TMI Tax Updates - e-Newsletter
May 16, 2012
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
FEMA
Central Excise
CST, VAT & Sales Tax
Indian Laws
Highlights / Catch Notes
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Income Tax:
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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Income Tax:
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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Income Tax:
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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Income Tax:
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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Income Tax:
Treatment of sales tax refund as income under section 41(1) - Decided against the revenue.
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Income Tax:
IT - extra money collected against levy of sugar in view of the incentive scheme of the Govt. - not taxable.
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Income Tax:
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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Income Tax:
Transactions under a software license agreement - The license charges earned by assessee was not liable to be treated as royalty.
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Income Tax:
IT - Affiliate Agreement - sharing of fee - Distance learning courses - information through website situated outside India - no royalty - no TDS
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Income Tax:
Typewriter is a machinery entitled to depreciation at 25%
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Income Tax:
Special audit u/s 142(2A) - opportunity of being heard before issuance of order of special audit - Cogent and valid reasons have been assigned by the Assessing Officer - order is not in error.
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Income Tax:
TP - Re-computation of arms' length price (ALP). - selection of comparable - no opportunity of being heard was provided to the assessee for rebuttal, therefore the Assessing Officer was not justified in considering those comparables while working out the ALP
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Income Tax:
In the case of intangible asset being commercial/business rights diminution in value or physical wear and tear is not an essential condition for admissibility for depreciation u/s 32
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Income Tax:
Period of investment for claiming exemption u/s 54EC - investments have been made within six months of receipt of such consideration. - exemption allowed.
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Income Tax:
Income from house property - notional interest on interest free deposits and advance rent - if the rent received or receivable is more than the municipal value then the actual rent received or receivable will be taken as annual letting value of the property within the meaning of section 23(1)
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Income Tax:
Deduction u/s 80IA - 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.
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Customs:
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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Customs:
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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Customs:
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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Customs:
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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Customs:
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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Customs:
Regarding removal of anti-dumping duty from '6 day light tyre curing press for manufacture of bi-cycle tyres'. - Notification
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Customs:
Regarding extension of the said levy further for a period of one year. - Notification
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Customs:
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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Customs:
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.
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DGFT:
Conditions and modalities for registration of contracts with DGFT for export of sugar. - Circular
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DGFT:
Export Policy of Sugar. - Notification
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FEMA:
Foreign investment in NBFC Sector under the Foreign Direct Investment (FDI) Scheme - Clarification . - Circular
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FEMA:
Bogus exports - Fabricated Export - export under the DEPB Scheme - Violation of the provisions of Section 3(b) and Section 3(d) of the Foreign Exchange Management Act, 1999 - orders of the Settlement Commission can not be challenged.
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Indian Laws:
Supreme Court Upholds the Powers of Central Excise Officers to Issue Summons for Recording Evidence During Investigations
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Indian Laws:
CBDT clarifies “Vodafone was warned“
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Service Tax:
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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Service Tax:
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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Service Tax:
Suo motu adjustment of excess service tax paid – Rule 6(4A) - stay granted.
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Service Tax:
The question as to whether the part of brokerage received by the appellant as sub-broker from the main broker would attract service tax has to be answered in the light of the judgment on this issue in the case of Vijay Sharma & Co. (2010 - TMI - 78818 - CESTAT, NEW DELHI - Service Tax)
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Central Excise:
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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Central Excise:
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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Central Excise:
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
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Central Excise:
Adjustment of refund claim (rebate claim on export of goods) with demand stayed by the CESTAT
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Central Excise:
CE - Classification of grab bar - the sanitary-ware - grab bar cannot be said to be a part of the bath tub. It's more like base metal amounting of heading 83.02
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Central Excise:
Amends Notification No. 49/2008-CX., (N.T.), Dated: December 24, 2008 - MRP based duty of Excise - Prescribes rate of abatement - Notification
Articles
Notifications
Central Excise-
26/2012-Central Excise (N.T.) - dated
10-5-2012
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CE (NT)
Amends Notification No. 49/2008-CX., (N.T.), Dated: December 24, 2008 - MRP based duty of Excise - Prescribes rate of abatement
Customs-
26 / 2012 - Customs (ADD) - dated
14-5-2012
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ADD
Regarding removal of anti-dumping duty from '6 day light tyre curing press for manufacture of bi-cycle tyres'.
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25/ 2012-Customs (ADD) - dated
14-5-2012
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ADD
Regarding extension of the said levy further for a period of one year.
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24 /2012-Customs (ADD) - dated
14-5-2012
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ADD
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.
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36/2012-Customs - dated
14-5-2012
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Cus
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 .
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35/2012-Customs - dated
14-5-2012
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Cus
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.
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34/2012-Customs - dated
14-5-2012
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Cus
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.
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33/2012-Customs - dated
14-5-2012
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Cus
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.
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42/2012 - dated
15-5-2012
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Cus (NT)
Amends Notification No. 36/2001-Customs(N.T) - Palm oil, Palmolein, Soyabean Oil (Crude) and Brass Scrap (all grades) - Traiff Values.
DGFT-
117 (RE – 2010)/2009-2014 - dated
14-5-2012
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FTP
Export Policy of Sugar.
Income Tax-
17/2012 - dated
11-5-2012
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IT
U/s. 80-IA of the IT Act, 1961 - Deductions - Profits and gains from industrial infrastructure undertakings, etc.
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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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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2012 (5) TMI 168
Entitlement to the bad debt written off - revenue contested it as the same was hit by the provisions of Section 36(1)(viia) – Held that:- The issue is covered by a decision in Catholic Syrian Bank Ltd. Vs. Commissioner of Income Tax (2012 - TMI - 210762 - SUPREME COURT OF INDIA) stated that u/s 36(1)(vii), the assessee would be entitled to general deduction upon an account having become bad debt and being written off - The proviso to Section 36(1)(vii) will relate to cases covered under Section 36(1)(viia) and has to be read with Section 36(2)(v) - Thus, the proviso would not permit benefit of double deduction, operating with reference to rural loans - therefore provisions of Sections 36(1)(vii) and 36(1)(viia) are distinct and independent items of deduction and operate in their respective fields – against the Revenue. Claim for depreciation on furniture and electrical fittings as well as typewriters - Held that:- Applying the decision of Commissioner of Income Tax, Madras Vs. Mir Mohammed Ali (1964 - TMI - 49371 - SUPREME Court) typewriter is a machinery entitled to depreciation at 25% and not at 33 1/3 %, as had been held by the Tribunal - as far as assessment year 1992-93 is concerned, the furniture and fittings are with reference to the bank, the assessee carrying on business in banking, sub-clause (1) would be a relevant entry and hence, the assessee would be entitled for deduction at 10% and the typewriter as machinery at 25% - in favour of revenue.
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2012 (5) TMI 167
Depreciation against assets given under hire purchase transaction - Board Circular No.689 dated 24.8.1994 - held that:- the Board pointed out that in matters of hire purchase, where the agreement disclosed the ownership resting with the lessee, the claim of depreciation should be allowed to the lessee on the entire purchase price. - Decided against the assessee.
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2012 (5) TMI 166
Special audit u/s 142(2A) - opportunity of being heard before issuance of order of special audit - held that:- A comparison of the show cause notice given to the petitioner with the reasons given by the Assessing Officer would show that the grounds on which the previous approval has been granted, finds mention in the show cause notice dated 11th of September, 2011 and the petitioner has not been prejudiced in any manner. - Decided in favor of revenue. Examination of books of accounts and form 3C before order u/s 142(2A) - held that:- The Assessing Officer first tried to clear the doubts by calling replies and he resorted to Section 142 (2A) thereafter, he found that it is difficult to work out the real income of the assessee due to complex nature of the entries in the account books. It is one thing to say that the account books may be rejected and the best judgement assessment may be resorted to under section 144 of the Act. But even then, best judgement cannot be arbitrary or whimsical. There has to be some basis for it. - Cogent and valid reasons have been assigned by the Assessing Officer - order is not in error - decided against the assessee.
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2012 (5) TMI 165
Treatment of Communication Expenses under section 10A - Re-computation of Arm's Length Price - AO while framing the assessment u/s 143(3) computed the deduction under section 10A of the Act by reducing lease line charges from export turnover, but not from the total turnover. - held that:- t if an item is excluded from the export turnover, the same should also be excluded from the total turnover to maintain parity between the numerator and denominator while calculating the deduction under section 10A of the Act. - matter remanded back to AO to recompute the deduction u/s 10A. TP - Re-computation of arms' length price (ALP). - selection of comparable - held that:- no opportunity of being heard was provided to the assessee for rebuttal, therefore the Assessing Officer was not justified in considering those comparables while working out the ALP in assessee's case. In that view of the matter, we deem it appropriate to set aside this issue back to the file of the Assessing Officer, to be adjudicated afresh in accordance with law, after providing due and reasonable opportunity of being heard to the assessee. - Matter remanded back. Adjustment where price variation falls within +/- 5% range of arithmetical mean of the comparables. - held that:- it appears that the benefit of +/- 5% adjustment has not been given to the assessee for the reason (as mentioned by the TPO) that sales made by the assessee to third parties were higher in comparison to the rates of sale by AEs to the assessee. But nothing is brought on record to substantiate the aforesaid observations of the TPO. - Since the facts of the present case are similar to the facts involved in the aforesaid referred to case of Tatra Vectra Motors Ltd. [2012 (4) TMI 359 - ITAT BANGALORE], so respectfully following the said order, we direct the AO to allow the benefit of +/- 5% to the assessee while computing the ALP.
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2012 (5) TMI 164
Addition u/s 68 - Penalty u/s 271 - share application money - onus to prove - held that:- the assessee has to discharge the primary onus by placing on record the basic information about the investors. This initial burden can be said to be discharged if the names and addresses of the investors are placed on record. Further, initial burden can also be said to be discharged if the mode of payment is also placed on record. The initial burden or the primary onus can also be said to be discharged if the genuineness of the transaction, i.e. share applications are also placed on record. Once all those documents were produced, then it can be safely held that the requisite primary onus, as casted upon an assessee, has been discharged. Thereafter, it is for the AO to scrutinize those details. The Hon'ble Courts, as cited hereinabove, have suggested that if the AO had made certain enquiries and nurtures any doubt about the creditworthiness of those investors, then he is free to take appropriate action in their respective hands. - Decided against revenue. Condonation of delay as granted by CIT(A) - held that:- litigant must not be thrown out of the litigation at the very threshold without providing an opportunity of hearing. Particularly in this case, we have noticed that the assessee was vigilant about his right of appeal and, therefore, knocking one door or the other and seeking for justice. It is not the case that no appeal at all was filed earlier. The first appeal was filed very much in time but it was treated as non-est due to non-payment of tax. A second appeal was filed after making the payment of taxes, stated to be a sum of Rs. 3,47,830/- as T.D.S. and Rs. 10,96,409/- as self assessment tax thus totalling to Rs.14,44,239/- i.e. admitted tax liability. Meanwhile, against the first appeal, the assessee had gone before Tribunal, however, that appeal was withdrawn in the month of November-2005 because by that time the assessee obtained the impugned order of CIT(A) Ahmedabad which was dated 27/10/2005, the impugned appellate order now under appeal before us. On account of these facts, it is not logical to conclude that the assessee was negligent or irresponsible, therefore, did not entitled for any discretion or sympathy. - Decided in favor of assessee.
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2012 (5) TMI 163
Unexplained investment - books of account had ever been produced before any Income-tax Authority for verification - ITAT deleted the addition - held that:- The source of investment was shown by the assessee by producing the relevant books of account. The books of account had contained the relevant entries for withdrawal of the amount - tribunal after considering the entire materials on record including the reasons given by the Assessing Officer and Appellate Authority has chosen to disagree and has recorded its independent findings holding that the investment is clearly reflected in the books of account produced by the assessee and has been properly explained by the assessee. The findings recorded by the Tribunal are essentially findings of fact based on material. - No substantial question of law - decided against the revenue.
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2012 (5) TMI 162
Depreciation on the intangible assets - purchase of franchise for a consideration of ₹ 5.51 crores. - it was contended that the assessee has not acquired any particular asset but it is a case of transfer of a on-going concern. - held that:- AFL transferred its rights of business and business network with respect to the money transfer business being the representative of the Western Union network. It is clear that it is not the case of entire on going concern i.e AFL or its brand name; but only business rights in respect of one of its various businesses. In the case of intangible asset being commercial/business rights diminution in value or physical wear and tear is not an essential condition for admissibility for depreciation u/s 32, if the assets used as a business tool for earning the income. The assessee paid the consideration for the purpose of enhancing its network in the field of money transfer business by acquiring the rights over infrastructure and other advantage attached to the marketing network and hence, the same falls under the category of intangible asset as contemplated u/s 32(1)(ii) of the IT Act. - Decided in favor of assessee.
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2012 (5) TMI 161
Period of investment for claiming exemption u/s 54EC - held that:- the interpretation placed by the CBDT in consultation with the Ministry of Law to the condition of making investment within six months from the date of transfer in section 54EC would support the claim of the assessee in this case also for exemption from capital gain with respect to the impugned sum of Rs 50 lakhs invested in specified assets on 3.8.2007 and 27.10.2007. - In the present case, admittedly the impugned amount of sale proceeds have been received by the assessee much after the date of transfer - investments have been made within six months of receipt of such consideration. Therefore, having regard to the interpretation placed by the CBDT to understand the requirement of making investment within six months from the date of transfer in section 54EC of the Act we are inclined to uphold the plea of the assessee for exemption from tax on capital gains qua impugned amount of Rs 50 lakhs. Claim under section 54B denied as the assessee would not put such land for agricultural purposes – Held that:- No material brought on record by the AO that the new land purchased for agricultural purposes is being actually put to use for any other purpose - only an apprehension on the part of the AO cannot be accepted to disallow the claim – Observation by AO that the assessee had ventured into a real estate business and therefore there was no possibility of the assessee undertaking agriculture on the new land purchased leads to no conclusion to disallow the claim - in favour of assessee.
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2012 (5) TMI 160
Interest free advances – Revenue contested that Tribunal held that funds available with the Assessee are much more than the amount invested in its subsidiary even though the sources of funds without considering secured loans are not sufficient for the application of funds - the Assessee does not have its own funds for making investment in the subsidiary or for advances and therefore borrowed funds have been utilized and interest on a pro rata basis has been rightly disallowed by the Assessing Officer – Held that:- The assessee has significant interest in the business of the subsidiary since both the assessee and the subsidiary are engaged in providing telecommunication services and utilizes even borrowed money for furthering its business connection, there is no reason or justification to make a dis allowance in respect of the deduction which is otherwise available under Section 36(1)(iii) - when the assessee advanced an amount to RIL for furthering the business of the assessee it in turn was to execute counter guarantees in favour of financial institutions for the benefit of the discharge of the EPCG obligations by the assessee – the findings of Tribunal are consistent with the judgment of the Supreme Court in S.A. Builders v. Commissioner of Income Tax (Appeals) (2006 -TMI - 2870 - SUPREME COURT OF INDIA)that if the business purpose is there while advancing money to the sister concern the dis allowance of interest cannot be sustained - against revenue.
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2012 (5) TMI 159
Income from house property - addition of ₹ 24,30,000/- on account of notional interest on interest free deposits and advance rent - Circular No. 204 dated 24.07.1976 - Held that: it is clear that if the Municipal valuation of the property is more than the rent received or receivable then the same should be taken for the purpose of valuation. However, if the rent received or receivable is more than the municipal value then the actual rent received or receivable will be taken as annual letting value of the property within the meaning of section 23(1) - ITAT Mumbai Bench in the case of Reclamation Realty India (P.) Ltd. (2010 (11) TMI 477 - ITAT, MUMBAI) - Decided in favor of the assessee
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2012 (5) TMI 158
Deduction u/s 80IA - ambiguity in the income tax act - infrastructure activities - Ownership of infrastructure itself - contractor or developer - held that:- the words 'developer' and 'contractor' have not been defined in or for the purposes of section 80-1A. - the very fact that the legislature mentioned the words (i) "developing" or (ii) "operating and maintaining" or (iii) "developing, operating and maintaining" clearly indicates that any enterprise which carried on any of these three activities would become eligible for deduction. Therefore, there is no ambiguity in the Income-Tax Act. Regarding ownership - 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. Developer or mere works contractor - held that:- it is clear that from an un-developed area, infrastructure is developed and handed over to the Government and as explained by the CBDT vide its Circular dated 18-05-2010, such activity is eligible for deduction under section 80IA(4) of the Act. This cannot be considered as a mere works contract but has to be considered as a development of infrastructure facility. Therefore, the assessee is a developer and not a works contractor as presumed by the Revenue. The case of Laxmi Civil Engineering (P.) squarely applicable to the issue under dispute which is in favour of the assessee wherein it was held that mere development of a infrastructure facility is an eligible activity for claiming deduction under section 80IA of the Act after considering the Judgement of the Mumbai High Court in the case of ABG Heavy Industries Ltd. (2010 -TMI - 75718 - BOMBAY HIGH COURT).
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Customs
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2012 (5) TMI 156
Ownership of imported goods - Requirement of Import licence while importing digital multifunction printing and copying machines - held that:- a person is unable to establish the ownership of the goods the respondent is vest with the power to reject the claim of the appellant and ultimately, correctly held that it is for the appellant to go before the authorities concerned after retracting confession and take all necessary steps to prove that he is the person holding out to be an importer and rightly stated if the appellant proves his ownership by retracting the statement before the authorities concerned, if he is able to establish his right as a person holding out to be an importer, he can go before the authorities concerned for assessing the consignment and release of his goods. It is needless to say, the burden is on the appellant to prove his ownership and release the goods as required by law.
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Corporate Laws
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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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2012 (5) TMI 155
Winding up of a company - appointment of liquidator - The appellant contested the winding up petition - guarantee declaration given by the appellant on behalf of the company under liquidation - authority through board resolution - held that:- The pleadings of the appellant Company are conspicuously silent as to why Mr. Ravi Chilukuri who has a substantial stake in the appellant Company and who from the documents filed by the respondent is the face/promoter of the appellant Company and/or of the Group of Companies to which the appellant Company belongs signed the Guarantee Declaration, Promissory Notes and as to how the Resolution aforesaid of the Board of Directors of the appellant Company landed with the respondent. Similarly though it is contended that comfort letter aforesaid issued by the Bankers of the appellant Company does not refer to the transaction in question but there is no explanation as to for which transaction it was obtained from the bank. - The appellant obviously had a stake in the Stock Purchase and Sale Agreement (supra), for the appellant Company to stand guarantee for the same. The world is a shrinking place today and commercial transactions spanning across borders abound. We have wondered whether we should be dissuaded for the reason of the transaction for which the appellant Company had stood surety/guarantee being between foreign companies. We are of the opinion that if we do so, we would be sending a wrong signal and dissuading foreign commercial entities from relying on the assurances/guarantees given by Indian companies and which would ultimately restrict the role of India in such international commercial transactions. As far as the argument of appellant Company of the purchasers under the aforesaid Stock Purchase and Sale Agreement being not before this Court and of denial of the knowledge of default, is concerned, certainly the appellant Company which had stood guarantee for the purchaser i.e. M/s Newco Prague s.r.o. would be in the know as to whether the purchaser has paid the price or not. If the purchaser was not in default, that would have been the first plea of the appellant Company against the petition for winding up. No such plea has been taken. On the contrary advantage is sought to be taken of technicalities and which cannot be permitted. As far as the argument of Stamp Act is concerned, the same is again only concerned with recovery of penalties and the documents even if unstamped can be read on penalty being paid. The same is thus no absolute bar to this Court acting on the basis of the said documents. It cannot be lost sight of that both the documents i.e. Guarantee Declaration as well as Promissory Notes were executed outside the country.
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FEMA
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2012 (5) TMI 157
Bogus exports - Fabricated Export - export under the DEPB Scheme - Violation of the provisions of Section 3(b) and Section 3(d) of the Foreign Exchange Management Act, 1999 (“the FEMA”) - Power of the settlement commission - held that:- the immunity is only from penalty under the Customs Act and not in respect of any other Act including the FEMA. - the orders of the Settlement Commission are considered to be conclusive of the matters stated therein and cannot be challenged in any other proceeding under any other law including FEMA. Rights of third parties - held that:- observations of the Tribunal cannot be construed as affecting the rights of any third parties who were not before the Court, since the Tribunal was and this Court is concerned only with the involvement of those who are parties to the appeal proceedings. Independently, the evidence against the Appellant is sufficient to sustain the finding of breach of Sections 3(b) and 3(d). The penalty is not disproportionate, but is commensurate with the gravity of the charge, the nature of the misconduct and the role attributed to the Appellant.
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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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2012 (5) TMI 154
Adjustment of refund claim (rebate claim on export of goods) with demand stayed by the CESTAT - held that:- In the instant case, though the Tribunal was not even in session, by way of abundant caution, the petitioner has filed applications before the Tribunal seeking extension of stay already granted on 09.05.2011, which was due to expire on 09.11.2011, but, the said applications were not taken up due to non-availability of the Bench. Of course, on the expiry of stay, the respondent was empowered to act upon the impugned proceedings, but, at the same time, it was incumbent on his part to keep in mind the non-availability of the Tribunal and maintain status quo until further orders, but not to take advantage of the expiry of stay and no extension thereof, which were wholly due to non- availability of the quorum. The Tribunal shall decide the appeals on their own merits, untrammelled by any of the observations made in this order. It is needless to mention that until the appeals are taken up by the Tribunal, the interim stay, already granted by this Court on 25.11.2011, shall continue. Power of the courts in exceptional circumstances - held that:- The court may in such cases bend the rules of procedure if no specific provision of law or rule of fair play is violated for it would promote substantial justice provided that there is absence of other disentitling factors or just circumstances.
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CST, VAT & Sales Tax
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2012 (5) TMI 169
Irregularity in Form C under sales tax - Assessment under section 21(1) of the U.P. Trade Tax Act, 1948 (UPTT) - It was contended that unless the petitioner is supplied relevant materials, which is basis of the proceedings under Section 21(1) of the Act, no assessment can be made. - The notice categorised the allegations against the petitioner in eight categories and with regard to each Form-C details of allegations have been clearly mentioned. - the respondents shall rely on only those documents of which the petitioner has been made aware by filing earlier counter affidavit and in the event the respondents propose to rely on any other document, opportunity of inspection of the document or copy thereof be given to the petitioner. It goes without saying that while passing the final order, the question of limitation is to be gone into by the respondents as at this stage no direction is needed to decide the said question separately.
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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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