TMI Tax Updates - e-Newsletter
February 7, 2012

Case Laws in this Newsletter:

Income Tax Customs Service Tax

Articles

1. India New Budget 2012-13 highlights and expectations

   By: SNEHAL SHAH

News

1. Text of the Speech of FM on the Release of National Policy on Narcotic Drugs and Psychotropic Substances and Highlights of the Policy.

2. Text of the Speech of Union Finance Minister Shri Pranab Mukherjee at the India Corporate and Investor Meet.

Case Laws:

• Income Tax

• 2012 (2) TMI 53
  Period of limitation - special audit u/s 142(2A) – assessment completed u/s 153A based on search and then special audit - extension of time availed - assessee contending that AO had no justification for ordering special audit u/s 142(2A) and therefore, AO was not entitled to extended period – Held that:- In the present case, no complexity of accounts was involved. It was a simple case of estimation of income based on documents and statements furnished by assessee. AO had also made adhoc disallowance of various items of expenses and had not even considered the accounts before special audit had been ordered with the intention of getting extended period. Further, facts in this order are identical with decision of the Tribunal in A.Y. 1998-99 to 2003-04 and 2004-05, in assessee’s own case, therefore, we hold that AO was not entitled for extra period for completing assessment and assessment order passed on 29/9/2006 was barred by limitation. – Decided in favor of assessee.

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• 2012 (2) TMI 52
  Work Contract vs Contract for sale – purchase of product - product manufactured out of raw materials supplied by a foreign company who had direct interest in the assessee company - product manufactured to the specification of the assessee utilizing the technical know-how supplied by it - labeling the product with the brand name of the assessee - supplying the entire product only to the assessee and not to anyone else – Held that:-This is not simply a situation of a product manufactured to the specifications of the assessee, being sold to the assessee at the price fixed by the seller but this is to be held as a specific contract for manufacturing of a particular product notwithstanding the fact that the seller had paid the price for the raw-material directly to the foreign company supplying raw material, but had interest in the assessee company in India and having a definite communication. Further, situation contemplated u/s.194C i.e. the payment being carrying out any work which is to improve the situation of such nature and of course preceded between the contract between the assessee and the manufacturer company. Therefore, it is held provisions of Section 194C are applicable to the assessee and is clearly attracted to the present situation – Decided in favor of Revenue.

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• 2012 (2) TMI 33
  Unexplained money – assessee appointed as collecting agent by a company – required to collect the sale proceeds of the aforesaid company from its customers and deposit the same in bank wherefrom it was remitted to company through DD – Revenue contending deposits in bank as unexplained money – Held that :- Assessee produced evidences regarding its appointment as Collecting agent & that deposits related to sales collected and its remittances to company through reconciliation of bank statements of assessee and company. Further, past records of assessee reveal that she had mere income of 1.25 lacs p.a. & have there is no such asset or any other business activities from which it can be said that the assessee had earned a sum of Rs.46.55 lacs from undisclosed sources. Therefore, addition made is deleted – Decided in favor of assessee.

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• 2012 (2) TMI 32
  Jurisdiction defect u/s 158BD – undisclosed income of any other person - assessee filed return in pursunace of notice issued to him u/s 158BD on 24.08.06 after two years 8 months and 23 days of passing the order in case of group searched - Notice u/s 143(2) issued to the assessee on 24.07.08 i.e. after one year 9 months and 12 days from the date of filing of the block return by assessee – Revenue rescuing to Section 292BB – Held that:- Prior to 1.4.2008 a notice u/s 143(2) could have been given within 12 months from the end of the month in which the return is furnished. Hence, in the present appeal, the notice could have been given only upto 31.10.2007 as on 1.4.2008 the limitation period had already expired. Omission on the part of the A.O. to issue notice u/s 143(2), therefore, cannot be a procedural irregularity and the same cannot be dispensed with. Where the legislature intended to exclude certain provisions from the ambit of section 158BC(b), it has done so specifically. Thus, when section 158BC(b) specifically refers to applicability of the proviso hereto, it cannot be excluded, therefore, section 292BB cannot come to Revenue s rescue. Even otherwise, section 292BB was effective from 1.4.2008 , whereas the return u/s 158BD was filed by the assessee on 12.10.2006 and notice u/s 143(2) was issued beyond period of limitation – Decided against the Revenue.

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• 2012 (2) TMI 31
  Unexplained credits – difference in bank balance as per books of accounts vs bank balance as per bank statement treated as unexplained credit – assessee submitted that difference is due to cheques received but not deposited in the bank on advice of cheque providers – Held that: Assessee did not at all get those cheques encashed received on the last day of the accounting year, also evidenced from Bank Statements. It was only a matter of passing entry, which was even reversed in later year. Confirmation from parties regarding issue of cheque & their advice for non-presentation in bank are available on record. Thus it fairly indicates that there is no inflow of any money with the assessee either in cash or through banking channel. Hence, there is no basis whatsoever for making any addition under these circumstances u/s.68 of the Act – Decided in favor of assessee. Similiar position is in relation to cheques issued by assessee and then advising party for non-presentatio. Aforesaid is held in this case also.

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• 2012 (2) TMI 30
  Fringe Benefit Tax – residential accommodation provided to M.D. - Deposit of Rs 5 crore made for the licence to use & occupy the property – Revenue considering notional interest on such deposit under FBT – Held that:- The provision relating to the computation of the value of the fringe benefits is contained in section 115WC. It is a settled principle of law that where the computation provision fails, the charging section cannot be effectuated. In present case, AO has adopted 9% rate which was generally available on FDRs, one can argue that this rate may be 20% which was applicable to ICD. Therefore, it is held that though the provision of security deposit is definitely in the nature of fringe benefit under clause (a) of sub-section (1) of section 115WB, but in the absence of valuation rules, the same cannot be subjected to tax. Accordingly, order of CIT(A) is set aside and addition made is deleted – Decided in favor of assessee.

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• 2012 (2) TMI 29
  Taxability of Cash compensation received – capital receipt vs Revenue receipt - assessee being member of a housing society received flat in new multistoreyed building, displacement compensation and cash compensation in lieu of demolishment of the old residential building owned by the housing society – Held that:- Capital receipt in principle is outside the scope of income chargeable to tax. It is not even the case of the A.O. that the compensation received by the assessee is in the revenue field, and rightly so because the residential flat owned by the assessee in society building is certainly a capital asset in the hands of the assessee and compensation is referable to the same. Further, Supreme Court in the case of CIT vs. Kamal Behari Lal Singha (1971 (8) TMI 15 - SUPREME Court) has held that in order to find out whether it is a capital receipt or revenue receipt, one has to see what it is in the hands of the receiver and not what it is in the hands of the payer. Therefore, receipt of Rs. 11,75,000 by the assessee cannot be said to be of revenue nature. However it is agreed that the same will be taken as part of cost of acquisition of new flat – Decided in favor of assessee.

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• Customs

• 2012 (2) TMI 39
  Plea for release of confiscated goods – import of Oats – goods confiscated due to the objections raised by the Port Health Officer and that goods have been misbranded - CESTAT vide order dated 27.10.11 directed for release of goods on fulfillment of certain conditions by assessee – release pending - Held that:- Since Revenue has not challenged the order of CESTAT hence with the conditions attached in the order, it is directed to implement the order of CESTAT within a period of two weeks from the date of receipt of a copy of this order. Petitioner would have to comply with a number of conditions like providing details to comply with the local laws, at the time of the re-packing and the re-labeling of the said goods, in the customs bonded area, and goods to be subjected to necessary tests to make sure that the goods in question are fit for human consumption, before release of goods – Decided in favor of petitioner.

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• Service Tax

• 2012 (2) TMI 26
  ‘Accommodation service' – Section 65(105)(zzzzw) of Finance Act, 1994 - Tirumala Tirupati Devasthanams (TTD) is constituted under the Andhra Pradesh Charitable and Hindu Religious Institutions and Endowments Act, 1987, running some guest houses for pilgrims – Held that:- There is no doubt that the petitioner is running guest houses by whatever name they are called whether it is a shelter for pilgrims or any other name. There is no dispute that it has been running these guest houses for a considerable time. Under these circumstances, the petitioner is liable to have itself registered for payment of service tax. We find no error in the view taken by the respondents in this regard – Decided against the assessee.

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