TMI Tax Updates - e-Newsletter
April 7, 2012
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
Wealth tax
Indian Laws
Highlights / Catch Notes
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Customs:
Hazardous Waste (Management, Handling and Transboundary Movement) Rules, 2008, issued under the Environment (Protection) Act, 1986 (29 of 1986). - Ntf. No. 31/2012-Customs (N.T.) Dated: April 4, 2012
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FEMA:
Authorised Dealer Category II – Permission for additional activity and opening of Nostro account. - Cir. No. 104 Dated: April 4, 2012
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2012 (4) TMI 496
Deletion of penalty u/s 271(1)(c) – LTCG on sale of factory land and building at Siliguri - deduction u/s 54G denied and penalty imposed on ground that area where assessee's undertaking was located was not declared to be 'urban area' – Held that:- Claim is declined on the ground that the place where assessee's industrial undertaking is located has not been declared to be an 'urban area' - something which is highly technical and it cannot be against the preponderance of probabilities, particularly in the light of legal advice rendered to the assessee, that the assessee made the error bona fide. As long as there is a reasonable explanation for the conduct of the assessee, the onus of the assessee stands discharged. CIT(A) was justified in deleting the penalty – Decided against the Revenue.
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2012 (4) TMI 495
Assessee firm of solicitors and advocates- in reassessment proceedings AO noted that the assessee has made payments to various lawyers for their professional services, but has not deducted tax at source under section 194J such payments are to be disallowed under section 40(a)(ia) - assessee's contention that the amounts paid to the lawyers were reimbursed by assessee's clients, and, therefore, the amounts paid to the lawyers were never claimed as a deduction in the first place - It was then contended that when deduction is not claimed in respect of these amounts, there cannot be any occasion to invoke section 40(a)(ia)- It appears from the copy of TDS certificates that the appellant had raised the composite bills for entire work on its clients and was accordingly paid after deduction of tax – Held that:- As a corollary to this position, unless a deduction is claimed in respect of the said amount, under sections 30 to 38, the disallowance under section 40(a)(ia) cannot come into play at all - the manner in which taxes have been deducted by the end user of the legal services cannot be determinative of whether the assessee has claimed it as reimbursement or no - restored to the file of the Assessing Officer for necessary verifications on this factual aspect.
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2012 (4) TMI 494
Exercise of extraordinary jurisdiction conferred by Article 226 of the Constitution Of India- Petitioner is engaged in the business of turn key projects - a warranty clause providing for warranty of performance - a notice u/s 143(2) of the Act issued in respect of the assessment years 1995-96 and 1996-97 stating that there were reasons to believe that the petitioner s income, chargeable to income tax, as estimated assessment for the aforesaid assessment years, within the meaning of Section 147 of IT Act - petitioner submitted that the said notices had been issued beyond the period of four years and the present assessment proceedings are based only on a change of opinion – Writ was filed - Held that:- the assessing authority had issued the impugned notices on the ground that there were reasons to believe that certain income chargeable to tax had escaped assessment within the meaning of section 147 - It is for the petitioner to raise its objections, if any, in respect of the impugned notices - Even assessing authorities concerned had accepted the methods of accounting for past years, it is for the assessee to substantiate its claim by furnishing the relevant pursuant to the impugned notices issued u/s 148 - when an efficacious alternative remedy is available under a statute, this Court would not exercise its extraordinary jurisdiction, under article 226 of the constitution of India - the writ petitions stand dismissed - open to the petitioner in the above writ petitions to raise its objections within a period of four weeks from date of Order.
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2012 (4) TMI 154
DTAC between India & Mauritius – Taxability of gains arising from transfer of shares and CCDs held by Mauritius company in Indian company – Z ltd (Mauritius company) along with Vltd (Indian Company) invested in shares and CCDs of S Ltd (Indian company) engaged in development of real estate project in India – prior to the mandatory conversion date of CCDs, V was given the call option to purchase particular shares and CCDs from Z, which was exercised by it – applicant contending CCDs not to be loan or advances and gains to be capital gains exempt from tax – withholding of taxes - Held that:- CCD creates or recognizes the existence of a debt, which remains to be so, till it is repaid or discharged. Further, it is observed that S Ltd being subsidiary of V ltd is though independent juridical person, S exercises no powers in managing its own affairs. It is de facto under the control and management of its parent company, V. It is V who is developing and running the real estate business of S, standing as a guarantor of the investment made by Z. V rather than S, acknowledges the CCDs as debts. The relationship between them as a parent and subsidiary is on paper: they are one and the same entity. Acknowledgment of debt with commitment to pay is factually upon V. Since, V and S are one and the same, hence the amount paid by V is clearly towards the debt that was taken by S from the Applicant. Gains arising on the sale of equity shares and CCDs are not exempt from capital gain tax in India under DTAC with Mauritius. The gains arising on the sale of CCDs being interest within the meaning of Section 2(28A) of the Act and Article 11 of the DTAC and are taxable as such. Tax is to be withhold on such payments – Decided against the applicant.
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2012 (4) TMI 153
DTAC between India & Mauritius - Buy back of shares proposed by A Ltd Co – major shareholders are 'A'(Mauritius company) - 25.06% shareholding, ‘A’(USA) - 48.87% shareholding and ‘A’ (Singapore) - 27.37% - offer accepted by only 'A'(M) both in year 2008 and 2010 – Revenue contended that tax is sought to be evaded in guise of buy back of shares – Held that:- It is significant that offer of buy-back was accepted only by ‘A’ (M) and not by 'A'(USA) or 'A' (Singapore) since only under the India-Mauritius DTAC, capital gains is totally not taxable in India. Had dividend being declared, company would have been obliged to pay tax on distribution of profits to shareholders. Instead, it allowed the reserves to grow and through proposed buy-back, considerable sums would be repatriated to ‘A (M) in Mauritius without the tax on the distributed profits being paid. Hence, we are satisfied that scheme of buy back of shares is a colorable device for avoiding tax on distributed profits as contemplated in Section 115-O. On our finding that the proposed buy-back is colourable, the distribution in question will satisfy the definition of dividend under the Act, Article 10 of the DTAC between India and Mauritius and consequently taxable as such. Also, applicant is required to withhold tax on the proposed remittance of the proceeds to ‘A’ (M).
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2012 (4) TMI 152
Delay in filing return - Public Charitable trust U/S 12A - also secured recognition under section 80G(5)(vi) - levy of penalty under section 272A(2)(e) for not filing the return of income within the due date as prescribed in section 139 - assessee in reply stated that the appellant was under a bonafide belief that recognition under section 80G would be a pre-requisite for filing the return of income – assessee contented that preoccupation on account of the trusties for meeting the obligations to secure recognition and this was the first year of operation of the trust thus the delay in filing the returns was not intentional – Held that:- On being appraised the correct provisions of law, return of income was filed immediately without any further delay there was no loss to the revenue as a result of late filing of the return and there was no ulterior motive to defraud the revenue - Penalty may be imposed under section 272A(2)(e) for failure, an attempt of deliberateness or deceptiveness, to furnish the return of income - Penalty cannot be levied under section 272A(2)(e) if there exists sufficient or reasonable cause for the default - "Reasonable cause' as applied to human action is that which would constrain a person of average intelligence and ordinary prudence - appeal filed by the assessee is allowed – in favour of assessee.
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2012 (4) TMI 150
Commencement of Business - Revenue is in appeal against the judgment of the Tribunal – AO disallowed the entire expenditure incurred by the assessee during the year as the business of the assessee had not yet commenced –Assessee contented that the assessee has submitted the return for AY 1998-99 wherein the basic pattern of investments and operations were the same as in AY 2001-02 and the set up of the business has been accepted during the AY 1998-99, the AO thus cannot again go back and say that the business has not been set up during the year - Tribunal, by the impugned order, allowed the appeal – Tax case Appeal by the Revenue – Held that:- if the assessee does first activity towards the attaining its main object, business shall be deemed to have been set up - the company entered into collaboration with to set up a joint venture company in which the respondent company had 26% equity share depicts that it is attaining its main objective as mentioned in MOA OF Company - AO is directed to treat all the expenses to be the revenue expenditure and allow set off of loss in accordance with law.Tax Case Appeal of revenue rejected.
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2012 (4) TMI 149
Notice under section 153 - There was a search operation conducted at the business premises and there was seizure of some incriminating documents and the cases were notified with the DCIT - Thereafter, notice under section 153A has been issued consequent to the search action - Held that:- no merit in the ground this ground of the assessee is dismissed. - Notice issued u/s 153 upheld. Deduction under section 80IA - the assessee contended that he is not a contractor but a developer of infrastructure facility – revenue denied it as the assessee not developed any new infrastructure facility as required under section 80IA(4)(i)(b) had only taken up the renovation and modernization of the existing net work/infrastructure facilities - Held that:- in view of retrospective amendment, the most important question for examination on facts is whether the business agreement in question can be termed a works contract or not. If the answer is in affirmative, nothing else matters because the Explanation takes over. If not, the other nuances such a development/operation etc., and other specified conditions become relevant. - where an assessee incurred expenditure for purchase of materials himself and executes the development work i.e., carries out the civil construction work, he will be eligible for tax benefit under section 80 IA of the Act. In contrast to this, a assessee, who enters into a contract with another person including Government or an undertaking or enterprise referred to in Section 80 IA of the Act, for executing works contract, will not be eligible for the tax benefit under section 80 IA of the Act. Ownership of project - held that:- according to sub-clause (a), clause (i) of sub section (4) of Section 80-IA the word “it” denotes the enterprise carrying on the business. The word “it” cannot be related to the infrastructure facility, particularly in view of the fact that infrastructure facility includes Rail system, Highway project, Water treatment system, Irrigation project, a Port, an Airport or an Inland port which cannot be owned by any one. Even otherwise, the word “it” is used to denote an enterprise. Therefore, there is no requirement that the assessee should have been the owner of the infrastructure facility. The assessee should not be denied the deduction under section 80IA of the Act if the contracts involves design, development, operating & maintenance, financial involvement, and defect correction and liability period, then such contracts cannot be called as simple works contract to deny the deduction u/s 80IA of Act. - Matter remanded back to AO. Sustaining/deleting of the expenses in the absence of bills and vouchers – Held that:- disallowance of expenses in these years also at 5% confirmed. Self made vouchers and bills in respect of purchase of sand – disallowed expenses by AO - there are chances of inflating the expenditure - Held that: - direct the assessing officer to disallow Rs.50 lakhs of the expenditure incurred by the assessee as it is not substantiated. Ground in assessee appeal partly allowed. Addition is made towards the difference between projected/provisional balance-sheet and the final balance-sheet. - The provisional balancesheet cannot be considered for determining the undisclosed income. However, as per disposition an amount of Rs.80 lakhs was agreed to be admitted as income, the same be considered as income on this count and no set off could be given towards workin- progress in any subsequent assessment year. This ground of assessee partly allowed. Seizure of cash - held that:- Either the assessee’s explanation is to be accepted as a whole or rejected as a whole. They cannot pick and chose according to their convenience and make addition. In our o opinion, the addition made towards cash found at the premises of Sri K. Venkata Kutumba Rao, cannot be made either in the hands of the assessee’s company i.e. M/s GVPR Engineers Limited or in the hands of Sri Siva Shanker Reddy. Accordingly, this ground of assessee is allowed.
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2012 (4) TMI 148
Order of Dispute Resolution Panel (DRP) u/s 144C - distinction between a 'null and void' order and an 'illegal or irregular' order - the order was christened as final order though the assessing authority was supposed to issue a draft order first inviting objections of the assessee against the adjustments proposed by the TPO - The assessee treated the said order as the final and filed appeal before the CIT(A) - on the mistake becoming apparent the AO issued a corrigendum stating that the first order to be treated as draft order - the corrigendum issued no legal force - Held that:- The argument that there is no provision in the Act to issue a corrigendum is not proper, as that power is always inherent with any statutory authority. In fact, a corrigendum is even appealable if it is prejudicial to an assessee. In the present case, the corrigendum issued by the assessing authority is not prejudicial. The Assessing Officer was only clarifying the situation. - Decided in favor of revenue. Higher Depreciation - Comparable companies - In Schedule 16 to its final accounts, which provides notes on accounts, the assessee has clarified the significant accounting policies followed by it in the matter of fixed assets and depreciation. It is stated therein that the assessee has provided depreciation on straight-line method. The rates have been adopted on the basis of technical estimates made of useful life of the assets. Accordingly, the assessee has provided depreciation at 33.33% in the case of plant and machinery including computer hardware and software. Furniture and fixtures were depreciated at the rate of 14.29% and motor vehicles at the rate of 20%. Depreciation was provided on office equipment at 20% and air-conditioners at 12.5%. – Held that:- The assessee is in fact not providing technical depreciation influenced by Income-tax Rules No force in the arguments advanced by the assessee company on the question of adjustment of the depreciation factor. - Decided in favor of revenue.
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2012 (4) TMI 147
windmill installed by assessee - claiming depreciation on written down value (WDV) basis at 15% - the quantum deduction claimed was half of the amount, as the asset was put to use for a period of less than 180 days - the assessee found claimed 15% to be incorrect and filed a letter before the AO to rectify the rate to prescribed rate of 80% - The AO rejected the claim as the assessee had not in fact, exercised its option to claim depreciation either on WDV method or on SLM and so also has not applied the correct rate of depreciation provided in the rules – assessee filed merely a letter rectifying the said mistake and not the revised return - as the assessee had claimed depreciation for the earlier assessment year on straight-line method, the same method and rate were followed for the subsequent impugned assessment year - assessee contested the point as the assessment year 2006-07 was the first year in which the assessee had claimed depreciation on windmill, thus the quantum of depreciation, whether under SLM or under WDV method, will be the same – Held that:- depreciation was for the first year, the depreciation was claimed on the original cost even though at a wrong rate and in the impugned assessment year, the depreciation was claimed again at wrong rate but on WDV method. Therefore, it is very clear that the assessee has exercised its option for choosing the method of providing for depreciation as prescribed in the statute - the assessee asked for adopting the correct rate which is in fact, was only a prayer to rectify a mistake apparent on record and not making any fresh claim no revised return need to filed – appeal of revenue rejected
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2012 (4) TMI 146
Validity of search and seizure - Whether the Tribunal was justified in holding that the assessments were invalid for the reason that search warrant issued in Form 45 was invalid - It is also pertinent to note from the search records produced by the department that food bills raised against the customers by Khyber Hayath (sadhya) restaurant and Bimbis Fast Food show the same telephone number 382357, which intrinsically prove that all the concerns are owned and managed by same party, though under separate group names and concerns for the purpose of income tax benefits - During search it was also noticed that all the group concerns had common store in the same building. It is seen that simultaneously on 10.3.1999 itself the Managing Partner's house as well as another premises of the Bimbis functioning in another place at Ernakulam was also searched based on separate warrants - Held that: the search is carried out strictly by following the procedure contained under Rule 112 and by issuing warrant by giving the names of each and every assessee separately after describing all of them as "Bimbis Group of Concerns" - Decided against the assessee by way of direction to Tribunal to decide this case on merit
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2012 (4) TMI 129
Applicability of Section 35AB to expenditure incurred on preliminary survey resulting in agreement for transfer of technical know how – Assessee company entered into agreement with foreign company for conducting preliminary survey, subsequently entered into collaboration agreement with same foreign company for transfer of technical know-how – payment to be made in installments – A.Y. 1994-95 - Held that:-If a technical collaboration agreement were not to culminate as a result of the preliminary survey which was carried out for the assessee, obviously there would be no transfer of technical know-how. Therefore, CIT(A) and Tribunal have rightly held non-applicability of Section 35AB since amount was paid for preliminary survey and not for transfer of technical know-how. However allowable u/s 37. Further, though the payment for know-how was liable to be effected in installments, it was nonetheless a fixed sum which had been agreed between the parties and was, therefore, a lump sum within the meaning of Section 35AB – expenditure on know-how eligible u/s 35AB – Decided against the Revenue. Matter related to deletion of addition on valuation made by A.O, is restored back to Tribunal to decide afresh. Also, matter related to deduction of lease rent and depreciation on leased assets for computing eligible profits u/s 80HHC is restored back to A.O.
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2012 (4) TMI 128
Premium paid on redemption of debentures – capital expenditure vs revenue expenditure - NCD issued in F.Y. 1984-85, liable to be redeemed in F.Y. 1991-92 at a premium of ₹ 15 lakhs - AY 1992-93 – Held that:-Amount paid towards premium is the liability which the assessee incurred for the purpose of its business in order to obtain the use of the funds for the period covered by the issue of NCD. Therefore in view of decision in case of Madras Industrial Investment Corporation Ltd v CIT (1997 (4) TMI 5 - SUPREME Court) actual premium paid upon the redemption of the debentures would have to be classified as revenue expenditure – Decided in favor of assessee. Set off of short term capital loss against short term capital gain arising on sale of debentures and units - deduction u/s 80M without adjusting the loss on sale of shares – Held that:- Same has been decided in favor of assessee in view of decision in case of CIT Vs. Walfort Share and Stock Brokers P. Ltd. (2010 (7) TMI 15 - SUPREME COURT) Deletion of addition by Tribunal in value of inventory and goods in process made by A.O – Held that:- Matter is restored back to Tribunal for deciding afresh on the finding that there was no independent application of mind by the Tribunal.
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2012 (4) TMI 127
Debenture Redemption Reserve - whether qualify as reserve for the purpose of Section 115JA - AY 1997-98 – Held that:- Supreme Court in National Rayon Corporation Ltd. Vs. CIT (1997 (7) TMI 113 - SUPREME Court) have held that “basic principle is that an amount set apart to meet a known liability cannot be regarded as reserve”. Where a company issues debentures, the liability to repay arises the moment the money is borrowed. The mere fact that a Debenture Redemption Reserve is labeled as a reserve will not render it as a reserve. Consequently, Tribunal was correct in holding that the Debenture Redemption Reserve is not a reserve within the meaning of Explanation (b) to Section 115JA – Decided in favor of assessee. Dis-allowance of pre-operative expenses by A.O. treating it to be capital expenditure – Held that:- Tribunal deleted the dis-allowance in view of its earlier decision in relation to AY 85-86 confirmed by this court treating Pre-operative expenses viz salary and wages, staff welfare expenses, power, travelling, legal and professional fees and miscellaneous expenses to be revenue expenditure – No infirmity found in the order – Decided in favor of assessee.
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2012 (4) TMI 126
Compensation for foregoing right to acquire the shares - the company received Rs.10 Crores towards compensation for waiving the right to receive the equity shares which was admitted under the head "Other Income" in the profit and loss account whereas in the computation of income the assessee company claimed this receipt to be capital in nature -It was the contention of AR that, there was no cost of acquisition incurred by the assessee for obtaining the rights under the agreement cited earlier in this order and so there could be no capital gains assessable in that connection - Held that :- the entire amount of Rs.10 crores received by the assessee company towards compensation for waiver of rights to receive the shares of KPCL is to be brought to tax as capital gain to be computed as long term or short term depending upon the investments/advances as made by assessee Recalculation of deduction under section 80IC - The AO has pointed out in the assessment order that the assessee has clearly deflated salary expenses, raw material expenses, etc. with respect to Dehradun to artificially inflate the profit - the formulations in Mekaguda unit cannot be sold in the market, it is obviously not practical for him to calculate the prices of inputs on the basis of market prices - Held that :- it is most appropriate to consider the actual cost as per cost records maintained by the assesee and thereafter assessing office consider the profits on these transaction as compared to other industries in similar line or if there is no comparable, fix reasonable percentage of profit depending upon market condition prevailing in the similar line of industry. Thus to set aside this issue to the file of assessing office to bring the comparable cases on record and redo the assessment on this issue. addition made by the assessing office towards interest - The assessee company had advanced certain loans to M/s Natco Organics Limited in the earlier years and the assessee has not admitted any interest - Held that :- Assessing Officer does not have any basis on the addition made for the interest - The issue is covered in favor of the assessee as that interest has to be charged from the date on which there is a resolution of the Board of the company stating that interest has to be charged.
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2012 (4) TMI 125
Disallowance u/s 14A - Assessing Officer, while making disallowance under Section 14A, had observed as under: “In the computation of income assessee has shown a dividend income of Rs.1,12,89,548/- and claimed the same as exempt u/s 10(33) of I.T. Act - The reply of the assessee has been considered and as per provisions of sec. 14A as mentioned above, the expense relatable to earning of exempt income are not allowable - CIT(Appeals), as observed above, held that the investment with reference to the applicability of section 14A should be taken as Rs.13,57,50,000/- and not as Rs.18,57,50,000/- after inter alia holding that the investment of Rs.5,00,00,000/- in bonds of ICICI Bank had not resulted in tax-free income - It is clear from the observations made by the Assessing Officer, in the assessment order, that his intention was to segregate and compute the disallowance to be made of expenses under Section 14A - Held that: the disallowance, if any, to be made by the Assessing Officer will not exceed the disallowance which was made in the original assessment order as reduced by the CIT(Appeals) - Decided in favor of the assessee by way of remand to AO
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2012 (4) TMI 124
Assessee in default - TDS u/s 194I - Central Board of Direct Taxes in Circular No.715 dated 8th August, 1995 - A plot of land was purchased by Late Sri Pyare Lal long back on which a building was constructed, which was numbered as 141/1, Hanuman Road, Ward -3, Shamli, district Muzaffarnagar - Fourteen persons, including M/s. Atma Ram and Brothers, executed a registered lease deed on 2nd January, 1986 giving lease of 6290 sq.ft covered area on the ground floor of the aforesaid property to the Manager, State Bank of India, Hanuman Road, Shamli, Muzaffarnagar - The covered area of 3287 sq.ft of the aforesaid property on the ground floor was given to the Senior Manager, Oriental Bank of Commerce vide registered lease deed dated 17.10.1997, which was valid for 20 years at the monthly rent of Rs.8904.50 per month inclusive of house tax and all other taxes with a clause that after every five years there would be an increase of 15% in the rent - On a reading of the Section 194-I and the scope and effect elaborated by the Board it is clear that Section 194-I was inserted to bring more persons in the tax net and it also helps in the reporting of correct income by way of rent - It has come on record that after the letter written by one of the coowners that the premises is owned by 15 co-owners and their shares are definite, the Bank has been paying rent to each co-owner by a separate cheque, the total of which did not exceed Rs.1,20,000/- a year - Decided in favor of the assessee
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2012 (4) TMI 123
Income from 'lottery' - revenue filed an appeal against the order of Tribunal as assessee was liable to pay tax on the prize of 1Kg. Gold won by him Section 2 (24)(ix) of the Income-tax Act, 1961 - assessee subscribed to PPF which formed part of Small Savings Scheme of the Government - lucky coupons were issued to encourage investments and the assessee was also issued a lucky coupon which won the prize of 1Kg. Gold - assesse contented that gold received by him did not amount to winning from lottery because for the purpose of lottery the assessee has to purchase a ticket and he loses the amount spent on purchase of lottery ticket but in case of contribution to small savings scheme a person obtains a return on his investment and there is no risk of loss on the amount contributed - Held that :- It may be observed that all the categories which are brought to tax in s. 2(24)(ix) concerns those schemes where there was an element of risk meaning that a person could lose part of his money except in the case of cross-word puzzles which has been specifically mentioned therein - assessee has invested in PPF and his contribution and return at the fixed rate remain the same and will be given to the person on maturity of the scheme irrespective of the fact whether the person has won the prize or not. Therefore, there is no element of risk involve - amount realised would not fall within the provisions of Section 2(24)(ix) and cannot be brought to tax - question raised by the revenue is decided in favour of the assessee and against the revenue.
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2012 (4) TMI 122
Assessee in default - Time limitation - assessee had a successful GDR issue with nine times over subscription and allotted 6,613,750 GDRs inclusive of firm and optional GDRs being the maximum issue possible at a rate of US$ 7.56 per GDR - The work involved in the issuance of GDRs to international investors was carried out outside India and as indicated above, the distribution and marketing as also approaching target international investors all necessarily had to be done outside India - AO passed an order u/s. 195 of the Income Tax Act, 1961 (the Act) on 30/3/1995 holding that the payments made by the assessee to the non-resident Lead Manager's was in the nature of fees for Technical Services rendered and therefore, the assessee ought to have deducted tax at source on the payments so made - AO worked out the quantum of tax in respect of which the Assessee was to be treated as Assessee in default and the quantum of interest payable on tax not deducted at source as follows - It has also been submitted that the question of limitation in whatever manner it arises is a question of law and goes to the root of the appeal and jurisdiction of the Tribunal - The liability of the person liable to deduct tax is a vicarious liability and, therefore, he cannot be put in a situation which would prejudice him to such an extent that the liability would remain hanging on his head for all time to come in the event the Income-tax Department decides not to take any action to recover the tax either by passing an order under section 201 of the Income-tax Act, 1961, or through making an assessment of the income of the person liable to pay tax - no period of limitation can be read into the provisions if there is no period of limitation specified in the Act for taking action u/s. 201(1) or 201(1A) then no time limit can be read into those provisions - Decided in favor of the assessee
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2012 (4) TMI 121
Search and seizure of 4136.83 grams of gold from the business premises - Following the search and seizure, by Exts.P2 to P2(f) orders issued on 31/12/2010, assessment for the years 2003-04 to 2009-10 was completed under Section 153C of the Income Tax Act - Penalty u/s 271(1)C - the correctness of the stand taken by the respondents in refusing to release the gold to the petitioner has to be decided with reference to the pendency of the penalty proceedings under Section 271(1)(c) of the Income Tax Act, 1961 - the respondents do not contend that the petitioner had any existing liability and therefore, the first part of section 132B(1)(i) of the Act does not have any relevance - the contention of the petitioner is that the section entitles the respondents to apply the assets seized only towards existing liability, liability determined, penalty levied and interest payable - These orders itself stated that penalty proceedings under section 271(1)C of the Act are being initiated and accordingly such proceedings have been initiated and are pending - When statute recognizes the entitlement of the respondents to apply the asset seized towards the tax liability determined,which includes penalty, it is puerile to contend that the statute obliges the respondents to return the same on determination of the tax liability and before levying the penalty - Held that: the section entitles the respondents to retain the gold in question with them until penalty is levied and apply the same towards the liability so determined, provided the petitioner is in default or deemed to be in default
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2012 (4) TMI 120
Addition u/s 92CA(4) of Rs.1,93,48,372 - A reference u/s. 92CA(1) of the I.T. Act for the Assessment Year 2004-05 was made to the TPO for computation of Arm's Length Price (ALP) in relation to the international transactions carried out by the assessee - TPO noted that the assessee has used TNMM method and its OP/TC comes to 1.8%. By taking comparable margins as per Annexure-I, the TPO noted that the OP/TC ratio comes to 20.42% for the sample set - TPO vide notice dated 24.11.2006 asked the assessee to show cause as to why the mark-up earned by the assessee at 10% upon cost be not considered as under pricing of the services to the parent company as the industry is earning a mark-up of over 30% - It is only after this incomplete list showing lesser profit than the profit declared by the assessee was brought to the notice of the TPO that he excluded the 47 loss making companies to determine the mean average profit at 20.42% - the submission of the Ld. Counsel for the assessee that there is no basis for only excluding the loss making companies and not excluding the high profit making companies or companies which are not at all comparable considering their size, volume of turnover and other factors. In our opinion, the whole exercise of selecting the comparables by the TPO is not proper and is in a haphazard manner - Decided in favor of the assessee Regarding addition of Rs.1,13,84,034/- made by the AO on account of income received from the holding company treated as advance by the assessee deleted by CIT(A) - Held that: during the course of assessment proceedings the assessee has given a statement that it has received advance towards market research analysis services rendered during the year - Appeal is partly allowed by way of remand to AO
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2012 (4) TMI 119
Saty petition - Taking note of the pendency of appeals and stay petitions mentioned above, this writ petition will stand disposed of directing that the first respondent will consider and pass orders on Exts.P3 and P7 stay petitions - Petition is stayed
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2012 (4) TMI 118
Recovery of duty - Petition to defer recovery proceedings - appeal against the order/ rectification order and stay petition are pending consideration - Held that:- 2nd respondent is directed to consider stay petition filed within stipulated time. Meanwhile further proceedings for recovering the amount due under said orders will be kept in abeyance.
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2012 (4) TMI 117
Deduction u/s 80IA - Rule 18C[4] of the Income Tax Rules, 1962 - petitioner, by a letter dated December 9, 2005 informed the Assistant Commissioner of Income Tax that the time mentioned as "September, 2002" was a typographical mistake in the petitioner's earlier letter dated August 25, 2003 and the correct time to be read was "September, 2001 - according to the petitioner, the Board ought to have notified the industrial park on getting a copy of approval letter dated June 21, 2001 of the Commerce Ministry, which is annexed to the writ-application as Annexure: A - it is the duty of the Commerce Ministry to decide whether an industrial undertaking is complying with the conditions envisaged in the scheme and if the undertaking fails to comply with those conditions, it is the Commerce Ministry alone, which has the right to withdraw the benefit granted under sub-rule [2] of Rule 18C of the Rules - Held that: it is a fit case where the petitioner is entitled to the relief claimed in the application. We, accordingly, direct the Central Board of Direct Taxes to notify the petitioner's industrial park for the benefits under Section 80-IA in terms of Rule 18C[[4] of the Rules within one month from today without any further inquiry - Decided in favor of the assessee
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2012 (4) TMI 116
Royalty paid to foreign software Supplier – Held that:- Consideration paid by the Indian customers or end-users to the assessee - a foreign supplier, for transfer of the right to use the software/computer programme in respect of the copyrights fells within the mischief of 'royalty' as defined under sub-clause (v) to Explanation 2 to Clause (vi) of section 9(1). See CIT v. Samsung Electronics (P.) Ltd (2011 - TMI - 208153 - Karnataka High Court)– Decided in favor of Revenue
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2012 (4) TMI 115
Disallowance of Depreciation - appellant is a charitable institution under Section 12A – acquired medical equipments with the surplus funds available – AO held that the assessee claims expenditure for acquisition of assets claiming depreciation in the computation of income though the appellant enjoys a 100% write off of the cost of assets – resulting in double deduction of capital expenditure leading to violation of the provisions of Section 11(1) – assessee contented that the system of allowing depreciation was followed by the assessee for several years - Held that :- if the assessee treats expenditure on acquisition of assets as application of income for charitable purposes under Section 11(1)(a) and claims depreciation then in order to reflect its true income, the assessee should write back in the accounts the depreciation amount to form part of the income -assessee cannot be taken by surprise by disallowing depreciation which was being allowed for several years and to demand tax for one year after making dis-allowance - assessee should be allowed to write back the depreciation for this year and even for previous and then allow the same to be carried forward for application for subsequent years - appeal in favour of Revenue but by granting the relief to the assessee .
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2012 (4) TMI 114
Assessee filed a return declaring a loss - scrutiny with the service of notice u/s 143(2) of the Act - A.O noticed that the assessee had entered into international transactions with its A.E – TPO suggested initiation of penalty proceedings u/s 271AA, 271G and 271BA - Ld. CIT(A) deleted the penalty levied by the AO as the appellant had submitted chronology of events before the TPO – Held that:- In the penalty orders passed by the AO,there is nothing to suggest as to which particular information or document was not submitted by the assessee nor the exact nature of default has been brought out - the Revenue have not placed any material, controverting the findings of the ld. CIT(A) to enable take a different view in the matter – appeal of revenue dismissed.
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2012 (4) TMI 113
Clerical mistake in filing return - return declaring nil income filed by the assesse - providing education and training for professionals in insurance and finance sector - service of a notice u/s 143(2)for scrutiny - A.O. noticed in the Tax Audit Report in Form 3CD that the prior period expenses totaling to Rs. 36,14,178/- were debited by the assessee under the different heads in the profit and loss account for the period ended 31.03.2006 - Show cause was issued as why the assessee did not add back aforesaid prior period expenses in the computation of income - the assessee submitted that the return filed originally contained some clerical mistakes and revised the computation of income, adding back the aforesaid amount of Rs. 36.14 lacs besides disallowing an amount of Rs. 2,17,344/- u/s 40(a) of the Act and claiming higher depreciation -The AO while accepting the revised computation of income added another amount of Rs. 7,000/- towards charity and donation and assessed loss - the AO initiated the penalty proceedings u/s 271(1)(c) of the Act in response to a show cause notice - After considering the reply to SCN, the AO levied penalty @100% of the tax evaded on the income as a result of aforesaid disallowances of Rs. 36,14,178/- and Rs. 2,17,344/- on the ground that the assessee furnished inaccurate particulars of income - Held that :- mere erroneous claim in the absence of any concealment or furnishing of inaccurate particulars, is no ground for levying penalty, especially when there is nothing on record to show that any material particulars were concealed or furnished inaccurate - appeal of revenue dismissed
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Customs
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2012 (4) TMI 493
Direction for release the goods - issues involved in this writ petition is covered by the order of this Court, wherein, this Court had directed the respondent therein to release the goods concerned subject to certain conditions – Held that:- Release of goods is directed subject to conditions namely:(i)The petitioner shall pay the entire amount of duty, as per the declared value, which may be based on the contract or price etc.(ii)the petitioner shall provide sufficient bank guarantee in respect of 50% of the difference in duty, in favour of the Department,(iii)the remaining 50% of the difference in duty, the petitioner shall furnish personal bond to the satisfaction of the respondent(iv)adjudication process to be completed by respondents
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2012 (4) TMI 145
Application for waiver of pre-deposit of penalty - applicants financed the project of client who failed to repay the amount in loan thus took over the project and thereafter sold it - contention of the applicants is that they are not concerned with the evasion of customs duty and penalty is not sustainable - Held that:- as the applicants only financed the project and thereafter sold on default of payment had not violated the provisions of Customs Act -Pre-deposit penalty is waived and is stayed during pendency of the appeal.
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2012 (4) TMI 144
Re-export - import of capital goods by availing Notification No.158/95-Cus dated 14.11.1995 - goods so imported are to be re-exported within a period of six months – Revenue stated that the applicants have not exported the goods within six months - applicants contented that as per Notification No.158/95-Cus, the Commissioner of Customs can extend time for further period of six months - Commissioner (Appeals) who directed the jurisdictional officer to dispose of the application for extension of time under Notification No.158/95-Cus within three weeks of the receipt of the order by issuing a speaking order - applicants was informed by letterthat the request of the applicant has been rejected by Commissioner (Appeals) – applicant contented that the request was rejected without affording an opportunity of hearing to the applicants and no speaking order was passed – Held that:- Commissioner of Customs directed the jurisdictional officer to pass a speaking order, however, no speaking order is passed – rejecting the application of assessee without giving opportunity to be heard -impugned order is set aside after waiving the pre-deposit of dues and the matter is remanded to the jurisdictional Commissioner of Customs to decide the issue afresh after affording an opportunity of hearing to the applicants
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2012 (4) TMI 143
Application for extension of pre-deposit - directed for the pre-deposit within six weeks from the date of Stay Order and report compliance on decided date - appellant made an application for extension of time of two weeks for making the pre-deposit which was granted - no representation for the appellant nor any evidence brought on record showing pre-deposit of the aforesaid amount on decided date - Held that:-appeal is dismissed for want of compliance under Section 129E of the Customs Act.
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Corporate Laws
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2012 (4) TMI 142
Writ petition - challenging the notice dated 29.06.2011 issued to the petitioner by the first respondent/Bank for sale of the movables listed therein, by invoking the powers under the Securitisation and Reconstruction of financial Assets and Enforcement of Security Interest Act, 2002 - The first respondent/Bank in the counter affidavit has specifically admitted that they are not proceeding to sell the movable properties under the provisions of the SARFAESI Act and they are prepared to withdraw the notification unconditionally - Even though the contention of the learned counsel for the first respondent/Bank is attractive and she has taken strenuous steps to pursue this court to accept her plea, we are unable to accept the same for the simple reason that the goods which are taken by the first respondent/Bank are not the subject matter of the security - It is not the case of the petitioner that the petitioner voluntarily given possession of these goods to the bank so as to enable the bank to keep it and the bank has taken steps without even giving notice to the petitioner, who is not liable to pay any amount in respect of the borrowal - Decided in favor of the petitioner
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2012 (4) TMI 108
Application for the winding up - a joint venture agreement - one company pulled out of it agreeing to sell to the company some assets - consideration to be paid in 15 installments - petitioning creditor files appeal for the principal due and an interest claim on outstanding amount - petitioning creditor submits that the claim is admitted by the company by placing an email - Company contented after importation equipments by the petitioning creditor were sold to the company but the ownership of these equipments remained with them - Company alleged that absence of the papers they were not required to pay the balance amount - Held that:- the company has been unable to disclose any bona fide defense to the claim of the petitioning creditor - defense by the company to pay the balance money on not providing the papers came only after the letter of demand was written by the petitioner creditor- by the time they sent their second email on 26th March, 2009 the required documents were received by the company else they would not have admitted their liability, so unconditionally - relegate the petitioning creditor to a suit to recover the claimed sum, but, upon the company furnishing security - directing the company to furnish within four weeks from date a bank guarantee in favour of the petitioning creditor by a nationalized bank for a sum of Rs. 2,92,01,970.41/- and to keep it renewed until contrary orders are passed by any court. The petitioning creditor will file a suit claiming the sum claimed in the winding up application within four weeks of furnishing of the above security - winding up application is disposed of
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Service Tax
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2012 (4) TMI 156
Application for waiver of pre-deposit of service tax interest and penalty - demand is confirmed the insurance of factory building is nothing to do with the manufacture of goods - Held that:- credit in respect of service tax paid on the insurance of building is already settled in favour of the assessee by the Tribunal in Utopia India Pvt. Ltd - 2011 - TMI - 206893 - CESTAT, BANGALORE - appeal of assessee allowed.
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2012 (4) TMI 134
Denial of CENVAT credit on outdoor catering service - Held that:- the appellant cannot claim CENVAT credit on outdoor catering service -Commissioner vs. Ultratech Cement Ltd 2010 (9) TMI 19 - High Court of Bombay – in favour of Revenue. Air travel service, rent-a-cab service, cleaning/house-keeping service - Held that:- a reasonable opportunity should be given to the appellant to establish, before the original authority, the requisite nexus between the business of manufacture of goods and the services which are claimed to be input services for the purpose of CENVAT credit. CHA Service – Held that: - the port of export was held to be the place of removal of the goods exported. It is not deniable that CHA s service was availed by the appellant for export of their goods, which was a part of their business. The requisite nexus between the service and the business of the company stands established. Hence CENVAT credit is admissible on the CHA service to the appellant. Penalty-related issue – Held that:- degree of offence of irregular availment of CENVAT credit will be ascertained only by the original authority pursuant to this order appellant after giving them an opportunity of being heard.
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2012 (4) TMI 133
Appellants entered into a contract for investing into the construction of BOOT Projects - permission to put up specified number of sky-signs, unipoles, kiosks, lollipops etc. at different parts of Jalandhar-Kaparthala railway over bridge and also rent certain shops under the said railway over bridge - Such places given to the parties under the contract were being used by them for putting advertisements or further allotting the same to the advertisers - service tax demand was confirmed under the category of Sale of Space and Time for advertisement services – assessee contented that there exists an agreement with the agency to spend a sum on the Jalandhar-Kapurthala railway line and in lieu of that obtained sole rights to display unipoles and sky signs with add-space - further submits that the applicants granted spaces to the agencies to put up structures and not space to advertise any products or services - he submits that the amount collected by the Municipal Corporation is on account of advertisement tax - the said parties are registered with the service tax department - Held that:- there is difference of opinion between Member (Tech) and Member (Judicial), the registry of the Tribunal is directed to place the case papers before Hon ble President for nominating a third Member for decision
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2012 (4) TMI 132
Application for stay - The appellants are engaged in the business of promoting and marketing vacations and trips conducted by foreign principals as “General Sales Agent” - An enquiry regarding the commission retained by the appellants was made and it was found to the department that the amount retained by the appellants is chargeable of Service Tax under the category of “Travel Agent Service” - Held that: no show-cause notice has been issued in this matter and there is no adjudication order against the appellants, therefore, no appeal was maintainable before the Commissioner (Appeals). Admittedly, the department has not challenged the impugned order before us - Appeal is allowed
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2012 (4) TMI 131
Application for stay - The facts of the case are that the appellant are engaged in the activity of selling of SIM cards and registered with the service tax department - It is contended on behalf of the appellant that on the same activity of selling of SIM cards they have to pay VAT to the State Government and under bona fide belief, service tax was also paid under the same challans - it is true that the appellant has paid the service tax regularly but under the State Government challans which was later transferred to the Central Government account, and that, as the appellant could not appear before the adjudicating authority, therefore, these facts were not considered by that authority - Appeal is allowed by way of remand to original adjudicating authority
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2012 (4) TMI 130
Demand - Cenvat credit on the strength of debit notes - assessee has submitted the detailed worksheet of debit notes (summary) for the relevant period along with challans evidencing payment of service tax by their two parties in question viz., M/s. Kunal Enterprises and M/s. Neha Global and the assessee has also submitted the service tax returns in the form of ST3 duly acknowledged by the C.Ex. department - Rule 4A of the Service Tax Rules, 1994 and the title of the duty paying documents, i.e. 'debit note' instead of 'invoice, bill or challan' does not make a difference more so when the service tax has been charged and paid into the Govt, exchequers account - Decided in favor of the assessee
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Central Excise
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2012 (4) TMI 141
waiver of pre-deposit of duty and equal amount of penalty - Commissioner (Appeals) has rejected the appellants appeal on the ground that it was filed 2 days after the due date - the assesee contented that order was received on 28.08.2007 and they were required to file appeal on 27.10.2007 but being the day was Saturday they filed appeal on 29.10.2007(i.e. Monday) and thus there is no delay - Held that?:- there is no delay of filing the appeal - the case is remanded to ld.commissioner(Appeals) to decide the stay petition and appeal afresh.
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2012 (4) TMI 140
Disallowing the CENVAT Credit along with interest, and imposed penalty under Rule 13 - Appellant are engaged in the manufacture of Wire Rope from duty-paid wire and accordingly availed the CENVAT Credit- Department denied the Credit as drawing of wire from wire rods does not amount to manufacture - appellant relied on CBEC Circular No.831/8/2006-CX dated 26.07.06 for claiming credit - Held that:- retrospective amendment in Rule 16 vide CBEC Circular No.831/8/2006-CX is aimed at facilitating wire-drawing units , which had paid a sum equal to the duty leviable on drawn wire after availing the credit of duty paid on inputs for the said period - Appeal in favour of assesee.
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2012 (4) TMI 139
Classification of products arising out of conversion of sugar – assessee engaged in the business of conversion of duty paid sugar into mishri, batasha, makhana and similar items - Revenue contending classification of bura under heading 1701.99 and other products Mishri and Makhana to be classified under heading 1704.90 – assessee contending such conversion not amounting to manufacture – Held that:- Since similar appeals of some other parties have already been remanded by the Tribunal for denovo decision considering all the relevant aspects. Therefore, impugned orders are set aside and matter is remanded to the adjudicating authority for denovo decision
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2012 (4) TMI 138
Classification of Retail visual identity (RVI) – Revenue contended classification under chapter heading 9405 6090 – assessee contended that erection of RVI at site does not amount to manufacture and the RVI installation cannot be termed as goods as the RVI items come into existence as fixtures on the site and these fixtures cannot be removed without damage and cannot be used at alternative site – Held that:- Matter is remanded back to the original adjudicating authority for fresh adjudication subject to further deposit of Rs 50 lacs and in the light of following directions - classification of the goods being cleared should be decided first - Excise duty should be demanded only on the goods manufactured and cleared and not on construction activity – appellant to submit details of goods manufactured, classification, value and the exemptions claimed
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2012 (4) TMI 137
Penalty imposed under Rule 25 of the Central Excise Rules, 2002 – interest on differential duty arising on supplementary invoices not paid by assessee until SCN issued – Held that:- Assessee chose to pay the amount only after receipt of the show-cause notice. In the absence of satisfactory explanation of the default, it is held that appellant wanted to evade payment of interest which invite the penal provisions of Rule 25 – Decided against the assessee.
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2012 (4) TMI 136
Packing of assorted medicament from retail packs taken from different cartons into a single carton – Revenue contending it to be manufacture – Held that:- In the present case, the duty paid goods received by the respondent from the another unit of the same company (Nagarjunasagar unit) were already marketable and nothing further was done by the respondent. Packing of assorted medicament into a single carton by taking small quantities of retail packs of various medicines from different cartons and writing the names and quantities of such medicament over the carton were done as per the requirements of the customer. Aforesaid does not amount to manufacture, as well as question of repacking from bulk pack to retail packs also does not arise – Decided in favor of assessee.
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2012 (4) TMI 135
Extended Period of Limitation – demand, penalty and interest imposed on ground of alleged wrong availment of Cenvat Credit on inputs imported under DEPB scheme and wrong availment of Cenvat Credit on Capital Goods on which depreciation was claimed u/s 32 of the Income Tax Act - F.Y. 2003-04 – SCN issued on 25.11.2005 – Held that:- Relevant show-cause notices were issued far beyond the normal period of limitation prescribed u/s 11A(i) of the Central Excise Act, without invoking the extended period of limitation. For invoking the extended period of limitation prescribed under the proviso to Section 11A(1), the department has to allege and establish fraud, collusion, willful suppression or misstatement of facts or contravention of any provision of law with intent to evade payment of duty, against the defaulter. This did not happen in the present case. Therefore the entire demand has to be held to be time-barred – Decided in favor of assessee.
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Wealth tax
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2012 (4) TMI 151
Wealth-tax appeals - assessee company engaged in the business of manufacturing and sale of glass products – due to adverse conditions faced by assessee granted plant and machinery and land and buildings on lease - offered the lease rent and processing charges earned for taxation under the head 'Business income' – AO held assessee was earning rental income assets leased out are liable for wealth-tax – Held that:- the nature and character of the properties given on lease remained the same even after the properties were let out - whether the business of manufacturing glass products is carried on by the assessee company itself or by the lessor, the assets including land, buildings, plant and machineries always remained as properties in the nature of commercial establishments occupied for the purpose of carrying on business –any property in the nature of commercial establishments or complexes is excluded from the definition of assets liable for wealth tax - in favour of assesee.
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Indian Laws
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2012 (4) TMI 155
Authority of President of the ITAT to record the Annual Confidential Reports of the Members – High Court held that President had no power to write the ACRs of the Members and directed Selection Committee to reconsider the claim of the Petitioner on merits de hors the ACRs - aforesaid verdict challenged by Vice President of the Tribunal before the Supreme Court – Held that at interim stage:- To be put up for final disposal on October 03, 2012. During the pendency of the special leave petition, the direction of the High Court in impugned judgment shall remain stayed. See Uttam Bir Singh Bedi vs UOI (2011 - TMI - 207466 - Madras High Court).
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