 under CHA services. In the absence of any such finding, no conclusion can be reached in the matter. Also in the appellant's own case, the co-ordinate Bench has remanded the matter back to adjudicating authority - in favour of assessee by way of remand.
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Central Excise
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2012 (12) TMI 679
Early hearing of appeal filled by revenue - Held that:- Appeal which has already been disposed of by this Tribunal earlier dated 21.05.2010 the application for early hearing of the appeal is filed in usual manner without verifying the records; This type of practice not only the increases work of department but also the increases work of this Tribunal. The concerned officer is directed to avoid this type of practice in future.
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2012 (12) TMI 678
Non maintenance of separate accounts for two types of activities - input services used for manufacturing and trading activities separately - liable to pay duty @10%/5% on their clearances of goods in trading activity as per Rule 6(2) of the CENVAT Credit Rules, 2004 - Held that:- As the applicants has not taken credit of common input service attributable to trading activity they covered under Rule 6(1) of CENVAT Credit Rules, 2004 and the provisions of Rule 6(2) of CENVAT Credit Rules, 2004 are not applicable. Therefore, they are not liable to pay 10%/5% of the value of the traded goods - applicant has made out a case for 100% waiver of pre-deposit.
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2012 (12) TMI 677
Cenvat Credit denial - failure to prove receipt of the inputs in the factory - Held that:- Evidence recorded to a finding that only invoices were received and no inputs were received at the factory remained un-assailed without leading any contradictory evidence. There was no credible evidence to show that from the origin to destination the goods travelled and reached nor there was any evidence to show that the goods were used in the manufacture of final products.- disallowance of cenvat credit confirmed - Against assessee.
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2012 (12) TMI 676
Undervaluation of Chassis - duty demand - seeking waiver of pre-deposit - Held that:- Chassis received by the appellant for body building were undervalued by TML is one which is apparently still under adjudication at Jamshedpur. The proceedings against the appellant are, therefore, prima facie unsustainable in law. Thus waiver of pre-deposit and stay granted.
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2012 (12) TMI 649
Breach of principle of natural justice - Assessee paid the duty by availing the CENVAT Credit prematurely – AO issue SCN and issue notice for public hearing – Held that:- As the assessee had requested for adjournment of the personal hearing afforded them, which was also acknowledged, however, the impugned Order was subsequently passed ex parte without giving any finding for not granting adjournment. Issue needs to be remanded to the Commissioner to decide the case afresh, by granting the effective hearing to the Appellant. Issue remand back to AO
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2012 (12) TMI 648
Cenvat Credit denied - services related to clearance of finished goods beyond the place of removal - nexus to manufacturing activities - Held that:- As decided in M/s. Lanco Industries Ltd. vs. CCE, Tirupathi [2009 (7) TMI 125 - CESTAT, BANGALORE] the credit of service tax paid on commission to agents is admissible. M/s. Cadila Healthcare Ltd. vs. CCE, Ahmedabad (2009 (8) TMI 172 - CESTAT, AHMEDABAD) the clearing and forwarding agents services is eligible for cenvat credit of service tax & in case of M/s. Nilkamal Crates and Bins vs. CCE, Vapi (2010 (2) TMI 232 - CESTAT, AHMEDABAD) credit of service tax under business auxiliary services or commission on export sales was held admissible. Thus all the decisions support the claim of the appellant that they are eligible for the benefit of service tax credit taken by them - in favour of assessee.
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2012 (12) TMI 647
Clearance of samples without payment of duty - Demand of Duty and Imposition of Penalty u/s 11AC - Held that:- As the appellant vide letter dated 7.1.2003 in reply to the Show Cause Notice submitted that the samples were in the form of unpacked tablets and drawn from the bulk prior to packing stage. From this letter, it is clear that the tablets, which are dutiable were cleared without payment of duty from the factory of production. Therefore,no infirmity in the impugned order - against assessee.
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2012 (12) TMI 646
Abatement of Duty - transportation charges, sales tax, dealer's profit and dealer's commission - Held that:- Abatement claimed towards transportation charges were on account of lorry rent, van maintenance, van depreciation, trolley hire and forwarding charges - figures were taken by the assessee from their Profit and Loss account and Balance sheet submitted before the Income Tax authorities and there is no specific challenge against these findings of the learned Commissioner. Moreover, the appellant (assessee) has not claimed that, in the written submissions filed with the adjudicating authority, he requested for supply of any records to be relied upon in support of his abatement claims. If that be so, the present grievance of the appellant with reference to the seized records is without bona fide - no iota of truth in the present grievance of the appellant that natural justice was denied to him - Commissioner granted further abatements after considering the submissions of the assessee and, accordingly, worked out the amount of Rs.1,23,146/- to be paid by him - In the result, this appeal gets dismissed.
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2012 (12) TMI 645
Non-compliance of the stay order - seeking waiver of pre-deposit of impugned demands - Held that:- Appellant had complied with the Stay order passed by the Commissioner (Appeals) and only on the ground of non-communication the dismissal order passed by the Commissioner (Appeals) deserves to be set aside. - as the matter needs verification remand the matter back to the adjudicating authority to verify the relevant records in support of their claim made by the appellant.
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