TMI Tax Updates - e-Newsletter
December 3, 2012
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
Highlights / Catch Notes
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Income Tax:
Income Tax (Fifteenth Amendment) Rules, 2012 - Amendment in Rules 11U and 11UA - Notification
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Customs:
Anti-dumping duty on the import of Caustic Soda, originating in or exported from Saudi Arabia, Iran. Japan and United States of America - Notification
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DGFT:
Modification of SION C-469 & Fixation of two new SIONs - Public Notice
Notifications
Companies Law-
[F No 17/161/2012-CL V - dated
30-11-2012
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Co. Law
Amendment in - Companies Filing of Documents and Forms in Extensible Business Reporting Language
Customs-
50/2012 - dated
29-11-2012
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ADD
Extend the validity of Notification No. 98 /2008-Customs dated 27th August, 2008 for a further period of one year, i.e up to and inclusive of 28th November, 2013
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49/2012 - dated
26-11-2012
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ADD
Anti-dumping duty on the import of Caustic Soda, originating in or exported from Saudi Arabia, Iran. Japan and United States of America
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106/2012 - dated
30-11-2012
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Cus (NT)
Amends Notification No. 36/2001-Customs (N.T.), dated the 3rd August, 2001 - Change in Tariff Value of RBD Palmolein, Brass Scrap (All Grades) Poppy Seeds, Gold and Silver Notified
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103/2012 - dated
16-11-2012
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Cus (NT)
Appointment of Common Adjudicating Authority - M/s KLJ Resources Ltd., KLJ House, 63 Rama Marg, Najafgarh Road, New Delhi
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102/2012 - dated
16-11-2012
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Cus (NT)
Appointment of Common Adjudicating Authority - M/s KLJ Organic Ltd., KLJ House, 63 Rama Marg, Najafgarh Road, New Delhi,
DGFT-
26 (RE-2012)/2009-14 - dated
30-11-2012
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FTP
Procedure and conditions for registration of contracts for export of cotton (Tariff Codes 5201 and 5203)- amendment thereof.
Income Tax-
HRD/CM/103/2010-11/1055 - dated
30-11-2012
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IT
Posting Policy for posting of officers in the Directorates of International Taxation & Transfer Pricing
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52/2012 - dated
29-11-2012
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IT
Income Tax (Fifteenth Amendment) Rules, 2012 - Amendment in Rules 11U and 11UA
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94/2012 - dated
9-10-2012
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On - Mata Amritanandamayi Charitable Trust, Amritapuri P.O., Kollam District, Kerala
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93/2012 - dated
9-10-2012
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects Or Schemes, Expenditure On - Jagadguru Rambhadracharya Handicapped University, Chitrakoot, Uttar Pradesh
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92/2012 - dated
9-10-2012
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects Or Schemes, Expenditure On - Deepak Foundation, 9-10, Kunj Society, Alkapuri, Baroda
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91/2012 - dated
9-10-2012
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects Or Schemes, Expenditure On - Kuriakose Elias Trust for Communication and Development, Thiruvanathapuram, Kerala
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90/2012 - dated
9-10-2012
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On - India Education Trust, Mahatma Gandhi Hospital- India Education Trust, 12-14, RIICO Institutional Area, Sitapura, Tonk Road, Jaipur - Rajasthan
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89/2012 - dated
9-10-2012
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects Or Schemes, Expenditure On - Arpan Trust, Ghatkopar, Bombay
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88/2012 - dated
9-10-2012
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On - H.B.S. Trust, (Human Benefits Service Trust) 21-C, Jodhpur -(Rajasthan)
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87/2012 - dated
9-10-2012
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IT
U/s. 35AC, IT ACT 1961 - Eligible Projects or Schemes, Expenditure On - Handicapped Children's Parents Association, Plot No. K (Behind Plot No. 13), Institutional Sector-5, Dwarka, New Delhi
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86/2012 - dated
9-10-2012
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IT
U/s. 35AC, IT ACT 1961 - Eligible Projects Or Schemes, Expenditure On - Care India Medical Society, H-1/13, Salunke Vihar, Pune -(Maharashtra)
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85/2012 - dated
9-10-2012
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On - Ent Charitable Trust, 4, Filka, Daftry Road, Mumbai
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84/2012 - dated
9-10-2012
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IT
U/s. 35AC, IT ACT1961 - Eligible Projects or Schemes, Expenditure On - Iskcon Food Relief Foundation, Hare Krishna Land, Juhu, Mumbai
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83/2012 - dated
9-10-2012
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects Or Schemes, Expenditure On - Noida Lok Manch, D-134, Sector 15, Noida
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82/2012 - dated
9-10-2012
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects Or Schemes, Expenditure On - Shree Ambica Niketan Trust, Parle Point Athwa Lines, Surat
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81/2012 - dated
9-10-2012
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IT
U/s. 35AC Eligible Projects Or Schemes, Expenditure On - Poona Blind Men's Association, 82, Rasta Peth, Pune
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80/2012 - dated
9-10-2012
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IT
Eligible Projects Or Schemes, Expenditure On - Nav Bharat Jagriti Kendra, Head Office Village Bahera, PO Brindvan, Via Chouparan, District Hazaribag
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79/2012 - dated
9-10-2012
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IT
U/s. IT ACT - Eligible Projects Or Schemes, Expenditure On - Special Olympics Gujarat Chapter, 4/16 professor Quarters, Gujarat University, Boys Hostel Campus, Navrangpura, Ahmedabad
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78/2012 - dated
9-10-2012
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IT
U/s. IT ACT, 1961 - Eligible Projects Or Schemes, Expenditure On - Swami Shree Nirodoshanandji Manav Seva Trust, Timbi Village, Umrala Taluk, Bhavnagar
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77/2012 - dated
9-10-2012
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects Or Schemes, Expenditure - The Association of People with Disability, 6th Cross Hutchins Road, Off Hennur, Lingarajapuram, St. Thomas Town Post, Bangalore
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76/2012 - dated
9-10-2012
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On - Shri Ugam Education Trust, 60, Shardakunj Society, Motipura Road, Ta Himmatnagar, District Sabarkantha, Gujarat
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75/2012 - dated
9-10-2012
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IT
U/s. 35AC, IT 1961- Eligible Projects Or Schemes, Expenditure On - Indian Red Cross Society, H.No.3-6-212, Street No. 15, Himayatnagar, Hyderabad
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74/2012 - dated
9-10-2012
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IT
U/s. 35AC, IT 1961 - Eligible Projects Or Schemes, Expenditure On - Manavseva Lokkalyan Mahasangh, Dr. Raj Siddiqui Complex, H.No.32, Asi Nagar, Nagpur, Maharashtra
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73/2012 - dated
9-10-2012
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IT
U/s. 35AC, IT 1961 - Eligible Projects or Schemes, Expenditure On - Aroh Foundation, 338, Than Singh Nagar, St. No. L, Military Road, Anand Parbat, New Delhi
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72/2012 - dated
9-10-2012
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IT
U/s. 35AC, IT 1961 - Eligible Projects or Schemes, Expenditure On - Ogawa Society, Hardas Nagar, Kamptee, Dist-Nagpur
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71/2012 - dated
9-10-2012
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IT
U/s. 35AC, IT 1961 - Eligible Projects Or Schemes, Expenditure On - Sahara Health Education Society, 39 Defence Park, Maheshtala, Kolkata
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70/2012 - dated
9-10-2012
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IT
U/s. 35AC IT 1961 - Eligible Projects or Schemes, Expenditure On - D-CACUS-Education Centre (Development of Communication, Arts & Culture, Science, Economics and Education Centre), Ningthoukhong Bazar Area, Bishnupur District, Manipur
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69/2012 - dated
9-10-2012
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IT
U/s. 35AC IT 1961 - Eligible Projects or Schemes, Expenditure On - Gohaldiha Jati Upajati Blue Bird, West Bengal
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68/2012 - dated
9-10-2012
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On- Krishnamurthy Foundation India, Chennai
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2012 (12) TMI 26
Addition u/s 69 - unexplained investments in plot of land - assessee surrendered the amount, however subsequently retracted from statement and contended that same was paid by Mr H - Held that:- It is found that impugned amount was disallowed merely on the ground that the impugned payment was paid by cheque dated 14.7.2002. From facts, it is found that it is a typographical error and in fact the payment was made on 14.7.2003 through cheque. Another reason for making the addition was that confirmation was not filed. However, we find that such confirmation was filed from Shri H, therefore, from both the angles, the claim of the assessee deserves to be allowed. Addition u/s 41(1) - amount transferred to the capital account of the assessee, who is a partner in the firm, Bhopal Garage & Service Station from loan account of his brother, in the same firm held as waiver of loan as gift but taxable u/s 41(1) - Held that:- From records genuineness of gift is established. Since it is money from the brother in the form of gift, section 41(1) is not attracted - Decided in favor of assessee Credit in the capital account of the assessee from the gifts received in ring ceremony of son - Held that:- Receiving of gift was accepted by the Assessing Officer, therefore, this addition is also deleted.
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2012 (12) TMI 25
Addition u/s 68 - share application money - amount transferred from outstanding balances of particular creditors - CIT(A) deleted addition holding that the identity, credit worthiness and genuineness of the transaction is explained - Revenue contesting order of CIT(A) on ground that confirmation of creditors has not been submitted - Held that:- Appeal is remanded to the file of the Assessing Officer with a direction to examine the alleged sundry creditor and the nature of such credits and then decide in accordance with law.
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2012 (12) TMI 24
Validity of reassessment proceedings u/s 263 - deduction u/s 80IB - CIT invoked revisionary jurisdiction u/s 263 on the ground that fire insurance claim cannot be said to be eligible for deduction u/s 80IB - Held that:- Amount so received by the assessee company from the insurance company is in the nature of compensation for loss of stock and such compensation cannot be treated as income of the assessee so as to decline the claim of deduction u/s 80IB and should be taken into account in determining the profit and gains of the assessee company. However, from the assessment order, it is found that there is not even a whisper regarding fire insurance claim and the cost of the raw cotton, therefore, matter is so set aside to the file of the AO. AO is directed to verify the factual figure of loss vis-a-vis the amount of compensation received from the insurance company against loss of stock. If amount of compensation received is more than the amount of actual loss, the excess amount is not eligible for deduction u/s 8IB - Decided in favor of assessee for statistical purposes
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2012 (12) TMI 23
Addition u/s 40A(2)(b) - commission of Rs 69 lacs paid to relative( Shri VKB) - part dis-allowance deleted by CIT(A) on the basis that Shri VKB has filed his return of income admitting income of Rs.44 lakh and therefore, to that extent, it cannot be said that the payment was with a view to avoiding tax - Held that:- On perusal of return it is found that income declared by Shri VKB under the head “income from business or profession” is only Rs.25 lacs. On working back of commission income received from TDS deducted of VKB by various parties, commission receipts come out to be more than Rs 1 crore, hence, it is clear that no part of the commission payment by present assessee-company to Shri VKB was forming part of the income declared by Shri VKB in his return of income. For the purpose of allowability of commission payment, what is required to be established by the assessee who is paying commission is this that the person to whom commission was paid has rendered services to the assessee-company for which commission was paid. No evidence has been brought on record before authorities below or before us that this increase in turnover has resulted because of services rendered by Shri VKB for which commission payment has been made - Dis-allowance of whole amount confirmed - Decided against assessee Addition on estimate basis treating the same as salary expenditure (staff) as having been incurred out of undisclosed sources of income - salary expenditure accounted for month of May’07 to Aug.’07 only and not for month of April’07 and Sep.07 to Mar.’08 - Held that:- On the one hand, the assessee-company paid the commission of Rs.69 lakh and submitted that the turnover has increased during this year from Rs.788 lakh in preceding year to Rs.4268 lakh in the present year and on the other hand in the month of April’07 and during Sept.’07 to Mar’08, the assessee is not accounting for any salary in its books of account. Addition upheld - Decided against assessee Dis-allowance u/s 40(a)(ia) - assessee contending payment before due date - Held that:- Though amount is paid to the credit of the government in the subsequent year but no exact date of such payment is available in records. Hence, we restore the matter back to the file of AO for fresh decision after finding out regarding the date of payment of TDS by the assessee in the next year and if it is found that the same was paid before due date of filing of return income of the present year, no dis-allowance u/s. 40(a)(ia) should be made
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2012 (12) TMI 22
Plea for rectification u/s 254 in order passed by Tribunal - main contention raised by Revenue was that the Distribution Agreement entered into between the two related parties was liable to question on ground that agreement did not contain any formula for sharing the profits between the two related parties and hence it allowed the parties to plan their affairs so as to ensure high margins to the UAE entity - Held that:- It is found that this aspect was decided by the Tribunal and it is noted by the Tribunal that the assessee company has executed proper distribution agreement with Vega UAE based on the ground that Vega UAE is carrying both the inventory risk as well as credit risk. This finding is given by the Tribunal after examining the facts of the present case. Also, clear finding given by the Tribunal that assessee company has entered into a valid and proper distribution agreement with Vega UAE and had been adhered to also. Hence, it is not proper to say that this issue was not discussed and decided. Hence, Revenue in M.A. has not established any apparent mistake in the Tribunal’s order and therefore, no rectification in this Tribunal’s order is called for u/s 254(2)
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2012 (12) TMI 21
Penalty u/s 271AAA - search - undisclosed income - assessment framed u/s 153A - Revenue contesting deletion of penalty by CIT(A) - Held that:- CIT(A) had deleted the penalty due to the following reasons - assessee had voluntarily disclosed the sum of Rs.50 lacs during the search proceedings with request that no penalty should be levied in respect of such disclosure - during the post search proceedings no specific question as regards manner of earning of undisclosed income or substantiation thereof was put forth by the revenue - assessee had also paid due tax for the undisclosed income declared voluntarily - when undisclosed income admitted by the assessee has been offered for tax in the return of income and the tax thereof duly paid, penalty cannot be levied, specifically, in the absence of any question in this respect by the AO. Reasons pointed out by the CIT(A) are justifiable for deleting the penalty levied u/s 271 AAA - Decided against Revenue
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2012 (12) TMI 20
Penalty u/s 271(1)(c) - addition due to difference in valuation of closing stock of diamonds - failure of assessee to produce stock register, show movement of goods - Revenue contended that assessee had valued the closing stock in an arbitrary manner to suit its convenience - Held that:- Every lot of diamond is expensive and unless and until the stocks are dealt with care and accuracy one cannot arrive at the profit or loss gained out of such purchases and sales. It is very much possible to list out all the pieces of diamonds purchased in a lot and the total cost apportioned to each of them on a scientific basis. Cost of each piece of diamond however small it may be, can be determined. In such circumstances there should not be any difficulty in arriving at the value of closing stock in hand. When the facts being so, the assessee has grossly erred and defied by not maintaining stock register in such a fashion so as to arrive at the correct value of the closing stock, or, did not produce the same before the Revenue, but has proceeded to value the closing stock in some method to suit its convenience. The learned AO had also made a clear finding that the assessee was valuing the closing stock every year based on different methods. Penalty levied for furnishing inaccurate particulars by invoking proceedings u/s 271(1)(c) is justifiable and therefore we uphold the same - Decided against assessee
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2012 (12) TMI 19
Search - addition on account of low household expenses, unexplained business income, unexplained cash credit, addition on account of undisclosed Long Term Capital Gains - assessee challenging jurisdiction as well as validity of the initiation the assessment order passed u/s 153A/153C - assessee contended that no search operation was conducted at the premises of the assessee and no document was recovered from his premises - Held that:- It is found that CIT(A) has not decided this issue of his jurisdiction and validity of assessment despite the fact that of specific ground had been raised by the assessee. In view of this matter, and the decision of ITAT-D Bench in other assessees of the same Group and in the interest of justice, we remit back this matter to CIT(A) to decide afresh - Decided in favor of assessee for statistical purposes.
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2012 (12) TMI 18
Addition on account of sale of pawned ornaments out of money lending business - assessee engaged in business of purchase and sale of silver ornaments – CIT(A) granted relief, in set aside proceedings however, in the absence of any submission, the amount was added to total income – assessee contesting the same on ground that addition was deleted by CIT(A) in the first round of appellate proceedings and so the addition be deleted – AY 96-97 - Held that:- No infirmity found in the order passed by CIT(A) and this ground of assessee’s appeal is rejected. Addition on account of alleged unaccounted cash found at the time of survey – AY 96-97 - Held that:- Since the books of account were not produced before the AO at the time of survey and the cash is found at the beginning of year and that subsequently and the appellant has failed to explain the source of cash found, the AO was thus justified in treating the cash as unexplained and the addition is therefore rightly confirmed by CIT(A) Addition on account of alleged excess stock on the date of survey – AY 96-97 - Held that:- From the order of CIT(A), it is evident that assessee could not produce evidences of such stock of silver and in support of the excess stock found at the time of survey. After considering all aspect of the matter, we feel in the interest of justice, this issue be restored back to the file of CIT(A) for fresh adjudication - ground of assessee’s appeal is allowed for statistical purposes. Dismissal of appeal for A.Y.1995-96 on the ground of delay in filing appeal - assessee contesting the same on ground that appeal was dismissed ex parte – Held that:- CIT(A) dismissed the appeal only on the ground of delay but CIT(A) has not given any decision on merit of the case. After considering all aspects of the mater, in the interest of justice, this appeal is restored back to the file of CIT(A) to decide afresh. Since the quantum appeal has been restored back to the file of CIT(A), hence, appeal contesting penalty u/s 271(1)(c) is also remitted back to the file of CIT(A) for fresh decision
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2012 (12) TMI 17
Deduction u/s 80IB - Real Estate Developers - dis-allowance on ground that land is not owned by the assessee-firm and approval of the local authority was also not in the name of assessee-firm - Held that:- CIT(A) deleted dis-allowance placing reliance on decision in case of Radhe Developers (2011 (12) TMI 248 - GUJARAT HIGH COURT) wherein it was held that Section 80IB(10) provides for deductions to an undertaking engaged in the business of developing and constructing housing projects under certain circumstances. It does not provide that the land must be owned by the assessee seeking such deductions - Revenue’s appeal is dismissed. Deduction u/s 80IB - dis-allowance of deduction on account of sale of bricks, sale of bitumen, Miscellaneous income - assessee contending the same to be in the form of sale of scrap generated during the manufacturing process - Held that:- Issues of sale of brick and sale of bitumen are remitted back to the file of AO except miscellaneous income to examine whether sale of brick and sale of bitumen is a trading activity or sale of scrap after examining these aspects. AO may decide afresh - Decided in favor of assessee for statistical purposes.
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2012 (12) TMI 16
Deduction u/s 10AA - SEZ - appellant engaged in the business of manufacturing and export of jewellery - dis-allowance on ground of various objections - AY 08-09 - Held that:- On first objection of AO that building was not ready for commencement of the production, it is observed that merely because some gate fitting was not done, it cannot be said that the building was not ready - second objection that the machine purchased is not adequate for manufacture of the jewellery it is observed that in the next year, the claim of the assessee was allowed by passing the assessment order u/s 143(3). Hence, if the same machineries were sufficient for effecting the export sale in A.Y.2009-2010, the claim of the assessee in the present year working of about six months cannot be doubted. Regarding third and fourth objection it is observed that it can not be said that merely because some electric installation for socket and PVC cable was done in March, 2008, commercial production had not started in August, 2007 - next objection that first electricity bill of the unit was received in the month of November, whereas the assessee has claimed export in the months of September and October it is observed that this is not the fact of the present case that there was a bill in August and October, 2007 also in which there was no power consumption and power consumption has started from November, 2007 only. When there is no bill for the months of August, September and October, 2007, it cannot be said that there was no power consumption during that period - Other objection are held to be invalid rejecting claim on ground that printer, AC, and steel safe was purchased after the first export bill. Since none of the objections raised by the AO is valid for rejecting the claim of the assessee for exemption u/s 10AA, particularly, when the same claim was allowed by the AO himself in the next year, deduction u/s 10AA is allowed in the present year. Addition u/s 68 - unexplained cash credit - capital introduced by partners - Held that:- Issue is now fully and squarely covered in favour of the assessee by decision in case of CIT Vs. Pankaj Dyestuff Industries (2005 (7) TMI 601 - GUJARAT HIGH COURT) wherein it was held that the Revenue is at liberty to examine the issue in the hands of the partners, and if such partners are not able to satisfy regarding the source of investment, then the addition can be made in the hands of the partners, but no addition can be made in the hands of the firm in respect of introduction of capital by the partners. In view of aforesaid, addition is deleted.
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2012 (12) TMI 15
Depreciation – dis-allowance in respect of assets given on lease – assessee contended it to be operating lease whereas Revenue as Financial lease – Held that:- Lessee purchased the asset on a lease finance of assets required by him and that the asset is user specific and is selected by the lessee for his own use and hence the first condition regarding finance lease is satisfied in the present case. The second aspect is that risk and rewards, incidental to ownership are passed on to the lessee. Since clauses of lease agreement go to show that risk and rewards incidental to the ownership of the asset in question is passed on to the lessee and hence, the second condition of finance lease is also satisfied in the present case. The third condition is that single lease repays the cost of the asset together with the interest. It is evident as per deed that total cost of asset together with interest is recovered through lease rentals; hence third condition is also satisfied. The other important feature is that the lessor does not bear the cost of repairs, maintenance and operation, which is also satisfied since lessee is required to pay all taxes penalty etc. levied either in connection with the transaction or the asset by sales tax, interest tax etc. and he is also to bear all costs in connection with the preservation of asset by insurance, repair etc. Hence the lease in the present case is the finance lease and consequently depreciation is allowable to the lessee and not to the lesser. See Induslnd Bank Ltd. vs. ACIT (2012 (3) TMI 212 - ITAT MUMBAI), Asea Brown Boveri Limited v. IFCI (2004 - TMI - 106804 - Supreme Court Of India). Penalty u/s 271(1)(c) – dis-allowance of depreciation - Held that:- In the present case, the penalty u/s 271(1)(c) is not justified in respect of dis-allowance of depreciation. It is seen that the same is in respect of dis-allowance of depreciation on finance lease although the claim was on this basis that these are operating lease. We find that there was no clarity on this aspect and therefore, it cannot be said that there is any concealment of income or furnishing of inaccurate particulars of income in the facts of present case because issue was debatable till very recently when Special Bench of the Tribunal clarified the legal position. We, therefore, delete the penalty – Decided in favor of assessee
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2012 (12) TMI 14
Dis-allowance of business loss in the transaction of sale & purchases within the group companies on ground of them being non-genuine and on paper only – Held that:- CIT(A) has rightly observed that these transactions were not with the intention to reduce taxable income because even if the loss and profit in Soya DOC and wheat are ignored, the taxable income of all the four group companies taken together will increase only by an amount of Rs.25,979/- which will have the tax effect of Rs.13,446/- only. Also, companies are public limited companies and it would have not been possible for these companies to be a party of any non-genuine transaction. It is also not speculative loss since assessee has already furnished documentary evidence showing delivery of stocks, and transactions were recorded in the stock register and sales tax return If the transaction is held to be bogus in the hands of this company which has incurred loss on account of such transaction, it has to be held as bogus in the hands of other companies also which is showing income on account of the same transaction and hence, the total impact has to be seen which is very marginal. Therefore, deletion of dis-allowance upheld - Decided in favor of assessee Dis-allowance of godown hire charges - business expediency – paper transaction – Held that:- CIT(A) gave clear finding that it cannot be proved by the A.O. that the agreement was bogus or not in existence. A.O.’s finding that no services were availed by the assessee under the said agreement cannot be any ground to decide the business expediency. Regarding business expediency, it is noted by CIT(A) that assessee company was engaged in the business of export of SOYA DOC and oil extraction and this was the first year of export. In view of the need for warehouse and godowns, which could arise in future in the course of export business, the agreement has been executed on 22.06.1992. If that be so then it has to be accepted that hiring of godown and warehouse for the purpose of export is very much for the business purpose and even if such godown was not ultimately required to be used for the purpose of export, which were kept ready for such purpose. CIT(A) rightly deleted the dis-allowance - Decided in favor of assessee Deduction u/s 80HHC – Revenue contesting order of CIT(A) to AO to recomputed deduction on account of difference between calculation of deduction and deduction claimed as per Form 10CCAC – Held that:- It is seen that part of deduction is clearly allowable in view of same being calculated by AO even as allowable u/s 80HHC. For the balance amount of deduction, CIT(A) has rightly directed the A.O. to recalculate deduction u/s 80HHC since the relevant transactions were held to be not bogus. Dis-allowance of business loss – goods sold at lower rate - non-genuine - Held that:- Clear finding is given by CIT(A) that there is no dispute about sale rates and loss were made at the price agreed upon in advance. Regarding purchase price, it is noted by him that the details of market price prevailing at the time of such transactions were also furnished which cannot be proved to be wrong by the A.O. in the remand report. It cannot be said that it is an arranged loss and that the transactions are not genuine. This finding is also given by CIT(A) that had the sale orders being not executed in stipulated time, the assessee company would have to pay damages for the breach of contract and such damage for breach of contract is an eligible deduction u/s 37(1) and therefore, such loss is also a business loss and allowable as deduction. Order of CIT(A) upheld - Decided in favor of assessee Dis-allowance of interest expenditure and prior year expenditure – bank borrowing - dispute about the rate of interest - amount paid in the present year – Held that:- It is seen from the records that the payment of this interest was made during this year and, therefore, deduction is allowable in the present year u/s 43B. Therefore, this disallowance is deleted - Decided in favor of assessee Dis-allowance of prior year expenditure – AY 93-94 – Held that:- This is not in dispute that this expenditure was disallowed by the A.O. in AY 1994-95 on this basis that the same pertains to the earlier year i.e. AY 1993-94. Therefore, there is no reason for not allowing this deduction in the present year - Decided in favor of assessee Dividend income and interest on debentures – part of it considered as business income and part as income from other sources – Held that:- CIT(A) rightly held that part of income from dividend on shares and interest on debentures will pertain to shares/debentures held by the assessee as investment and would be taxable under Income from other sources and the remaining part of dividend/interest pertaining to the shares/debentures held as stock in trade would be taxed as business income of the assessee. No infirmity found in order of CIT(A) Penalty u/s 271(1)(c) - dis-allowance u/s 35D of expenditure incurred on the issue of debentures – CIT(A) deleted the penalty on the ground that claim of the appellant u/s.35D in respect of debenture issue expenses is debatable - Held that:- Even after confirming the dis-allowance by the Tribunal in the quantum proceedings, penalty in the present case is not justified because the issue was debatable at the time of filing of return of income and, therefore, we decline to interfere in the order of CIT(A) on this issue. Deduction u/s 10B – adjustment of unabsorbed depreciation – Held that:-To work out the profit of 10B undertaking, only the brought forward unabsorbed deprecation of 10B undertaking should be considered and not brought forward unabsorbed deprecation of any other unit. We, therefore, set aside the order of CIT(A) on this issue and restore the matter back to the file of the A.O. for a fresh decision Renovation of D.G. set – revenue expenditure or capital expenditure – Held that:- CIT(A) has noted that the assessee has not purchased any new genset and not enhanced the installed capacity of the existing genset. The assessee has merely changed the input requirement of DG set from HSD to furnace oil because of business expediency, since import price of HSD rose high. Therefore, expense incurred is not capital expenditure - Decided in favor of assessee Deduction u/s 80HHC – Held that:- Gain from foreign exchange fluctuation as eligible for deduction u/s 80HHC
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2012 (12) TMI 13
Reopening of assessment due to findings of certain incriminating documents during the course of survey proceedings u/s 133 at business premises of assessee and her associates - AO has recorded following reasons for reopening jointly for Shri Tarun(associate) and Shardaben (assessee) that income chargeable to tax to the extent of the investment made in the land and building, flats and shops either in name of Shri Traun or in the name of somebody else whose ownership appears to be of the assessee escaped assessment - Held that:- It is evident that there is no whisper of any irregularities committed by the assessee. Further, no incriminating documents pointing out the assessee suppressing any materials to establish escapement of income in her hands was found during the course of survey proceedings which is evident from the reasons recorded u/s 148. The assessee was also not found to be the owner of any other flats/shops/plots mentioned in the reasons for reopening recorded by the AO. In these circumstances, we do not find any justification for issuance of notice u/s 148 to the assessee. Order set aside - Decided in favor of assessee Income from undisclosed sources – addition u/s 69 based on statement recorded during survey – Held that:- It is apparent that the revenue has not come out with any corroborative evidence to support the statement obtained from the assessee’s son in order to establish undisclosed income of the assessee. Board Circular F. NO.286/2/2003 dated 10-03-2003 is binding on the revenue. Addition made on mere statement on oath obtained at the time of survey cannot be relied upon to make addition without bringing forth any other materials on record to support the stand of the revenue. Addition is directed to be deleted - Decided in favor of assessee
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2012 (12) TMI 12
Validity of reopening of assessment u/s 147/148, earlier framed u/s 143(3), after expiry of four years from end of relevant AY – inadmissible depreciation on goodwill - Held that:- In the instant case, AO reopened the assessment completed u/s 143(3) merely on the basis of facts already available before him at the time of original assessment proceedings. Not even a whisper is evident from the reasons recorded or the facts narrated in the impugned order as to whether or not there was any failure on the part of the assessee in disclosing fully and truly all material facts necessary for his assessment. The reasons do not indicate why and how the assessee failed to make full and true disclosure of material facts in relation to depreciation on goodwill. Any such failure as is envisaged in the proviso to sec. 147, is a matter of fact alone and there can be no deemed failure. In these circumstances, in absence of any failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment for the assessment year under consideration, the notice u/s 148 having been issued after the expiry of a period of four years from the end of the relevant assessment year, the very initiation of proceedings u/s 147 stands vitiated and as such cannot be sustained - Decided against Revenue
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2012 (12) TMI 11
Penalty u/s 271(1)(c) - concealment of income and furnishing inaccurate particulars - surrender of income to to buy peace, and avoid protracted litigation, however during assessment proceedings, assessee disclosed details of bank account in the name of firm, but not disclosed details of second bank account in his name, having various cash credits during relevant period - Held that:- Admittedly, assessee did not disclose the bank account in his name in his balance sheet annexed with the return nor the transactions reflected therein in the regular books of accounts. Indisputably, cheques and cash was deposited in the undisclosed account. The assessee also admitted that transactions of sale of bearings of Rs.Rs.52.27 lacs were not recorded in the regular books of accounts. During the course of assessment proceedings, the assessee did not furnish any explanation regarding source of deposits in the undisclosed bank account to the satisfaction of the AO and accordingly, accepted addition of Rs.9 lacs to the total income proposed by the AO. Even in response to SCN before levy of penalty, the assessee did not furnish any explanation whatsoever before the AO and thus, failed to discharge the onus laid down upon him in terms of explanation 1 to sec. 271(1)(c). Where the surrender of income was not voluntary, but was as a result of detection by the assessing authority, penalty cannot be avoided. Order of penalty u/s 271(1)(c) is upheld - Decided against assessee.
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2012 (12) TMI 10
Addition on account of foreign resilience received by the assessee from M/s Gorkha Airlines Kathmandu Nepal despite the fact that the assessee had not furnished any relevant and cogent evidence to show that the said income has been earned abroad and it is not taxable in India - assessee claiming governance by the proviso to section 5(1) - Held that:- CIT(A) rightly deleted the addition on observation that assessee was employed in Gorkha Airlines, Nepal as Sr. Captain during AY 2004-05 and retired on 23.2.2005 and the assessee was paid for finalizing the aircraft deal pertaining to Doniar Aircraft and for training the personnel to operate and maintain it and the assessee was also paid profit share in lieu of salary in installments after deduction of tax at source. It is observed that after due consideration of submissions and evidence submitted by the assessee and examined by the AO, the CIT(A) held that the entire amount had been properly explained by the appellant assessee and he deleted the addition on just and proper grounds - Decided against Revenue
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2012 (12) TMI 9
Charitable Trust – accumulation and application of income - inter-charity donations out of accumulation of income in excess of 15% of income – whether Explanation below Sec. 11(2) could be interpreted to draw a distinction between accumulation of income in excess of 15% and upto 15% of income - assessee Trust having income of Rs 6.41 crores, had incurred expenditure of Rs 7.80 lacs during the year including Rs 2.50 crores donation – Revenue contending as to how donation of Rs 2.50 crores could be considered as application of income in view of Explanation to sec. 11(2) on the ground that the said donation was not paid out of the current year’s income but from the accumulation of income Held that:- It has been held in case of Bagri Foundation (2010 (7) TMI 85 - DELHI HIGH COURT ) that “Explanation” appended after section 11(2) is nothing but an additional condition attached to accumulation in excess of 15 per cent permitted u/s 11(2). It cannot be held as a condition on accumulation up to 15 per cent as provided for in section 11(1)(a) also. There is no rational classification for imposing the restriction as contained in the “Explanation” to the accumulation of up to 15 per cent also when there is no such restriction to donating the entire income of a year to another charitable trust. Hence, CIT(A) in view of aforesaid decision, has rightly deleted the addition – Decided against Revenue
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2012 (12) TMI 7
Reassessment u/s 147 - Issuance of notice when the after four years have been expired. - held that:- In the assessment year 2002-03, the return was filed on 30th October, 2002, and notice was issued u/s 148 on 24.2.2009. In this year, return was originally processed u/s 143(1) and there was no scrutiny assessment u/s 143(3), therefore, contention of the assessee that since reopening was initiated after four years from the end of the relevant assessment year under proviso to Section 147 reopening was not valid, does not hold true in so far as there was no scrutiny assessment u/s 143(3). Therefore, proviso to Section 147 is not applicable. - Decided against the assessee. Deduction u/s 80IB - held that:- no merit in the order of lower authorities for decline of claim of deduction on the ground of not fulfilling condition of furnishing the completion certificates, which condition was made effective by the Finance Act, 2004,w.e.f. 2005-06. Deduction u/s 80IB - contractor versus Developer - held that:- The facts for assessment year 2002-03 to 2004-05 are similar, wherein the assessee had undertaken development of project as a whole rather than simple work as contractor. - Deduction allowed - Decided in favor of assessee. With respect to the assessment year 2006-07 and 2007-08 - it has to be deemed that the date of the completion is the same as the date claimed by the assessee. By referring to all these decisions, the assessee has also highlighted the absurdity in Explanation (ii) of Section 80IB(10) with regard to completion certificate. After highlighting various decisions, the ld. Authorized Representative has submitted that absurdity has to be avoided in interpretation of the statutory provisions. Similarly, where the interpretation leads to futility, it cannot be accepted. Rule of reasonable construction was also highlighted with reference to the C.B.D.T. Circular as well as Judicial pronouncement by Hon'ble Supreme Court. It was also contested that the rule of beneficial interpretation should be applied and fiscal statute must be interpreted in favour of the assessee. Assessing Officer directed to decide this issue of completion certificate after verifying the certificate of completion dated 22.3.2010 placed on record and in terms of the observations made in this order. In the result, the appeals for the assessment years 2001-02 to 2004-05 are allowed. Appeal for assessment year 2005-06 is dismissed and appeals for assessment years 2006- 07 and 2007-08 are allowed for statistical purposes.
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2012 (12) TMI 6
Reassessment u/s 147 - Notice u/s 148 on the basis of the information provided by the assessee during the course of appellate proceedings that investment relates to HUF and not to the individual. - Tax effect - held that:- There is uncontroverted fact that the tax effect in the present appeal is below prescribed monetary limit. - the appeal of the Revenue is dismissed being not maintainable. Even on merit, ld. CIT(A) has rightly quashed the order of the AO as the ITAT, Indore - Since the above direction has been quashed by the ITAT, the AO was not right in framing reassessment proceedings against the assessee. - Decided in favor of assessee.
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2012 (12) TMI 5
Deletion of addition to Gross profit - fall in gross profit - rejection of books of accounts - business of job work of diamond and export of diamond - CIT(A) has deleted the entire addition on the ground that the assessee has properly explained the fall in GP ratio and no specific defects were pointed out in the books of account by the AO. The AO has rejected the books of account of the assessee as the basic data of the business from which correct profit could be deduced were not properly maintained by the assessee and if at all they were maintained, the same were not produced for verification before the AO at the time of assessment proceedings. Held that:- The intention of the Legislature in enacting section 44AA was to put an obligation on the assessee to maintain and keep primary records on the basis of which the Tax Authorities can ascertain and compute the correct income. Therefore, it was not the prerogative of the assessee to maintain the records in the manner in which it likes. Facts in this case are identical to the facts of the case before the ITAT Mumbai Bench in the case of DCIT vs. Samir Diamonds Exports (P) Ltd. [1998 (10) TMI 509 - ITAT MUMBAI BENCH]. Order of AO to enhance the gross profit by 4% of the total turnover restored. - Decided in favor of revenue.
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2012 (12) TMI 4
Reopening of assessment u/s 147/148 - period of limitation - effect of block assessment - unexplained cash credit - addition u/s 68 - held that:- In the reasons AO has made a reference to the order of the ITAT wherein it has been observed that such type of income is to be assessed in the regular assessment and not in the block assessment. This observation is in the nature of finding comes within the meaning of section 150 (i) and there was no time limit for issuing a notice u/s 148 in order to give effect to the finding of the ITAT. - If the addition could not be made under the block assessment and the same had to be made in the regular assessment, then it would be unreasonable to say that this income could not be taxed either in the block assessment or in the regular assessment of the assessee. - Decided against the assessee. Claim of depreciation - commencement of business - held that:- the AO’s observations that the machinery was not put to use before 31.3.1995 is not correct. - The independent evidence of several government departments indicating the use of machinery before 31.3.1995 justifies the assessee’s stand that the plant and machinery was put to use before 31.3.1995. Therefore, the AO was not justified in disallowing the depreciation on the plant and machinery. Accordingly, the disallowance made by the AO is deleted. - Decided in favor of assessee.
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2012 (12) TMI 3
Addition u/s 68 - unexplained share capital - the names and addresses of the shareholders, number of shares allotted, their Permanent Account Nos. and the AO with whom they are assessed were available with the AO. - held that:- The AO made direct inquiry from the shareholders and each one of them have affirmed the amount invested in the share capital of the assessee company. The AO made verification from the AO of the shareholders from where also, it is affirmed that the said shareholders have invested the money in the share capital of the assessee company. The Profit & Loss account and balance sheet of the shareholders are produced, bank accounts are also produced. In view of these facts, we hold that the assessee has duly discharged the burden of proving the share capital which lay upon it. - Addition of Rs. 1,38,00,000 made by the AO on account of unexplained share capital u/s 68 of the IT Act deleted. - Decided in favor of assessee.
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2012 (12) TMI 2
Reassessment proceedings - case was reopened involving the issue foreign exchange fluctuations and data usage charges - no addition was made on account of foreign exchange fluctuation loss. - Addition made on account of data usage charges deleted by DRP - held that:- no addition having been made on the basis of the reasons recorded by the AO for reopening the completed assessment and the remaining additions being not part of the said reasons to believe recorded by the AO, in keeping in Ranbaxy Laboratories Ltd. v. CIT (2011 (6) TMI 4 - DELHI HIGH COURT) and ADHUNIK NIRYAT ISPAT LTD. [2012 (11) TMI 895 - DELHI HIGH COURT], reopening of the completed assessment in the present case is bad in law. - Decided in favor of assessee. Addition by DRP without affording any opportunity to the assessee to rebut such evidence - held that:- the assessee has produced confirmations from 45 vendors before the DRP, and the DRP had forwarded the same to the AO for verification. The AO had requested for more time to make the verification. The DRP, however, directed the AO to verify the evidence and if the AO were satisfied, he was to restrict the disallowance, if any, which, in any case, as per the DRP, could not exceed Rs. 89,39,92,188/-, the payments made to third parties not verifiable. Since the matter is now being remitted to the file of the AO, as above, the assessee would get ample opportunity to prove its case.
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2012 (12) TMI 1
Estimation of net profit - rejection of books of accounts - failure to produce the books of accounts - difference of opinion - third member decision - held that:- It is not in dispute that the assessee maintained books of account and they were duly audited under section 44AB of the Act. In fact the Legislature places an obligation on the assessee, whose turnover is above Rs. 40,00,000/-, to maintain proper books and to obtain a tax audit report. It is not the case of the assessee, at any stage, that it has not maintained the books of account. Once it is not disputed, either by the assessee or by the Revenue, that assessee maintained books of account, the next issue to be considered is whether the AO can arbitrarily reject the book results and estimate the profit in the event of non-production of bills and vouchers. Assessee merely made a statement that the books of account were impounded by the local police but no evidence, whatsoever, was furnished to support the plea. The learned counsel submitted before me that the premises was seized in November 2005 but the attachment was lifted on 24.01.2006. If the attachment was lifted by a court order it could not have been difficult for the assessee to produce some evidence in that regard but no such evidence was produced. The duty of the Third Member is only to appreciate the orders passed by the respective Members to find out as to which order is more reasonable and the Third Member cannot reappraise the matter in any other manner. AO has discretion to either reject the books of account and estimate gross profit or to consider the books and may make specific additions by considering as to whether the expenditure claimed is reasonable or not. The AO having chosen the second option, the Appellate Tribunal cannot substitute its opinion to that of the AO, unless it is pointed out that in the process of adopting the option he had arbitrarily made the additions which have no rational basis. Separate disallowance of expenditure is permissible, by taking into consideration the reasonableness of the claim under various heads such as purchase, labour charges, etc. Addition sustained by the Id. CIT(A) under various Acts confirmed - Decided against the assessee.
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2012 (11) TMI 990
Registration u/s 12AA - Charitable purpose - Section 2(15) - advancement of any other object of general public utility - Held that:- If the assessee conducts marathon in a commercial manner, then the trust cannot be said to be existing only for charitable purposes in view of the amended definition of the charitable purpose w.e.f. 1.4.2008 - DIT(E) is directed to examine whether receipt of fees from marathon is incidental to charitable object of the assessee or it is the main activity of the assessee and decide thereupon. If the assessee falls under the purview of amended provision of section 2(15), then registration is not to be granted - In the result, appeal of assessee is allowed for statistical purposes.
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2012 (11) TMI 989
Repairs and Maintenance of Residential flats and office buildings - 'capital expenditure' - held that:- most of the expenditure is incurred on the existing buildings or structures in the nature of repairs for maintenance of the asset as such, except the expenditure incurred on Mohandev Building, item No.8, 9 and 10 listed in the CIT (A)'s order. As seen from the details the amount of Rs. 11.00 lakhs and Rs. 4,85,970/- were incurred in connection with the sofa, recreation central table etc., which seems to be for creation of new assets and cannot be considered as repairs of the existing assets. Likewise the amount of Rs. 3.00 lakhs was spent on electrical fittings and Rs. 1.00 lakhs was spent for design consultancy and supervision charges. Therefore, in our view this expenditure is in the nature of capital expenditure and therefore, we uphold the disallowance to that extent. - AO directed to allow depreciation on capital expenditure - Decided partly in favor of assessee. Disallowance of amount spent on computer software - held that:- this matter should be referred to AO for fresh adjudication in the light of the decision of the Special Bench of the Tribunal in the case of Amway India Enterprises v DCIT, [2008 (2) TMI 454 - ITAT DELHI], as was done in earler years - issue is restored to the file of AO for fresh adjudication in accordance with the law and the principles governing this issue and after giving due opportunity of being heard to assessee. Unclaimed liabilities - accrual of liability or cessation of liability during the year - diference of opening and closing balance of unclaimed liability account - held that:- As and when the parties seek the amount which cannot be recognized as income, assessee is refunding the amount and once client does not seek any adjustment the same is accepted as income of the year after the end of three years limitation period as per assessee's own accounting method. - No reason for supporting the action of AO in bringing to tax the entire credit in the account as income of the year without examining the principles governing the method of accounting followed by assessee and accrual of income. Addition u/s 92CA(3) - selection of comparable - Payment was made for purchase of software for use in the business of advertising and media services. - Assessee claimed deduction u/s 37(1) for purchase of software and reported it as related international transactions. - held that:- determination of ALP at nil cannot be sustained. - assessee could not furnish necessary documents evidencing service - in the interest of justice we restore the issue to the file of TPO to examine the said payment for customized software afresh and determine the appropriate method for arriving at the ALP after giving due opportunity to assessee.
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2012 (11) TMI 988
Determination of Arm's Length Price - Transaction with Associate Enterprises - In the present case Assessee has adopted "Transactional Net Margin Method" as most appropriate method for determining its ALP of international transaction. It had used six comparable companies for bench marking its ALP on international transactions. However, out of six, the TPO rejected three comparables on the ground that their related party transactions were either more than 15% or turnover was more than Rs. 1,500 crore - TPO introduced his set of fresh nine comparables to bench mark the ALP of international transaction of the assessee. The arithmetic mean of the PLI of the 12 comparable companies (three of assessee and nine of TPO) worked out to 5.34%. Held that:- Value of international transaction of the assessee falls within safe harbour of +/- 5% of the ALP determined by the TPO. Accordingly, on this preliminary ground alone, the adjustment of Rs. 3,70,87,177 made towards ALP by the Assessing Officer is uncalled for and the same is hereby deleted - grounds raised by assessee are allowed. The contention of the revenue that adjustment arising our of ALP has to be made on the entire turnover instead of restricting the same to the international transaction with the A.E - Decided in favor of assessee. Disallowance of Expenditure on Computer Software - held that:- insofar as the directions on account of AMC for maintenance of software given by the DRP is concerned, the same appears to be very reasonable and no interference is called for - However, with regard to the other expenditure, the Assessing Officer is directed to verify this contention of the assessee in the light of the decision of the Special Bench of the Tribunal, Delhi, rendered in Amway India Enterprises v. DCIT, [2008 (2) TMI 454 - ITAT DELHI]- Thus, this ground is partly allowed for statistical purposes. Disallowance of Depreciation on laptop purchased - held that:- Assessee could not produce evidence for purchase of laptop - no merit in the contention of the assessee and the same is dismissed - Thus, this ground is dismissed.
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2012 (11) TMI 987
Interest accrued - method of accounting - assessee submitted that when the Tribunal had remanded the main issue, at this stage, question of charging interest would not arise – Held that:- Tribunal has merely remanded the proceedings to the Assessing Officer for fresh consideration on the question whether the assessee followed mercantile system of accounting or cash. In that view of the matter no question of law arises. Charge of interest u/s 234D - assessee submitted that when the Tribunal had remanded the main issue, at this stage, question of charging interest would not arise. - held that:- question would have no relation to system of accounting followed by Shiva Specific Family Trust - Assessing Officer would decide the issue in accordance with law on the basis of material on record
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2012 (11) TMI 986
Reopening of assessment - Escapement of Income - Treatment of Entrance fees - Capital Receipt vs Revenue Receipt - held that:- The question of treating such entrance fees either as capital receipt or revenue receipt, was not part of query at the time of original assessment and therefore, the angle of taxability of such a receipt being a receipt of revenue in nature, cannot be stated to be a part of the query. Dispute is with respect to taxabilty of receipt of Rs. 5,56,000/- towards entrance fees as Capital receipt at the time of original assessment. In the present case When the notice has been issued by the Assessing Officer within a period of four years from the end of relevant assessment year, and when Assessing Officer had not formed any opinion in the original assessment with respect to taxability of the amount in question, such notice cannot be stated to be without jurisdiction or invalid - In the result, the petition fails and is dismissed. - Decided against the assessee.
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2012 (11) TMI 985
Relinquishment of tenancy rights - whether deductible expenditure for computation of capital gains u/s 48 - held that:- Revenue Authorities and the Tribunal have held that the expenditure was not incurred wholly and exclusively in connection with the transfer of the capital assets. sale deed was not a tripartite agreement and the amount expended by the assessee separately would not fall within the expression wholly and exclusively incurred in connection with the transfer. Karta of the assessee HUF and his brother were the directors of the said Company. The said Company was shown to be the tenant of substantial portion of the building. The Company, however, created a sub-tenancy on the same property in favour of the Bank of Baroda. Payment of Rs.15,00,000/- made to the Company by the assessee was only for reducing its tax liability and not for the purpose of executing the transaction of sale. Sect 48(1) of the Act provides for mode of computation and deduction while charging capital gain. Clause-I thereof in particular provides for a payment from the value of consideration received or accrued as a result of transfer of capital asset, expenditure incurred wholly and exclusively in connection with such transfer. The expenditure cannot be stated to be incurred wholly and exclusively in connection with such transfer - no error in order of Tribunal - In the result, the question is answered in the negative - decided against the assessee.
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2012 (11) TMI 984
Addition u/s. 68 of the Act – huge capital was introduced by two partners of the firm and as source of capital was not found satisfactorily explained - Held that:- no addition u/s. 68 of the Act can be made in case where the partner introduces capital in firm and he is assessed to tax separately. - Fund in such event had only to be taxed in the individual case of the partner concerned and not in the case of firm - when the partner who invested the fund since is already assessed to tax separately, in the case of the firm there would not be any necessity for explanation of the fund – In favor of assessee
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2012 (11) TMI 983
Exemption u/s 11 - grant in aid received by assessee - held that:- the income in the form of voluntary contributions made with a specific direction that they shall form part of the corpus of the trust or institution is not to be included in the total income of the previous year of the person in receipt of the income - Decided in favor of asessee. Carry forward unabsorbed application u/s 11 and 13 - excess of expenditure over income - Held that:- Income derived from the trust property has to be determined on commercial principles and if commercial principles for determining the income are applied, it is but natural that the adjustment of the expenses incurred by the trust for charitable and religious purposes in the earlier year against income earned by the trust in the subsequent year will have to be regarded as application of income of the trust for charitable and religious purposes in the subsequent year in which such adjustment has been made having regard to the benevolent provisions contained in section 11 of the Act and will have to be excluded from the income of the trust under section 11(1)(1) of the Act – In favor of assessee
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2012 (11) TMI 982
Deduction u/s.80IA – small scale industrial undertaking – Held that:- In the case of Prabhudas Kishoredas Tobacco Products Private Limited. (2006 (1) TMI 68 - GUJARAT HIGH COURT ) it was hold that the use of tobacco which was used in the input do not retain its identity once the beedies are rolled and in relation to the assessee's status as unit of small scale industrial undertaking, the Court decided the issue in assessee's favour by holding that while ascertaining the monetary limit laid down in the provision, all assets of business be not taken into consideration, upholding the version of the Tribunal treating the activity carried out by the assessee amounting to manufacture of beedi. - In favor of assessee Disallowance u/s.40A(2)(b) - Alleged that interest paid to the persons at the rate of 22% excessive and unreasonable – Held that:- Amount is borrowed in earlier years at a stipulated rate of interest and which is still utilized for the purpose of business, the interest rate could not have been renegotiated. Even the lending rate by banks in respect of secured loan is as high as 19.5%. Therefore, rate of interest, paid by the assessee is quite reasonable - Since the rate of interest paid by the assessee is reasonable disallowance deleted
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2012 (11) TMI 981
Disallowance of loss on sale of shares - assessee could not produce the confirmations from M/s.R.K. Consultancy and even the Assessing Officer has required the assessee to produce the said broker for examination - Once the confirmation is not produced and even broker is not produced for examination in respect of transaction carried on by him, the transaction cannot be treated as genuine – matter remanded to AO Addition being amount advanced to Shri Sanjay – Held that:- Receipt of Rs.4 crores, which the assessee claimed he had received by way of an advance from one Shri Sanjay Amin - He, however, could not produce confirmation of said Shri Sanjay Amin as he had left the country - assessee could not produce the confirmation and other details regarding to said person and that therefore the claim was disallowed - further materials produced by the assessee - without proper verification such material ought not to have been accepted - issue was remanded to the Revenue authorities
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Customs
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2012 (11) TMI 998
Confiscation and redemption fine and penalty - importation of Heavy Melting Steel Scrap - appellant not obtained pre-shipment certificate – Held that:- According to the Foreign Trade Policy during the relevant time, pre-shipment certificate was essential for import of shredded heavy melting scrap - pre-shipment certificate was not produced and in the second case, the requirement of shredding has been fulfilled - appellant has suffered heavy demurrage charges, a lenient view is called for - redemption fine and penalty imposed on the Heavy Melting Scrap reduced
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2012 (11) TMI 997
Conversion of two Free Shipping Bills into Export Promotion Scheme Shipping Bills – Held that:- No dispute as regards description, value and fact that goods were being exported for fulfillment of export obligation - no allegation of fraud against the assessee and there is no allegation of manipulation also - essential requirements for conversion of Shipping Bills from one scheme to another have been fulfilled by the appellant - conversion was allowed on the ground that in the ARE-1 form, there was a certification from the Superintendent certifying that the export took place under his supervision and the documents were existing at the time of export - Commissioner of Customs directed to allow conversion of the Free Shipping Bills to the Export Promotion Scheme Shipping Bills as requested.
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Corporate Laws
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2012 (12) TMI 31
Challenging the Award - retirement on superannuation towards compensation along with all due retirement benefits - Held that:- The majority judgement had accepted the principle that a person who takes a benefit under an order de hors the claim on merits cannot repudiate that part of the order which is detrimental to him because the order is to take effect in its entirety. In the present case the conduct of the petitioner is very significant. The company has responded to his letter and made the payment which the petitioner had accepted in full and final settlement of his dues. From his conduct it cannot also be inferred that he ever considered the Award not to be binding on him. On the contrary his conduct was such which made the company alter its position to its detriment as he had accepted the amount in full and final satisfaction of the sum awarded. This is a case in which the equitable principle of estoppel precludes the writ petitioner from challenging the Award. The petitioner in the writ petition has prayed for a writ of Mandamus upon the respondents numbers 2 to 4 to pay to the petitioner full compensation in lieu of 50 per cent of the wages with full retirement benefit is not maintainable as the employer, could not be said to be a ‘State’ within the meaning of Article 12 of the Constitution of India for the purpose of challenging an order of termination of service of its employees. The petitioner has also prayed for setting aside of the Award after taking the benefit of it is not allowed as he can never now ask for an order setting aside of the Award which has been satisfied by the payment received by him. Thus it will be inequitable to admit the writ petition challenging the Award the benefit of which has already been taken by the petitioner in full and final satisfaction of the dues.
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2012 (12) TMI 8
Scheme of amalgamation - It is the case of the plaintiffs/respondents that one of the conditions of such Sanctioned Scheme was that a sum of Rs. 386 lakh was to be paid by CIL to the plaintiffs and the amount of Rs.386 lakh (subsequently reduced to Rs. 319 lakh) was to remain frozen till 2003 and only thereupon CIL (the new promoters) was to pay this amount to the plaintiffs which fact has been disputed by the appellant/defendant. It is the case of the appellant/defendants that the letter dated November 1, 1993 written by CIL to BIFR was merely a proposal and was in no way connected with either the plaintiff or the defendant and nor did it belong to the Goenka group and, therefore, without being furnished with any particulars or details of the so called claims of the erstwhile promoters it was stated that the interest of the claim of the erstwhile promoters may be reduced and this was merely on the proposal stage. Held that:- the appellant/defendant having accepted the scheme are bound to implement it but nothing prevents them from disputing the claim of the plaintiffs/respondents which was found by the learned Company Judge to be a bonafide dispute. The finding of the learned Company Judge and the offer of the defendant company to secure the claims of the plaintiffs/respondents which has been finally accepted and acted upon by the defendant sufficiently protect and secure the claims of the plaintiffs/respondents and, therefore, the learned Single Judge ought to have exercised the discretion by granting leave to the defendant. We, therefore, quash and set aside the judgment and order in all the six suits and grant leave to the appellants/defendants to defend as a result of which now they will be at liberty to file their written statement before the learned Single Judge.
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Service Tax
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2012 (12) TMI 35
Refund of Service Tax – Assessee avail input services which were claimed to have been used for export of Iron Ore fines – Part of refund was allowed and reject the balance claim – Assessee file an appeal with CIT(A) – CIT(A) remand back the issue to original authority for fresh consideration – Held that:- As CIT(A) remanded the case to the original authority regardless of the legal position that the CIT(A) did not have the power of remand. The original authority had not given a reasonable opportunity to the refund-claimant for adducing evidence and other materials in support of the claim for refund. Therefore, after setting aside the impugned order, we allow this appeal by way of remand with a request to the original authority to reconsider the respondent’s claim for refund. Appeal remand back to AO
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2012 (12) TMI 34
Maintenance and Repair Services - confirming the demands raised along with interest, and penalties u/s 76 and 77 - Held that:- As appellant is not disputing the service tax liability and interest thereof , thus both confirmed by the adjudicating authority along with interest is upheld. As appellants had been in continuous correspondence with the purchasers of their goods and they were constantly interacting regarding taxability of the services rendered by them in the absence of any mens rea to avoid/evade the service tax liability, this a fit case to invoke the provisions of Section 80 to set-aside the penalties imposed u/s 76 and 77.
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2012 (12) TMI 33
Commercial training and coaching services - waiver of pre-deposit, interest and penalty - Held that:- The applicants are conducting various courses in respect of spoken English and the demands which were confirmed on the same ground had already waived the pre-deposit of dues in the case of Apex Institute of English Vs CCE, Guntur [2010 (8) TMI 245 - CESTAT, BANGALORE]. As per Board's Circular No. 59/8/2003-S.T. dated 20.6.2003 foreign language institutes are not liable to pay service tax - in favour of assessee.
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2012 (12) TMI 32
Cenvat credit on the GTA services - denial of claim as per Notification No. 10/08 CE (NT) dated 1.3.08 - Held that:- As decided in M/s. Shree Rajasthan Syntex Ltd. & Others Versus CCE Jaipur [2011 (8) TMI 265 - CESTAT, NEW DELHI] amendment effected from 18.4.06 vide which the explanation to Rule 2p of the CCR was deleted has not effected the assessees entitlement to avail the Cenvat credit. However, with effect from 1.3.08, with the issuance of Notification No. 10/08-CE(NT), the appellants were not entitled to avail the credit inasmuch as GTA services were specifically excluded the definition of output services. Denial of Service Tax credit for the period prior to 1.3.2008 is not justified and denial of Cenvat credit for the period after 1.3.2008 is to be upheld - set aside the penalties imposed on the appellants as it cannot be held to be a case of any malafide - partly in favour of assessee.
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2012 (12) TMI 28
CENVAT credit on services provided to the job-workers at the job-worker's premises - Held that:- As the applicant has not disclosed the nature of services availed by the job-worker before the lower authorities it is difficult to conclude about the eligibility of the services to the input service tax credit. The applicant is unable to make out a prima facie case in their favour, thus directed to pre-deposit of Rs.40,000/- within six weeks from today - against assessee.
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2012 (11) TMI 1000
Demand of service tax under 'construction of complex' as defined under section 65(91a) of Finance Act - Appellants have undertaken construction work of 15 residential houses under a contract with M.P. Housing Board – Held that:- Submission of the appellant is that the entry covers only such building where each of the building has got more than 12 residential units. They have built 15 independent houses and not a complex - service tax can be demanded under section 65(105)(zzzh) only if the building concerned has more than 12 residential units in the building and such levy will not apply in cases where in one compound has many buildings, each having not more than 12 residential units – In favor of assessee
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2012 (11) TMI 999
Refund claim - Notification No. 05/2006 CE - denial of the refund already granted by the original authority is on the ground that two of the services viz. management consultant services and maintenance or repair services (in connection with DG sets) are not input services in relation to the services rendered by them viz. ITSS – Held that:- management consultant service was utilized for rendering the business with efficiency and it was prerequisite to render the business efficiently especially to cater to the export market and therefore, should be treated as 'input services' - services could be treated as 'input services' in respect of services rendered by the appellant - waiver of pre-deposit allowed
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2012 (11) TMI 994
Input services - vastu consultancy - Denial of Cenvat credit of Service Tax in relation to civil construction work in the factory - setting up of labour hutments, kisan sheds is for providing temporary residential facility to the workers as also for the cane growers – Held that:- Vastu is in relation to the construction activity and as such, if construction activity has been held to be admissible services by the Commissioner, the vastu consultancy is also required to be held accordingly. As regards dismantling of building structure - before raising new construction for setting up of the factory, it is necessary to clear the place including dismantling of old structure stand thereon and such services are essentially included under the limb of setting up of a factory. As such, I find that the denial of credit by the adjudicating authority on the above services was not correct and proper. Extended period of limitation – Held that:- Credit so availed was part of the total credit availed by the assessee and was being duly reflected in the returns so filed. The appellant cannot be held guilty of suppression or mis-statement with an intent to evade payment of duty - a positive act with a mala fide intention is the requisite criteria for invocation of longer period of limitation. In the absence of the same, assessee cannot be held guilty of any malafide - entire demand having been raised after the normal period of limitation is time-barred.
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Central Excise
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2012 (12) TMI 30
Cenvat credit on input services - disallowance as the services have no nexus with excisable goods manufactured - Held that:- The matter of invoices in the names of "Valco Aluminium Extrusion" and "Vishnu Associates Ltd." the assessee submits that "Valco Aluminium Extrusion" is the brand name of their product and "Valco Industries Ltd." is the registered name of the company. So some of the service providers used their brand name to refer to the company and that is the reason why such name appears on the invoices in some cases. They also point out that their unit at Chandigarh was earlier known as "Vishnu Associates Ltd." before their name was changed to "Valco Industries Ltd". A few service provides had issued bills in their earlier name. There is no other company by name. "Vishnu Industries Ltd." and the services in question was received by them and utilized. So considering provisions of the proviso to Rule 9(2) of Cevant Credit Rules, 2004 there is no justification in denying the credit. Security services for the factory at Chandigarh - Held that:- No reason to deny Cenvat credit on this however, the submission of fact made by the Counsel in this regard needs verification. In respect of mobile phones also, the credit is to be extended based on precedent decisions though such credit should be apportioned as would relate to dutiable products following the principles laid down under Rule 6 of Cenvat Credit Rules. Service tax relating to insurance service for the vehicles in the name of the Directors - Held that:- It is necessary to verify the factual submissions regarding the fact that vehicles were figuring as assets in the balance sheet of the company and its expenditure was being met by the company. Also it is necessary to apportion the Cenvat credit on this item between the value of dutiable goods and value of exempted products manufactured by the appellants following the principles laid down under Rule 6 of Cenvat Credit Rules 2006.
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2012 (12) TMI 29
Cenvat credit on aluminium sheets, flush partition, plush door, ceiling - denial as the items are neither inputs used in the manufacture nor capital goods - Held that:- The case relied by assessee are distinguishable from the facts of the present case and also the Manager of the applicant's unit has already admitted in this case that the items are not covered under the definition of capital goods under Rule 2 of the Cenvat Credit Rules. The applicant has not able to make out a strong prima facie case in their favour. Order to pre-deposit of 25% of the duty within a period of eight weeks and compliance is to be reported.
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2012 (12) TMI 27
Waiver of Pre deposit of Duty u/s 35F – Transaction value versus MRP based value - Assessee manufacture insecticides on job works basis – Held that:- . Rule 2A(a) provides exemption from printing MRP on the packages more than 25 kgs. Admittedly, in this case, the packages cleared by the appellant were of 25 kgs. and not more than 25 kgs., as such, Rule 2A does not help the appellant. Regarding industrial use - held that:- Purchasing concern was admittedly involved in trading and did not put the goods to industrial use. - prima facie against the assessee - Therefore 50% of duty demand is waived.
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2012 (11) TMI 996
Rebate - manufacture of man-made fabrics – alleged that appellant is not entitled for Cenvat credit on the hangers and booklet inasmuch as they have not been used as inputs in or in relation to the manufacture of the final products – Held that:- Hangers are nothing but packing material in which the fabrics have been placed and, therefore, they are inputs as per Rule 2(k) of the Cenvat Credit Rules, 2004 and rightly eligible for the Cenvat Credit. As regards, the booklet containing the designs, the same has been used in the manufacture of fabrics exported; without the designs, the fabrics could not have been manufactured. Therefore, drawings and designs are essential inputs in or in relation to the manufacture of the final products. Therefore, they qualify as inputs eligible for Cenvat Credit under rule 2(k) of the Cenvat Credit Rules, 2004. Even it is held that they are not inputs, these goods have been exported along with fabrics as such on payment of duty and, therefore, on export of goods they are rightly entitled for the credit
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2012 (11) TMI 995
Waiver of pre-deposit - penalty under Rule 25 of Central Excise Rules - whether the appellant is required to be visited with penalty under Rule 25 of the Central Excise Rules, 2002 for not discharging the duty liability on the P & P Medicaments, cleared by them by applying pro-rata value of sale pack cleared by them – Held that:- Appellant had cleared physician samples by following the principles of cost control method as provided in Rule 8 of the Central Excise (Valuation) Rules. The law that the physicians samples needs to be valued proportionately with the sale pack - If two views were possible for the valuation of physician samples, appellant s choosing a particular view, cannot be faulted with – demand of duty liability and interest thereof, is rejected - penalty under the provisions of Rule 25 of Central Excise Rules, be set-aside
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2012 (11) TMI 993
Waiver of pre-deposit - applicant manufactured and cleared Pan Masala Gutka and had not paid duty as per the provisions of Pan Masala Packing Machines Rules, 2008 – Held that:- As per rule 6, the manufacturer has to file a declaration stating therein the number of packing machines - when the applicants filed the declaration stating therein that there is no packing machine for manufacture of Pan Masala Gutka and in absence of any verification to that extent - applicants have made out a strong case in their favour - pre-deposit of duty, interest and penalty waived
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2012 (11) TMI 992
Interest on differential duty – Held that:- Appellant assessee is liable to discharge interest liability on the Central Excise duty paid by issuing supplementary invoices for the increased price of the final products cleared by them to their suppliers – against assessee
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2012 (11) TMI 991
Whether the duty paid by the job worker on goods, received back by the appellant can be availed as Cenvat credit by the appellant – Held that:- Once the duty has been paid by job worker on goods sent back to appellant, there is no reason to deny benefit of Cenvat credit to the appellant – In favor of assessee
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