TMI Tax Updates - e-Newsletter
March 5, 2012
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Central Excise
CST, VAT & Sales Tax
Indian Laws
Highlights / Catch Notes
-
Income Tax:
Surrender of leasehold rights Provisions of Section 50 C will apply on receipt of consideration on transfer of a property, being land or building or both, and not in case of transfer or surrender of tenancy rights. - AT
-
Income Tax:
Expenditure incurred on closure of business of manufacturing activity - since the assessee had been doing other business activity also, namely, 'trading' it could not be said that the assessee had closed its business. - HC
-
Income Tax:
Assessee in default - Time limitation - issuance of notice u/s 201 after a period of 4 years - though there is no period of limitation prescribed for exercise of that power, still such a power must be exercised within reasonable time - HC
-
DGFT:
Amendment in the subject of Notification No. 98 (RE-2010)/2009-14 dated 23.02.2012. - Ntf. No. 101 (RE-2010)/2009-2014 Dated: March 2, 2012
-
FEMA:
Foreign Institutional Investor (FII) investment in to be listed debt securities - Cir. No. 89 Dated: March 1, 2012
-
Corporate Law:
Registration of Companies or LLPs which have one of their objects is to carry on the profession of Chartered Accountant, Cost Accountant, Architect, Company Secretary etc. - Cir. No. 2/2012 Dated: March 1, 2012
-
Indian Laws:
Constitutional validity of the Cess Act - Tax versus Fee - Building and Other Construction Workers Welfare Cess - The levy by the impugned Act is in effect a fee and not a tax - SC
-
Central Excise:
Classification of goods - Combined factor that requires to be taken note of for the purpose of the classification of the goods are the composition, the product literature, the label, the character of the product and the user to which the product is put. However, the miniscule quantity of the prophylactic ingredient is not a relevant factor. - SC
-
Central Excise:
Clarification regarding levy of Excise duty on branded precious metal jewellery - Cir. No. F.No.354/38/2011 -TRU Dated: March 2, 2012
-
Central Excise:
Interest for taking the Cenvat credit wrongly - assessee had availed wrongly the Cenvat credit on capital goods - Before the credit was taken or utilized, the mistake was brought to its notice. The assessee accepted the mistake and immediately reversed the entry - Without the liability to pay duty, the liability to pay interest would not arise. - HC
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
-
Income Tax
-
2012 (3) TMI 62
Deemed Dividends - Advance from Company - Assessee "managing director" holding 10% Beneficial ownership - Accumulated Profit 32,43,511 - money advanced as capital added as notional income - Held That:- For applicability of deemed dividends accumulated profits should exist on the date of loan, matter referred to AO to ascertain whether there was accumulated profits after reducing the notional income that was added under section 41 of the Act for the asst. year 2003-04.
-
2012 (3) TMI 61
Best Judgment - Estimation of Profits - A/Y 03-04 profit estimated at 1.25 percent for 04-05 at 1 per cent - Held That:- On the basis of material available CIT(A) estimated profit after considering the comparable cases and the profit ratio of the similarly placed traders of the locality.Estimations were correct. Unexplained Investments - AO: loan on security of stock and not utilized for construction - Held That:- Case referred back to to establish the nexus between the borrowal of the loan and the construction of the building.
-
2012 (3) TMI 60
Validty of Re-opening under 147 - Assessment under 143 on 28.02.06: Necessary facts and report of Registered valuer on record - Matter referred to DVO under 55A, report received on 13.03.06 - Held That:- Assessee had disclose fully and truly all material facts necessary for his assessment. AO have not formed any reason to believe for escapement of LTCG rather he wanted to review the assessment on the basis of opinion of DVO who has opined for a lower fair market value as on 01.04.1981. Assessment under 147 after expiry of 4 years from relevant A/Y is not valid.
-
2012 (3) TMI 59
Dis allowance of Commission - Sales bill didn't mention assessee as Commission agent - Appellant failed to produce any material in support of agent obtaining orders from these parties - No evidence on support of material transferred and liaisoning - Held That:- the appellant has failed to explain why M/s Rohit Traders has failed to raise debit note at the end of the every sale. The appellant has also failed to explain why the claim of commission @2% is on sales much lower than the total sales to these two companies. The sales Hindalco Industries Ltd. is of Rs.103.04 crores but the commission is only of Rs.88.36 lacs. The sales to Essar Steel Ltd. are Rs.97.09 lacs but commission is claimed only on Rs.86.74 lacs. Decided against assessee. Disallowance - The assessee stated that it had made payment on three different dates and it submitted copy of payment vouchers copy of bank statement, DD through which payment was made and TDS certificate evidencing the payment. The assessee further argued that since the TDS payment was made late, proportionate disallowance has already been made u/s 40(a)(ia) and it amounts to double addition. The AO, however, disallowed the commission payment because the assessee failed to give evidence of rendering services. No evidence was brought on record for services being rendered. The AO further stated that the TDS was not deducted at the rate prescribed under the Income-tax Act. - disallowance confirmed. Incentive paid to workers - genuiness of expenses - while going through the details filed by the assessee in the Paper Book in respect of these expenses and taking into consideration the smallness of the amount involved that too for welfare of labourers and taking a lenient view of the matter, the addition of Rs.53,200/- made by the AO and sustained by ld. CIT(A) is deleted.
-
2012 (3) TMI 58
Capital OR Revenue Expenditure - Collaboration Agreements for "Electric Rice Cookers" and "Mixer Grinders" - Payment in "Lumpsum" and "Royalty" - Amount Capitalized and depreciation claimed - AO disallowed 25percent royalty after treating it towards cost of acquisition of the capital asset - Held That:- In view of Apex Court CIT vs I.A.E.C.(Pumps) Ltd. (1997 -TMI - 5672 - SUPREME Court) - Collaboration Agreement for Mixer Grinders amounts only to licence fee and not the price for acquisition of a capital asset. Payment to be treated as "revenue expenditure". Deduction under 80HHC - Sale of Scrap, insurance claim received, provisions written back - Held That:- Sale of scrap would be a part of the income from business for the purpose of computing the eligible deduction u/s 80HHC. 90% of the receipts from sale of scrap would be required to be deducted from the profits of business in terms of clause (baa) appended to section 80HHC
-
2012 (3) TMI 57
Order under 263 - "Audit Objections" and "Possibility of different View" - Funds raised by issuing Shares & Debentures - Additions made u/s 68(cash credits) - CIT: "Unaccounted Income in course of business activity" - Held That:- It is not an unreasonable inference to draw that the addition made u/s 68 is a receipt from business of the assessee. Therefore, this Tribunal is of the opinion that there is no justification on the part of the Commissioner of Income-tax(A) to revise the order in exercise of his jurisdiction u/s 263 of I.T. Act
-
2012 (3) TMI 56
Business Income Set off against Brought forward loss - Change in shareholding pattern loss not allowed - Held That:- Share transfer by uncle to nephew is not covered by proviso to Section 79, AO justified in not allowing the set of of less of Rs.2,52,269. Addition on account of Under Valuation of Stock - AO: valued "Methanol" entire stock at 10887.5 MT - Held That:- Valuation by assessee are in conformity with the method of accounting followed by it consistently and stands duly supported by the documentary evidence as submitted any lying on the record which has been verified. Consignment Sales - Bank deposits - Show cause treating it "Accommodation entries" - Held That:- SAles made to consignment agent who further sold goods to ultimate consumer. In assessee's books credit was given to agents, to save, time and expenses, the consignment agent asked the parties to whom goods have been sold to deposit the amount in the bank account of assessee. The assessee has paid commission to the consignment agent and tax was also deducted at source. On the above factual matrices amount received in bank account cannot be held as "Unexplained Deposits".
-
2012 (3) TMI 47
Surrender of leasehold rights invocation of Section 50C - CIT(A) deleted addition made on account of LTCG on the ground that Section 50C has no application on transfer of leasehold right in building Held that:- Provisions of Section 50 C will apply on receipt of consideration on transfer of a property, being land or building or both, and not in case of transfer or surrender of tenancy rights. Lessee's rights cannot be treated as ownership rights. There is nothing on the record to suggest that the assessee was owner of the property in question. Further, cost of acquisition of the tenancy rights, in view of the specific provisions of Section 55(2)(a), should have been taken as nil. This aspect is however tax neutral since qualifying investment u/s 54F is more than the consideration for surrender of these tenancy rights Decided against the Revenue.
-
2012 (3) TMI 46
DTAA between India and Sweden applicant availed loan facility from AB SVENSK Export Kredit (SEK), a company incorporated in Sweden facility being guaranteed by the Swedish Export Credits Guarantee Board (EKN) whether payment of interest (through the Facility Agent NORDEA Bank AB(PUBL)) is exempt in India withholding of tax - Held that:- Payment of interest to SEK through NORDEA Bank AB is not taxable in India under Article 11.3 of the India-Sweden Double Taxation Avoidance Convention in view of and only in view of the Most Favoured Nation Clause in the India-Sweden Protocol which has to be taken as part of the Convention. Since it is claimed that SEK has no Permanent Establishment in India, there will be no obligation on the applicant to withhold taxes u/s 195 of the Income-tax Act, on the interest payable on the transaction.
-
2012 (3) TMI 45
India-Japan DTAC Japanese company, subsidiary of USA company product sold are copyrighted material in software form - right to use the application is given to customers by way of vendor licence key and through an independent reseller in India - license is provided on a non-exclusive and non-transferable basis taxability of payments received for sale of product whether royalty or business income withholding of tax Held that:- As held in Citrix Systems Asia Pacific Pty. Ltd. (2012 - TMI - 210758 - Authority For Advance Rulings) that there cannot be a user of software over which exists a copyright without a use of the copyright therein. The payment for such use can only be royalty. Therefore, in present case, what is paid by the reseller to the applicant and what is paid for updates and maintenance are royalty as defined in Article 12 of the India-Japan DTAC and not business income covered by Article 7 of the India-Japan DTAC. Further, tax needs to be deducted by the customers while making the remittances to the applicant as consideration for the software supplied to them.
-
2012 (3) TMI 44
Interest free advances - Additions made by AO applying 12% rate of interest - Held That:- the assessee was having sufficient interest free fund in the form of capital and reserves Rs. 5.48 crores against interest-free advances of Rs. 1.30 crores. Since the assessee has having sufficient interest-free funds to interest free advances, we therefore, delete the addition of Rs. 15,66,180/- Reliance placed on Torrent Financiers v. Asstt. CIT (2001 - TMI - 55358 - ITAT AHMEDABAD-A).
-
2012 (3) TMI 43
Assessee importing & trading timber - Requisition under 133(6) - Books of Account Rejected - On comparable GP calculated at 3% - CIT(A) reduced the rate to 2.5% - Revenue aggrieved by action of CIT is in appeal - Held That:- CIT was correct in rejecting books of account. After considering the nature of business, loss declared and after considering the decision cited by ld. A.R. including the decision of ITAT, Rajkot Bench, we find that it will be fair and just to both sides if GP is estimate at the rate of 2% as against 3% applied by the AO and 2.5% applied by the CIT(A). Interest free Advances - Additions made by applying 18% rate of interest - Held That:- In view of Torrent Financiers v. Asstt. CIT (2001 - TMI - 55358 - ITAT AHMEDABAD-A),disallowance deleted.
-
Customs
-
2012 (3) TMI 42
Contravention of import policy in respect of rough diamond absolute confiscation of goods held failure of assessee to furnish Kimberly Process certificate in respect of import of said goods - seeking permission for re-export of goods and waiver of penalty Held that:- No evidence of wilful attempt by the assessee to contravene the rules is found, therefore there is no reason to impose any penalty. Hence, order of the Commissioner (Appeals) of setting aside the penalty is upheld. Further, Respondent is not making a clear submission as to why he wants the goods to be re-exported. He has not made any payment towards the goods. Thus, permission for re-export of goods is denied and order of the original adjudicating authority for absolute confiscation of the goods is restored Decided partly in favor of assessee.
-
Corporate Laws
-
2012 (3) TMI 41
Reduction of Share Capital - Recessionary Conditions - no explanatory statement along with notice of AGM - Held That:- As there were no creditors on the date of passing special resolution, no objection from any other party. Company may be permitted to reduce the share capital from Rs. 12,64,10,930/- divided into 1,26,41,093/-equity shares of Rs. 10/- each to Rs. 9,14,10,930/-. equity shares of Rs. 10/- each.
-
Central Excise
-
2012 (3) TMI 40
Classification of `Povidone Iodine Cleansing Solution USP' and 'Wokadine Surgical Scrub' - assessee contending it to be medicaments classifiable under Chapter sub-heading 3003 whereas Revenue contends it to be detergents classifiable under chapter sub-heading 3402.90 on ground of presence of the surface active agent and other substances in it Held that:- Combined factor that requires to be taken note of for the purpose of the classification of the goods are the composition, the product literature, the label, the character of the product and the user to which the product is put. However, the miniscule quantity of the prophylactic ingredient is not a relevant factor. In the instant case, it is not in dispute that this is used by the surgeons for the purpose of cleaning or degerming their hands and scrubbing the surface of the skin of the patient before that portion is operated upon. The purpose is to prevent the infection or disease. Therefore, the product in question can be safely classified as a "medicament" which would fall under chapter sub-heading 3003 which is a specific entry and not under chapter sub-heading 3402.90 which is a residuary entry Decided in favor of assessee.
-
2012 (3) TMI 39
Plea for waiver of pre-deposit manufacture of Asbestos Cement Sheets denial of exemption under Notification No.6/2002 Revenue denied the plea on ground that no prima facie case has been made out by the petitioner and no supporting documents had been furnished to substantiate existence of 'financial hardship' Held that:- While dealing with the application twin requirements of considerations i.e., consideration of undue hardship aspect and imposition of conditions to safeguard the interest of Revenue have to be kept in view. In present case, it could be inferred that the petitioner has a strong prima facie case in the said appeal. Tribunal ought to have waived condition of pre-deposit, even if financial hardship had not been shown to exist or proved by acceptable evidence, as held by the Supreme court, in RAVI GUPTA Vs. COMMISSIONER OF SALES TAX, DELHI. However, in order to safeguard interests of the revenue, petitioner is directed to furnish a bank guarantee for a sum of ₹ 4.50 crores for hearing of the appeal by Tribunal.
-
2012 (3) TMI 38
Jurisdiction defect penalty imposed under Rule 26 of the Central Excise Rules, 2002 for alleged wrong availment of credit on capital goods Revenue's case is that there were no goods cleared at all from supplier of capital goods located at Indore appellant factory situated at Nasik - Held that:- The order is not specific as to how there is jurisdiction vested with CCE, Indore for imposing penalty for taking wrong Cenvat credit in Nasik or how the provisions of Rule 209A or Rule 26 is applicable to the situation. Thus no merit is found in the argument for imposing penalty under aforesaid Rules and vesting of jurisdiction with CCE, Indore for credit taken in Nasik factory penalty order set aside - Decided in favor of assessee.
-
2012 (3) TMI 37
Maintainability of the reference application filed u/s 35H by Revenue - whether substantial question of law arises - Tribunal allowed refund claimed on duty paid under protest on input manufactured by the assessee and captively consumed in the manufacture of final product - Held that:- In this case, final product is sold at market price which is same for all products manufactured and sold by every manufacturer. It is the duty of the assessee to prove that market price at which they sold the product does not include duty on input paid under protest. Therefore, substantial question of law arises that whether Tribunal was justified in holding that there is no unjust enrichment thereby entitling the assessee for refund of the duty paid under protest on input.Tribunal is directed to draw up a Statement of the case and refer the above question for decision by this Court.
-
CST, VAT & Sales Tax
-
2012 (3) TMI 66
Kerala General Sales Tax Rules, 1963 - allowability of discount provided vide credit notes under rule 9(a) Revenue contended that discount to qualify for exemption must be shown in the invoice itself Held that:- We find nothing in rule 9(a) to read it in the restrictive manner to mean that a discount in order to qualify for exemption under its provision must be shown in the invoice itself. It is significant to note that the rule stipulates that the discount must be shown in the accounts. In UOI and Ors v. Bombay Tyres International (P) Ltd., this court held trade discount to be deductible from the sale price. Further in case of Godavari Fertilizers and Chemicals Ltd. v. Commissioner of Commercial Taxes, High Court have held that discount given by means of credit notes issued subsequent to the sale is as much a trade discount admissible to deduction in determining the turnover of a dealer. Therefore, we are unable to sustain the impugned orders and remit the matter to the Assessing Authority to make assessments in light of this judgment.
-
2012 (3) TMI 51
Delhi VAT, 2004 - interpretation of proviso to Section 2(1)(zd) - appellants are Government undertakings marketing petrol, diesel and petroleum products increment of petrol prices by Government - relief in the price rise to the consumers provided by non-charging of VAT on incremental prices prices subsequently rolled back - appellants contended entitlement of reduction in VAT on the VAT payable even on restoration of prices Held that:- The proviso inserted to Section 2(1)(z) only protected and gave exemption in respect of enhanced ad valorem VAT payable on account of increase in prices of diesel and petrol from 6th June, 2006 and this increase was not to form part of the prices of petrol and diesel. The proviso did not say that VAT will not be payable and applicable on the pre 6th June, 2006 prices on petrol and diesel. Further, benefit under the proviso ceased to be applicable on roll back of prices w.e.f. 16.02.2007. Assessee contention of applicability of proviso even after the roll back of the prices does not find merit Decided against the assessee.
-
Indian Laws
-
2012 (3) TMI 48
Difference of opinion of members of Tribunal - Plea filed by applicant being Accountant Member of the ITAT, Chandigarh for invalidation of the transfer order by averring that it is punitive in character alleged difference of opinion in a judicial matter with private Respondent No.4, who made complaint against him Held that:- In present case, applicant retained draft judgement of private Respondent No.4 for more than one month, which does not appear to be appropriate and then returned it with contrary view. Applicant must have followed the procedure to be adopted by a Member who wishes to dissent from a draft judgment thus, applicant cannot himself be said to be free from blame. Further, we have not been persuaded to fault the wisdom exercised by the collegium in the matter of making a recommendation for transfer of the applicant from Chandigarh Bench of ITAT to the Rajkot Bench. Therefore, O.A. is held to be denuded of merit appeal dismissed.
|
