TMI Tax Updates - e-Newsletter
March 15, 2012
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Central Excise
Indian Laws
Highlights / Catch Notes
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Income Tax:
Capital Gains - Slump sale – whether amount of liability reflected in the negative net worth can be added to determine value of sale consideration - Decided in favor of Revenue. - AT
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Income Tax:
Where a transaction is sham and not genuine, it cannot be considered to be a part of tax planning or legitimate avoidance of tax liability. - HC
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Income Tax:
Whether the CIT (A), in exercise of power under Section 251 (1) (a) of the Act has the power to enhance the assessment in the manner done in the instant case - held yes - HC
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Income Tax:
Block assessment - Undisclosed income versus opening capital - block assessment - held that:- the said opening capital accrue to the assessees at a point of time anterior to the commencement of the block period, it cannot be treated as undisclosed income at all. - HC
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Income Tax:
Applicability of 40A(7) - Given the fact that Section 40A(7)(b) of the Act contemplates deduction in respect of the provision made, not only for the purpose of contribution towards the approved gratuity fund, but equally so for the purpose of payment of gratuity payable during the year, rightly the Commissioner of Income Tax (Appeals) granted the relief. - HC
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Income Tax:
Brought forward and Setoff of business expenditure and business loss against “Income from House Property“ when business has already closed in earlier year - Section 71 - adjustment allowed - HC
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Income Tax:
The fact that the excisable products are exempt from the payment of excise duty cannot be a ground to hold that the products in question are not manufactured by the assessee - Deduction u/s 80IA allowed - HC
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Customs:
Regarding extension of Status Holder Incentive Scrip (SHIS) scheme upto 31.03.2013 . - Ntf. No. 07 /2012 - Customs Dated: March 9, 2012
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Customs:
Ban on export of Cotton (Tariff Code 5201 and 5203)- reg. - Cir. No. 08/2012-Customs Dated: March 13, 2012
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Customs:
Duty free re-import of cut & polished diamonds into India after certification/grading by the laboratories / agencies as notified in the Foreign Trade Policy. - Ntf. No. 09/2012-Customs Dated: March 9, 2012
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FEMA:
Deferred Payment Protocols dated April 30, 1981 and December 23, 1985 between Government of India and erstwhile USSR . - Cir. No. 91 Dated: March 13, 2012
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FEMA:
Opening of Diamond Dollar Accounts (DDAs) – Change in periodicity of the reporting. - Cir. No. 92 Dated: March 13, 2012
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Corporate Law:
Petition for winding up of companies - Existence of arbitration clause is not a ground to dismiss the application seeking an order of winding up of the respondent-company. - HC
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Indian Laws:
Railway Budget 2012-13 at a Glance :
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Indian Laws:
Highlights of Railway Budget 2012-13.
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Indian Laws:
RBI releases its Monthly RBI Bulletin for March 2012
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Indian Laws:
E&Y fined and reprimanded over audit work
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Service Tax:
Waiver of pre-deposit - Business Exhibition services received by the appellant in South Africa and other middle eastern countries - no service tax - AT
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Service Tax:
Stay of Demand - Business Support Services - Business or profession - Sir Ganga Ram Hospital was providing infrastructural support to certain doctors who were allowed to hold private outpatient consultation in the hospital and was charging some amounts from those doctors. - Prima facie no service tax - AT
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Service Tax:
Levy of service tax - even if the appellant has discharged the service tax liability, after taking the registration under this category, the question of confirming the demand without putting the appellant on notice is incorrect and not within the provisions of the law - AT
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Service Tax:
Export of services - instead of foreign exchange going out of India, there is conservation of foreign exchange in India to the extent of commission earned by the service provider appellant in view of the arrangement made by the service recipient abroad in that behalf through Indian Railways - benefit of export allowed - AT
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Service Tax:
Whether hiring of ambulance does not fall under the ambit of Service Tax as ‘Rent-a-Cab’ service - ambulances are not meant for carrying passengers on hire and hence question of levy does not arise - AT
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Service Tax:
Allocation of work relating to Service Tax procedures to the Service Tax wing of the CBEC – regarding. - Cir. No. 153/04/2012 – Service Tax Dated: March 6, 2012
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Service Tax:
Appellant agrees to arrange at his own cost suitable godowns for warehousing the products and also to arrange insurance of the goods in the joint name with the principal - Appellants are entitled for annual commission on the volume of sales - held as taxable - AT
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Central Excise:
Refund - Supply of goods from DTA unit to SEZ unit - treated as physical exports for the purpose of entitling refund of unutilized Cenvat credit contempla ted under the provisions of Rule 5 of the Cenvat Credit Rule, 2004. - HC
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Central Excise:
Valuation under 4A of MRP - warranty charges - After sales service charges for four years being optional, not includible for valuation purpose while determining MRP under Section 4A of Central Excise Act, 1944 - AT
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Central Excise:
Imposition of restriction to prevent evasion of, and default in payment of, duty of excise on a manufacturer, first stage and second stage dealer or an exporter in case of certain offence - Ntf. No. 05/2012 - Central Excise (N.T.) Dated: March 12, 2012
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Central Excise:
Amends Central Excise Rules, 2002 - Rule “12CC“ shall be substituted by “12CCC“. - Ntf. No. 04/2012-CENTRAL EXCISE (N.T.) Dated: March 12, 2012
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Central Excise:
Second Amendment in the CENVAT Credit Rules, 2004. - Ntf. No. 03/2012-CENTRAL EXCISE (N.T.) Dated: March 12, 2012
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Central Excise:
Determination of value of excisable goods - clearances to sister unit for captive consumption as well as to independent buyers - in a case where both the rules are applicable, the application of Rule 4 will lead to a determination of a value which will be more consistent and in accordance with the parent statutory provisions of Section 4 of the Central Excise Act, 1944. - AT
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Central Excise:
Duty liability on the scrap generated at the end of job workers during the course of machining of the inputs/castings - assessees are not liable to pay duty on the scrap generated at the job workers' end. - AT
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Central Excise:
Even if attracting nil rate of duty, the goods remain excisable and they do not become non-excisable. Therefore, just because the goods listed in the schedule attract nil rate of duty, it cannot be said that they become non-excisable. - AT
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Central Excise:
Demand of duty under Section 4 of the Central Excise Act - Goods cleared under MRP scheme u/s 4A - packaged form was opened at the dealers end for addition and mixing of the desired colourants, prior to the delivery to the ultimate customer - Demand on the basis of valuation u/s 4 set aside. - AT
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VAT:
Classification of utting oil - merely because the product also has a lubricating effect, cannot be classified as "lubricant" under entry 15 of Schedule II, Part A to the Act, sale of cutting oil is classifiable under entry 34 of Schedule II, Part A of the Gujarat Sales Tax Act, 1969 - HC
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2012 (3) TMI 176
Capital Gains - Slump sale – whether amount of liability reflected in the negative net worth can be added to determine value of sale consideration - whether the “negative net worth” could be treated as Nil or had to be added to the “consideration” for determining capital gain - assessee transferred its “Power Transmission Business” to KEC Int Ltd under scheme of arrangement u/s 391 & 394 of the Companies Act for a total consideration of Rs. 143 crores – same being offered as Capital gains taking negative net worth of Rs 157 Crore to be nil – reference to Special Bench for determination of full value of consideration and capital gains - Held that:- Since capital asset is an undertaking (All assets minus All liabilities), the full value of consideration would be determined by reducing the value of liabilities of the undertaking from the agreed value of all the assets of the undertaking. If one adds the liabilities to this value, one is arriving at the consideration for the “assets” but not the consideration for the “undertaking“. Therefore, full value of consideration of the undertaking should be taken at Rs. 143 crore and not Rs. 300(143+157) crore. In case of a slump sale, Capital gain on transfer of 'Undertaking’ = Full value of consideration received or accruing (All assets minus All liabilities) - 'Net worth’ or in other words the cost of acquisition and cost of improvement (All assets minus All liabilities) of the undertaking. Hence, while sustaining the figure of sale consideration at Rs. 143 crore, the negative net worth is “deducted from” (i.e. “added to“) the full value of consideration. Consequently, the chargeable capital gain is Rs. 300 crores (Rs. 143 crores + Rs. 157 crores) – Decided in favor of Revenue.
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2012 (3) TMI 175
Transaction being sham and not genuine cannot be considered to be a part of tax planning - Assessee borrowed Rs. 48 crores from the G. K. Rathi group and bought shares in four 100% subsidiary companies – shares purchased at unreasonable premium price (at Rs 150 per share when average value is less than Rs 25 per share) - amount received by the said subsidiary companies was transferred back to another company of the G.K. Rathi group – said shares sold for Rs. 5 each in subsequent A.Y. - short-term capital loss claimed – set-off of such loss against other long-term capital gains – AO, CIT (A) & Tribunal rejected the transaction of investment into, and sale of, shares as a sham – dis-allowance of capital loss and its set off – dis-allowance of loss arising out of the business of providing guarantees – Held that:- Whenever there are reasons to believe that the apparent is not real; then the taxing authorities are entitled to look into surrounding circumstances to find out the reality and apply the test of human probabilities. Supreme Court in case of Vodafone International vs. UOI (2012 - TMI - 208574 - Supreme Court Of India) made it clear that a colourable device cannot be a part of tax planning. Where a transaction is sham and not genuine, it cannot be considered to be a part of tax planning or legitimate avoidance of tax liability. In the present case the purchase and sale of shares, so as to take long term and short term capital loss was found as a matter of fact by all the three authorities to be a sham. See (Sumati Dayal vs CIT (1995 - TMI - 5469 - Supreme court) – Decided against the assessee. In respect of guarantees – Held that:- The surrounding circumstances can be looked at, but not without considering the evidence led by the party in support of its stand. Hence, it would be proper to remand the matter to the Tribunal to reconsider the issue in respect of loss on account of business of providing guarantees and pass an appropriate orders thereon.
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2012 (3) TMI 174
Penalty u/s 271D – loans and deposits received in contavention to Section 269SS – penalty waived by Tribunal accepting contention of assessee that the same is share application money – Held that:- First and the foremost aspect, which has to be considered and examined is whether the amount received was loan or deposit. This aspect has not been considered and examined by the tribunal in spite of the specific findings recorded by the A.O. and the CIT (Appeals). Therefore, an order of remit is passed to the Tribunal to decide the appeal afresh after recording factual finding – Decided in favor of Revenue.
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2012 (3) TMI 173
Writ petition - stay petition - recovery of dues - attachment - notice issued under Section 226(3) attaching the bank accounts - demand contained in notice is for more than Rs.26 crores and according to the Standing Counsel for the respondents substantial amounts are available in the Bank accounts of the petitioners - result of the notices above mentioned, the entire bank operations have been stopped and as a consequence there of, their business operations have also been stopped – Held that:- pendency of the appeals filed by the petitioners, petitioners directed to pay Rs.5 crores in two equal monthly installments - the notice issued by the respondent under Section 226(3) of the Income Tax Act will stand stayed on the payment of the Ist installment, Writ petition is disposed of as above.
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2012 (3) TMI 168
A society formed for advancement of music, other fine arts and traditional arts - assessee applied for renewal of its approval under Section 80G of the Act - Assessee registered under Section 12AA - The Department contented receipts of the assessee from sponsorship fees, sale of tickets and music coaching was in excess of Rs. 10 lakhs and application for renewal of approval under Section 80G of the Act rejected - Held that :- assessee's object was development of music and other fine arts based on Indian culture and assessee was not carrying on any trade, commerce or business, when it was collecting fees from persons who were attending the programmes - denial of renewal of application under Section 80G of the Act, when its registration under Section 12AA of the Act was intact, was unjustified [Mylapore Fine Arts Club v. Dy. DIT(E) in I.T. Appeal No. 1706/Mds/2010 ] - advancement of traditional musical culture of Tamil Nadu and conducting music programmes sponsored by various persons and sponsorship fee so received, distributed among the artists, can never be considered as an activity in the nature of trade, commerce or business - assessee was eligible for renewal of approval under Section 80G of the Act - appeal filed by the assessee is allowed.
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Customs
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2012 (3) TMI 172
Writ Appeal- appellant imported some electrical goods - officers of the 1st respondent seized the goods due to undervaluation and issued Ext.P3 show cause notice under Section 124 - appellant sought for interim release of the goods pending completion of the proceedings initiated - The provisional release also came to be ordered subject to conditions as per Ext.P7 - appellant contends that conditions imposed. Held that:- if the matter is kept pending, heavy demurage charges to be incurred by the appellant - 2nd respondent shall complete the proceedings initiated against the appellant by issuing show case notice within three weeks from the date of receipt of the copy of the judgment - the Writ Appeal is dismissed.
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2012 (3) TMI 171
Purchase of the vehicle from a "used car" dealer in Dubai - on inspection damaged chassis number and corrected was noticed and over the engine number in the engine block, a metal plate was fixed covering the original number and with a new number - adjudicating officer confiscated the car and levied penalty - importer filed appeal before the Commissioner (Appeals)- to set aside the order of confiscation reducing the fine and personal penalty - department as well as importer filed appeals before the Tribunal - Held that :- The information given by the authorized dealer that car is '2004' in India of Toyota Motors, Japan that it is of 2004 make has to be accepted as conclusive - uphold the order of the Commissioner confirmed by the Tribunal to release the vehicle on payment of redemption fine and personal penalty, besides import duty payable at the applicable rate - no reduction in personal penalty and modification of redemption fine 2,00,000/- and 1,50,000/- respectively.
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2012 (3) TMI 162
Re-import of goods being returned by foreign purchaser as find not suitable for consumption - Port Health Officer conform not upto the standards prescribed by the Prevention of Food Adulteration Act - Petitioner filed writ petition to allow release of goods under Bill of Entry No.4605474 dated 12.9.2011 and to reexamine the goods- Held that :- food item not find suitable by foreign buyers and same confirmed by Port Health Officer - dump the same on unsuspecting public in India cannot be permitted - writ petition is dismissed.
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Corporate Laws
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2012 (3) TMI 170
Approval of the scheme of amalgamation - held that:- it is not prejudicial to their interest, since they would be continuing in the Transferee-Company and the shareholders would be allotted shares of the Transferee-Company, the rates for which has been worked out by the experts. Thus, taking notice of the basic requirement of the scheme and also considering the fact that neither the Regional Director nor the official liquidator have raised any objections with regard to the scheme, the scheme as proposed requires to be approved. - scheme of amalgamation allowed
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2012 (3) TMI 160
Prosecution of eight Directors of M/s. Metlex Ceramics Ltd. (in liquidation) on the ground that no Statement of Affairs had been filed by any of these Directors in spite of the company being ordered to be wound up - Held that :- The Official Liquidator has filed the report and as per the details as of today except Sh. S.L. Chopra it would not be possible to proceed against any other Directors - if the appellant or Sh. S.L. Chopra are also allowed to go scot free and are not even tried, the effect of that would be as if none of the Directors had any responsibility and/or duty to file the statement of affairs; such a situation cannot be accepted - Once the appellant assumed the position of a Director and some evidence has come on record in the form of signing the documents, prima facie it would lead to the conclusion that she was taking part in the day to day affairs of the company - no merit in this appeal and is accordingly dismissed - Official Liquidator to take up the matter before Learned Company Judge against Sh. S.L. Chopra
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Central Excise
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2012 (3) TMI 169
Deemed Modvat credit on the inputs in terms of Notification No.58/97-CE, dtd. 30.08.97 - credit was availed by the appellants on the strength of invoices issued by supplier of inputs discharging their duty liability in terms of Section 3A of the Central Excise Act, 1944 read with Rule 96ZP(3) Central Excise Rule, 1944 (scheme commonly known as Compounded Levy Scheme) - credit was denied on the grounds that invoices did not declare that the appropriate duty of excise has been paid on the inputs under the provisions of Section 3A of the Act - Held that :- inputs suppliers are working under the Compounded Levy Scheme who discharge their duty liability at the end of the month in which the goods stand cleared by the input supplier and duty liability in respect of each and every clearance was not being determined and reflected in the invoices - appeal allowed with consequential relief to the appellants to take input credit
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2012 (3) TMI 159
Pre-deposit of Duty along with penalty u/s 11AC - manufacture of Chewing Tobacco (Khaini) under the brand name of Raja falling under Chapter 24 of the First Schedule to the Central Excise Tariff Act, 1985 - Revenue contented that one of the raw materials i.e. lime used is first dissolved in the water and after filtration of dissolved limestone, the filtered lime water is further put to use for making khaini by dissolving other raw materials in this end - 50% of the production so recorded on the ground that addition of water results in 50% of excess production and duty stands confirmed against them on the findings of excess production and clearance - Held that;- appreciating the order of the Settlement Commission laying down that such water addition to lime and the other material results in 10% excess production of final product - the appellant to deposit Rs. 3.50 crores within a period of 12 weeks from the date of order passed.
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2012 (3) TMI 158
Dispute of quantification - SSI Exemption - Held that:- Excise duty actually paid at the time of clearance of goods from the factory, in terms of Notification No.175/86 is not required to be included in the total demand, in as much as that already stands paid by the appellants. Once they cross the nil rate of duty slabs and start paying concessional rate of duty under the second slab, the entire clearances thereafter have to be treated as having been cleared on payment of concessional rate. Similarly after crossing the final slab requiring the appellants to pay full rate of duty, the clearances affected thereafter are required to be considered as having been made on full rate of duty. - set aside the impugned order and remand the matter to Commissioner for correctly quantifying the demand of duty.
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Indian Laws
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2012 (3) TMI 177
Invocation of proviso (b) to Article 311(2) of the Constitution of India to dispense with the inquiry against the appellant to remove him from service - appellant working as sub-ordinate Judge in Garhwa, Jharkhand alleged of not preparing judgments on his own, rather getting it prepared through some body else before delivering the judgments - appellant challenging legality of order and jurisdiction of High Court – Doctrine of pleasure under article 310 - Held that:- Under Articles 310 and 311, public servants are given protection from being dismissed, removed or reduced in rank without holding a proper inquiry or giving a hearing. However, proviso (b) to Article 311(2) provides for dispensing of such condition on reasonable and legal grounds. In present case, High Court on basis of facts was of the opinion that holding of such enquiry should be dispensed with in view of the fact that if an enquiry is held the same may lead to the question of validity of several judgments rendered by the appellant. Because of legal and valid grounds there was no necessity of giving him any opportunity of hearing. Subsequent to that, the Governor decided to invoke the provisions of Article 311(2) (b) of the Constitution of India and dispensed with condition of holding enquiry. Thus, procedure and the pre-conditions laid down for invoking the extra-ordinary power under Article 311(2) (b) having been complied with and properly exercised within the parameters of the provisions – Decided against the appellant.
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