TMI Tax Updates - e-Newsletter
June 9, 2012

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws Service Tax Central Excise Wealth tax Indian Laws

Articles

1. Highlights of Amendments in Service Tax (Determination of Value) Rules, 2006

   By: Surender Gupta

2. ASSESSEE MAKING PAYMENT WITHIN PERMISSIBLE TIME UPON RECEIVING NOTICE UNDER SECTION 156 PENALTY CANNOT BE IMPOSED.

   By: DR.MARIAPPAN GOVINDARAJAN

3. SERVICE TAX TERMINOLOGY PART – IX

   By: Dr. Sanjiv Agarwal

News

1. Union Finance Minister to Inaugurate the Annual Conference of Chief Commissioners and Directors General of Income Tax.

2. Anand Sharma Addresses National Seminar on Foreign Trade Policy.

3. Exchange Rates Relating to Imported and Export Goods Notified.

4. Union Finance Minister Writes to the Chief Ministers of 16 States/Union Territories to Expand the Number of Districts in their Respective State/UT for Initiation of Pilots Related to Certain Government Schemes based on the Aadhaar Platform.

5. Change in Tariff Value of Gold Notified.

6. Things to Know about Stamp Papers :

7. Recapitalization of Regional Rural Banks to improve their Capital to Risk Weighted Assets Ratio.

Notifications

Companies Law

1. F.NO. 1/1/2011-CL-V - dated 5-6-2012 - Co. Law

Form DIN 1 amended.

Customs

2. 32/2012 - dated 7-6-2012 - ADD

Seeks to levy provisional anti-dumping duty on import of Plain Gypsum Plaster Boards of all thicknesses and dimensions, originating in or exported from China PR,Indonesia, Thailand, and UAE.

3. F.No.437/64/2010-Cus. IV - dated 7-6-2012 - Cus (NT)

Appointment of Common Adjudicating Authority in respect of M/s Steel Exchange India Limited, Visakhapatnam, M/s Rashtriya Ispat Nigam Limited, Visakhapatnam and M/s Gangadhara Steels Private Limited, Visakhapatnam.

4. F.No. 437/28/2012-Cus. IV - dated 7-6-2012 - Cus (NT)

Appointment of Common Adjudicating Authority in respect of M/s Ratnamani Metals & Tubes Limited, Ahmedabad and others.

5. F.No. 437/26/2012-Cus. IV - dated 7-6-2012 - Cus (NT)

Appointment of Common Adjudicating Authority in respect of M/s Welspun Corporation Limited (formerly M/s JSW Steel Limited, Mumbai and others.

6. 49/2012 - dated 7-6-2012 - Cus (NT)

Rate of exchange of conversion of each of the foreign currency with effect from 8th June, 2012.

7. 48/2012 - dated 7-6-2012 - Cus (NT)

Amends Notification No. 36/2001-Customs(N.T) - Palm oil, Palmolein, Soyabean Oil (Crude) and Brass Scrap (all grades) - Traiff Values.

Service Tax

8. 24/2012 - dated 6-6-2012 - ST

Service Tax (Determination of Value) Second Amendment Rules, 2012.

Circulars / Instructions / Orders

Service Tax

1. 09 - dated 11-5-2012

Designation of CPIO in Service tax Commissionerate, New Delhi under RTI Act, 2005.

2. 07/ST/2012 - dated 25-4-2012

Procedure & documents required in respect of Single/Centralised Registration under Rule 4 of Service Tax Rules,1994

3. 06/ST/2011 - dated 18-4-2012

Clarification on Point of Taxtion Rules, -regarding.

4. 05/ST/2012 - dated 16-4-2012

Meaning of the expression ‘gross amount’ appearing in Rule 3(1) of the Works Contract (Composition Scheme for payment of Service Tax) Rules, 2007, as it stood prior to 07th day of July 2009 – regarding.

Companies Law

5. 13/2012 - dated 6-6-2012

Extension of time in Filing Annual Return by Limited LiabilityPartnerships.

Highlights / Catch Notes

Income Tax

• Assessee in Default for Not Deducting TDS on Security Services; Not Technical u/s 9(1) Explanation 2.

  Case-Laws - AT : Non deduction of TDS - Assessee in default - Technical service - Circular No. 715 dated 8.8.1995 - the services provided by security personal under a contract with the agency cannot be categorized as technical service unless the provisions of Clause (vii) to Explanation 2 to Section 9(1) are fulfilled - AT
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• Converting a partnership into a company may trigger tax implications, but exemptions exist u/s 47A and 47(xiii).

  Case-Laws - AT : Capital gains - Conversion of partnership firm into company - exemption - conversion of balance in capital account of a partner into loan - transfer - Section 47A r.w.s section 47(xiii) - AT
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Customs

• Proposed Anti-Dumping Duty on Gypsum Plaster Boards from China, Indonesia, Thailand, and UAE to Protect Local Industry.

  Notifications : Seeks to levy provisional anti-dumping duty on import of Plain Gypsum Plaster Boards of all thicknesses and dimensions, originating in or exported from China PR,Indonesia, Thailand, and UAE. - Notification
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• New Foreign Currency Exchange Rates Effective June 8, 2012 for Customs and Tax Calculations.

  Notifications : Rate of exchange of conversion of each of the foreign currency with effect from 8th June, 2012. - Notification
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Corporate Law

• Amendments to Form DIN 1 Announced: Key Changes to Enhance Compliance Under Companies Law

  Notifications : Form DIN 1 amended. - Notification
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• LLPs Get Extended Deadline for Annual Returns Filing Under Companies Law to Ease Compliance Pressures.

  Circulars : Extension of time in Filing Annual Return by Limited LiabilityPartnerships. - Circular
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Indian Laws

• New Exchange Rates for Imports and Exports Announced, Impacting Valuation for Taxation and Customs in International Trade.

  News : Exchange Rates Relating to Imported and Export Goods Notified.
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• Revised Service Tax Rules 2006: Clearer Guidelines on Costs and Expenses for Accurate Taxable Value Calculation.

  Articles : Highlights of Amendments in Service Tax (Determination of Value) Rules, 2006 - Article
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• Timely Tax Payment u/s 156 Shields Assessee from Penalties, Promoting Prompt Settlement of Tax Liabilities.

  Articles : ASSESSEE MAKING PAYMENT WITHIN PERMISSIBLE TIME UPON RECEIVING NOTICE UNDER SECTION 156 PENALTY CANNOT BE IMPOSED. - Article
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• Auditor Cleared of Professional Misconduct Charges in Share Transaction Arbitration Role.

  Case-Laws - HC : CA - Professional misconduct - respondent, while holding position of auditor of a company, agreed to act as an arbitrator/mediator in transaction of shares - respondent was not at all guilty of any professional misconduct as charged - HC
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Service Tax

• Deadline for Service Tax Refund Claims on Export Services from March-June 2008 Extended to December 31, 2008.

  Case-Laws - AT : Refund claims of service tax on specified taxable services used for exports of goods made in the quarter Mar-Jun 08 could be filed till 31st Dec 08 - AT
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• Appellants Must Pay Service Tax on Turnkey/EPC Contracts Executed After June 1, 2007, as Works Contract Services.

  Case-Laws - AT : Works Contract Service - Turnkey Contract - What matters is the fact that the contracts were executed by the appellants and payments received by them after 01/06/2007 and therefore they are liable to pay service tax on the taxable service tax under the head 'works contract service' on the turnkey/EPC contracts in question. - AT
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• Penalties Waived for Short Payment of Service Tax Due to Clerical Error Over Several Months.

  Case-Laws - AT : Short payment / delayed payment of service tax - The clerical errors which crept in a few months has resulted in a short-payment - Penalty waived - AT
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• Refund Claim Rejected on Invalid Grounds: Service Tax Refund Entitlement Exists Even Without Prior Registration.

  Case-Laws - AT : Entitlement for refund of service tax prior to registration with the service tax department - authorities committed a serious error in rejecting the claim for refund on the ground which is not existence in law. - AT
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• Iron Wire Leased Line Not Considered Telephone Service for Tax Purposes Before July 16, 2001.

  Case-Laws - AT : The leased line provided through iron wire which is capable of only data communication cannot be brought under the ambit of the entry for telephone service prior to 16.07.01. - AT
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• 2012 Amendments Clarify Service Tax Valuation Rules for Better Compliance and Efficient Administration.

  Notifications : Service Tax (Determination of Value) Second Amendment Rules, 2012. - Notification
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Case Laws:

• Income Tax

• 2012 (6) TMI 160
  Deffered revenue expenditure - The facts are that the expenditure has been incurred for promoting "Bacardi" brand which is not owned by the assessee but by the BIL. The advertisement on TV channels is also accessible to persons outside India who are not the customers of the assessee - the expenditure has been incurred for the purpose of the business of the assessee - assessee could have claimed the whole of the expenditure as revenue expenditure in this year as advertisement expenses are in the nature of revenue expenditure. However, it has claimed only 1/5th of the expenditure in this year and the balance expenditure has been claimed and allowed in assessment years 2004-05 to 2007-08 - Decided in favor of the assessee

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• 2012 (6) TMI 159
  Capital gains - Conversion of partnership firm into company - exemption - conversion of balance in capital account of a partner into loan - transfer - Section 47A r.w.s section 47(xiii) - Held that: merely because the partners credit balance lying as their capital was converted into their loan and which was repaid to them, it cannot be said that there was any undue benefit directly or indirectly to the partners - Decided in favor of the assessee

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• 2012 (6) TMI 158
  Addition u/s 14A - Rule 8D of I.T. Rules - Held that: assessee failed to discharge the onus placed upon them in establishing that the borrowed funds had indeed been utilized for the purpose of their business purposes nor the assessee proved that the aforesaid investment had been made in the shares out of their own interest free fund - Decided in favor of the revenue by way of remand to CIT(A) Regarding disallowance of excess depreciation on computer peripherals - in the case of Income Tax Officer vs. Samiran Majumdar (2005 -TMI - 60148 - ITAT CALCUTTA-B), held that the printer and scanner are integral part of the computer system and, therefore, entitled to higher rate of depreciation @ 60 per cent - Decided in favor of the assessee

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• 2012 (6) TMI 157
  Write back sundry credit balances - AO disallowed the credit as the assessee on the doubt on genuineness of the books of accounts prepared by the assessee - not even got its accounts audited - imposed the penalty – Held that:- A mere making of the claim which is not sustainable in law will not amount to furnishing inaccurate particulars regarding the income of the assessee - there is nothing to indicate incorrectness of particulars beyond unacceptability of the claim of deduction the impugned penalty to the extent relatable to write off of Rs. 60,54,678, cannot be sustained – in favour of assessee. Penalty in respect of long-term capital gain - assessee's contention that the returned loss was understated by Rs. 44,70,437 vis-a-vis the loss stated originally as this aspect of the matter has not been examined by any of the authorities below by way of a speaking order– Held that:- Matter deserves to be remitted to the file of the AO for fresh adjudication give a fair opportunity of hearing to the assessee

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• 2012 (6) TMI 156
  Deduction/s 80IB - Exclusion of DEPB benefit - this issue is now settled against the assessee by the decision of the Hon'ble jurisdictional High Court in the case of Commissioner of Income-tax v. Kalpataru Colours and Chemicals reported in (2010 -TMI - 76895 - BOMBAY HIGH COURT) - Decided against the assessee Regarding capitalization of trademark related expenses - ld AR of the assessee has pointed out that though this issue was considered by the Tribunal in assessee's own case for the AY 2004-05 and 2006-07; however, during the year under consideration, apart from the expenditure on registration of trademark, the assessee has also incurred the expenses regarding legal fee, processing fee for renewal of the existing trademark - the expenditure incurred, which is common for the year under consideration as well as in the AY 2006-07, the same is disallowed As regards the expenditure on renewal of the trademark is concerned, the same is required to be examined and if found that any part of the expenditure has been incurred by the assessee for renewal of the existing trademark or in connection with the existing trademark, then the same shall be allowed - Held that:Assessing Officer is directed to verify and decide this issue, after giving reasonable opportunity of being heard to the assessee

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• 2012 (6) TMI 155
  Whether the incomes made by the assessee in his own name and in the name of family member through the loan taken are to be assessed in the hands of the assessee, as individual or as HUF - Revenue appeal dismissed

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• 2012 (6) TMI 154
  Addition of Rs. 50,00,000 on account of share application money - Addition of Rs. 9,75,668, on account of interest earned on bank deposits - In the absence of confirmation and copy of application submitted for allotment of share, the nature of money received by the assessee cannot be held to be money received as share application money. In the present case there is complete absence of linkage of the amount credited by the assessee in its books of account and the amount having been paid by those creditors and, therefore, it cannot be said that the identity has been established vis-a-vis the deposits received by the assessee from those companies - The initial burden cannot be said to be discharged by simply placing on record the information of creditor which is obtained from the Registrar of Companies website - The amount has ultimately been credited by the assessee in its profit and loss account and it has neither returned to those parties nor is any share allotted to them - Held that: the contention that the assessee has a strained relationship with the creditors is wholly unsupported and cannot be accepted Regarding business income or other sources - assessee in the present case was running a hotel which was temporarily closed for the renovation - Held that: link between the amounts borrowed for purchase of capital asset and development of infrastructure before commencement of business and the amount invested in fixed deposit receipts is absent in the present case as no document whatsoever has been brought on record to show that whatever was invested in fixed deposit receipt was actually out of the amount received by the assessee for acquiring capital asset or for development of infrastructure - In the absence of such link, the amount has to be assessed separately as income from other sources - Decided against the assessee

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• 2012 (6) TMI 153
  Revision u/s 263 - ad-hoc disallowance - the assessee had shut down business more than five years back and also the fact that these workers such as fitters, carpenters, electricians, etc., are not stationery in a given address and pleadings of the assessee expressing her difficulties on the facts and circumstances of the case, to produce evidence, we are of the considered opinion that the interest of justice would be made if the disallowance is restricted to Rs. 2,00,000 on ad-hoc basis, as the fact that the assessee would have been incurred expenditure cannot be disputed - assessee's appeal is partly allowed.

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• 2012 (6) TMI 152
  Whether tribunal was legally justified in holding that the receipts in by way of interest were incidental to the main business of the assessee and the receipts are to be taken as capital receipts and not income of the assessee from any independent source despite assessee's failure to adduce any evidence in this regard – Held that:- in Tuticorin's case (1997 - TMI - 5601 - SUPREME Court - Income Tax) interest income is always of a revenue nature unless it is received by way of damages/compensation. questions as formulated in the present appeals are answered against the Revenue and in favour of the assessee; and the appeals are dismissed

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• 2012 (6) TMI 139
  Deduction u/s 54EC - eligibility for deduction u/s 54EC on investment in REC Capital Gain Bonds on account of minors' income from Long Term Capital Gains (LTCG) separately, in case income is clubbed u/s 64(1A) - assessee together with his minor children earned LTCG on sale of shares and invested the same in specified bonds - Revenue clubbed LTCG earned by his minor children in assessee's hands but limited deduction u/s 54EC only to investment of Rs.50 lakhs in assessee's name - Held that:- From definition of 'person' u/s 2(31), it is clear that in case minor is an assessable entity even though his income is clubbed u/s 64(1) in the hands of his parents, he is to be considered separate than his parents. Further, income to be clubbed u/s 64 should be net taxable income, i.e. income computed after allowing permissible deductions. It may also be mentioned that there is difference between the word "assessee" and the word "person". Notification no. 380/2006 dated 22.12.2006 prescribing maximum limit of 50 lacs on the amount of investment in REC Bond, have not put on any embargo on the investments by an assessee but the embargo is on allotment of the bonds to a "person" and such embargo is on the allotting authority. Sec. 54EC stipulates investment limit and not deduction limit, hence deduction for investment by each minor child is thereby allowed - Decided in favor of assessee

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• 2012 (6) TMI 138
  Transfer Pricing - ALP - rejection of addition of three new comparable by the assessee before the DRP - Held that:- This was rightly rejected by the DRP. Assessee itself had selected two comparable companies originally and such a selection was done based on a detailed analysis. In this situation, assessee cannot be allowed to bring in a new set of comparable, for if allowed, it will result in an unending exercise since endeavor of all assessee would be to bring the ALP within comparable range - Decided against the assessee. Correctness of method adopted by AO - Held that:- AO divided the total operating cost between material cost relatable to AEs and cost relatable to non-AEs, which included both material cost as well as other costs. Thus the ALP cost arrived at by TPO was not logical. He deducted from the operating cost, only the material cost relatable to purchases from AEs and not the operating cost attributable to such material cost. The resultant figure will not give ALP of the purchases made from AEs. Matter requires a re-visit by the AO insofar as it relates to determination of ALP of the purchases made from AEs - matter remanded back On contention of assessee that adjustment ought have been allowed on the margins with reference to M/s Halonix Ltd., for a reason that it had different functionality it is held that ALP analysis is made under TNM method. TNM method is generally preferred where functions are not strictly comparable, but when the tested and comparables were in the same lines of business.

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• 2012 (6) TMI 137
  Treatment of prepaid expenses under FBT - Revenue contested that prepaid expenses to superannuation fund should be charged under FBT considering section 115WB(2) – Held that:- The assessee declared fringe benefit value of Rs. 32,76,478/- towards contribution to superannuation funds which was the actual amount debited to P&L Account - the CBDT in Circular No.8/2005 dated 29/8/2005 had made it clear that FBT would be payable in the year in which the expenditure is incurred and would not be payable on payment of advance towards expenses to be incurred in the future - though a contribution of Rs. 42,40,926/- was made during the previous year only a sum of Rs.33,13,584/- related to contribution related to previous year relevant to A.Y 2006-07 and the remaining sum was a pre-paid contribution to superannuation fund the CIT(A)'s Order cannot be considered at default – against revenue. Treatment of sales promotion expenses under FBT - Revenue contested that expenses on account of sales promotion to be charged under FBT as provided u/s. 115WB(2) – Held that:- The payment has been made for business promotion to another group company - the charge to FBT is dependent on enjoyment of benefit collectively by the employees as clarified by CBDT’s circular No.8 dated 29.08.2005 which is totally missing in the present case of brand equity payment and hence cannot be subjected to FBT – against revenue.

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• 2012 (6) TMI 136
  Validity of reassessment reopened on basis of statement obtained in the course of survey - statements obtained in the course of survey made u/s 133A have been retracted by both the assessees - Held that:- Statements made by the assessees, later retracted, do not have any evidentiary value. A reason must be formed by the Assessing Officer to reopen an assessment on the basis of material or information recognized under law. Even if reassessments are held to be valid, still no additions could be made on the basis of those statements. Therefore, reopening of an assessment is not permissible in law on the basis of a statement obtained in the course of survey action u/s 133A, which has been later on retracted. Consequently, revision orders passed u/s 263 for AY 2000-01 and 2003-04 also do not survive - Decided in favor of assessee.

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• 2012 (6) TMI 135
  Eligibility of sale proceeds of the exim scrips for the exemption under Section 10B – Held that:- The issue is covered against the assessee by reason of the Apex Court decision in M/s Liberty India Versus Commissioner of Income Tax [2009 (8) TMI 63 (SC)] - in favour of the Revenue Allowing the expenditure on gift articles as deduction as per rule 6B – revenue appeal against the Tribunal Order - Held that:- Considering the expenditure and that the presentation of a small gift on the occasion of festival season, it would not amount to advertisement - against revenue. Exclusion of the value of the customs duty from the closing stock – Revenue contested that the assessee while claiming modvat benefit against its actual liability for excise duty has valued its closing stock without including the duty component paid by it at the time of purchase of raw material - Held that:- Guided by the decision of the Apex Court CIT v. INDO NIPPON CHEMICALS CO. LTD[2003 (1) TMI 8 (SC)] the assessee was liable to pay excise duty on the goods manufactured by them and got MODAVT credit for the excise duty paid on the purchase of raw materials and the proportionate part of the modvat credit was set off against their excise duty liability on the sale of manufactured goods - the assessee being adopting the net method - on the sole ground that the modvat credit was an irreversible credit available to manufactures upon purchase of duty paid raw material, the same would not amount to income which was liable to be taxed under the Act - not permissible for the AO to adopt the gross method for valuation of raw materials at the time of purchase and the net method for valuation of stock on hand - the assessee had availed modvat credit in respect of the excise duty paid on the raw materials and on the final product on which excise duty was payable - in respect of customs duty paid on the determined value, the Revenue does not dispute the fact that the assessee had been consistently adopting the method of accounting on net valuation method on the closing stock – against revenue.

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• 2012 (6) TMI 134
  Penalty levied u/s 271[1][c] on capital gains on renunciation of right shares – The Assessee took a stand that no part of the aforesaid receipt was taxable because the cost of acquisition of rights shares cannot be determined and therefore it was not possible to compute capital gain – Held that:- The return of income is the only document where the assessee can furnish his particulars of income, whereas the appellant company has not disclosed the receipt of premium received on renunciation of rights in its return of income nor in the computation of income accompanied with the return of income - the entire consideration received by the assessee company on renunciation of right shares was shown under the head “Reserves & Surplus” without mentioning the nature of its constituents and as to how the same was exempt – As nothing was revealed in this regard by way of even a note to computation of total income chargeable to capital gains there is concealment or furnishing of inaccurate particulars on part of the assessee company. To reduce the afore said penalty levied u/s 271[1][c]- Held that:- AO has levied penalty which is @ 200 % of the tax sought to be evaded but while disposing off the appeal the ld CIT[A] has concluded that to levy penalty u/s 271[1][c] @ 100 % of the tax sought to be evaded on capital gains on renunciation of right shares - As the penalty levied by the AO has already been brought down to 100%, which is the minimum penalty u/s 271[1][c] of the Act no point to reduce it further – against assessee.

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• 2012 (6) TMI 133
  Actual Cost - Calculation of depreciation on the Gas Cylinders acquired from associate concern through MOU - AO has allowed the depreciation on the closing WDV of the said firm and not on the " cost" as recorded by the assessee-company - Held that:- Through MOU the assigner a Registered firm has transferred all its assets and liabilities to assignee, the assessee-company who has taken over all the liabilities as well and agreed to transfer a consideration, plus the shares in the name of the partners of the said erstwhile firm – as this is not the case of transfer of capital assets by holding company to its subsidiary company, or the case of capital asset being transferred by amalgamation, or transfer of capital asset by demerger, then the only recourse for the Revenue ought to be that the "actual cost" as defined u/s.43(l) should have been taken for the calculation of depreciation - since the assets and liabilities of the firm have been taken over by the assessee-company therefore the exception as prescribed u/s.47(xiii) that nothing contained in section 45 shall apply to any transfer of the capital asset or intangible asset by a firm to a company as a result of succession of the firm by a company in the business carried have its application and that could have been the reason that no action was ascribed in the hands of the erstwhile firm – against revenue. Direction to allow depreciation of Gas Cylinders being “put to use” – once the assessee has demonstrated that the cylinders were purchased and were dispatched for its destination and from that very day the assessee has started receiving the lease-rent the date is very relevant to decide whether the assets in question have actually been "put to use" for 180 days or more for the purpose of eligibility of full rate of depreciation - Held that:- Since the admitted fact is that one of the business of the assessee is hiring of gas cylinders thus the assets in question have actually been leased out with effect from 27.09.2003 and have been "put to use" for hiring business for more than 180 days – against revenue. Addition of sum being difference between receipts credited in profit and loss account and the actual receipt as per TDS certificates not affording the Assessing Officer an opportunity to rebut the evidence put before him – Held that:- The provisions of Rule 46A was infringed by CIT(A) by not confronting certain new evidences to the AO –as the reconciliation with supporting evidences was not in the knowledge of the AO it is advisable to restore this ground of the Revenue back to the stage of the AO to be decided after investigation and verification of the TDS certificates – in favour of revenue for statistical purposes. Deleting the addition of sum being diversion of profit under charging rent on cylinders leased to the associate concern – Held that:- For alleging the impugned diversion of profit the AO has overlooked the business model and the pattern of business activity of the assessee - though the business activity of the group concern is leasing out of LCH cylinders but the dealing with the GACL of the sister-concern who was not a loss making concern should have been taken into account before alleging the diversion of profit - the rate of tax as applicable in the case of the said sister-concern was identical with the rate of tax of the assessee with no mala fide motive for such diversion of income on the part of the assessee – against revenue. Treatment of vehicle expenses - C.I.T.(A)deleted the addition of Rs. 36,801 being vehicle expenses for personal use – Held that:- In the absence of any specific instance of user of vehicle for non-business purpose, we are of the view that there was no scope for such an ad hoc disallowance – against revenue. Claim of bad debt disallowed – Held that:- As decided in T.R.F. Ltd. v. CIT[2010 (2) TMI 211 (SC)] in order to obtain a deduction in relation to bad debts, it is not necessary for the assessee to establish that the debt, in fact has become irrecoverable. It is enough of the bad debt is written off as irrecoverable in the accounts of the assessee – against revenue.

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• 2012 (6) TMI 132
  Treatment of interest income from FDRs under Tonnage Tax Scheme - the assessee had received interest income on FDs which he had not offered for taxation and had instead taken the sum as covered under Tonnage Scheme – assessee contested that he had borrowed funds from bank for shipping activities placing the FDRs with the bank as collateral securities and the interest income received was conclusively linked to the shipping activity - Held that:- Placing FDRs with bank cannot be considered as activity for operating ships or activity of shipping contract or shipping trades -it can be considered as an incidental activity but under the Tonnage Tax Scheme, the incidental activities have been separately defined in Rule- and which clearly does not contain the activity of placing FDRs - under the Tonnage Tax Scheme, only profit from core activities and profit from incidental activities are included and as regards the interest income, the source of such income is FDR and not the shipping activity either core or incidental – against assessee. Only the net interest income should be assessed as assessee had used borrowed funds for making the FDRs – Held that:- While computing interest income expenses incurred for earning interest income have to be excluded - restore the submission of the assessee regarding netting of income to the file of CIT(A) for deciding the same after necessary examination and after hearing the assessee – in favour of assessee. Assessment of other income consisting of sundry balance written back, excess provision written back and miscellaneous income - AO assessed such income as income from other sources in addition to income under Tonnage Scheme – Held that:- Since the CIT(A) had not adjudicated the issue the matter should be sent back to CIT(A) for fresh adjudication and after allowing opportunity of hearing to the assessee.

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• 2012 (6) TMI 131
  Revision u/s 263 - Disallowance u/s 14A - expenditure towards interest paid/payable to ICICI Bank on the loan taken and utilised for the purpose of investment in shares in Andhra Pradesh Gas Power Co. Ltd. (APGPCL in short). - held that:- nce it established that there was nexus between the expenditure and the purpose of the business, the Revenue cannot justifiably claim to put itself in the armchair of the business man or in the position of the board of directors and assume the role to decide how much is reasonable expenditure having regard to the circumstances of the case. No business man can be compelled to maximise his profit. What is relevant is whether the amount was advanced as a measure of commercial expediency and not from the point of view of whether the amount was advanced for earning profit. The money which was borrowed by the assessee from ICICI Bank was utilised for the purpose of acquisition of shares of APGPCL for the purpose of business advantage and it cannot be considered as investment in relation to earning of income exempted from tax. The benefit derived by the assessee by this investment is more than interest incurred by the assessee towards loan from ICICI Bank. The investment in the shares by the assessee by borrowing money from ICICI Bank to be seen with saving of power cost. The assessee derived exorbitant benefit on the cost of power. Had the assessee not investment in the shares of APGPCL, the assessee should have incurred additional expenditure towards supply of power. - Decided in favor of the assessee

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• 2012 (6) TMI 130
  Expenditure related to exempted income / dividend - held that:- - It is true that the power of the ld CIT(A) to set aside any matter was curtailed by making amendment to section 251(1)(a) w..e.f. 1.6.2001 - CIT(A) without referring the working given by the assessee set aside to the file of the Assessing Officer - Appeals are allowed by way of remand to the file of CIT(A) for passing a speaking order Regarding capital or revenue expenditure - It was contended by the Ld AR for the assessee that as such this amount was incurred towards annual subscription's and not towards outright purchase of software - The contention of the assessee should be adjudicated and if so required remand report may be obtained from the Assessing Officer before passing a fresh order - Appeals are allowed for statistical purpose

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• Customs

• 2012 (6) TMI 151
  Claim of refund - notification No. 102/2007-Cus dated 14.9.2007 - learned C.S. attendance was ignored on behalf of the appellant without proper Power of Attorney executed by the company - Held that:- If the respondent satisfy the authority, there is no hurdle to grant refund, if permissible by law - Documentary evidences in support of satisfaction of the notification are to be filed before the adjudicating authority within 6 weeks of receipt of this order or reference to the documents already filed - since burden of proof lies on the respondent to show that conditions of notification are satisfied.

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• 2012 (6) TMI 129
  Suspension of the CHA licence - appeal against order of suspension - Revenue praying for no interference to the suspension, placing gravity of depositions recorded from various persons and more incriminating evidence gathered in the course of investigation followed by search proceedings - Held that:- We do appreciate that appellant deserves to be provided opportunity of hearing to defend against charges. Granting 4 weeks time for defence to be lead by the appellant appropriate adjudication shall be done by learned Commissioner.

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• Corporate Laws

• 2012 (6) TMI 150
  Winding up - petitioning creditor entered into these agreements as the owner of vessels. The Indian company was the charterer. It appears that the petitioning creditor became entitled to demurrage. The parties agreed to pay demurrage – but company did not paid full amount - company says that the power of attorney was required to be stamped under section 3(c) read with section 18 of the Indian Stamp Act, 1899. Since it was not properly stamped, the court should impound it under section 33 of the Act. Therefore, the winding up petition filed on the basis of such power of attorney was not admissible under section 35 of the said Act – Held that:- endorsement recognises it as stamp duty received by the State of Maharashtra. The payment is authenticated by a seal and the emblem of India. presumption of regularity of the Government actions unless the contrary is proved (see section 35 read with section 114 of the Indian Evidence Act, 1872). No evidence to rebut the presumption is on record. company is indebted to the petitioning creditor for a sum of US$ 300,000, company unable to pay said amount. winding up application is admitted.

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• 2012 (6) TMI 149
  Whether in a pending proceedings before the company court if any application is filed, does it require to be accompanied by a judge's summons as per rule 11(b) of the Companies (Court) Rules, 1959 and whether summons will have to be issued afresh to all the respondents/opponents on such application/s though respondent/s being same and having appeared, represented and contesting the proceedings – Held that:- in a situation where in a pending proceedings, the parties are served and were unrepresented and any application or IA is made seeking additional prayer or further orders against those persons, then notice has to go to those persons necessarily as otherwise it would be in violation of the principles of natural justice and no order can be passed behind their back or without hearing them. In such a situation, it would be incumbent upon the registry to insist on the applicant to furnish the requisite number of applications/affidavits along with the judge's summons and pre-paid registered post for issuing summons/notices on such application to those parties who had been served and had remained unrepresented, since any order that may be passed on such application is likely to affect them. Issuance of notice of the application/s by post or otherwise on those respondents, who are already represented and contesting the matter in a pending proceedings would not arise since they are already on record and represented by learned advocates and carrying out such an exercise would lead to prolonging the proceedings and results in delay and this is not the intention of the Legislature. The Registry is directed to comply with these directions henceforth

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• 2012 (6) TMI 128
  Sanction of Scheme of Amalgamation - Held that:- Pendency of any proceedings if any by the Income Tax Department cannot be a ground not to sanction the scheme. The Court also finds that the issue and allotment of shares whether on premium or otherwise is in the sole domain of the Board of Directors of the Company. Furthermore, even the action of the Company in forfeiting the shares cannot be said to be against the provisions of Companies Act, 1956. In case of default in payment of call money, it is open for the Board of Directors of the Company to forfeit the shares of the concerned shareholder. In any case, such aspects would not affect Scheme of Amalgamation as proposed u/s 391-394 of the Companies Act, 1956. The Court finds that there is nothing in the report which adversely affects the interest of the Company and/or its shareholders, or creditors or public interest by virtue of the provisions of the Scheme of Amalgamation. Scheme of Amalgamation is hereby sanctioned.

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• 2012 (6) TMI 127
  Winding up – Official Liquidator took out an application for misfeasance - at the time of determination of decretal dues the rent realized by the Official Liquidator have not been accounted for nor the said recovered amount was disclosed - It was further claimed that various payment which was shown as due in the balance sheet dated 31-3-1958 had already been paid and, therefore, those amounts specially amounts noted on liability side against Omprakash Mohta, Mohta Brothers, D.C. Dhiman should have been removed and the decretal dues should have been corrected – Held that:- rent collected by the Official Liquidator could be refunded only after the payments were made to the secure creditors. claim of the petitioner, on the basis of the balance sheet prepared in 1958 is also not acceptable to the Court in view of the fact that the order of winding up was passed on 7-9-1965 and, therefore, there is no scope today to consider the balance sheet of 1958, which was lost all its relevance. claim of making payments to the said O.P. Mohta and Mohta Brothers are also rejected. application is rejected

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• Service Tax

• 2012 (6) TMI 166
  Refund claims of Service Tax paid in respect of input services used in the manufacture of export goods, exported during period April 08 to June 08 - claim filed on 08.09.2008 - denial on ground that claim should have been filed within 60 days from the last date of the quarter i.e. before 30.08.2008 under Notification No.41/2007-ST - Held that:- Board s circular No.112/6/2009-ST, dt.12.3.2009 clarifies that consequent upon revision of limitation period, any refund claim that is filed within such revised limitation period would be admissible if it is otherwise in order. Therefore, refund claims of service tax on specified taxable services used for exports of goods made in the quarter Mar-Jun 08 could be filed till 31st Dec 08 - decided in favor of assessee.

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• 2012 (6) TMI 165
  Works Contract Service - Turnkey Contract - whether service provided to the Irrigation and CAD Department of Government of Andhra Pradesh are classifiable under the head "works contract service" - invocation of extended period of limitation - penalty imposable u/s 76, 77 & 78 - Held that:- Scope of work that was executed by Ramky-Murthy JV was a turnkey project in general and an engineering/procurement/construction/commissioning (EPC) project in particular, and what was executed by Maytas-NCC JV for the benefit of the State Government was an EPC project. Hence, services provided satisfy the statutory requirements of "works contract" defined u/s 65(105)(zzzza) inasmuch as (i) transfer of property in goods was involved in the transaction and VAT was paid on such goods, (ii) the contracts were for the purpose of carrying out irrigation projects of the Government through turnkey/EPC mode, and (iii) none of the contracts was in the excluded category of works contracts. Further, appellants have not been able to establish that any "dam" was built in execution of any of the EPC contracts and nothing in the text of the definition of "WC" indicate that turnkey/EPC projects for irrigation are excluded. Retrospective exemption notification - Notification No.41/2009 dated 23.10.2009 exempting works contract in respect of canals is not retrospectively effective. Furthermore, Circular dt. 24/05/2010 also stand unfavorable to appellant. - an exemption notification cannot be given retrospective effect unless it expressly provides for retrospective operation. Non-Taxability in view of introduction of 'Works Contract' w.e.f. 01.06.2007 - Held that:- What matters is the fact that the contracts were executed by the appellants and payments received by them after 01/06/2007 and therefore they are liable to pay service tax on the taxable service tax under the head 'works contract service' on the turnkey/EPC contracts in question. Benefit u/s 67(2) - Held that:- Benefit of Section 67(2) is liable to be granted to the assessees and accordingly the gross amount charged can be treated as cum-tax value and the service tax element can be deducted from it to arrive at the taxable value of works contract service. Deductions of retention money from gross amount charged - Held that:- Retention money was only a deferred payment and the appellants were entitled to receive the gross amount charged in the R.A. Bill. If that be so, there can be no valid claim for deduction of the retention money from the gross amount as rightly held by the adjudicating authority. CENvat credit - Held that:- No entitlement of CENVAT credit on inputs used as this benefit is barred under Rule 3(2) of the Works Contract (Composition Scheme) Rules, 2007. But there appears to be no embargo on taking CENVAT credit on capital goods or input services. Extended period of limitation - Held that:- Since, Ramky, the leading partner of the Ramky-Murthy JV, was registered with the Department under "WCS", filling ST-3 returns and paying service tax in respect of similar turnkey/EPC contracts after 01/06/2007. Hence, Ramky-Murthy JV cannot be assumed to have bona-fide belief that they were not aware of service tax liability under the head "WCS" in respect of the subject contracts - allegation of suppression of facts with intention to evade tax is sustainable - right invokation of extended period. Penalty u/s 78 - Held that:- Section 78 underwent an amendment w.e.f. 10/05/2008 and simultaneous penalty u/s 76 & 78 cannot be imposed. however in present case, since periods of dispute in these two appeals are partly beyond 10/05/2008, hence, matter needs to be examined fresh. Penalty imposed u/s 75, 77 and 76 is sustained.

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• 2012 (6) TMI 164
  Prayer in the application is to dispense with the pre-deposit of Service tax - “Commercial and Industrial Construction Services” and “Maintenance and Repair Services” - It was seen that during the course of audit that the appellants have provided services of construction of pipe lines running within the industrial and commercial establishment, during the period 10-9-2004 to 15-6-2005. However, they have not paid any Service tax on the same – Held that:- CBEC, vide its Circular No. 79/9/2004-S.T., dated 17-9-2004 has clarified that any pipe line other than those running within an industrial and commercial establishments such as factory, refinery and similar industrial establishments are long distance pipe lines. Thus, construction of pipelines running within such an industrial and commercial establishment is within the scope of services levy of Service tax with effect from 10-9-2004, appellants have not pleaded any financial hardship, applicant/appellants directed to deposit an amount of Rs. 35 Lakhs

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• 2012 (6) TMI 163
  Revisionary order - tax demand – Held that:- in the case of UOI v. Inani Carriers reported in 2009 (2008 - TMI - 32322 - RAJASTHAN HIGH COURT - Service Tax) , once the appellate power has been exercised, exercise of revisionary power is not acceptable to law on the same controversy

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• 2012 (6) TMI 162
  Waiver of penalty – short payment - assessee is a hotel run by the public sector undertaking. The clerical errors which crept in a few months has resulted in a short-payment - appellant promptly paid the service tax involved along with interest. Therefore he seeks waiver of penalty invoking the provisions of Section 80 of the Finance Act, 1994 – Held that:- sufficient cause has been shown for invoking the provisions of Section 80 of Finance Act, 1994. appeal is allowed. Penalty waived

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• 2012 (6) TMI 143
  Entitlement for refund of service tax prior to registration with the service tax department - Held that:- High Court held in case of of mPortal India Wireless Solutions (P) Ltd. Vs. CST (2011 (9) TMI 450 (HC)) that in the absence of a statutory provision which prescribed that registration is mandatory and that if such a registration is not made the assessee is not entitled to the benefit of refund, authorities committed a serious error in rejecting the claim for refund on the ground which is not existence in law. By following the Karnataka judgement, Revenue s appeal is rejected.

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• 2012 (6) TMI 142
  Demand of service tax in respect of telephone service provided through leased line - Held that:- In view of the fact that the leased lines provided through ACSR/copper wire provided voice communication, said leased circuits have been rightly held to be covered under the existing entry for telephone service even prior to the period 16.07.01. - To that extent the tax demand is justified. The leased line provided through iron wire which is capable of only data communication cannot be brought under the ambit of the entry for telephone service prior to 16.07.01. Matter remanded back to the original authority for verifying as to whether the service tax amount has been separately paid by service recipient and for allowing cum tax benefit in such of those cases where no service tax has been separately paid. He will also segregate the amounts relating to leased lines based on iron wire meant for only data circuit and if the demand has been made for such circuits, to reduce the demand to that extent.

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• 2012 (6) TMI 141
  Stay – demand of service tax - Rent-a-cab service - cabs were let on hire on demand basis as and when made by users. Those were not provided by the appellant on fixed rental basis - Held that:- if a cab operator provides a cab with driver to his client on demand and charges on km. basis, control of the vehicle always remaining with the cab operator, in that case he shall be said to have provided transport service instead of renting-a-cab. - Decision in R.S. Travels v. CCE [2008 (7) TMI 27 (Tri)] followed. - Decided in favor of assessee.

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• 2012 (6) TMI 122
  Eligibility of CENVAT Credit of the Service Tax paid to clearing house agents for export of the goods - Stay Petition for waiver of pre-deposit of CENVAT Credit with interest and equal amount of penalty - Held that:- As decided in COMMR. OF C. EX., MYSORE Versus CHAMUNDI TEXTILES (SILK MILLS) LTD.[2010 (4) TMI 450 (Tri)], Tata Steel Ltd. Vs. CCE Mumbai-IV[2010 (11) TMI 287 (Tri)]such credit needs to be allowed - in favour of assessee.

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• Central Excise

• 2012 (6) TMI 148
  Clandestine removal - absence of corroborating evidence - Held that:- First appellate authority while setting aside the demands held that there was no corroborative evidences regarding the clandestine removal of the goods. Even today also, the Revenue is not in a position to putforth corroborative evidence as regards the clandestine removal of the goods, hence, we do not find any infirmity in the said findings - Appeal of Revenue stands rejected.

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• 2012 (6) TMI 147
  Reversal of CENVAT Credit on the goods cleared after availing the benefit of Notification No.30/2004-CE - refusal to give the copy of the report of Assistant Commissioner - Held that:- As the adjudicating authority relied on the report of the Assistant Commissioner that the appellant has not reversed the correct CENVAT attributable to the inputs utilized in goods wherein the benefit of Notification No.30/2004-CE has been availed it has not followed the principle of natural justice to do not give a copy of the report of jurisdictional Assistant Commissioner to the appellant on repeated request so that they can defend the case before him - remand the matter back to adjudicating authority directing to give a copy of report to all these appellants and decide the issue after getting representation/defence against said report from the assessee.

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• 2012 (6) TMI 146
  Penalty under Rule 25 of Central Excise Rules, 2002 - delay in payment of excise duty - CCE & C vs. Saurashtra Cement Ltd [2010 (9) TMI 422 (HC)]- Held that:- To resolve the controversy and to enable the appellant to have an opportunity to satisfy the adjudicating authority as to whether stringent financial condition was there the matter is remanded back to him for fair hearing and to pass a reasoned and speaking order.

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• 2012 (6) TMI 145
  Application for waiver of pre-deposit of duty,interest and penalty - demand is confirmed on the ground that the applicants are suppressing the value and quantity of the goods manufactured to evade payment of duty – Held that:- Merit in the contention of the applicant that the directions given by the Tribunal in the remand order directing that the documents asked for by the appellant shall be made available and the appellant shall file complete and proper reply to the various allegations were not complied with as the adjudicating authority on 23.3.2010 supplied copies of the documents except the document at serial No. 23 of Annexure E to the Show Cause Notice - as during the pendency of the present appeals the appellant has received all the documents the matter requires reconsideration by the adjudicating authority afresh - impugned order is set aside after waiving pre-deposit of the dues - in favour of assessee.

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• 2012 (6) TMI 144
  Confiscation of the goods and imposition of penalty – Held that:- Since Final Order of the Tribunal declares that said demand of the duty on 28,057 kgs of Aluminum Sections now stand set aside and as when there is no demand, the question of penalty under Rule 26 does not arise - the said rule demands imposition of penalty only when there is knowledge of the liability of confiscation of goods and the question of confiscation of goods arises only when there is liability and evasion of Central Excise duty on clearances of such goods which is not present in this case – in favour of assessee.

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• 2012 (6) TMI 126
  Condonation of delay - dismissal of appeal filed on 05.02.09 on ground of it being time barred by Commissioner (Appeals) without giving opportunity of being heard to appellant - assessee contended that delay was caused due to time-limit prescribed for filing the appeal being given as 'within three months from date of communication of order' in the impugned order dated 14.11.2008 - assessee also contended late receipt of order on 11.12.2008 - Held that:- Since Commissioner (Appeals) has not granted any opportunity of hearing to the Applicant, before dismissing the appeal, it is perplexing how the Applicant could show that they had received the OIO on 11.12.2008.. The case is, therefore, remanded to the Commissioner (Appeals) to examine all the aspects and decide.

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• 2012 (6) TMI 125
  Condonation of delay - dismissal of appeal on ground of it being non-maintainable by Commissioner (Appeals) - assessee contended that delay was caused due to time-limit prescribed for filing the appeal being given as 'within 90 days from receipt of order' in the impugned order - assessee filed the appeal on the 79th day - Held that:- The impugned OIO was issued on 16.10.2007 and the appeal was filed on 07.02.2008 and if the time-period is reckoned from the date of dispatch, i.e.16.10.2007, there was a delay of 19 days in filing the appeal in terms of time-limit prescribed u/s 35. We find that the delay of thirty days beyond sixty days is condonable as per Section 35. Therefore, there was no delay in filing the appeal. In this situation, we remand the matter to the Commissioner (Appeals) to decide all aspects afresh.

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• 2012 (6) TMI 124
  Condonation of delay - dismissal of appeal dated 01.06.09 on ground of it being non-maintainable by Commissioner (Appeals) - assessee contended that order dated 23.02.09 was received on 17.04.2009, hence there was no delay in filing the appeal - Held that:- It is found from the Range Superintendent's letter that the impugned OIO dated 23.02.09 was handed over to the authorized signatory of the Applicant on 17.04.2009, and the acknowledgement to that effect was also obtained. If the time-period is reckoned from the date of acknowledgement, i.e. 17.04.2009, the appeal was filed within the time-limit prescribed u/s 35 of the Act. Therefore, there was no delay in filing the appeal. In this situation, we remand the matter to the Commissioner (Appeals) to decide the appeal afresh.

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• 2012 (6) TMI 123
  Demand of duty and equivalent penalty on it - Assessee contention that the demand is time-barred as SCN issued by invoking extended period of limitation - Held that:- The allegation of suppression with intent to evade payment of duty is not sustainable as the records clearly depicts that the appellants were filing necessary returns showing taking of credit and utilizing the same for payment of duty during the period in question - set aside the demand and the consequential penalty as time-barred - in favour of assessee.

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• Wealth tax

• 2012 (6) TMI 167
  Assets under wealth tax - Assets was allotted to the assessee but was not transferred in favor of assessee during the period - Whether ITAT was right in holding that the land was occupied by the assessee itself, particularly when it had shown substantial amounts of rental income as derived from the leasing of sheds constructed on the land in question - Held that:- assessee, in the present case, was allotted the land by the State Government. It constructed shops thereupon and rented out the same and derived income therefrom. The sheds were therefore under the domain and control of the assessee. Even if legal ownership had not passed to the assessee the property in question belonged to it. The assessee was deriving rental income and collecting the same which itself shows that it was the assessee to whom the property belonged. assets in question should be deemed to belong to the assessee and these assets are liable to be included in the assets by the assessee. Clause (iii) of Section 2(ea) indicate that the house to be exempt must be in the occupation of the assessee for the purpose of any business or profession carried on by him. Keeping in view the language of the Section it cannot be said that the assessee was in possession through the tenants. Decided in favour of the Revenue and against the Assessee.

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• Indian Laws

• 2012 (6) TMI 140
  Professional misconduct - respondent, while holding position of auditor of a company, agreed to act as an arbitrator/mediator in transaction of shares of said company - Held that:- In order to attract the aforesaid clause, the act or omission must be in connection with the duties cast upon a chartered accountant in such capacity which no person other than a chartered accountant can perform. breaches alleged did not come within the purview of the expression "professional misconduct". The council had found the respondent guilty only on the aforesaid charge and no other. respondent was not at all guilty of any professional misconduct as charged under clause 7 of part 1 of the Second Schedule and, consequently, no action was called for against the respondent.

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