TMI Tax Updates - e-Newsletter
December 19, 2012
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
FEMA
Service Tax
Central Excise
Indian Laws
Highlights / Catch Notes
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Income Tax:
Deemed dividend u/s 2(22)(e) - merely stating in the object clause that the business of the assessee company was money lending cannot be held that the case of assessee falls under exceptional circumstances not to treat the deemed dividend. - AT
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Income Tax:
Deemed dividend u/s 2(22)(a) - perquisite u/s 2(24)(iv) - CIT(A) is not justified to hold that it is perquisite benefit given by HPPL to its shareholder and not the transfer of occupancy rights to its shareholders. - AO has rightly held that the value of flats received are nothing but dividend given in the form of assets by HPPL. - AT
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Income Tax:
Loss from derivatives transactions is to be allowed to be set off against the profit arising out of delivery based transactions as both are speculative/deemed speculative transactions. - AT
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Income Tax:
Deemed dividend u/s 2(22)(e) - Assessee has only given a colour to the transactions so as to characterise the same as in the nature of trade advance. Therefore provisions of section 2(22)(e) are clearly attracted - AT
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Income Tax:
Re opening of assessment - rules of Department requiring a compulsory scrutiny of such cases, cannot in any way be deemed as a reason to believe that there was escapement of income. - AT
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Customs:
Seeks to Amend notification No.82/2008-Cus,dated 27.06.2008. - Notification
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Customs:
Rescinds Notification No.41/2011-Cus. dated. 23rd May, 2011 - Notification
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Customs:
Seeks to levy Anti-dumping duty on imports of Sodium Hydrosulphite, originating in, or exported from People’s Republic of China, for a further period of five years - Notification
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Customs:
Modify final anti-dumping duty on imports of Cable Ties, originating in, or exported from the People’s Republic of China and Taiwan and imported into India, imposed vide Notification No. 44/2009-Customs dated 30th April, 2009 - Notification
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DGFT:
Amendments in Appendix 5 of the Handbook of Procedures (Vol.I) - Public Notice
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DGFT:
Enlistment of agencies authorized to issue Certificate of Origin – Non-Preferential. - Public Notice
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SEZ:
Set up a Multi-product Special Economic Zone at Dimapur in the State of Nagaland; - Notification
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VAT:
Regarding Taxability of Set Top Boxes (STBs). - Circular
Articles
Notifications
Customs-
56/2012 - dated
14-12-2012
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ADD
Modify final anti-dumping duty on imports of Cable Ties, originating in, or exported from the People’s Republic of China and Taiwan and imported into India, imposed vide Notification No. 44/2009-Customs dated 30th April, 2009
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55/2012 - dated
14-12-2012
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ADD
Seeks to levy Anti-dumping duty on imports of Sodium Hydrosulphite, originating in, or exported from People’s Republic of China, for a further period of five years
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54/2012 - dated
14-12-2012
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ADD
Rescinds Notification No.41/2011-Cus. dated. 23rd May, 2011
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53/2012 - dated
14-12-2012
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ADD
Seeks to Amend notification No.82/2008-Cus,dated 27.06.2008.
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F.No. D-22011/06/2012 (Part I) - dated
12-11-2012
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Safeguard
Safeguard investigation concerning imports of Hot Rolled Flat products of Stainless Steel of 304 grade into India from China PR-Preliminary findings-Reg.
FEMA-
246/2012-RB - dated
27-11-2012
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FEMA
Foreign Exchange Management (Borrowing or Lending in Foreign Exchange) (Third Amendment) Regulations, 2012
SEZ-
S.O.2503(E) - dated
15-10-2012
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SEZ
Set up a Multi-product Special Economic Zone at Dimapur in the State of Nagaland;
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2012 (12) TMI 582
Deduction u/s 80IA & 80HHC - Interest Income, Commission Income, Export incentives and Currency Exchange Gain - Held that:- Tribunal has not considered the judgment of the Supreme Court in Liberty India v. CIT [2009 (8) TMI 63 - SUPREME COURT] regarding the deduction u/s 80IA on Interest Income thus restore the issue back to the Tribunal for a fresh decision after duly considering all the relevant aspects of the matter. As decided in CIT v. Rachna Udyog [2010 (1) TMI 38 - BOMBAY HIGH COURT ] & CIT Tax 8 Versus M/s Syntel Limited [2009 (12) TMI 689 - BOMBAY HIGH COURT] the difference on account of exchange rate fluctuation is liable to be allowed under s. 80IB. Deduction u/s 80HHC - As the interest income in the present circumstances as 'Business income’, it will merit inclusion at the first instance and thereafter 90% of the net interest is to be allowed as decided in the ACG Associated Capsules Pvt. Ltd. v. CIT [2012(2) TMI 101 - SUPREME COURT OF INDIA] As in terms of the judgment of the Supreme Court in Topman Exports v. Commissioner of Income Tax (2012 (2) TMI 100 - SUPREME COURT OF INDIA) AO directed to compute the deduction under Section 80HHC.
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2012 (12) TMI 576
FIS - article 12 of India-US DTAA - Marketing and management fees - Fees for included services (FIS) - the employees of the assessee visited India - held that:- the scope of section 9(1)(vii) is somewhat different in comparison with the Article 12(4)(b). In order to rope in any amount within the purview of FIS under the Article 12(4)(b) of DTAA, which has been invoked by the AO, it is essential that the payment should be to 'make available technical knowledge, experience, skill, know-how or processes, or consist of the development and transfer of a technical plan or technical design.' On the contrary, there is no such requirement of 'making available' any managerial, technical or consultancy services'. Simple rendition of such services is sufficient. It is not the case of the Revenue that the assessee made available some managerial, technical or consultancy services to WNS India. The amount of ₹ 41.02 crore cannot be considered as FIS, naturally the amount received by the assessee on this score needs to be examined from the angle of taxability under other provisions. Royalty - reimbursement of international telecom connectivity charges - held that:- the term "royalty" has been defined in the DTAA as per Article 12(3). Such definition of the term "royalty" as per this Article is exhaustive. Pursuant to the insertion of Explanation (5) by the Finance Act, 2012, no amendment has been made in the DTAA to bring the definition of royalty at par with that provided under the Act. Subject matter of the Explanation is otherwise not a part of the definition of Royalty as per Article 12. As such, it is clear that the contention of the learned Departmental Representative that the retrospective insertion of Explanation 5 to section 9(1)(vii) should be read in the DTAA also, cannot be countenanced. This amount can be considered as royalty only in the hands of the owner or lessor or any other person entitled to permit the use of equipment and earning income in his own right from allowing the use of such equipment to others. By no stretch of imagination an intermediary, who makes payment to the owner of equipment on behalf of some person and then gets reimbursed for the said payment, can be considered as an owner or lessor etc. of the equipment so as to be considered u/s 9(1)(vi). The said amount may be considered as royalty in the hands of MCI WorldCom and other international operations under the provisions of the Act, who own the equipment and allowed use or right to use such equipment to WNS India. The assessee in the instant case simply paid a sum of ₹ 6.14 crore to MCI WorldCom etc. in the first instance and then recovered the same from WNS India. Thus it is evident, the said sum is not royalty even as per section 9(1)(vi) of the Act. Determination of correct nature of reimbursement of international telecom connectivity charges - held that:- The international telecom connectivity charges are not related in any manner with the rendering of marketing and management services. By no standard, such a claim for reimbursement of expenses can be considered as division of the contract price so as to gain some tax advantage. - Once it is held that there is no profit element in such reimbursement, it becomes manifest that the gross income of ₹ 6.14 crore recovered by the assessee from WNS India is equal to the same amount paid by it to MCI WorldCom etc., thereby leaving no surplus liable to tax under Article 7 of the DTAA.
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2012 (12) TMI 575
Accommodation entries - Income escaping assessment - reassessment u/s 147 - held that:- As regards the challenge to the reopening of proceedings is concerned, the Court is satisfied that the notice under Section 147 reflected due application of mind to objective material furnished to the AO, i.e. by way of Investigation Report which could have given rise to a bonafide belief, legitimately falling within Section 147. The materials produced before the AO and also discussed by the AO in the remand report were taken into consideration. Furthermore, it is not as if the entire amount of Rs.55,44,816/- which was shown to be the balance in the bank account of the appellant is sought to be added back. In that regard, the assessee’s explanations were somewhat accepted. The Revenue has proceeded on the footing that the appellant provided some services and charged him only to the commission reasonably earned by it, i.e. Rs.1,10,896/-. Being a pure question of fact, this Court cannot, exercising jurisdiction to consider substantial questions of law, convert it into a third Court of fact and examine the concurrent findings. - Decided against the assessee.
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2012 (12) TMI 574
Disallowance of quantity discount u/s 40A(2)(b) - the dispute is for free cells and not trade discount. - the free cells scheme is on the basis of sales at the point of stokist and, therefore, details of free cells passed on to various stokists is necessary to determine whether free cells were actually passed on or not. Regarding this argument of the assessee that distribution of free cells is by way of quantity discount and, therefore, the same is not covered u/s 40A(2b), - held that:- it was decided by Ld. CIT(A) that the assessee has claimed costs in respect of distribution of free cells in the P & L account and, therefore, it amounts to claim of expenses. - Decision of CIT(A) confirmed. - Decided against the assessee. Disallowance of royalty of Rs.4,45,53,651/- by invoking the provisions of Section 40A(2b) - TPO has made addition on account of payment of royalty on the ground that the assessee did not provide details of cost of development of technology by the separate enterprise and the information relating to payment of royalty by other group companies. - held that:- the claim of assessee is not correct that those documents were furnished by the assessee before Ld. CIT(A) and before us also, these documents are not submitted by way of compliance of the relevant Tribunal rules and, therefore, the same are not admitted - Decided against the assessee. Deduction u/s 80IB - assessee failed to file mandatory form No. 10CCB with the return of income - held that:- even if it was a procedural requirement and the assessee could not submit the same along with return of income for any reason, there could not be any reason for non-submission of the same before the completion of the assessment proceedings and the assessee in the present case has not submitted the same even during assessment proceedings. - Decided against the assessee. Computation of eligible profit - reduction of interest on overdue customers and on staff loan - held that:- if deduction is not allowable to the assessee u/s 80-IB, individual item of income is not required to be examined for eligibility of deduction u/s 80-IB - Decided in favor of assessee.
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2012 (12) TMI 573
Block assessment - undisclosed stock - held that:- the respondent has offered in the aggregate an amount of Rs.41,51,082/- as taxable income for the Assessment Year 1996-97. The aforesaid amount includes an amount of Rs.28,59,171/- being the undisclosed income disclosed in the seized Balance Sheet from the residence of the respondent's partner. Once, the revenue has accepted the amount of profit shown in the seized Balance Sheet then there was no justification to make any further addition from that very seized Balance Sheet as sought to be done by the Assessing Officer. Further, it is very pertinent to note that neither during the course of the search, nor during the block assessment proceeding the Revenue found any evidence or material to support that the respondent was in possession of undisclosed stock valued at Rs.53,98,229/. Further, the finding of the authorities below is essentially a questions of fact. Therefore, the reframed question does not give rise to any substantial question of law. - Decided in favor of assessee.
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2012 (12) TMI 572
Capital expenditure or revenue expenditure - huge expenditure towards machinery / plant made, which extended the life time - the assessee is engaged in the business of manufacturing of automotive gaskets, radiators & CFJS at its units. - held that:- Expenses that were incurred on purchase of band knives for use in splitting machine. - The nature of the item indicates that it is spare parts which require frequent replacement. - the expenditure was incurred on removing the roller jammed in order to make it functional. Therefore, this amount was also considered as revenue expenditure. - In respect of item No. 4, no new asset came into existence which was capable of producing any saleable items. - Decided in favor of assessee. Remuneration to Direction - disallowance u/s 40A(2)(b) - held that:- Shri R.R. Biswas is a qualified person and he was employed in a professional capacity with the assessee-company and there was increase in the sales by 26.87% in the current year as compared to earlier year, this finding of the fact is not rebutted by the Revenue - Expenditure allowed - Decided in favor of assessee.
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2012 (12) TMI 571
Deemed dividend u/s 2(22)(e) - assessee (director) has taken unsecured loan from Krishna Beads Industries Private Limited - held that:- the assessee has failed to establish that the substantial part of business of the company is money lending and the loans and advances received to the assessee is the in the ordinary course of money lending business. Unless the assessee establishes that money lending business was the substantial part of the business of the company and the loans and advances received during the course of money lending business, the assessee will not fall under the exceptional circumstances provided in section 2(22)(e)(ii) for the purpose not to include the calculation of deemed dividend. Further, merely stating in the object clause that the business of the assessee company was money lending cannot be held that the case of assessee falls under exceptional circumstances not to treat the deemed dividend. - Decided against the assessee.
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2012 (12) TMI 570
Revision u/s 263 - held that:- no reason whatsoever set out in the show cause notice as to why the Commissioner was of the view that the assessment order is erroneous and prejudicial to the interest of the revenue. Unless the Commissioner specifically sets out such reasons in the show cause notice, and hears the assessee on the same, it is not open to him to exercise his revision powers under section 263 of the Act. The manner in which impugned order is passed leaves a lot to be desired, and it does not show any application to mind. Such an action cannot meet any judicial approval. In any case, unless categorical finding is given about what is wrong in the order, the matter cannot be set aside to file of the Assessing Officer for fresh examination. - Decided in favor of assessee.
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2012 (12) TMI 569
Deemed dividend u/s 2(22)(a) - perquisite u/s 2(24)(iv) - the benefit received by the assessee on account of occupancy rights of the premises - assessee is a shareholder of HPPL, which is a closely held company - held that:- assessee has received occupancy rights in the premises on perpetual basis and in lieu of which, assessee to hold shares in HPPL and also to give interest free refundable deposit of Rs. 18 lakhs towards proportionate land cost and development cost. Assessee is also entitled to transfer the occupancy rights by way of sale and transfer of block of assets and create third party rights subject to transferee deposit the required amount of interest free refundable security deposit and assessee thereafter to give possession to the transferee. CIT(A) is not justified to hold that it is perquisite benefit given by HPPL to its shareholder and not the transfer of occupancy rights to its shareholders. - provisions of section 2(24)(iv) of the Act does not apply to grant of occupancy rights by HPPL to the shareholder, i.e. assessee herein. AO has rightly held that the value of flats received are nothing but dividend given in the form of assets by HPPL.
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2012 (12) TMI 568
Disallowance of expense incurred in relation exempt income u/s 14A r.w Rule 8D – Whether provision of Sec. 14A attracts on expense incurred to earn tax free income from SEZ unit – Held that:- As the similar issue has a been considered by the Tribunal in assessee’s own case for AY 2007-08 that the investment or expenses incurred to earn income from SEZ, do not merit reckoning in computing disallowance u/s 14A. Therefore, AO is not justified for making the disallowance u/s.14A r.w. Rule 8D to consider the investment made in SEZ unit whose income is not includible in the total income of the assessee. Issue decides in favour of assessee Disallowance of interest u/s 14A in respect of dividend income – Held that:- The assessee has earned dividend which is not includible in the total income of the assessee as it is exempt as per sec 10(34/35). To earn the said dividend from the investment, it is a fact that assessee must have incurred some administrative cost to maintain portfolio. Therefore issue remand back to AO for making a reasonable disallowance u/s.14A.
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2012 (12) TMI 567
Share transactions in a particular case should be treated as investment activity or trading activity – Assessee consider income from sale of shares as Capital Gain – Held that:- The shares which have been sold within three months constitute about 90% of transactions. The pattern of transactions clearly shows that the assessee is trading in shares and is not an investor. Therefore such income shall be treated as business income In so far as long term capital gain is concerned, those shares have been sold after one year and, therefore, considering the holding period, volume and frequency, the income declared by the assessee as long term capital gain is reasonable.
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2012 (12) TMI 566
Nature of Income – Whether the royalty income has to be considered as business income or as income from other sources - Assessee had handed over its Hotel, management and control on royalty basis treat it as business income – AO held that the royalty was nothing but payment received by the assessee on letting out of the hotel premises, treat as income from other sources - Held that:- It is a case of commercial exploitation of the assets owned by the assessee. Moreover, we also note that both in the earlier years and subsequent years the department had accepted the income as business income and, therefore, the doctrine of consistency is also in favour of the assessee. Appeal decides in favour of assessee Addition on account of cash deposit in bank u/s 68 – Assessee contended that cash deposit being money deposit by partner towards capital – AO’s ground was that there is time gap between cash withdrawal from partners bank account and deposit in assessee account – Held that:- As the introducing partner is doing his own business also and is regularly assessed to tax and cash withdrawals as well as introduction of cash in the firm are reflected in his accounts about which no dispute has been raised. Therefore, merely on the ground that there was time lag between the cash withdrawals and the deposits, addition cannot be justified as there is no legal bar on a person keeping money in cash. There is also no material placed on record to show that the cash withdrawals by partner had been used for some other purpose and were not available for cash deposits in the bank account of the firm. Appeal decides in favour of assessee Addition on account of cash deposit in current account u/s 68 – Assessee had handed over its hotel business on royalty basis – Said account in the name of hotel and hold by such another person who manage the control of hotel – Held that:- Such bank account had been duly disclosed in the balance sheet of Hotel and maintained separate P&L Account and Balance sheet for Hotel which he was running as per conducting agreement on payment, of royalty. Therefore no justification of such addition by AO. Appeal decides in favour of assessee
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2012 (12) TMI 565
Whether loss from derivative transactions is eligible to set off against profit arising out of delivery based transactions – Whether delivery based purchase and sale of shares is deemed to be speculative business - Assessee is engage in both delivery and non-delivery based and derivatives transaction of shares & securities – AO treated the equity derivatives F&O losses upto 25.01.2006 as speculative loss - Provision of Sec. 43(5)(d) will be applicable vide Board Circular from date 25.01.2006, loss/profit arising on derivative transactions in equity futures and options at BSE/NSE was to be treated as business loss/profit – Held that:- Where an assessee is a company whose business consists in any part of the purchase and sale of shares of other Companies, it shall be deemed to be carrying on a speculation business to the extent to which the business consists of purchase and sale of such shares. Whether or not it is a profit or loss that has resulted from carrying on such business, is a consideration which is alien to the meaning of what constitutes a speculation business by the explanation to Section 73, any loss computed in respect of that speculation business, can be set off only against the profits and gains of an other speculation business. Therefore, loss from derivatives transactions is to be allowed to be set off against the profit arising out of delivery based transactions as both are speculative/deemed speculative transactions. Appeal decides in favour of assessee
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2012 (12) TMI 564
Deemed dividend u/s 2(22)(e) - Company from sufficient reserves has advanced to a Director substantial interested - Assessee contented that this is a trade transaction and the advance was given for purchase of contiguous land since the company was not authorised to purchase non-agricultural land in his name – Held that:- As the assessee has received advance from the company on 07-11-06 and 08-11-06 and whereas the payments for land have been made on 08-06-06 and 26-10-06. Assessee has only given a colour to the transactions so as to characterise the same as in the nature of trade advance. Therefore provisions of section 2(22)(e) are clearly attracted in the facts and circumstances. Appeal decides in favour of revenue
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2012 (12) TMI 563
Production/process Loss – Assessee engaged in the business of manufacturing and supply of iron and steel - Assessee claimed burning loss on actual basis - AO restricted the burning loss @ 6% on basis that the proper records and quantitative details are not maintained regarding production of steel and loss are not with line of similar industries - Held that:- As the burning loss cannot be static and it varies from case to case and largely depends on the raw material used. Burning loss is very subjective phenomenon and it depends on various facts and circumstances and so this cannot be precedent for all industries engaged in the manufacturing steel and iron. Appeal decides in favour of assessee
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2012 (12) TMI 562
Nature of service in order to calculate export turnover u/s 10B - Whether the expenses incurred in foreign currency on onsite software development outside India was to be excluded from export turnover – Assessee contended that it was not rendering any technical services outside India to any third party, but the foreign currency expenses incurred were in connection with its own staff in foreign branch in foreign country - Held that:- Since the fact of the case was not similar as quoted by assessee in his favour. Therefore, admittedly these were related to technical services rendered outside India. Hence decides in favour of revenue Assessee has not raise separate billing for such expense to its clients – Held that:- Once expenses of the nature mentioned in clause (iii) of Explanation 2 to Sec. 10B are incurred, these will have to be excluded from export turnover, whether or not billings of the assessee specifically mentioned such items. Even if such expenses other than on technical services, are incurred in India, it still has to be excluded from export turnover. Appeal decides in favour of revenue & remand back to AO Exclusion of expense from total turnover calculated in relation to Sec. 10B – Held that:- The items which were excluded by the AO from export turnover by relying on clause (iii) of Explanation 2 to Sec 10B, will have to be excluded from total turnover also for the purpose of computing deduction u/s 10B. Issue decides in favour of assessee & remand back to AO
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2012 (12) TMI 561
Reassessment u/s 147 – Whether reopening of assessment without giving the reasons for reopening sought by the assessee, will render whole proceedings unlawful and illegal – Held that:- No, the whole proceeding shall not be rendered as unlawful and illegal. The procedure, that was mandatory to be followed when a notice u/s 148 was issued. If the said procedure is not followed, orders of lower authorities have to be set aside and matter remitted back to AO for doing the assessment after supplying copies of reasons recorded. It is a curable procedural infirmity and the matter has to go back to the point where the defect occurred so as to cure of such defect, and continue with the proceedings in accordance with law. Therefore order of AO set aside & matter remand back to AO
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2012 (12) TMI 560
Additional depreciation on the windmill - Assessee was having three divisions - Whether each of divisions can be considered independently for the purpose of claiming additional depreciation u/s 32(1)(iia) – AO argued that installed capacity would not increase by 10%, taking into consideration installed capacity of the entire company instead of individual unit – Held that:- If the weaving division is considered independently, undisputedly, the capacity had increased by almost 80%. In the nature of business of the assessee, in yarn manufacturing, we are of the opinion that the weaving division can be considered as a separate undertaking. Its expansion having resulted in installed capacity by going up more than 10%, additional depreciation was indeed allowable. Issue decides in favour of assessee Whether failure to file Form 3AA along with ROI, could result in denial of the additional depreciation – Held that:- Following the decision in case of Parry Agro Industries Ltd. (2006 (5) TMI 63 - KERALA HIGH COURT) that non-production of audit report can only be considered as procedural lapse and assessee having cured the lapse before completion of assessment, a disallowance could not be made for this reason. Issue decides in favour of assessee
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2012 (12) TMI 559
Deemed Registration u/s 12A - Exemption under Sections 11 and 12 - Held that:- As per the assessee, it had submitted Form No.10A for the purpose of such registration as early as 7.12.2000. Nevertheless, having not received any order on such application, assessee submitted one more application on 13.12.2008. The CIT acted on second application and granted it registration under Section 12A with effect from 1.4.2008. Thus submission of second application by the assessee on 13.12.2008 will not efface the effect of its earlier application on 7.12.2000. The legal consequence arising out of such application will continue unblemished. If the assessee had made an application on 7.12.2000 in Form No.10A for a registration under Section 12A and if such application was not dealt with by the Department either by issuing an order denying registration or by issuing an order granting registration, thus in absence of an order either denying registration or granting registration, where the statutorily allowed time for dealing with an application in this regard had expired, registration would be deemed as granted - matter has to go back to the file of the A.O. for verifying whether assessee had indeed made an application prior to the impugned assessment year, before the appropriate authority for registration under Section 12A in Form 10A - The CIT(Appeals) did not put this issue before the AO while asking for a remand report. - Matter remanded back to AO to verify the facts.
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2012 (12) TMI 558
Re opening of assessment - international transactions exceeded Rs. 15 Crores - Held that:- As decided in ACIT Versus Rajesh Jhaveri Stock Brokers P. Limited [2007 (5) TMI 197 - SUPREME COURT] for resorting to Section 147, the basic condition to be satisfied is that A.O. should have a reason to believe that income chargeable to tax had escaped assessment. As in the present case turnover of an assessee in international transaction exceeding Rs. 15 Crores, and rules of Department requiring a compulsory scrutiny of such cases, cannot in any way be deemed as a reason to believe that there was escapement of income. No reasonable man can come to such a belief based on such a reasoning. There was no relevance of the reason cited, with the reopening done. Therefore the re-opening suffered from a fundamental flaw. Upward adjustment to the arm's length price to its associate enterprises - Rejection of internal comparables and TNMM analysis based on internal comparables by TPO - Held that:- ITAT in the preceding assessment year concluded that the assessee was justified in undertaking internal bench marking analysis on stand alone basis by placing on record working of operating profit margin from international transactions with AEs and transactions with unrelated parties undertaken in similar functional and economic scenario, and the same should be the basis for determination of arm’s length price in respect of international transactions undertaken with the associated enterprise. It was further concluded that the TPO had no mandate to have recourse to external comparables when, in the present case, internal comparables were available, which could be applied for determining the arm’s length price of international transactions with AEs - The Revenue have also not placed any material so as to enable us to take a different view in the matter in the present year. Transfer pricing adjustment based on TNM method are to be applied on transaction levels and not at enterprise level. If that be so, nothing stops an assessee from making internal TNM study, for justifying the value of its international transactions, as long as it can show that it had sufficiently uncontrolled transaction with non-AEs, which could give a meaningful analysis. The benchmarking that has to be done in TNMM can be either with an external party or based on segmental result of the assessee itself. International transfer pricing methodology does not reject an internal TNM method or stipulate that TNMM based could be based only on external comparables. In a nutshell, the view taken by the lower authorities that TNMM could not be adopted on internal analysis, cannot be accepted. Admittedly, the PLI for AE transaction was 3.91% only as per assessee’s own working, against 4.4% for non-AE transactions. Thus by adopting 4.4% as the comparable PLI, the expected operating profit on operating cost of Rs. 22,52,92,028 will be Rs. 99,12,849/-. The operating profit shown by the company is Rs. 88,61,863/-. So, the upward revision that can be made by adopting ALP will be Rs. 10,50,986.23. A.O. is directed to consider this amount as the upward adjustment necessary on account of fixation of ALP. Ordered accordingly.
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2012 (12) TMI 530
FBT - Computation of fringe benefits - AO argued that assessee has not treated freebies expenditure and cost of samples of companies own products given free to customer on purchase of its products and expenditure on celebrity endorsement as fringe benefits 115WB(2)(D) – Held that:- Following the decision in case of T & T Motors Ltd. (2012 (1) TMI 96 - DELHI HIGH COURT) that the expenditure incurred by the assessee on freebies is not a fringe benefits covered u/s 115WB(2) (D). Similarly the expenditure incurred by way of giving samples of company’s products free to the customers along with sale of products of the assessee company was in the nature of sale expense and cannot be included as fringe benefits u/s 115WB(2)(D). In favour of assessee
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2012 (12) TMI 529
Approval u/s. 10(23C)(vi) - denial of exemption u/s. 11 - Educational income of the Trusts & Societies - Held that:- Following view taken by the coordinated benches of Tribunal in similar matters the order of the CIT(A) for the years under appeal is set aside and restore the matter to the file of AO with a direction to verify the aspect of donation, capitation fee etc., if any collected by the assessee, and if it is found that besides fulfilling other prerequisites for exemption under S.11, the assessee has not charged any money i.e. donation, building fund, auditorium fee etc, over and above the prescribed fee for the admission of students, the assessee would be entitled for exemption under S.11, even though the notification under S.10(23C)(vi) have not been received by it - in favour of revenue by way of remand. Depreciation claim denied - Held that:- AO directed to verify in respect of each asset on which depreciation claimed, whether the value of such asset was in fact allowed under S.11, and if it was so allowed, the depreciation would not be allowed in respect of such asset - Impugned order of the CIT(A) set aside and the matter restored to the file of the AO for fresh consideration - in favour of revenue by way of remand. Unrecorded capitation fees collected from the students admitted under the management quota - Held that:- Substantive additions having been made in the hands of the trustees on protective basis and as substantive additions have reached finality which has not been controverted by DR the impugned protective additions have no legs to stand - CIT(A) justified in deleting the said additions - in favour of assessee.
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2012 (12) TMI 528
Capital versus revenue expenditure - Expenditure on prospecting, etc., for certain minerals – Assessee claim over burden removal charges, Drilling, Blasting and Explosive, Shifting and Leveling charges, query development charges and mining survey – AO argued that these expenses are incurred for the purpose of exploring of iron ore and thus are covered by Sec. 35E – Held that:- An expenditure is made not for the purpose of bringing into existence any such asset or advantage but for running the business or working it with a view to produce profits it is a revenue expenditure. Hence the expenditure incurred in removal of overburden was of revenue nature and hence the assessee was entitled to claim deduction. In favour of assessee Addition on account of plot bidding charges – Revenue or capital expenditure – Assessee claim amount incurred for acquiring a plot inside the Port is revenue in nature - Ownership of the Plot is with Paradeep Port and the assessee is nothing but a tenant – Held that:- The assessee has incurred this expenditure for carrying out stowing operation for export business and such expenditure is not incurred for the purpose of bringing into existence any such assets or advantage but for running the business with a view to earn profits. The assessee was to bid when the Port Trust authority allowed it stock with condition of export of 1 lakh tones per annum. No capital assets can be transferred with condition and stipulation which rather indicate that the assessee must export lest be deprived of the plot in the Port Trust. The expenditure was necessarily for the smooth business of the assessee and not for creation of an asset or enduring benefit. In favour of assessee Disallowance u/s 40A(3) – Cash payment exceeding Rs. 20000 – Held that:- As the details as inscribed by the AO which are not individual vouchers for incurring a particular expenditure but are a group head. Delete the addition. In favour of assessee
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2012 (12) TMI 527
Disallowance of expenses on which assessee failed to deduct on TDS - When the provision of Section 40(a)ia)is attracted on the expenses which are paid or payable without deducting TDS as on balance sheet date - Held that:- Provisions of section 40(a)(ia), provided in non-deduction of amount which remains payable to a resident in respect of fees for technical services, commission etc.; that it is not applicable where expenditure is paid as decided by Special Bench of the ITAT in Merilyn Shipping & Transport (2012 (4) TMI 290 - ITAT VISAKHAPATNAM). The expression implied in section 40(a)(ia) of the Act, is “payable” and not “paid”. In the present case, the commission involved undisputedly stands paid. Therefore expression “payable” has been used which suggests that disallowance would be made of those expenses which are payable on 31st of March of every Year. Hence disallowance in the case of the assessee is not sustainable. Appeal decided in favour of assessee.
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2012 (12) TMI 526
Addition on account of short term capital loss – Assessee is in business of shares – Investment made in shares at a premium in a private company – Shares sold at 10% of cost after three months – AO made addition saying that no major change in financial of company in short spam – Held that:- As the assessee discharged his liability through cheque. And buyer also confirmed the same at value stated by assessee by filling affidavit with AO. Appeal decided in favor of assessee. Addition on account of cash deposit in bank – AO made addition during assessment u/s 143(3) on basis that practice of holding such large amount of cash in saving a/c was not practical - Assessee submit the details of income earned over the years from which cash in hand can be sustained - Held that:- As the assessee shown cash in his Wealth Tax which was in confirmation with cash book & detail submitted before authority by assessee. And fully explained opening & closing balance of cash. Therefore addition made by AO duly deleted. Decision in favour of assessee.
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2012 (12) TMI 525
Determination of cut-off date to determine pre-operative expense – AO's view is that date of commencement of business is the date of set up of business and such date is relevant to determine the nature of expenditure incurred – Assessee's view is that date of set up of the business is when some consultants were appointed for advice about the feasibility – Held that:- As revenue expenses incurred after the setting up of business and prior to its commencement are an allowable expense. Mere appointment of consultants, in itself does not mean anything in line of business. There are host of other activities which are required to be undertaken/ performed before the business can be stated to have actually been set up line of business. - even the road show conducted for launching of the project were only promotional activities and are therefore pre-operational in nature. The date of setup of the business should be 1.1.2003 and hence all the expenses which the assessee has incurred after 1.1.2003 whether on the payment of consultants or on rent or on staff salary or all other expenses of revenue nature etc. should be allowed as deduction, as against from 7.3.2003 taken by the Assessing Officer. All expenses incurred form 1.4.2002 to 31.12.2002 should be treated as pre-operative expenses and should be capitalized on which the assessee is entitled to get depreciation at the applicable rates. - Order of CIT(A) sustained.
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2012 (12) TMI 524
Difference in comparable sale price - Cotton Waste sold to sister concern - market value of comparable cases as against the actual sale consideration - Held that:- Nowhere in the order sheet, the assessee agreed for an estimated addition of Rs.88,06,811/- towards difference in sale price of cotton waste. Therefore, the observation of the AO that the assessee admitted for an estimated addition of towards difference in sale price of cotton waste compared to the prevailing market price is not born out from the record. CIT(A) sustained the addition holding that the concept of revenue neutral cannot be seen from the assessment year alone and it has to be seen from the subsequent years of taxation. As the CIT(A) has not given any finding on the ground raised by the assessee that there is no admission at all by the assessee for an ad-hoc estimated addition and as the AO has not provided any data collected by him to the assessee calling for its objection for making such an estimated addition, it is necessary to set aside the issue to CIT(A) for disposing of the issue afresh - in favour of assessee for statistical purposes.
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2012 (12) TMI 523
Condonation of Delay in filling appeal before Tribunal – Delay of 2053 days - Whether the petition filed by the assessee seeking condonation of delay of 2053 days in filing the appeal is liable to be accepted – Held that:- Even if an assessee can’t explain delay on day to day basis, at least it should be able to demonstrate its inability in a reasonable manner. Here, the assessee is not a naďve or a first time litigant. This appeal itself is second round of litigation. We notice that neither there are sufficient particulars nor satisfactory explanation. The CIT(Appeals) passed order on 29.8.2006 whereas in the year 2011, for the first time, the assessee filed its representation(supra). No doubt, the law of limitation is only a tool to serve justice. When there is sufficient explanation, even time barred lis can be entertained by condoning delay. Hence, in our opinion, this hopelessly time barred appeal is liable to be dismissed for want of limitation. Issue decides against assessee Claim u/s. 40(b) – Fresh Claim before ITAT- Whether the CIT(A) order confirming the findings of the AO in rejecting assessee’s claim u/s 40(b)B is to be upheld or modified as per the respective stands of the parties – Held that:- Assessee needs for filing a revised return for making a fresh claim. In first round of assessment neither such claim had been raised nor was any revised return filed. Assessee preferred to raise claim the benefit of Sec.40(b) that too in the absence of books of accounts and other supporting documents. Issue decides against assessee
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2012 (12) TMI 522
Revision of Order by CIT u/s 263 – Erroneous and prejudicial to the interest of Revenue – Adjustment of unabsorbed depreciation while claiming deduction u/s 10B - Held that:- Divergent views were expressed by the Hon’ble Karnataka, Bombay & Kerala High Court. Following the decision in case of Malabar Industrial Co. Ltd. (2000 (2) TMI 10 - SUPREME COURT) that when two views are possible and the AO has taken one view with which the CIT does not agree, it cannot be treated as erroneous and prejudicial to the interest of Revenue unless the view taken by the AO is unsustainable in law. There is a contrary view expressed by the Hon’ble High Courts and AO has accepted one view. Therefore order of CIT u/s 263 needs to be set aside. Issue decides in favour of assessee
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2012 (12) TMI 521
India UK DTTA - Income from Shipping Business - Held that:- The assessee herein is a resident assessee but it is not borne out of record as to whether the "UK Company" is a resident assessee or non-resident assessee - relationship between the assessee-Company and the UK Company needs to be examined at the end of the AO in order to find out whether the assessee-Company is really acting as the agent of the UK Company. Further the applicability of DTAA to the instant transactions also needs to be examined. Both the assessee as well as the CIT(A) placed reliance on the decision of ITO Versus IAL Shipping Agencies (Mumbai) Ltd. [2010 (1) TMI 889 - ITAT, MUMBAI] that the assessee is only acting as the agent of the UK Company, it has to be examined whether the decision rendered in that case applies to the facts surrounding the instant case. As the assessee has not substantiated various claims made by it before the AO all the issues require re-examination at the end of the AO - AO directed to frame the assessment de nova without being influenced by the "Annual no objection certificate" in accordance with law - appeal filed by the Revenue allowed for statistical purposes.
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2012 (12) TMI 520
Chargeability to Capital Gain Tax - Valaution - nature to two different transaction - land development agreement as well as sale of developed land - Conversion of Agricultural land into Housing Plots - held that:- When the Assessing Officer himself has treated two agreements entered into by the assessee as two distinct and separate transactions, he was not correct in taking the indexed cost of acquisition, the purchase value of the land in 1980 and 1989. While computing capital gains arising out of transfer of 15% interest in developed land to M/s Koncept Nirman Pvt. Limited in April, 2006. In our view, the CIT (A) was right in holding that the cost of 15% of the right in developed land should be taken to be the value on which the SRO has calculated stamp duty of Rs.5,41,675/- The asset sold by the assessee to M/s Koncept Nirman Pvt. Limited is not the same which was given to the developer under the development agreement. Once the agricultural land was transferred to the developer under the development agreement, it lost its character as agricultural land. It is also evident from the materials on record that the intention of the parties was never to carry on any agricultural activity but to develop the land to residential/saleable plots. The nature and character of the land has also been changed from agricultural to residential by the order passed by the HUDA in its G.O. Ms. No.810 dated 21-9-2005 prior to the sale of 15% right and interest to M/s Koncept Nirman Pvt. Limited in April, 2006. That apart the assessee himself in the written submissions has submitted that no agricultural activity has taken place from the assessment year 2000-01 to 2005-06. On consideration of these facts, it cannot be said that the capital asset sold to M/s. Koncept Nirman Pvt. Limited in April, 2006 under the sale deed is the same as the land which was given for development under the development agreement and therefore not chargeable to capital gains tax. All the appeals by the Revenue as well as Cross Objections filed by the assessee are dismissed.
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2012 (12) TMI 519
Penalty u/s 271(1)(c)- Expenditure by hotel industry on renovation is a capital or revenue expenditure - Assessee claiming renovation expenditure as revenue expenditure – Assessee file belated return declaring loss - Held that:- As the assessee is not entitled to carry forward loss in these circumstances, there cannot be any intention to disclose more loss. In case of a hotel whether an expenditure on the renovation of hotel premises i.e. restaurant, bar & lounge, corridor, rooms, staircase, entrance lobby etc. is a capital or revenue is a highly debatable issue. In case where two views of the claim of the assessee were possible, the explanation offered by it could not be said to be false. Therefore, merely because the renovation expenditure was claimed by the assessee as a revenue expenditure but treated as capital expenditure by the Revenue would not be sufficient to hold that the assessee either furnished inaccurate particulars or concealed the income follow the decision of SC in Reliance Petro Products Pvt. Ltd. (2010 (3) TMI 80) & Delhi High Court in Zoom Communication Pvt. .Ltd (2010 (5) TMI 34). Decision in favour of assessee.
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2012 (12) TMI 518
Conversion of fixed asset into stock in trade - Business Income vs Capital Gain - Held that:- Though the land was shown as investment in the balance-sheet at the time of acquisition, the assessee has converted it into stock in trade before entering into the development agreement on 25-4-2004. This fact is clear from the assessee’s letter dated 6-12-2008 submitted before the AO in course of assessment proceedings. Therefore, the assessee having given stock in trade for development, the capital gains arising there from has to be charged to tax as per the provisions contained u/s 45(2). The assessee never had the intention of acquiring the land as an investment but to exploit it as business venture. When the assessee has entered into joint development agreement on 25-4-2004, the asset has already been converted into stock in trade and no more remains a capital asset. Therefore, it cannot be treated as a transfer u/s 2(47)(v). Thus no reason to interfere with the finding of the CIT (A) directing the AO to work out the short term capital gains on conversion of land held as investment in stock in trade and also the business income arising from sale of stock in trade separately - against revenue.
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2012 (12) TMI 517
Undisclosed cash credit - Held that:- It is revealed from the ledger account submitted with the paper book that the assessee has disclosed the addresses and telephone numbers of the members in the ledger account, therefore, the allegation of the AO that the details have not been furnished, cannot be accepted - no infirmity in the accounting methodology as the appellant debits the cash account on receipt of monthly instalment and credits the ledger account of the customer & when the jewellery is given, at that point the credits are converted into sales - in favour of assessee. Addition on account of deficit stock of Diamonds - survey under section 133A - Held that:- The AO treated the deficit in stock as unaccounted sales and added an amount of Rs.5,74,394/- but when the assessee has produced certain evidences, the same cannot be discarded on doubts and presumptions without bringing sufficient material to disprove them. It appears from the assessment order that there is no out-right denial from Sri Satish Kumar Shah regarding receipt of diamonds for assortment, AO is not precluded from making any enquiry to find correctness of the claim made out by the assessee. However, principles of natural justice demands the assessee must be informed about the result of such enquiry and may be given a fair chance of rebutting it - set aside this issue to the file of AO who shall make proper enquiry and come to a conclusion after affording an opportunity of being heard to the assessee in this regard. Disallowance of notional interest received on loan advances - Held that:- It is seen from the balance-sheet of the assessee having enough capital to advance the loan amount of Rs.30 lakhs, and the unsecured loans were all taken in the earlier years and no fresh loan has been taken in the current assessment year hence there is no nexus between the borrowed capital and loan advanced by the assessee - addition towards notional interest cannot be sustained - in favour of assessee. Monies collected as a part of the assessee’s monthly gold scheme lucky draw - Held that:- It is seen from the terms and conditions of the scheme that under no circumstances, cash will be refunded to the member and only gold ornaments will be issued. Therefore, the inference to be made is as soon as the member participates in the scheme and pays installment money, there is accrual of income to the assessee since the money is not going to be refunded to the member. Therefore, it cannot be said that the income has not accrued to the assessee - The assessee is showing it as a liability, will not change the character of receipt which always remains as a trading receipt - against assessee. Addition on account of valuation of closing stock - Held that:- As the assessee has been consistently adopting the same FIFO method of valuation of closing stock from the past years without being doubted or questioned by the department and is sought to be changed by the department, it has to be backed by sound reasoning which is lacking in the present case - set aside this issue to the file of the AO who shall take a decision after affording a reasonable opportunity of being heard to the assessee.
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Customs
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2012 (12) TMI 554
Classification – Refrigerator originating from Thailand - benefit of notification No. 85/04-Cus - assessing officer classified the goods under CTH 84181090 on the ground that the goods under importation were combined refrigerators-freezers, fitted with separate external doors and therefore, not eligible for the aforesaid exemption – Held that:- Classification of combined refrigerator-freezer with separate external doors would be under sub-heading 8418.10 and not under 8418.21 as was being followed by certain customs field formations. Accordingly these goods are not covered under sl.No. 50 of notification No. 85/2004-Cus dated 31-8-2004 – in favor of revenue
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2012 (12) TMI 553
Penalty – smuggling of foreign currency for consideration – Held that:- Foreign currency was recovered from one Shri Iqbal Suleman while boarding a flight of Oman Airways to Dubai. Shri Suleman in his statement recorded under Section 108 of the Customs Act named the appellants who helped him in taking the currency in the airport without disclosing to the Customs authorities for the consideration of ₹ 4,000/-, i.e. ₹ 2,000/- each - appellants also admitted that they had received, on earlier occasions also, gifts from Shri Suleman such as mobile phones etc. The appellants being in the security staff of the Oman Airways are to look after security of the passengers - for the safety of passengers travelling by air, the persons like the appellants being in the security staff can do anything for a monetary consideration – In favor of revenue
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2012 (12) TMI 539
License of Custom House Agent - old v/s new regulation - Held that:- All those who had cleared the examinations, under the regulations issued in the year, 1984, would be eligible for the grant of the custom house agents license, subject to their fulfilling the other conditions of eligibility as decided in Sunil Kohli Vs. Union of India [2012 (10) TMI 638 - SUPREME COURT]. Consequently, the petitioners are entitled to be considered for grant of Customs House Agent licenses without having to clear the examination in the additional subjects. It is appropriate to direct the respondents to issue the necessary certificate granting the Customs House Agents Licence to the petitioner, as per Regulation 9 of the Customs House Agents Licencing Regulations, 2004, on the petitioner complying with the requirements prescribed, under Regulation 10 of the said regulations, within a period of eight weeks from the date of receipt of a copy of this order - writ petition is ordered accordingly.
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2012 (12) TMI 538
Contempt of Court proceedings - Held that:- Appellant chose not to file reply to the show-cause notice dated despite several opportunities therefore, it was observed that the appellant has nothing to say in reply to the show-cause notice - matter referred to Hon'ble High Court of Bombay for proceedings of contempt of Court against the appellant.
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Corporate Laws
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2012 (12) TMI 556
Winding-up petition - held that:- The documents relied and referred by both the Counsel itself shows that there are various questions, which need to be adjudicated first before accepting the averments of the Petitioner. Unless the transactions based upon which the present Petition is filed by the Petitioner has binding force and unless it is declared accordingly in view of the challenge so raised, I am inclined to observe that the present Company Petition, as filed, is not sufficient to pass the winding-up order against the Respondent-Company. There is no foundation to accept and exercise the discretion that the Respondent-Company "neglect to pay due and "payable/agreed amount". The Petitioner is not remedyless to recover the amount. - Petition dismissed.
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2012 (12) TMI 555
Scheme of Amalgamation - Held that:- In view of the approval accorded by the Shareholders and Creditors of the Petitioner Companies, representation/reports filed by the Regional Director, Northern Region and the Official Liquidator, attached with this Court to the proposed Scheme of Amalgamation, there appears to be no impediment to the grant of sanction to the Scheme of Amalgamation. Sanction is hereby granted to the Scheme of Amalgamation under sections 391 and 394 of the Companies Act, 1956. The Petitioner Companies will comply with the statutory requirements in accordance with law. Certified copy of the order be filed with the Registrar of Companies within 30 days from the date of receipt of the same. The whole or part of the undertaking, the property, rights and powers and also all the liabilities and duties of the Transferor Company No. 1 to 2 be transferred to and vest in the Transferee Company without any further act or deed - Upon the Scheme coming into effect, the Transferor Companies shall stand dissolved without winding up. Order of amalgamation will not be construed as an order granting exemption from payment of stamp duty or taxes or any other charges, if payable in accordance with any law - Petitioner Companies would voluntarily deposit a sum of Rs. One lac in the Common Pool fund of the Official Liquidator within three weeks from today - Petition is allowed.
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2012 (12) TMI 537
Scheme of Amalgamation - Merger - Application u/s 391,394 of Companies Act - Held that:- Representation/reports filed by the Regional Director and the Official Liquidator that no objections of Shareholders and Creditors of the Petitioner Company, received to the proposed Scheme, there appears to be no impediment to grant of sanction to the Scheme - no notice is required to be given to the commission in case of an amalgamation which involves an Holding company and its subsidiaries, which are wholly owned by enterprises belonging to the same group - Sanction is hereby granted to the Scheme u/s 391 and 394 of the Companies Act, 1956 - Petitioner Company will comply with the statutory requirements in accordance with law - Certified copy of the order will be filed with the ROC within 30 days from the date of receipt of the same - Petitioner Company and the property, rights and powers & all the liabilities and duties concerning the same will be transferred to and vest in the Transferee Company without any further act or deed - this order will not be construed as an order granting exemption from payment of stamp duty or taxes or any other charges, if payable in accordance with any law - Petitioner Company would voluntarily deposit a total sum of Rs.1,00,000/- in the Common Pool fund of the Official Liquidator within three weeks from today - Scheme of Amalgamation allowed.
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2012 (12) TMI 536
Winding up petition - Whether scheme u/s 391-392 of the Companies Act is maintainable in a winding up petition filed by the Reserve Bank of India under Section 45MC(1) of RBI Act, 1934? - Held that:- If the scheme contains any term or condition which is in derogation of any statutory provision, the same cannot be sanctioned. It is a part of public policy itself that statutory provisions are to be followed and are not to be disregarded or contravened. Therefore, a scheme which ignores or side-steps statutory provisions would clearly be opposed to public policy. Therefore, while a scheme under Sections 391/392 of the Companies Act could be considered by the company court even during the pendency of the winding up petition filed by RBI under Section 45MMC of the RBI Act, such a scheme cannot be sanctioned if it is in violation of any of the statutory provisions including the provisions of Chapter III-B of RBI Act. Whether criminal and income tax proceedings pending against the company and its directors & quasi-judicial orders passed by a statutory authority like SEBI could be stayed by the company court while sanctioning a scheme under Sections 391-392 of the Companies Act, 1956 - Held that:- “Suit or other legal proceeding” as appearing in Section 446(1) as also the expression “suit or proceeding” under Section 446(2) of the Companies Act do not include criminal proceedings. The same would be the position with regard to the expression “suit or proceeding” as appearing in Section 391(6) of the Companies Act. The consequence of this would be that a company court while examining or sanctioning a scheme under Section 391/392 of the Companies Act cannot stay any criminal proceedings as that is beyond the scope of the powers and jurisdiction of the company court. In Krishna Texport Industries Ltd. Versus DCM Ltd. (2008 (5) TMI 425 - HIGH COURT OF DELHI) an unequivocal view was taken that Section 391(6) of the Companies Act does not envisage either quashing or stay of criminal cases against the company or its Directors. Such criminal proceedings include those under Section 138 of the Negotiable Instruments Act, 1881. Statutory authority like SEBI or orders passed by RBI and the ITA under special enactments cannot be set aside while sanctioning a scheme under Section 391 of the Companies Act. No stay of any criminal or income tax proceedings can be ordered by the company court while considering an application under Sections 391/392 of the Companies Act, 1956. Therefore, the scheme which entails a direction to SEBI to revoke the orders passed under Section 11B of the SEBI Act could not have been sanctioned in law. Similarly, directions regarding “vacation or stay sine die” of all criminal cases could not have been given by the company court. Directions could not be given to the CBI to release the passport of the propounders of the scheme as also of the Ex-Directors of CRB Capital nor a direction could be given to CBI to hand over all records and documents of CRB Capital including records of fixed deposits, particularly, in view of the fact that the criminal cases were pending against the said Directors/ Ex-Directors of CRB Capital - the provisions of SEBI Act and RBI Act being special and complete codes in themselves with regard to their respective subject matters would over-ride the provisions of Companies Act in case there is any inconsistency between the said provisions Whether the scheme formulated in the instant case is bona-fide, feasible and fair? - Held that:- It is apparent that the reliefs and concessions as sought under the scheme form an integral part of the scheme. If a majority of reliefs and concessions sought in law cannot be granted, the scheme itself would be unworkable - Several directions including the direction in respect of criminal cases and stay of demands and vacation of ex-parte orders insofar as income tax authorities are concerned also the release of the passport of the propounders of the scheme would probably be contrary to the direction given by the criminal court inasmuch as that may have been a condition for grant of bail. Such a direction, once again, may be contrary to law, thus scheme as formulated in the present case is not bonafide, feasible or fair. Whether grounds for winding up of the Company under Section 45MC (1) of Reserve Bank of India Act, 1934 as made out in the winding up petition exist. If so, to what effect? - Held that:- If the scheme cannot be successfully implemented, then the winding-up petition filed by the RBI in respect of CRB Capital would revive. It is obvious that the company court has not examined the winding-up petition of RBI on merits - set aside the impugned judgment as also the scheme and remit the matter to the company court for consideration of the winding-up petition in accordance with law - no bar on CRB Capital propounding another scheme during the pendency of the said winding-up petition or even thereafter, in case winding-up is ordered.
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FEMA
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2012 (12) TMI 557
Whether the Tribunal was justified in directing the appellant to deposit 50% of the penalty Rs. 35 lacs imposed by the Adjudicating Authority for the purposes of hearing the appellant's appeal under the Foreign Exchange Regulation 1973 ('FERA 1973') on merits? - held that:- The emphasis before the Tribunal on the part of the appellant appears to have been financial hardship and for that purpose had filed an affidavit contending that he is in no position to deposit the penalty amount and in support thereof contends that he is even not an Income Tax assesee. This is difficult to accept in the light of the appellant's contention that he was an independent person and was carrying on import business on his own and in that regard had remitted and amount of US$ 29,91,100/- during the period January to April 1991 on his own. The order of the Tribunal dated 25/1/2008 directing the appellant to deposit 50% of the penalty amount i.e. Rs.17.50lacs out of Rs.35lacs imposed upon him is reasonable.
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Service Tax
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2012 (12) TMI 581
Refund claim - Cenvat Credit on Service Tax distributed by the Head Office - Denial as Head Office was not registered as Input service distributor - Held that:- Requirement for registration came only in 2006 and prior to this there was no such requirement. Therefore, what is required to be seen is whether the input service in respect of which the credit is taken is required for providing the output service and has nexus with the rendering of the output service. If the nexus can be established, the appellant would be rightly entitled for the credit of the service tax paid thereon. Service tax paid on leased telecom lines - denial of Refund claim - Held that:- Appellants are rightly entitled for Service tax credit and refund thereon for the reason that the exports are undertaken electronically and to undertake this export they need dedicated lines from their office premises to the telecom authorities, who will receive the data for transmitting the same abroad. Without these dedicated lines, the appellant cannot deliver the output service and, therefore, leasing of telecom lines by the telecom authorities is an eligible input service as defined in Rule 2(l) of the CENVAT Credit Rules, 2004. No export of Output Service - Held that:- The view adopted by Revenue that appellant has not exported the output service because the service was transmitted through telecom service providers in India is completely irrational as when data is transmitted through electronic medium, it has to be first transmitted to a server of the telecom authorities in India and thereafter uplinked/transmitted to the foreign service recipient - foreign service recipient has received the output service and has made payment in convertible foreign exchange to the appellant towards the services received, payment has been received by the Head Office of the appellant unit in Bombay whereas they are situated in Nashik and the appellant needs to produce evidence to show that the payments which were received in convertible foreign exchange in Bombay related to the exports made by the units at Nashik - remand the matter to the original adjudicating authority subject to verification of these facts through documentary evidence to consider the refund claim of the appellant - in favour of assessee by way of remand.
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2012 (12) TMI 580
Application for Modification - applicant submits that they have paid the entire amount of service tax - waiver claimed of pre-deposit of Duty, Interest and Penalty - Held that:- Contention of Applicant was that there was a bonafide belief that they have paid the entire amount of service tax and that the statement was made before this Tribunal on 23/05/2012 on the basis of certificate issued by the Chartered Accountant wherein it has been stated that the demand raised in the show-cause notice, the whole of the service tax has been paid. As per the applicant the amount payable is only Rs. 6,24,51,219/-, which has been paid. But as per Revenue entire amount of service tax in dispute was Rs.18,08,18,228/- In the interest of justice, the applicant directed to make a pre-deposit the balance amount of service tax in dispute apart from already made along with 25% of penalty as directed by this Tribunal by order dated 28/06/2012 within a further period of eight weeks and report compliance. Show-cause notice has been replied by the appellant and they have tendered unconditional apology for the inconvenience caused to this Bench, therefore, withdraw the show-cause notice issued to the applicant.
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2012 (12) TMI 579
Discharge of service tax liability by the agent of the assessee - payment of service tax under the wrong head - Held that:- In this set of facts, service tax liability has been discharged by Matrix on the above said activity cannot be denied merely on the ground that it has paid under Advertisement Agency Service. As M/s Matrix has paid the service tax under the category of Advertisement Agency Service that does not mean that M/s Matrix has not paid service tax on behalf of the appellant. By mere paying the service tax liability under wrong head does not meant that service tax liability has not been discharged. - In this case, appellant has appointed M/s Matrix as her agent to discharge her service tax liability on her behalf and same has been discharged by M/s Matrix. - In favour of assessee
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2012 (12) TMI 542
Assessee provide services in the state of J&K and to SEZ - Service provided in the state of J&K does not attract service tax leviable under Sec.66 - Services provided to the units situated in SEZ is exempted vide Notification 4/2004-ST dated 31.3.2004. Assessee had not maintained separate accounts in respect of receipt, consumption and inventory of input services meant for use in providing output service - Which are chargeable to tax as well as exempted service, as provided under Rule 6(2) of CCR, 2004 - Availed cenvat credit on the entire input services received by them – Revenue contended that if cenvat credit on common input services is not taken, appellant is required to maintain separate accounts – Assessee argued that once a service tax paid on input services has not been taken at all, the provisions of Rule 6(3)(c) of CCR would not be applicable – Issue remand back to revenue and waive the requirement of pre-deposit of service tax demanded by Commissioner. Held that:- As the assessee did not fulfill their obligation which has resulted in impugned order. Therefore an amount of pre-deposit required to be deposit by assessee. And also submit copies of the relevant documents with a worksheet showing the details of documents on the basis of which credit is taken and the details of credit utilized. Appeal remand back to AO
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2012 (12) TMI 541
Travel Agent Services - Demand of Service Tax, Interest and Penalty - denial of SSI benefit - Held that:- In view of the fact that during the previous year appellants were availing the SSI benefit, denial of the same in the next year on the ground of non-filing of declaration is not appropriate. Even after surrendering of certificate and treating it as declaration, it was the bounden duty of the appellants to register themselves when they crossed the turn over of Rs.3 lakhs and to start following the statutory procedure, but they have failed to do so. Since they have failed to do so demand for service tax of Rs. 2930/- with interest is upheld and penalty under section 76 and Section 78 at Rs. 2930/- each is upheld. Penalty amounting to Rs. 1000/- u/s. 77 also confirmed.
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2012 (12) TMI 540
Maintainability of rectification of mistake - difference of opinion between Member (Judicial) & Member (Technical) - Promotion or marketing of logo or brand - demand under BAS - Held that:- No mistake apparent in the Tribunal's order while arriving at decision by both the members independently. Reliance placed on the decision of Suzlon Infrastructure Ltd. (2009 (5) TMI 64 - BOMBAY HIGH COURT) wherein the Hon'ble High Court hold that the application for ROM is maintainable but in that case, both the Members had not given finding on some issues but in this present case Member (Judicial) allowed the appeal on merit and Member (Technical) dealt with all the issues. Therefore, the decision of Suzlon Infrastructure Ltd. (supra) is not applicable to the facts of this case - application for ROM is dismissed.
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Central Excise
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2012 (12) TMI 552
Refund – appellants made export of Readymade Garments and filed a refund claim under the provisions of Rule 5 of Cenvat Credit Rules, 2002 read with Notification No. 54/2001-CE - Revenue submitted that Notification No.54/2001 is issued under provisions of Section 3 of the Central Excise Act and fixing tariff value in respect of readymade garments @ 60% of the retail sale price. As the appellant had not fixed any retail sale price, therefore, taking into consideration the price as per market value declared in the shipping bill is taken into consideration as maximum retail price (MRP), refund rejected – Held that:- There is no requirement of fixing the RSP on the goods for export - as the readymade garment has not been notified under Section 4A of the Central Excise Act, there is no requirement for fixing the RSP on the readymade garments which were exported therefore, provisions of Notification No.20/2001-CE are not applicable - rejecting a part of the refund claim by taking into consideration the provisions of Notification No. 20/2001-CE, is not sustainable
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2012 (12) TMI 551
Waiver of pre-deposit – appellant-company, registered as input service distributor, was distributing input services to various manufacturing units of theirs during the material period - they were also engaging themselves in a trading activity - Held that:- It is not the case of the department that any duty or tax was payable on the trading activity - entire credit was utilized for payment of duty of excise on the dutiable final products - manufacturing units were lawfully utilizing the entire credit for payment of duty on the dutiable final products. Trading activity was not one of the taxable services under Section 65 of the Finance Act 1994 and, therefore, there was no question of payment of service tax on that activity by the manufacturing units of the company - manufacturing units could not have been expected to maintain separate accounts. The show-cause notices appear to disclose self-contradictory stand of the revenue with reference to the fact of this case - appellant also seems to have a good case on limitation against the impugned demands - in favor of assessee
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2012 (12) TMI 550
Eligibility of credit taken on the capital goods/input services used in laying down railway line for about 10 Kms. from the factory to the nearest railway station and in laying the pipeline from the factory to nearby dam – Held that:- Credit accumulated can be utilized only when they started manufacturing final products and clear them - They could not utilize the credit so far and that it will take time before they can utilize the credit accumulated and also undertakes not to utilize the credit till the Appeal decided – pre-deposit waived
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2012 (12) TMI 549
Waiver of pre-deposit - manufacture of motor vehicles and motor vehicles parts – alleged that certain quantity of motor vehicles which were cleared to the depots and were subsequently transferred to other depots and cleared on the higher value – Held that:- Applicant produced data regarding such goods and submitted that in majority of cases applicants have sold the goods at lower value on which the duty has been paid at the time of clearance from the factory - in view of the definition 'place of removal' and in view of the provisions of Rule 7 of the Central Excise Valuation (Determination of Price of Excisable Goods Rules, 2000 - applicants have made out a strong case for total waiver of pre-deposit - Stay petitions allowed
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2012 (12) TMI 548
Provisional assessment - whether the respondents are liable to pay interest on finalization of the assessment if the differential duty has been paid before the finalization of the assessment – Held that:- Assessee is not liable to pay interest on the differential duty paid by them before the finalization of the provisional assessment
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2012 (12) TMI 547
Defaulted in payment of duty – alleged that there is a violation of Rule 8 (3A) of Central Excise Rules inasmuch as they are strictly prohibited from utilizing CENVAT credit during the default period – Held that:- Directing the appellant to pay the demanded amount in cash and allowing credit of the said amount (no such order has also been passed by the authorities below) would amount to double payment of duty. However there is clear violation of provisions of Rule 8(3A) of Central Excise Rules - appellant directed to deposit
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2012 (12) TMI 546
Quantification of demand - assessee is disputing the computation of the demand – Held that:- Full value of machinery items which are traded, is taken into consideration whereas as per the provisions of Rule 6 of the Cenvat Credit Rules, the value in case of trading shall be different between the sale price of the cost of goods sold or 10% of the cost of goods, whichever is more - demand is not sustainable - amount already deposited is sufficient for hearing of the appeal. The pre-deposit of the remaining amount of duty, interest and penalty is waived. Stay petition allowed.
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2012 (12) TMI 545
Waiver of pre-deposit – alleged that the applicants were taking non refundable amount from the customers as security deposit in respect of the reusable containers used in the manufacture of bottled water and Revenue wants to add this amount to the assessable value to the MRP - applicants submitted that the cost of reusable containers has been amortized and included in the MRP – Held that:- Applicants submitted the documents on 28.11.2011 such as copies of certificate of the Chartered Accountant dated 20.3.2003, Expenses Summary Statement as per Trial Balance as on 31.3.2000, copy of worksheet of landed cost of packing materials, copies of purchase invoices of packing materials etc. In spite of submitting these documents, the same were not taken into consideration while passing the impugned order - matter is remanded to the adjudicating authority
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2012 (12) TMI 544
Denial of cenvat credit - CENVAT credit availed in respect of the structural items used for the fabrication of sugar silos and weighbridge - invoices are seen mentioned in the Chief Engineer's statement which indicates that the HR coils covered by the invoices were used in the fabrication of sugar silos - same set of invoices and the same structural items are seen stated in the Chief Engineer's statement which also indicates the end-use as sugar silos – Held that:- Chief Engineer's statement specifies the structural items and also states that these were used in the fabrication of weighbridge. There is no evidence to show that the weighbridge fabricated out of the structural items covered by the above three invoices is located within the factory premises of the respondent - order is sustained to the limited extent of grant of CENVAT credit of Rs.78,185/- which was availed by the respondent on the following invoices viz. No.201, 209 and 210 dt.08/09/2006, No.2089 and 2378 dt.19/02/2007 and No.2113 dt.20/02/2007. Any further CENVAT Credit allowed by the Commissioner (Appeals) shall stand denied to the respondent - credit so quantified by the original authority shall be recovered from the respondent without interest or penalty.
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2012 (12) TMI 543
Remission of Duty – clearance of excisable goods from the factory of a Hundred Percent EOU. - calculation of duty - held that:- The provision under Rule 21 of Central Excise Rules is for goods manufactured in a factory and goods have been lost or destroyed by natural causes or unavoidable accident before removal from factory. This provision is clearly not applicable. Sections 13 and 23 of Customs Act are applicable to goods imported into the country and which are not yet cleared out of the customs area. These provisions are not clearly applicable. The argument that these goods are to be treated as imported goods is being raised apparently for the reason that duty at rate prescribed in Customs Tariff is being demanded. This is not the correct position. Duty being demanded is excise duty. Duty payable is calculated at rates prescribed in Customs Tariff. Imposition of Penalty - held that:- There are mitigating factors in favour of the appellant. Revenue has not been able to prove any mala fide intentions of the appellant - penalty imposed on the appellants is set aside - Thus appeal is allowed partially.
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2012 (12) TMI 535
Restoration of stay petition - waiver of dues dismissed for non-prosecution - Held that:- Appellant produced a copy of the letter dated 4.08.2012, which was sent through Speed Post and as per receipt of the Speed Post, that letter was submitted to the Postal Department on 4.08.2012 at 2.28 p.m. - notice for hearing was issued on 18.06.2012 fixing the application for waiver of dues on 06.08.2012 - The applicant receive the notice, however, the request for adjournment was only made through letter dated 04.08.2012 - applicants are interested only in delay the proceedings - matters listed before the Bench are also put up on the Website of the CESTAT. As the applicant was interested in undue delay in disposing of the application for waiver of dues, the Restoration application of Stay petition is allowed subject to deposit of cost of Rs.20,000/- to be deposited with the jurisdictional Commissioner within a period of two weeks. The Stay application is adjourned to 4.12.2012.
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2012 (12) TMI 534
Confiscation of Drums of packing material - drums were found having not been entered in their RG 23A Part I records - Imposition of Penalty - Held that:- Statements of appellant had clarified that these drums were old and used drums and were purchased under an invoice which was not cenvatable. As such the question of making entries of the same in RG 23 A Part I does not arise. The appellate authority have not found that appellants have taken the credit in respect of seized drums. The Revenue, for confiscation of drums in question should have shown that they have taken the credit in respect of seized drums. There is no such finding by the authorities below - no reason to uphold the confiscation of drums or to impose penalty on the appellant - in favour of assessee.
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2012 (12) TMI 533
Power of Commissioner to remand the matter to the adjudicating authority for fresh adjudication - setting aside of Demand of Duty, Interest and Penalty - Held that:- If the order in original is passed without giving opportunity of being heard to the assessee or without permitting him to produce evidence in support of his case then only order with the Commissioner (Appeals) would be able to pass him to set aside the impugned order on the ground of failure of justice. This would create an anomaly with prejudice to the Revenue as it would bring an end to the litigation without adjudicating on the demand raised by the show cause notice. Therefore, just and proper order in such a case would be nothing but an order of remand to adjudicate the matter denovo after giving due hearing to the assessee - it is apparent that Commisioner(A) have power to remand the matter back to original adjudicating authority even after amendment of Sec 35A(3). As decided in COMMISSIONER OF CENTRAL EXCISE, AHMEDABAD-I Versus MEDICO LABS [2004 (9) TMI 108 - HIGH COURT OF GUJARAT AT AHMEDABAD] that Commissioner (Appeals) continues to have power of remand even after the amendment of Section 35A(3) of the Central Excise Act, 1944 by Finance Act, 2001 w.e.f. 11.5.2001 - no merit in appeal filed by the department.
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2012 (12) TMI 532
Wrong availment of Cenvat Credit - Imposition of Penalty and Interest under Rule 15 of CCR 2004 rws 11AC of Central Excise Act, 1944 - Held that:- On reading of Rule 15(2) it is evident that this rule is applicable only in respect of Cenvat credit wrongly availed by the assessee in relation to “Inputs” or “Capital Goods”. This rule does not apply to wrong availment of Cenvat credit in relation to “Input Service”. Rule 12(4) would show that it is applicable in the case in which the assessee is a service provider. However, in the instant case appellant is a manufacturer and not service provider. Thus, in our view Rule 15(4) is also not attracted. At best, the appellant can be penalised under Rule 15(3) to the extent of Rs. 2,000/- - thus impugned order is set aside and amount of penalty is modified to Rs. 2,000/- in accordance with Rule 15(3) of CRR, 2004.
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2012 (12) TMI 531
Rectification of Mistake - Condonation of delay of 124 days in filing ROM Application – Held that:- Foolowing the decision taken in COLLECTOR OF C.E., CHANDIGARH Versus DOABA CO-OPERATIVE SUGAR MILLS [1988 (8) TMI 103 - SUPREME COURT OF INDIA] there is no scope for condonation of delay in filing of ROM application under Section 35C(2) when there is no provision for such condonation and the Tribunal being a creation of statute, cannot travel beyond the confines of the statute. The provisions of Section 5 of the Limitation Act, 1963 read with Section 151 CPC are not applicable for condonation of delay in filing of appeals or rectification application under the provisions of Central Excise Act, 1944.The delay in filing of ROM application, therefore, cannot be condoned and the application has to be rejected as time barred. Interest on Refund of Pre deposit - Held that:- As from ROM it is seen that assessee seek interest @ 12% p.a. from the date of pre-deposit i.e. 8-8-2008 till the date of refund of pre-deposit on 18-10-2011. But there is no provision in Central Excise Act, 1944 for interest on pre-deposit from the date of pre-deposit. Section 35FF permits interest only from the date of expiry of three months from the date of communication of the Appellant order to the Department till the date of refund of pre-deposit. A debatable point of law can not be a “mistake apparent from the record” as held in case of CCE, Calcutta v. ASCU Ltd. (2002 (12) TMI 87 - SUPREME COURT OF INDIA) - a mistake apparent from record’ is that which is an obvious and patent mistake and is not something which has to be established by long drawn process of reasoning on which there may be conceivably two opinions - ROM application and condonation of delay in filing of ROM application dismissed.
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Indian Laws
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2012 (12) TMI 578
Appointment of Mr. Pradip Kumar as Judicial Member of Customs Excise and Service Tax Appellate Tribunal [CESTAT] - he was a practising Advocate in the Calcutta High Court as well as before the CESTAT for over twenty years mainly dealing with the customs, excise and service tax matters. On 22nd April, 2006 he appeared for an interview before the Selection Committee for the post of Member [Judicial] in CESTAT. On being duly selected, he assumed charge as Member [Judicial] in the CESTAT on 22nd November, 2006. Service conditions of the Member of the CESTAT are governed by Customs, Excise and [Service Tax] Appellate Tribunal Members [Recruitment and Conditions of Service] Rules 1987 [hereinafter referred to as the “Rules”]. The controversy in the present proceedings is limited to the interpretation of Rule 8 and Rule 9 [2] of the aforesaid Rules. Under the Rules, Member of the CESTAT is put on probation for a period of one year [Rule 8(1)]. The order of discharge, being based upon the report of the President, is clearly stigmatic and could not have been passed without giving an opportunity to the respondent to meet the allegations contained in the report of the President, CESTAT. Although, the High Court had allowed the writ petition of the respondent only on the ground that there had been a violation of Rule 9(2), we have come to a conclusion that the order of discharge was vitiated being colourable exercise of power, stigmatic and punitive in nature and such order cannot be sustained in law. In our opinion, the order of discharge is arbitrary and therefore violates Article 14 of the Constitution. The appellant - Pradip Kumar is entitled to be reinstated in service. He shall be entitled to full back wages during the period he has been compelled to remain out of service. Union of India is directed to release all consequential benefits to the said Pradip Kumar within a period of two months of the receipt of a certified copy of this order.
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2012 (12) TMI 577
RTI - secrecy - Bihar Public Service Commission - Queries related to providing the names, designation and addresses of the subject experts present in the Interview Board, names and addresses of the candidates who appeared, the interview statement with certified photocopies of the marks of all the candidates, criteria for selection of the candidates, tabulated statement containing average marks allotted to the candidates from matriculation to M.Sc. during the selection process with the signatures of the members/officers and certified copy of the merit list. The answer book usually contains not only the signature and code number of the examiner, but also the signatures and code number of the scrutiniser/co-ordinator/head examiner. The information as to the names or particulars of the examiners/co- ordinators/scrutinisers/head examiners are therefore exempted from disclosure under Section 8(1)(g) of the RTI Act, on the ground that if such information is disclosed, it may endanger their physical safety. The possibility of a failed candidate attempting to take revenge from such persons cannot be ruled out. On the one hand, it is likely to expose the members of the Interview Board to harm and, on the other, such disclosure would serve no fruitful much less any public purpose. Furthermore, the view of the High Court in the judgment under appeal that element of bias can be traced and would be crystallized only if the names and addresses of the examiners/interviewers are furnished is without any substance. The element of bias can hardly be co-related with the disclosure of the names and addresses of the interviewers. Bias is not a ground which can be considered for or against a party making an application to which exemption under Section 8 is pleaded as a defence. Bihar Public Service Commission is not bound to disclose the information asked for by the applicant under Query No.1 of the application.
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