TMI Tax Updates - e-Newsletter
May 17, 2012
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Central Excise
Wealth tax
Indian Laws
Highlights / Catch Notes
Income Tax
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IT - TP - Selection of comparable transactions - the selection of comparables and selection of similar transactions is not easy to find out and a difficult task to pick up exactly identical business model. Only an endeavour should be made so that the comparables should match with the assessee as close/near as possible.
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Trust - Interpretation of Section 11(1)(a) - Application of income - treatment of payment of taxes under the Voluntary Disclosure of Income Scheme, 1997
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TDS on the activity of super stockist of Chemists & Druggists - Principal to Principal relationship or Principal to agent relationship
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Interest Expenditure u/s 36(1)(iii) - even if the assessee has capitalized its interest expenditure in the books of account, the same is eligible for claim of deduction u/s 36(1)(iii).
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Block assessment - Participation in assessment proceedings - Notice u/s 143(2) was not serviced - assessment not valid even under section 292BB.
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Deduction u/s 80IB - inclusion / exclusion of balcony - built up area - admittedly if the balcony area is excluded
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Transfer Pricing adjustments - Arms length price (ALP) - u/s 92CA - software development and IT enabled services - selection of comparable - Size matters in business
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IT - Fees for technical services - meaning of 'make available' - Technology will be considered 'made available' when the person acquiring the service is enabled to apply the technology.
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Exemption u/s Section 10-A - conversion of a proprietorship concern into partnership firm - benefit is attached to the undertaking and not to owner thereof
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DTAA between India and UAE. - The expression 'liable to tax' is not to read in isolation but in conjunction with the words immediately following it i.e., 'by reason of domicile, residence, place of management, place of incorporation or any other criterion of similar nature'.
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IT - Family arrangement by a deed – The sale proceeds earned by the assessee out of sale of shares held in private limited companies cannot be treated as the income of the assessee.
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Treatment of sales tax refund as income under section 41(1) - Decided against the revenue.
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IT - extra money collected against levy of sugar in view of the incentive scheme of the Govt. - not taxable.
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Since appellant-sugar mill is engaged in marketing of agricultural produce of its members, it is entitled for the exemption as provided under Section 80-P (2) (a) (iii) of the Act
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Transactions under a software license agreement - The license charges earned by assessee was not liable to be treated as royalty.
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IT - Affiliate Agreement - sharing of fee - Distance learning courses - information through website situated outside India - no royalty - no TDS
Customs
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Writ petition - to pay the reward @ 20% on the entire duty including penalty and fine as earlier sanctioned
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Amends Notification No. 36/2001-Customs(N.T) - Palm oil, Palmolein, Soyabean Oil (Crude) and Brass Scrap (all grades) - Traiff Values. - Notification
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Seeks to amend notification no. 10/2008-Customs - Prescribes effective rate of duty (concessional rate of duty) on certain goods imported from Singapore subject to Origin of goods are of Singapore . - Notification
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Seeks to amend notification no. 75/2005-Customs - Exemption to specified goods of the origin of Republic of Singapore, when imported into India from Republic of Singapore. - Notification
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Seeks to amend notification no. 74/2005-Customs - Exemption to specified goods of the origin of Republic of Singapore, when imported into India from Republic of Singapore. - Notification
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Seeks to amend notification no. 73/2005-Customs - Exemption to specified goods of the origin of Republic of Singapore, when imported into India from Republic of Singapore. - Notification
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Regarding removal of anti-dumping duty from '6 day light tyre curing press for manufacture of bi-cycle tyres'. - Notification
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Regarding extension of the said levy further for a period of one year. - Notification
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Seeks to provide provisional assessment to imports of PVC Flex Film, originating in or exported from China PR by M/s M/s Haining Tianfu Wrap Knitting Co Ltd, China PR ( Producer) and M/s Manna, Korea RP (Exporter), pending the outcome of New Shipper Review. - Notification
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Anti-dumping duty on the imports of Saccharin – sub-section-1 read with sub-section-5 of section-9A(5) - enhancement in Anti-dumping duty originating or exported from China PR is correct and does not require any interference.
DGFT
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Areca nut (i.e. Betel nut) under SIONs (including Leather SIONs), disallowing import thereof. - Public Notice
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Conditions and modalities for registration of contracts with DGFT for export of sugar. - Circular
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Export Policy of Sugar. - Notification
FEMA
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Foreign investment in NBFC Sector under the Foreign Direct Investment (FDI) Scheme - Clarification . - Circular
Service Tax
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When the service tax has been paid together with interest after a delay, and that show cause notice under Section 73 of the Finance Act, 1994, cannot be issued for imposition of penalty in such a situation.
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Board's Circular F. No. B. 43/10/97-TRU, dated 22.8.1997 has treated the activities of out-bound tours as outside the purview of service tax. - stay granted.
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Suo motu adjustment of excess service tax paid – Rule 6(4A) - stay granted.
Central Excise
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Cenvat credit - AED (T&TA) and AED (T&TA) - just because during the period of dispute, they were not in position to utilize the AED Credit, the AED (T&TA) cannot be included in the cost of inputs.
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CE - imposition of penalties one on the proprietorship firm and second on the proprietor would amount to imposition of penalty twice, which cannot be sustained in the eyes of law
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Demand - Revenue neutral exercise - Whether the pre-deposit is to be waived on the basis of revenue neutrality assessed by Member (Judicial) or pre-deposit should be called for considering that express provisions of notification as in force after 01-04-08 has been violated as assessed by Member (Technical) - Difference of opinion - matter referred to third member.
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CE - the appellant has supplied the goods for the 4 x 250 MW (1000 MW) power plant at Raigad and they have also produced project authority certificate in respect of such supplies thus the appellant is eligible for exemption
VAT
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Offline block for filing of DVAT/CST returns and Annexure 2A & 2B . - Circular
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2012 (5) TMI 208
Transfer pricing - arm's length price (ALP) - transactions with Associated Enterprises (AEs) - selection of comparable - held that:- The Tribunal in the case of Genisys Integrating Systems (India) (P.) Ltd. had given specific direction to be followed by the Transfer Pricing Officer. - Matter remanded back for denovo consideration. Admission of additional evidence - held that:- the additional evidence would be relevant to consider and decide the case already made out by the Revenue and it is, therefore not a case of tendering of fresh evidence by the department to support a new point or to make out a new case. According to us, the additional evidence filed by the revenue is quite relevant for the purpose of deciding the issue before us and the same, therefore, can be admitted as per rule 29 of Appellate Tribunal Rules, 1963. Capital or revenue expenditure - held that:- The Special Bench in the case of Amway India Enterprises (2008 -TMI - 64346 - ITAT DELHI-C) had laid down various tests to determine whether the expenditure incurred for purchase of computer software is capital or revenue.
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2012 (5) TMI 207
Income from surrender of possessory rights of premises - tenancy (sub tenancy) right - held that:- the assessee is in continuous possession of the property, was continuously conducting the business from the premises, in fact had right to construct buildings therein for the purpose of business subject to permission from the tenants and the authorities and further he had undertaken to pay increased tax, if any, on the said premises. All these factors including the fact that the assessee undertook not to sublet the premises to others do indicate that the assessee is keeping the premises only as a sub-tenant with tenancy rights. - the question of allowing to let out the premises can arise only by a tenant. The landlord/vendor has only received a consideration of Rs. 75 lakhs for sale of the trust property, whereas the assessee for surrendering his possessory title/ other rights has obtained Rs. 1.75 crores - The fact is that the amount received by the assessee was more than the amount received by the vendors per se. This also indicates that there is a right in the said property to the assessee and not mere a license holder as contended. - the assessee is having property as a sub tenant and his tenancy rights were surrendered to the buyer. Therefore, provisions of section 55(2) are applicable. - Decided against the assessee.
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2012 (5) TMI 206
Transfer pricing - Arm's Length price (ALP) - associated enterprises - Software Development Activity - selling agent (or markteing office) versus distributor - held that:- there was no direct evidence in the hands of the TPO to say that the assessee was simply a selling agent and that it appears that the TPO had proceeded on a presumption that the MUK has acted as a selling agent for the year under consideration. - His presumption is primarily based upon one fact that there was a fixed percentage of award given by MIL to MUK; which in his opinion is prevalent in selling agent's case. - considering the FAR analysis, risk factor and the business model as well as the terms and conditions of the Master Agreement incorporated in the light of the changed circumstances of UK, the AE, i.e. MUK has functioned as a distributor in UK. - it was not appropriate to characterize MUK as a 'marketing services provider' instead of a 'distributor'. Selection of comparable transactions - held that:- the selection of comparables and selection of similar transactions is not easy to find out and a difficult task to pick up exactly identical business model. Only an endeavour should be made so that the comparables should match with the assessee as close/near as possible. Applicability of cases decided u/s 40A(2)(a) - held that:- though presently not the subject matter of dispute, that the case laws which are already in public domain in respect of deciding the disallowances made u/s. 40A(2)(a) of the Act can be helpful. We have expressed this opinion because in a difficult Transfer Pricing case, primarily because of the complexity of the facts, even the best intentioned tax-payer can make an honest mistake and like-wise the best intentioned tax-examiner, may genuinely draw wrong conclusion. OECD TP guidelines thus suggest, first, tax examiners are to be flexible because precision may be unrealistic and, second, commercial judgment or business expediency or trade realities do play a vital role in the application of arm's length principle. Human Resource Management ('HRM') s Services / Secondment services between AEs- for enabling the AEs to provide 'onsite' service, the assessee has seconded its employees to those AEs. - held that:- The assessee has made out a case that by such an arrangement of sending the employees to AEs, in return assessee has also been benefited. Employees, after returning, are with upgraded skills, better experience, update knowledge and with a better delivery skills. This is one part of the advantage and the other part of the advantage happened to be procurement of "offshore" business in high volume. - The comparability analysis as carried out by the TPO do not match with the facts of the case. - The assessee was not functioning as an external recruitment agency. Interest on account of excess credit period to AE's - held that:- Once it is an admitted fact that the MIL is a debt free company and that there was no interest burden on the assessee, then it cannot be justifiable to presume that the borrowed funds have been utilized to pass on that facility to AEs. - There is no rationale to inflict upon the assessee, merely on presumption, that he ought to have charged the interest from it's AEs. Non deduction of Tax (TDS) - fees for technical services (FTS) - section 9(1)(vii)(b) - held that:- Explanation has been inserted by Finance Act, 2007 and later on substituted by Finance Act, 2010. Due to this reason, at the relevant point of time, i.e. during the relevant Financial Year, it was not possible on the part of the assessee to comply with the said Statute. We therefore hold since the services in question were neither "availed" nor "rendered" and even not "utilized" in India, therefore no tax was required to be deducted at source. Rest of the issues about the nature of the FTS and whether it was made available to the assessee are alternate plea of the assessee and need not to be addressed because on the preliminary question of "chargeability", the issue stands decided in favour of the assessee. Disallowance of 20% of recruitment and training expenses - held that:- where the requisite detail in respect of training of employees and the genuineness of the expenditure was very much before the AO and in respect of these two reasons, no disallowance was suggested, then it was unjustifiable on the part of the AO to say that a 20% recruitment and training expenses would be disallowed on mere presumption that it was not wholly beneficial to the assessee. Setting off losses of other units while computing deduction under section 10A of the Act from the profits of eligible units - held that:- AO erred in not appreciating the fact that each eligible undertaking is an independent and distinctive business that required deduction to be computed specific to eligible undertaking instead of considering net profits of the assessee. Ld. AO ought to have granted deduction u/s 10A of the Act without setting off losses of eligible and non - eligible undertakings against profits of eligible undertaking while computing deduction u/s 10A of the Act.
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2012 (5) TMI 204
Interpretation of Section 11(1)(a) - Application of income - treatment of payment of taxes under the Voluntary Disclosure of Income Scheme, 1997 – revenue contested taxes paid are not to be treated as application of income of the trust - Held that:- In the case of a business undertaking held under trust, its 'income' will be the income as shown in the accounts of the undertaking - the expenditure incurred by a charitable trust by way of payment of tax out of the current year's income has to be considered as application for charitable purposes because such payment has to be made to preserve the corpus, the existence of which is absolutely necessary for the trust - The issue whether the word "income" used in Section 11(1)(a) of the Act must be assigned the same meaning as the words "total income" as defined in Section 2(45) of the Act cannot be accepted as confirmed by circular No. 5 dated 19.06.1968 - the payment of taxes under the VDIS is to be deducted before arriving at the commercial income of the assessee-trust that is available for application to charitable purposes – in favour of assessee. Expenditure incurred outside India on events/activities held in connection with the exhibition – Held that:- The provision as it existed after the amendment made in Section 11(1)(a) w.e.f. 1.4.1952 makes a reference to application or accumulation for application of the income of the trust "to such religious or charitable purposes as relate to anything done within the taxable territories" - even if relocate the words "in India" in the manner in which assessee suggests in the definition , it would make no difference to the -meaning to be ascribed to the group of words - the amount spent by the assessee-trust cannot be considered as application of the income of the trust in India - against assessee. Non Applicability of Section 28(iii) on trust - non-refundable admission fee from its members as well as annual subscription charges – Held that:- The annual subscription fees is a "recurring receipt, receivable by the assessee-trust by mere efflux of time irrespective of whether any services are rendered or not to the members - what is contemplated in Section 28(iii) is the receipt of fees from particular members to whom specific services have been rendered by the trust - in the absence of any evidence to show that the assessee receives fees from the members for specific services rendered to them the Tribunal was correct in holding that the annual subscription fees was not assessable under the section - in favour of the assessee. Corpus donation received by the assessee – Held that:- The finding of fact recorded by the Tribunal that the members who paid the one-time admission fee were aware that it can be spent by the assessee only for the purposes of acquiring a capital asset and, therefore, the amount must be held to be a corpus donation, not taxable as income - in favour of assessee.
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2012 (5) TMI 203
TDS on the activity of super stockist of Chemists & Druggists - Principal to Principal relationship or Principal to agent relationship - held that:- the assessee company has not paid even a single penny to its super stockiest. - Rather, it is just the opposite. - The super stockist is paying to the assessee company for the produce of Drugs. In turn, it is selling those goods at the rate of 80% of MRP and is earning income of 10% of MRP which is stipulated in the Memo of Understanding dated 12-05-2009. - Therefore, the relationship between the assessee company and its super stockiest is on a Principal to Principal basis. The A.O. as well as the CIT(A) totally misinterpreted the agreement, misread the facts and have come to wrong conclusions. - Decided in favor of assessee.
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2012 (5) TMI 202
Reassessment - Notice u/s 148 - Addition on account difference in revenue booked in P & L A/c and TDS Certificates - held that:- not only the return of income stood assessed but also the proceedings u/s.154 have been concluded after the assessee has submitted its reply. After all these stages reopening u/s.147 has been initiated by an issuance of notice u/s.148 dated 25.03.2009. On this background, the validity of the proceedings u/s.147 has been challenged before us in the additional grounds. - The case is covered directly by the ratio and law laid down by the Hon'ble Calcutta High Court in the case of Berger Paints India Ltd. (2009 -TMI - 76496 - CALCUTTA HIGH COURT) - assessment proceedings u/s 147 quashed.
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2012 (5) TMI 201
Challenge to notice u/s 143(2) on CA of the assessee - held that:- the CA representing the assessee received the notice and thereafter the assessee ratified the notice by filing various submissions. Thus, these estoppels from challenging such service of notice as held in the case of Y. Rajendra, Dy. CIT v. Khoday Eshwarsa & Sons (2004 -TMI - 10101 - KARNATAKA High Court). Interest Expenditure u/s 36(1)(iii) - held that:- even if the assessee has capitalized its interest expenditure in the books of account, the same is eligible for claim of deduction u/s 36(1)(iii) of the Income-tax Act, 1961. Since this is a purely legal claim and entire facts are available on record, the CIT(A) was not justified in not admitting the purely legal ground raised before him for the first time. - matter restored before CIT(A). Netting off of Interest - Interest received and Interest Paid - held that:- view of the decisions in ACG Associate Capsules (P.) Ltd. (2012 -TMI - 210468 - SUPREME COURT OF INDIA) and Shriram Honda Power Equip (2007 -TMI - 2891 - HIGH COURT, DELHI) the Hon'ble High Court held that where the assessee is paying interest expenditure and also in receipt of interest income, net interest income is to be arrived at after excluding the interest expenditure incurred for earning such interest income. - matter remanded back to CIT(A).
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2012 (5) TMI 200
Profit from sale of DEPB - Deduction u/s 80HHC - held that:- the matter is no longer res integra as the same has been finally settled by Hon'ble the Supreme Court in a recent judgment rendered in the case of Topman Exports (2012 (2) TMI 100 - SUPREME COURT OF INDIA).
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2012 (5) TMI 199
Stay - Admission of appeal before ITAT where no payment was made u/s 249(4) - held that:- in view of the case of Pawan Kumar Laddha (2010 -TMI - 75438 - SUPREME COURT) the appeals of the assessee are maintainable because the provisions of section 249(4)(a) in Chapter XX-A relating to the filing of appeal before the CIT(A) cannot be read into section 253(1)(b) in Chapter XX-B of the I T Act which relates to filing of an appeal before the ITAT. - stay granted.
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2012 (5) TMI 198
Block assessment - Participation in assessment proceedings - validity of assessment in view of section 292BB - Notice u/s 143(2) was not serviced - held that:- We find that a categorical finding has been recorded by the CIT (A) and the Tribunal that no notice under Section 143 (2) of the Act had been served upon the assessee and the block assessment has been made. They participated in the said proceedings. Matter is squarely covered by the law laid down by Hon'ble Supreme Court in the case of Hotel Blue Moon (2010 -TMI - 35251 - SUPREME COURT OF INDIA). - Decided in favor of assessee.
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2012 (5) TMI 197
Deduction u/s 80HHC - exclusion of unrealized export receipts - definitions of 'export turnover' and 'total turnover' provided in explanation (b) and (ba) to 80 HHC of the Income Tax Act 1961 - held that:- Tribunal did not commit any error in directing the AO to exclude unrealized export receipts as they could have affected the calculation of total turnover in applying the formula. - Decided in favor of assessee.
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2012 (5) TMI 196
Deduction u/s 80IB - inclusion / exclusion of balcony - built up area - held that:- admittedly if the balcony area is excluded, none of the residential units is more than 1,500 sq. ft. Therefore, the assessee is entitled to 100% benefit of Section 80IB(10), The Tribunal was not justified in giving only the proportionate benefit. - the assessee is entitled to the benefit of Section 80IB(10) in respect of the 152 flats. - Decided in favor of assessee. Dis allowance on account of payment in cash - Rule 6DD read with section 40A(3) - The assessee contends when he has not put forth any claim of expenditure, Section 40A (3) is not attracted and 20% disallowance was not permissible. - held that:- matter remanded back.
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2012 (5) TMI 195
Default under section 194C on account of payment under labour charges – the assessee contention that he has not engaged any labour contractor and all the payments made towards labourers who are employed by the assessee directly and it is accounted for the said payments in its cash book - Held that:- The AO is required to examine the assessee’s cash book and find out whether the assessee has directly paid the amounts to the individual labourers or the same was paid through the mastri - If the assessee paid the said payments to the individual labour, then the assessee is not liable to deduct TDS under section 194C of the Act, otherwise the assessee is liable to deduct TDS - set aside the entire issue to the file of the AO to decide the same afresh – in favour of assessee.
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2012 (5) TMI 191
Fees for technical services - meaning of "make available" - Section 9(l)(vii) of the Income Tax read with Article 12(5) of the DTA agreement between India and Netherlands - services to supply technical data including drawings, plans, maps etc., (geological survey) to identify the mineral deposits – Held that:- The technical knowledge or skills of the provider should be imparted to and absorbed by the receiver so that the receiver can deploy similar technology or techniques in the future without depending upon the provider. Technology will be considered "made available" when the person acquiring the service is enabled to apply the technology. The fact that the provision of the service that may require technical knowledge, skills, etc., does not mean that technology is made available to the person purchasing the service, within the meaning of paragraph (4)(b). Similarly, the use of a product which embodies technology shall not per se be considered to make the technology available. In other words, payment of consideration would be regarded as "fee for technical/included services" only if the twin test of rendering services and making technical knowledge available at the same time is satisfied. Article 12 of the India-Netherlands Treaty defines fees for technical services for the purpose of Article 12 which deals with royalties and fees for technical services paid to any person in consideration for rendering of any technical services only, if such services make available technical knowledge, expertise, skill, know-how or processes - in terms of the contract entered into with Fugro data, photographs and maps are made available but they have not made available technical expertise, skill or knowledge in respect of such collection or processing of data to the assessees, which the assessee can apply independently and without assistance and undertake such survey independently excluding Fugro in future - Fugro has rendered technical service to the assessees. They have not made available the technical knowledge with which they rendered technical service - if the technology is not made available along with the technical services and what is rendered is only technical services and the technical knowledge is with-held, then, such a technical service would not fall within the definition of technical services in DTAA and not liable to tax – in favour of assessee. Whether payment to Fugro was for the development and transfer of technical plan or technical design to the assessee - Held that:- the assessees not being possessed with the technical know how to conduct this prospecting operations engaged the services of Fugro which is expert in the field - By way of technical services Fugro delivered to the assessees the data and information after such operations - These maps and photographs which were made available to the assessees cannot be construed as Technology made available as Fugro has not devised any technical plan or technical design - The maps which are delivered are not of kind of any developmental activity – Fugro is engaged in providing services relating to collection and processing of the data and the contract is for providing of services and not for supply of technical design or plan - in favour of assessee.
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2012 (5) TMI 189
Deduction u/s 80IB - erection of telecom shelter erected at the site of mobile telephone service providers - ‘article’ or ‘thing’ or just an immovable property - meaning of attached to the earth - manufacture or production of an article or thing - Held that:- the product manufactured by the assessee is liable to excise duty and sales tax and accordingly - aforesaid process was a movable property and not an immovable property like a building or dam, since the same can be dismantled and installed at a new place. - the expression "attached to the earth" that the telecom shelters fixed to a foundation with the help of nuts and bolts to provide stability to the shelter does not qualify for being described as attached to the earth under any one of the three clauses extracted above. - Deduction allowed - Decided in favour of the assessee. Disallowance of Rs.4,13,416/- on account of foreign travel expenses - Held that:- In the absence of any evidence of purpose of visit at each of the places/persons visited or even break up of expenses incurred at each of such places, the ld. CIT(A) was not justified in deleting the disallowance. - Decided against the assessee by way of remand. Depreciation on copy right expenses @ 25% - Held that:- assessee submitted before the lower authorities and even before us that the amount of Rs.4,47,000/- represented the amount paid to a foreign company, Climator AB towards charges for agreeing to sell their products exclusively to the assessee for a period of one year, the relevant terms and conditions or a copy of the agreement has not been placed before us. - It introduces clarity, checks the introduction of extraneous or irrelevant considerations and minimizes arbitrariness in the decision-making process. - As is apparent, the order f CIT(A) suffers from lack of reasoning and is not a speaking order. - matter remanded back. Disallowance u/s 14A - Held that:- AO made an estimated disallowance of aforesaid expenses on account of interest and administrative expenses since the assessee earned exempt income, invoking provisions of sec. 14A of the Act. - CIT(A) did not succinctly brought out as to whether or not borrowed funds had indeed been invested in mutual funds or any other expenditure had nexus with earning of aforesaid dividend income nor he had the benefit of the view taken in the aforesaid decisions, - Decided in favour of the assessee by way of remand of CIT(A)
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2012 (5) TMI 188
Deletion of penalty imposed under section 271(1)(c) – Held that:- Found by the Tribunal that all the figures of the earlier years losses were available with the Department and as such it cannot be said that there was any deliberate attempt on the part of the assessee to furnish inaccurate particulars - the explanation given by the assessee that it was a case of human error while preparing Schedule 6 and as soon as the mistake was detected, the figures were rectified was not any attempt made by assessee to justify the figures mentioned in Schedule 6 filed along with the original return and the Assessing Officer himself admitted the fact – Tribunal rightly held it is not a case either of concealment of income or of furnishing inaccurate particulars – in favour of assessee.
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2012 (5) TMI 187
Claim of exemption denied in view of Section 10-A subsection (9) and (9A) - as the assessee was earlier a proprietorship concern, but converted into a partnership firm during the previous year – Held that:- Sub-sections (9) and (9-A) were no longer in existence w.e.f. 1/4/2004 i.e. for assessment year 2004-2005 and there is no other provision for disallowance of benefit to assessee under section 10-A - the Board's Circular No.7/2003 dated 05/9/2003 mentions that benefit is attached to the undertaking and not to owner thereof - It is an acknowledged legal position that beneficial circular issued by CBDT is binding on the department – in favour of assessee.
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2012 (5) TMI 186
Addition made on account of alleged unexplained income – ITAT deleted the addition - Held that:- Once the assessee has established that he has taken money by way of accounts payee cheques from the lenders who are all income tax assessees whose PAN have been disclosed, the initial burden under Section 68 of the Act was discharged - once the Assessing Officer gets hold of the PAN it was his duty to ascertain from whether in their respective return they had shown existence of such amount of money and had further shown that those amount of money had been lent to the assessee - without verifying such fact from the income tax return of the creditors, the action taken by the AO in examining the lenders of the assessee was a wrong approach - Tribunal below rightly set-aside the deletion made by the Assessing Officer, based on erroneous approach by wrongly shifting the burden again upon the assessee without verifying the Income Tax return of the creditors – in favour of assessee.
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2012 (5) TMI 185
The expression 'liable to tax' - Non residents - DTAA between India and UAE. - Relief under Explanation 1(b) of Sec. 9(1)(i) of the Income Tax Act, 1961 - Export of electronic goods and plastic mould to Dubai and Nigeria. - Deduction u/s 80HHC - held that:- The expression 'liable to tax' is not to read in isolation but in conjunction with the words immediately following it i.e., 'by reason of domicile, residence, place of management, place of incorporation or any other criterion of similar nature'. The case of Green Emirate Shipping & Travels (2005 -TMI - 80954 - ITAT MUMBAI) is squarely applicable to the facts of the present case. As held in the aforesaid case, expression 'liable to tax' in the contracting state as used in Article 4(1)of Indo-UAE-DTAA does not necessarily imply that the person should actually be liable to tax in that contracting state and that it is enough if other contracting state has right to tax such person, whether or not such a right is exercised. Thus the Assessee has to be treated as "Resident of UAE" and the provisions of the DTAA between India-UAE have to be examined by treating him as a resident of UAE. Deduction u/s 80HHC / 80HHE to non residents - held that:- The provisions of Sec.80-HHE and 80-HHC are identical and so are the relevant clauses of the DTAA between India and UAE regarding non-discrimination. Respectfully following the ratio laid down by the Special Bench in the case of Rajeev Sureshbhai Gajwani (2011 -TMI - 202351 - ITAT, AHMEDABAD), we hold that the Assessee cannot be denied the benefit of deduction u/s.80-HHC of the Act on the sole ground that he was not a resident.
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2012 (5) TMI 184
Family arrangement by a deed – settlement of dispute by Arbitrator lead to resign and transfer of shares of assessee for a consideration – AO held there was a transfer, there was a capital gain and therefore the assessee is liable to pay the tax – Held that:- What is recorded in a family settlement is nothing but a partition and that the word ‘transfer' does not include partition or family settlement - The sale proceeds earned by the assessee out of sale of shares held in private limited companies cannot be treated as the income of the assessee and brought to capital gains tax - in favour of assessee.
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2012 (5) TMI 183
Stay application - Charitable purpose - Scope u/s 2(15) - maintenance of stay application - held that:- the outstanding demand for assessment year 2009-10 is the direct outcome of the order passed u/s.12AA(3) of the Act cancelling the registration granted to the assessee u/s.12A of the Act. Thus, the outstanding demand for assessment year 2009-10 is related to the appeal filed by the assessee before the Tribunal challenging the validity of the order passed u/s.12AA(3) of the Act. - Application is maintainable. Cancellation of registration - DIT(E) has exercised the power to cancel registration to the assessee for the sole reason that the assessee's activities are in the nature of trade, commerce or business. In this regard, the DIT(E) has referred to the fact that there were receipts of huge amounts out of sale of houses which is nothing but business and commercial activity, though with a low profit. The DIT(E) has also further held that the assessee was having income by way of lease rent which is nothing but business income by exploiting property commercially in a systematic manner. - held that:- the above reasons cannot be the basis to hold that the activities of the assessee are not genuine. - assessee has made out a prima facie case for grant of an order of stay. - stay granted.
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2012 (5) TMI 182
Extension of approval granted u/s 80G denied - The assessee society was registered u/s 12A – Held that:- For granting approval under section 80G(5)(vi) the society has to satisfy that, it is established in India for a charitable purpose and the conditions stipulated under provisions of section 80G(5)(i) to (vi ) are to be additionally fulfilled - Revenue have not placed any material, suggesting that the assessee society did not fulfill the conditions stipulated under the section 80G(5) and rule 11AA thereunder - there is nothing to suggest that any part of income or property of the society was used or applied directly or indirectly for the benefit of any person referred to in section 13(3) - once the registration under s. 12A(a) of the Act is granted, the grant of benefit cannot be denied, especially when the facts and circumstances are the same as in earlier years since grant of registration u/s 12A – in favour of assessee.
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2012 (5) TMI 181
Treatment of sales tax refund as income under section 41(1) - held that:- as held by the CIT(A), the Assessing Officer has not specifically brought into the fact in the assessment order as to the debit of a specified amount in a specific year. In a general manner, the assessment order speaks of the claim of the assessee in the earlier year which does not show the year of assessment, the amount allowed by the Department warranting taxation of the sales tax refund in this year. - Reliance placed on the judgement of Supreme Court in the case of Tirunelveli Motor Bus Service Co. (P.) Ltd. v. CIT (1970 -TMI - 6216 - SUPREME Court). - Decided against the revenue. Deduction u/s 80IA - developer or works contractor - ownership of the project - held that:- the assessee should not be denied the deduction under section 80IA of the Act as the contracts involve development/construction, operating/maintenance, financial involvement, and defect correction and liability period, then such contracts cannot be called as simple works contract. In our opinion the contracts which contain above features are to be segregated and on these contracts deduction u/s. 80-IA has to be granted and the other agreements which are in the nature of pure works contracts hit by the explanation to section 80IA(13), those works are not entitle for deduction u/s 80IA of the Act. The profit from such is to be computed by assessing officer on pro-rata basis of turnover. The assessing officer is directed to examine accordingly and grant deduction on eligible turnover as directed above. Where the assessee has carried out the development of infrastructure work in Consortium or jointly with any other agency and not as a sub-contractor, then also the assessee is entitled for deduction u/s 80IA of the Act. The same principle is applicable in respect of work allotted by Government Corporation to the assessee. Being so, we are inclined to partly allow the ground relating to claiming of deduction u/s. 80IA.of the Act.
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2012 (5) TMI 180
Disallowance of legal claim of deduction u/s 80-P(2)(a)(iii) wherein the appellant having inadvertently claimed deduction only u/s 80-P(2)(d) – Held that:- As per bye-laws of the appellant-sugar mill it is engaged in the manufacturing of sugar products from the sugarcane supplied by its members, who are admittedly sugarcane growers - Since appellant-sugar mill is engaged in marketing of agricultural produce of its members, it is entitled for the exemption as provided under Section 80-P (2) (a) (iii) of the Act – in favour of assessee. Taxability of the extra money collected against levy of sugar in view of the incentive scheme of the Govt. – Held that:- Grant was not for the purpose of bringing into existence new assets but was for the purpose of making payment to the sugarcane growers thus same shall be treated as capital receipt – Decided in the case of CIT v. Ponni Sugars & Chemicals Ltd. [2008 - TMI - 30719 - SUPREME COURT] that the payment received by the assessee under the Scheme was not in the course of a trade but was of capital nature - in favour of the assessee.
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2012 (5) TMI 179
Transactions under a software license agreement - assessee a German company taxed as a non-resident in India owning 26% of the shareholding in two Insurance companies in India – Revenue treated transaction towards Royalty receipt within the meaning of section 9(1)(vi)- Held that:- The license charges earned by assessee was not liable to be treated as royalty following the judgment in Director of Income-tax Versus Ericsson A.B [2011 (12) TMI 91 - Delhi High Court] - in order to qualify as royalty payment, within the meaning of Section 9(1) (vi) it is necessary to establish that there is transfer of all or any rights (including the granting of any license) in respect of copy right of a literary, artistic or scientific work - in order to treat the consideration paid by the cellular operator as royalty, it is to be established that the cellular operator, by making such payment, obtains all or any of the copyright rights of such literary work but in the presence case, this has not been established - even issuing the payment made by the cellular operator is regarded as a payment by way of royalty u/s Section 9(1)(vi) it can never be regarded as royalty within the meaning of the said term in article 13 para 3 of the DTAA Article 13(3) - that payment received by the assessee was towards the title and GSM system of which software was an inseparable parts incapable of independent use and it was a contract for supply of goods thus no part of the payment therefore can be classified as payment towards royalty - where two views are available on an issue one favorable to the assessee and does not support levy of tax on the assessee should be preferred, should be applied to non-resident assessee in this case – in favour of assessee.
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2012 (5) TMI 178
Benefit of Article 8 of the Indo-USA DTAA to the line-haul activity – revenue contested that CIT(A) erred in not adjudicating on nature of Cargo business carried on by assessee in India and has failed to inquire into real nature of business activity – Held that:- The claim of the assessee does not fall within the scope of article 8(2) of Indo-USA DTAA - from the language of article 8 it clearly emerges that the income derived from the operation of ships in international traffic shall also include income from "any other activity directly connected with such transportation" - the claim of the assessee can be examined with reference to paragraph 4 of article 8 which includes profits from participation in a pool, a joint business, or an international operating agency - matter is restored to the file of the Assessing Officer to reframe the assessments to examine the question as to where a space is booked with other airlines, whether transportation through such airlines can be said to be transportation by the aircraft chartered by the assessee with reference to the first part of the definition given in article 8(2) in the light of material placed – in favour of revenue.
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2012 (5) TMI 177
Full value of consideration in view of property assessed by Stamp Valuation Authority for charging stamp duty being deemed sale consideration of the property for computing LTCG on the same – Held that:- DVO has not discussed anything while determining fair market value, rather he has based his opinion on the basis of fair market value assessed by Stamp Valuation Authority for ascertaining value for stamp valuation purposes - the DVO has not ascertained any market value to which a willing, reasonable and prudent purchaser would pay for this property - considering the fair market value determined by A.D.S.R., Sutahata, Govt. of West Bengal at Rs. 76,18,872/- seems to be fair and reasonable for the purpose of computation of long-term capital gains because when assessee sold his property, in question, there was no circle rates fixed by stamp valuation authority as conceded by Ld. SR DR - though the assessee argued with the relevant materials that the valuation arrived at by the assessing officer was not proper and justified, Learned Tribunal has not considered this aspect of the matter - this matter needs to be reconsidered - remanded for fresh hearing by the Learned Tribunal – in favour of assessee
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2012 (5) TMI 176
Disallowance the claim of late payment of PF, ESIC and ESI – that the assessee has paid the amounts on account of employers/ employee contribution and employees contribution in the next month of deduction - Held that:- If the amounts are deposited before the date of filing of return of income then no disallowance can be made - Amendments made in Section 43-B w.e.f. 1st April, 2004 is retrospective in nature and shall cover the deposits made towards the provident fund contribution even before 1st April 2004 - no dispute that payment were made after the due date of the employees contribution and the employers contribution, but the payment were made well before the due date for filing the return of income prescribed for the year under appeal – in favour of assessee.
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2012 (5) TMI 175
DTAA with USA - withholding tax (TDS) - Affiliate Agreement - sharing of fee - Distance learning courses - information through website situated outside India - 'permanent establishment' or 'business connection' - held that:- nature of payment made to eCornell is not 'royalty' as the payment is not for the use or the right to use any copyright or literary work. The fact that it is not for artistic, scientific work, work on film, tape, radio, television, broadcasting etc. does not arise. It is also not for use or right to use patent, trademark, design, plan, secret formula or process etc. - It is purely and simply a case of pooling of resources by way of an Affiliate Agreement wherein the respective roles and responsibilities have been assigned and the arrangement being of the nature of pooling of resources where fee sharing of the two parties have been set out this is not a case where any payment is being made to eCornell by the assessee for any kind of service as it is purely a case of apportioning of fees attributable to eCornell as per the Affiliate Agreement being remitted to eCornell and the portion of the fees collected for providing enrolment infrastructure in order to access the study material by the students is retained by the assessee as its share. As such on facts the present case does not partake the nature of royalty as contemplated under Clause 3(a) of Article 12 of the Indo-US DTAA. It is again and again the same principle which has been applied namely that the intention of the parties can be gathered only from the agreement which has to be read as a whole. The said issue is not in dispute. On a careful consideration of the Affiliate Agreement along with Exhibits, we are of the view that the remittances made to eCornell (TILS) do not fall in the category of Royalty as considered in Clause 3(a) of Article 12 of the Indo-US DTAA. - Decided in favor of assessee.
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Customs
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2012 (5) TMI 194
Cost paid for grant of further opportunity to accused - appellant contested that no provision in the Cr.P.C under which this cost can be imposed by Court and be given to the accused persons and when accused have been substantially responsible for the delay and by directing the payment of costs to them, it will be putting premium on their conduct - Held that:- Since Petitioner has stated that he has no objection to the deposit of cost with the Delhi High Court Legal Services Committee and a statement has been made by the learned counsel for the accused persons also confirming such payment - Let the cost be deposited with the Delhi High Court Legal Services Committee by the petitioner. Evidence of the petitioner ought not to have been closed - Held that:- Even after framing of the charges against the respondents, sufficient number of opportunities had been given by the Court and even one final opportunity was given to the petitioner - If the petitioner did not complete its evidence, despite the final opportunity having been given, it cannot be said that the evidence of the petitioner had been erroneously closed - two decades having gone by, it cannot be said that the right, which is guaranteed under Article 21 of the Constitution of India to the respondents, is being observed in letter and spirit.
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2012 (5) TMI 193
Writ petition - to pay the reward @ 20% on the entire duty including penalty and fine as earlier sanctioned – Held that:- The Reward Committee in the last two minutes of meeting held has opined that the information given by the petitioner was of generic nature and according to the role played, the petitioner is entitled to reward @ 8.33% on Rs.60 lacs and 8.28% on Rs.160 lacs - there is a contradiction between the findings recorded in the minutes of the Reward Committee one in which it was decided that the petitioner would be paid reward @ 15% on all future realization of the penalty amount - merit in the contention of the petitioner that there is element of arbitrariness, inconsistency and disagreement in the three minutes - the difference in monetary terms in view of the quantum is substantial - an order of remit to the Reward Committee to consider afresh the rewards awarded vide minutes dated 26th March, 2009 and 10th March, 2010.
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Corporate Laws
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2012 (5) TMI 192
Liquidation of a company - Claim under Section 536(2)- transfer of flat after the order of winding up – Held that:- Transaction undertaken by company in liquidation can be validated under Section 536(2) as compulsion of circumstances, in order to save or protect the company, provided evidence is produced about such compulsion and it was further held that the assets of the company (in liquidation) cannot be disposed of at the mere pleasure of the company - The Agreement for Sale executed by Smt. Anita Jain in favour of the appellant bears the date of payment of stamp duty of 14.02.2002 whereas the said Agreement is however purported to be ante dated on 13.12.2001 when the Agreement to Sell executed by the company in liquidation in favour of Smt. Anita Jain bears the date of payment of stamp duty of 13.02.2002 - This alone shows collusion and an attempt to show the Agreement to be of a date different than it is borne out to be of - it cannot be said that transfer of subject flat, after the order of winding up and in violation of the order restraining such transfer was under compulsion or for the benefit of the company in liquidation - claim under Section 536(2) rejected.
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2012 (5) TMI 174
Scheme of Arrangement and Demerger - between Zuari Industries Limited (Transferor) and Zuari Holdings Limited (Transferee) and their respective shareholders and creditors. The sanction is sought from the appointed date that is 1st July 2011. - held that:- objection based on increase in the stake of the promoter shareholders is liable to be rejected. - the scheme is not demonstrated and proved to be prejudicial to the interest of the shareholders/creditors and general public.
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Central Excise
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2012 (5) TMI 173
Levy of penalty under Rule 209 r.w.r. 26 of the Central Excise Rules,2001 directing the proprietor and partner of default companies to pay penalty – Held that:- Proprietorship firm or proprietor thereof cannot be treated as two different legal entities - Partnership firm is a firm in mercantile usage, however, penalty imposed on the proprietorship or partnership firms would mean penalty on the proprietor or partners thereof - imposition of penalties one on the proprietorship firm and second on the proprietor would amount to imposition of penalty twice, which cannot be sustained in the eyes of law – in favour of assessee.
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2012 (5) TMI 172
Demand - Revenue neutral exercise - Whether the pre-deposit is to be waived on the basis of revenue neutrality assessed by Member (Judicial) or pre-deposit should be called for considering that express provisions of notification as in force after 01-04-08 has been violated as assessed by Member (Technical) - Difference of opinion - matter referred to third member.
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2012 (5) TMI 171
Claim of benefit under Notification no. 63/95-CE dated 16.06.1995 - Held that:- Notification no. 63/95-CE grants duty exemption on goods manufactured by specified public undertakings and are for supply to the defence for official purposes - company to whom the goods have been supplied by the appellant, is one of the organizations specified in the said notification and further, from the certificate issued by company, it is seen that the goods supplied by the appellant has been used in the manufacture and supply of equipment for defence purposes and the said - stay granted. Claim of benefit under Notification no. 3/20045-CE dated 08.01.2004 - Held that:- The appellant has not produced any certificate mentioning that the goods are required to be supplied for setting up of Water Supply Plant/Project from the District Collector/Deputy Commissioner required to claim benefit of the Notification - stay granted as appellant has already depsosited the amount. Claim of benefit under Notification no. 6/2006-CE dated 01.03.2006 under International Competitive Bidding procedure - Held that:- The benefit under the said notification is available for the goods that are required for setting up of any mega power project so certified by an officer not below the rank of a Joint Secretary to the Government of India in the Ministry of Power - the appellant has supplied the goods for the 4 x 250 MW (1000 MW) power plant at Raigad and they have also produced project authority certificate in respect of such supplies thus the appellant is eligible for exemption - stay granted.
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2012 (5) TMI 170
Cenvat credit on capital goods which are used in the captive power plant - part of electricity generated is sold outside the factory. - held that:- in view of the provisions of Rule 6(4) of the CENVAT Credit Rules, we find prima facie the applicants have made a strong case in their favour for waiver of pre-deposit of duty in respect of capital goods. - stay petition allowed.
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Wealth tax
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2012 (5) TMI 205
Addition to the net wealth on account of Urban Land - agriculture land under wealth tax act 1957 - held that:- There is no dispute about the fact that the impugned lands were within the Municipal limits of Shamli. U/s 2(ea) of the Act, Urban land is liable to wealth tax. - from 1.4.1993, any urban land whether it is agriculture land or otherwise is liable to wealth tax if it falls under the definition of urban land. - The construction of building is "not permissible under any law" does not mean that agricultural land will falls under such category. - Decided against the assessee.
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Indian Laws
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2012 (5) TMI 190
Allegation of offence by the employee - CBEC - employee has crossed the age of superannuation even if he had continued in service. - writ jurisdiction - held that:- We could have answered the question of subsistence allowance also. But the order of dismissal was made on 31.1.2012. We are not going to look as to on which date it was served on the employee. But if we are to answer any jurisdictional issue regarding the said disciplinary proceedings; for one thing, we may be going beyond our jurisdiction under Article 226/227 of the Constitution. Secondly, more importantly, we may even be foreclosing the opportunity of the employee for judicial review of the disciplinary proceedings as it now stands before the Tribunal. We may then be forcing him to get confined to the statutory appellate remedy before the appellate authority in the department. In the fitness of things, having regard to the totality of the facts and circumstances, we deem it appropriate to remit the entire matter after noticing the aforesaid facets and laying down the clear interpretation of Annexure A7 order dated 7.10.2008 to be in the manner in which we have stated above.
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