TMI Tax Updates - e-Newsletter
June 23, 2012
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
Wealth tax
Indian Laws
Highlights / Catch Notes
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Income Tax:
Annual Maintenance Contracts - following Principle of matching concept of income and expenses, assessee was justified in not recognizing revenue for the unexpired period of AMC - AT
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Income Tax:
Keyman Insurance Policy - Therefore, the difference between premium paid and surrender value is not taxable in the hands of assignee - AT
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Income Tax:
Valuation of Closing Stock - adjustment of excise duty and VAT - addition - assessee contended aforesaid inclusion to be revenue-neutral - Decided in favor of assessee - AT
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Income Tax:
Investment in Mutual Funds - merely because the transactions was put through Bank account, does not make it a genuine/bonafide transaction - AT
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Income Tax:
Existence of Permanent establishment - pierce the veil - there is interlacing of activities and interlocking of funds between the assessee and its Indian subsidiary in executing the dredging contract. - relationship of agency is there and the existence of permanent establishment is also there. - AT
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Income Tax:
Deferred revenue recognition - 50% of this Administration/Contract Fee is to be treated as income in the first two years of receipt and charged to tax @ 25% in each of the first two years and the balance 50% is to be treated as income and spread over in the remaining portion of the time share period
- AT
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Income Tax:
Valuation of stock – change of method of accounting - By shifting to a new ERP package, for example, SAP 2 worked out the value of the stock at cost, any reduction in the valuation of the stock is not permitted in law. - AT
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Income Tax:
Principal of mutuality - Association - - Scope of section 28(iii) - purchase and distribution of tyres, automobile spares, etc., to its own members. - mutuality squarely applies - HC
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Customs:
Amendments in Notification No. 44/2011-Customs (N.T.) and 40/2012-Customs (N.T.) . - Notification
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Customs:
Rate of exchange of conversion of each of the foreign currency with effect from 22nd June, 2012. - Notification
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DGFT:
Handbook of Procedure Vol.I (Appendices and Aayaat Niryat Forms). - Public Notice
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FEMA:
Annual return on Foreign Liabilities and Assets Reporting by Indian Companies – Revised format. - Circular
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Corporate Law:
Uniformity and consistency in decisions - If some courts grant compensation and if some other courts do not grant compensation, the inconsistency, though perfectly acceptable in the eye of law, will give rise to certain amount of uncertainty in the minds of litigants about the functioning of courts. - SC
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Corporate Law:
Nature of proceedings under NI Act - Proceedings under section 138 of the Act cannot be treated as civil suits for recovery of the cheque amount with interest. - SC
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Indian Laws:
Taxation of Services - An Education Guide.
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Wealth-tax:
Determining the value of urban land - the land in question is held as stock in trade a business asset and the method of valuation as laid down in rule 14 and Schedule III part ‘D’ is also applicable and on both counts the valuation adopted by AO cannot be upheld - AT
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Wealth-tax:
Assessee-society was exempt under section 5(1)(i) of the Wealth-tax Act in respect of its assets consisting of the land and buildings comprised in the kalyana mandapam owned by it - HC
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Service Tax:
Refund – time bar - Commissioner (Appeals) allowed the claim without time bar after holding that the amount paid by the party did not represent any tax - order sustained. - AT
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Service Tax:
CENVAT credit on stockbroker's service - 'Input service' under Rule 2(l) of CCR, 2004 - credit not allowed - AT
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Service Tax:
Denial of cenvat credit of service tax paid on outward freight - restriction is related to finished goods only - ST paid on outward transportation of inputs and capital goods allowed - AT
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Service Tax:
Service of renting of immovable property - Considering the definition of immovable property, the same does not include building used solely for residential purposes and building used for the purpose of accommodation including hotels, hostels, boarding houses, holidays accommodation, tents, camping facility etc - AT
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Central Excise:
SSI Exemption - As the casing is not traded in the market under the brand name 'Universal' and is further used in the manufacture of pre-recorded audio cassettes, exemption allowed. - AT
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Central Excise:
SSI Exemption - Deemed export - Value based exemption - Value of "Deemed Exports" is to be included in the calculation of aggregate value of clearances for extending the benefit of exemption - AT
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Central Excise:
Amendment to CENVAT Credit Rules - Notification
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VAT:
Amendments in the Delhi value Added Tax Act, 2004. - Notification
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VAT:
Borlaug Institute of South Asia (BISA). - Notification
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VAT:
Regarding Information in form T-1. - Notification
Articles
Notifications
Central Excise-
28/2012 - dated
20-6-2012
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CE (NT)
Amendment to CENVAT Credit Rules
Customs-
53/2012 - dated
21-6-2012
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Cus (NT)
Amendments in Notification No. 44/2011-Customs (N.T.) and 40/2012-Customs (N.T.) .
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52/2012 - dated
21-6-2012
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Cus (NT)
Rate of exchange of conversion of each of the foreign currency with effect from 22nd June, 2012.
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F.No. 437/16/2012-Cus. IV - dated
20-6-2012
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Cus (NT)
Appointment of Common Adjudicating Authority in Respect of of M/s Welspun Corporation Limited (formerly M/s Welspun Gujarat Stahl Rohren Limited), Mumbai.
VAT - Delhi-
F.7(433)/Policy-II/VAT/2012/DSIII/461-462 - dated
21-6-2012
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DVAT
Amendments in the Delhi value Added Tax Act, 2004.
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F.7(433)/Policy-II/VAT/2012/229 - dated
19-6-2012
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DVAT
Borlaug Institute of South Asia (BISA).
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F.7(433)/Policy-II/VAT/2012/211-222 - dated
18-6-2012
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DVAT
Regarding Information in form T-1.
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F.3(7)/Fin.(Rev.-1)/2012-13/SSF/93 - dated
16-6-2012
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DVAT
Date of coming into force the Delhi Value Added Tax (Third Amendment) Act, 2012 dated 15.06.2012 .
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F.3(6)/Fin.(Rev.-1)/2012-13/SSF/92 - dated
16-6-2012
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DVAT
Date of coming into force the Delhi VAT (Second Amendment) Act, 2012 dated 15.06.2012 .
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F.14(6)/LA-2012/cons2law/61 - dated
15-6-2012
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DVAT
Amendments by Delhi Value Added Tax (Second Amendment) Act, 2012 – Sections 2, 9, 10, 28, 36A, 38, 49, 50, 66, 70, 73, 82 and 86 .
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F.14(4)/LA-2012/cons2law/71 - dated
15-6-2012
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DVAT
Delhi Value Added Tax (Third Amendment) Act, 2012 – Amendment of section 2 .
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2012 (6) TMI 518
Admissibility of petition for revision of order of Tribunal beyond period of 4 years from date of the order - appeal filed on 04.04.2012 against ex-parte order dated 23.02.07 rendered in respect of AY 97-98 - assessee contending limitation of period from date of service of order - Held that:- U/s 254(2), the Statute has chosen not to compute the period of limitation from the date when an ITAT order is served, but the Statute has chosen to compute the time within four years from the date of the order. Although another four years has further been granted for filing a petition u/s.254(2) by the Statute, but on assessee having reasonable cause for non-filing of appeal. In present case, appeals filed in 2003, remained pending, until decided on 23/02/2007 ex-parte. Appellant has never enquired in the said four years between 2003 to 2007 about the fate of his appeals. After the lapse of 8 years, undisputedly a long gap, now this assessee is seeking a favourable decision which may tantamount to re-writing the Statute. Therefore, condonation as sought through these petitions is beyond jurisdiction, hence rejected.
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2012 (6) TMI 517
Search & Seizure - Block assessment - Period of limitation - search conducted at bhatta premises of the assessee vide first authorization dated 17.12.2002 of which panchnamas was drawn on 20.12.02, 21.12.02(order u/s 132(3)), and 03.01.03 and search conducted at office premises vide last authorisation dated 20.12.2002 of which panchnama was drawn on 27.12.2002 - assessee contended that search was concluded on 21.12.2002 itself and panchnama dated 3.1.2003 was merely for revocation of order u/s 132(3) - Held that:- In the present case panchnama dated 3.1.2003 is not a panchnama which finds mentioned in Explanation 2 to section 158BE. Hence, the limitation cannot be governed by the said panchnama. The search essentially was concluded and completed vide panchnama dated 21.12.2002, when order under the second proviso to section 132(1) was passed for deemed seizure of stock of goods, statement of one person was recorded and a restrain order u/s 132 was passed. Panchnama dated 21.12.2002 was the last panchnama as described in Explanation 2 to section 158BE and, therefore, the limitation has to be commenced from the said panchnama, rendering time limit to frame assessment u/s 158BC to be 31.12.2004. As against that, the impugned assessment is passed on 31.1.2005 which is not passed within the limitation described in section 158BE. The assessment, therefore, is bad in law and has to be quashed. It is also held that the point of time of issue of authorization will not have any relevance but it is a point of time when last panchnama is drawn in respect of authorization whether it is first authorization or it is last authorization. “Last panchnama” as relevant for Explanation 2 to Section 158BE will be the panchnama which show the conclusion of the search. Hence, assessment is barred by limitation and is not a valid assessment in the eyes of law - Decided against the Revenue.
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2012 (6) TMI 516
Unexpired value of Annual Maintenance Contracts - addition - Held that:- Undisputedly, said amount pertained to unexpired period of AMC falling outside the end of the relevant previous year. The clients of the assessee could at any point cancel the contract and get a refund for the unexpired period. This itself meant that the amount received by the assessee at the point of time it entered into an AMC was nothing but an advance, which on the progress of each day got converted into revenue. Therefore, following Principle of matching concept of income and expenses, assessee was justified in not recognizing revenue for the unexpired period of AMC - Decided in favor of assessee. DTAA between India and Mauritius - payment made to Mauritius company for conducting market survey for exploring Opportunities in Asia for Electronics - Revenue contended the same to be FTS and dis-allowed expenditure u/s 40(a)(ia) on account of non-deduction of tax at source - Held that:- Since, such a "market survey" definitely involved exercise of technical knowledge and skill by the persons, therefore, by virtue of Explanation 2 to Section 9(1)(vii), the type of service received was nothing but fees for technical services. However, Chapter III of DTAA between India and Mauritius did not provide for taxing any fees paid for technical services. Only for a reason that DTAA is silent on a particular type of income, such income will not automatically become business income of the recipient. Hence, when DTAA is silent on an aspect, the provisions of the Act has to be considered and applied. Therefore, matter remitted back to A.O. for consideration afresh.
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2012 (6) TMI 515
Renewal of exemption u/s 80G(5) - rejection by CIT(A) without issuance of SCN - assessee Trust, established on 17.1.2002, had been granted registration u/s 12A as well as exemption u/s 80G - last exemption granted for the period from 1.4.2008 to 31.3.2011 - Held that:- In view of omission of proviso to Section 80G(5)(vi) w.e.f.01.10.2009, approval once granted u/s 80G(5)(vi) shall continue in perpetuity. Further, Circular No. 5 being "Explanatory circular for Finance (No. 2) Act, 2009" is in favour of the assessee and even if the assessee by ignorance or inadvertently filed an application for renewal, the CIT was required to decide the same in accordance with the amended provisions. therefore, we set aside the impugned order and hold that approval u/s 80G(5) already granted to the assessee shall continue unless and until the concerned authority takes appropriate action in accordance with law. See Association for Advocacy and Legal Initiatives v. CIT (2011 (2) TMI 315 (Tri)) - Decided in favor of assessee.
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2012 (6) TMI 514
Keyman Insurance Policy - taxability of difference between the premium paid by employer and surrender value paid by employee to employer at time of assignment of same to employee - Held that:- Hight court in case of CIT Vs Rajan Nanda(2011 (12) TMI 392 (HC)), held that it was only the surrender value of the policy at the time of assignment or the sum received by an individual at the time of retirement, which is taxable. Insofar as assignment is concerned, at that time surrender value was paid by the employee and therefore, nothing could be taxed. Therefore, the difference between premium paid and surrender value is not taxable in the hands of assignee - Decided in favor of assessee. It is noteworthy that Keyman insurance policies becomes ordinary insurance policies at the time of assignment, hence, amount received on maturity of keyman insurance policy is to be treated as exempt u/s 10(10D).
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2012 (6) TMI 513
Valuation of Closing Stock - adjustment of excise duty and VAT - addition - assessee contended aforesaid inclusion to be revenue-neutral - Held that:- It is not appropriate to include the closing Modvat in the figure of closing stock without modifying the figures of purchases, sales and opening stock. Hence, keeping in view that the assessee is following consistent method of accounting and Tribunal in assessee’s own case for AY 2005-06 and 2006-07 has decided in favor of assessee. Hence, CIT(A) was fully justified in deleting the addition. Deduction u/s 80IB - dis-allowance in respect of interest income on ground that same cannot be said to have been derived from industrial undertaking - interest income assessed under the head 'income from other sources' - Held that:- Since the interest income has been assessed under the head income from other sources, therefore, the assessee is entitled to the deductions u/ 57(iii). Software expenses, Website expenses - Revenue or Capital expenditure - Held that:- Expenditure incurred on software and website are allowable as revenue expenditure. Loss incurred on discontinuation of assignment for installation of software system - business loss or capital loss - Held that:- Since aforesaid expenditure has been incurred for installation of software system (ERP) which was discontinued due to commercial expediency as going on ahead with such system may not be in line with the company’s requirement, therefore, the loss incurred by the assessee is allowable as a business loss. Export incentives - Revenue contended the same to be shown as separate income rather reducing it from cost of purchases of materials - Held that:- CIT(A) has rightly observed that consumption of raw material and packing has been increased by the provisions of export incentives of Rs.(13,142,053). Thus, deduction u/s 80IB stands reduced accordingly and AO has erred in treating the aforesaid expenses as income. In absence of any contrary finding, order of CIT(A) is upheld. Foreign exchange rate difference loss on account of conversion of CC limit to FCNRB (DL) working capital loan - business loss or capital loss - Held that:- Foreign currency exchange loss relates to the working capital loan and thus, allowable as business loss. Dis-allowance deleted.
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2012 (6) TMI 512
Write off of obsolete Stock - consequent write back of liability of foreign creditor and offering the same for taxation - dis-allowance of loss on ground that there were no details to show that the assessee was under instructions by the foreign party to write off the liability - Held that:- How a negative fact can be proved when the assessee submits that they have imported the goods and the same could not sold in so many years and with the consent of Commercial Tax authorities destroyed the goods, the fact of which was accepted by the other authority. The books of account also represents the same situation. Also, it is on record that assessee wrote back the liability in the P/L Account and offered for taxation. claim of loss of stock is genuine and hence allowed - Decided in favor of assessee. Dis-allowance of 50% of the expenditure on the reason that the assessee does not have any business activity - Held that:- Since the assessee has been in the business during the year and has other income and claimed a meagre amount of Rs.1,64,828/- as expenditure, which is just enough even for maintaining its corporate identity, we are of the opinion that disallowing 50% of the amount is not warranted and is arbitrary. Penalty u/s 271(1)(c) - Held that:- There is no reason for levy of penalty as the basis for levy of penalty was disallowance of the claim which was allowed therein - Decided in favor of assessee.
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2012 (6) TMI 511
Application for Interim stay of the order of Assessing officer, during the pendency of the appeal - rejection by Appellate Authority expressing reservation about his powers to grant the interim order - Held that:- In present case, Appellate Authority has not proceeded to appreciate the points raised by the petitioners in support of his prayer for grant of interim order based on materials available before him. Instead, he has ventured into discussions which are irrelevant and impermissible having regard to the binding precedent in the form of a direction issued by the Division Bench. Appellate authority shall consider the application for stay filed by the assessee on merits and in accordance with law. It is made clear that he has inherent power to grant or not to grant stay though such power is expressly conferred on him u/s 246-A. Impugned orders are quashed. Writ petitions allowed.
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2012 (6) TMI 510
Initiating re-assessment proceedings u/s. 263 – SCN issued as AO did not assess the amount received by the assessee as repairs of machinery charges and contract receipts for assessment year 2002-03 – on submissions by the assessee in reply to SCN CIT remitted the matter to the file of the AO that the claim of the assessee requires verification - Held that:- The impugned revision order is not sustainable as the grounds on which order was subjected to revision are different, vis-à-vis the grounds on which revision proceedings were actually initiated as in the show-cause notice CIT states that the order passed by the AO was erroneous and prejudicial to the interest of revenue because he did not assess the amount of ₹ 55 lakhs received by the assessee as repairs of machinery charges and did not assess a sum of ₹ 2,41,81,436/- being contract receipts for A.Y. 2002- 03”, whereas in the revision order, learned Commissioner abundance this stand and merely directs the Assessing Officer “to call for the original vouchers as well as the original ledger containing the sales account as well other sub-accounts in which the assessee claims to have made entries regarding such income - there was a shift in the stand of the Commissioner as to whether it was a case for revision on the ground that income as stated was required to be added to the income assessed or whether it was a case for revision on the ground that the AO did not make necessary verification about the related transactions – as the revision order is passed on the ground other than the grounds for which revision proceedings are initiated, the same cannot be sustainable in law – in favour of assessee.
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2012 (6) TMI 509
Professional fees receipts - CIT(A) deleted the addition made by AO – AO contested that the profit and loss account does not tally the amount as revealed in TDS certificates – Held that:- The returns filed for the Assessment Years 2003-04 and 2005-06 are less than the professional receipts as per the TDS certificates. However, for the Assessment Years 2004-05 and 2006-07 the professional receipts admitted in the P&L A/c, accounts are more than the receipts as per TDS certificates, and the receipts during Assessment Year 2005-06 may not tally with the bills raised during the previous year because the receipt during the year include amounts for which bills were raised in the earlier previous year also – as the receipts admitted by the appellant, for the Assessment Years 2004-05 and 2006-07, in their P&L A/c are more than the receipts as per TDS certificates, it cannot be concluded that the appellant has suppressed the professional receipts – against revenue. Investment in Mutual Funds admittedly made out of disclosed bank account of the assessee – Held that:- As the assessee failed to explain the source, nature and mode of payment of such investments along with supporting papers and documents such an investment is treated as unexplained - merely because the transactions was put through Bank account, does not make it a genuine/bonafide transaction – against assessee. Annulation of Order passed in pursuance of Notice issued u/s 148 – Held that:- As original assessment in this case has been made u/s 143(1) evident from the assessment order itself the additional ground raised by assessee dismissed.
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2012 (6) TMI 508
Claim of loss of stock in trade - allowed by Tribunal - Held that:- Following the view taken in T.A. Quereshi (Dr.) v. Commissioner of Income Tax [2006 (12) TMI 91 (SC)] that if the stock in trade was seized and confiscated, it has to be allowed as a business loss the Tribunal held that the confiscation of the pharmaceutical drugs exported by the assessee must be treated as a loss of stock in trade - no substantial question of law arises for consideration
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2012 (6) TMI 507
Interest u/s 206C(7) - Tax collected at source paid by deductees (Contractors) - Evidence placed on record in reply to SCN - Held that:- Considering the provision contained in section 206C(7) and Circular dated 29.01.1997 it is clear that even if the deductees (Contractors) pay tax, the liability of the deductor (appellant) with regard to charging of interest will continue till the date of payment of taxes by the deductees (contractors)- if the person responsible for collecting tax does not collect the tax or after collecting the tax fails to pay it as required under this section, he shall be liable to pay simple interest at the rate of one per cent per month or part thereof on the amount of such tax from the date on which such tax was collectible to the date on which the tax was actually paid - no substantial question of law is involved - against assessee.
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2012 (6) TMI 506
Non-inclusion of TDS deductions in assessment - CIT deleted the AO's Order - Held that:- The order of the A.O. was erroneous insofar as it was prejudicial to the interests of Revenue. Assessee might have submitted some details before AO, but looking at the said details itself shows that the assessee has claimed a number of payments as not liable for deduction of tax at source since the payments did not exceed Rs.20,000/50,000 and had also claimed that part of charges were arising only out of sub-contract - as theses aspects were never examined by the A.O. CIT exercised his power under Section 263 rightly set aside the order of A.O. considering it erroneous - against assessee.
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2012 (6) TMI 505
Block assessment - validity and legality of the search - Power of the tribunal – Held that:- An appeal can be filed by assessee challenging the block assessment order to contend that this foundation for block assessment is an illegal search - it is obligatory on the part of the Tribunal first to go into the jurisdictional aspect and satisfy itself that the said search was valid and legal. It is only then it can go into the correctness of the order of block assessment - C. Ramaiah Reddy Versus Assistant Commissioner of Income-tax (IMV) - the matter is remitted back to the Tribunal for fresh consideration – in favour of assessee.
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2012 (6) TMI 504
Block assessment - validity and legality of the search - Power of the tribunal – Held that:- An appeal can be filed by assessee challenging the block assessment order to contend that this foundation for block assessment is an illegal search - it is obligatory on the part of the Tribunal first to go into the jurisdictional aspect and satisfy itself that the said search was valid and legal. It is only then it can go into the correctness of the order of block assessment - C. Ramaiah Reddy Versus Assistant Commissioner of Income-tax (IMV) - the matter is remitted back to the Tribunal for fresh consideration – in favour of assessee.
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2012 (6) TMI 503
Proceedings under s. 132A - seizure of the cash - petitioner was travelling allegedly in a jeep hired by him in District, Bhopal. The jeep was seized by the Station House Officer, Khajuri Sadak District—Bhopal and cash amounting to Rs. 6.5 lacs was seized from the vehicle in which the petitioner was travelling - petitioner made certain allegations against the police officer who had seized the vehicle and the cash, and petitioner has tried to indicate that the police officer was trying to extract a bribe of Rs. 1 lac – Held that:- These amounts are received by the petitioner on 3rd June, 1994, 11th March, 1997 and on 7th Jan., 2001 and it is not known as to how and under what circumstances the amount received by the petitioner during the period of more than six years is kept by him or he is carrying the same amount along with him wherever he is going or was with him on 23rd Jan., 2001. The petitioner has to give a convincing explanation for the cash found in his person on 23rd Jan., 2001 and if the explanation is not convincing enough then no prima facie case is made out in the matter and interference into the matter by a Writ Court is not warranted. finding no merit in the claim made by the petitioner, the petition is dismissed
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2012 (6) TMI 502
Determination of export profit eligible for deduction - assessee's invoice value on exports got reduced by the value of components supplied by the foreign buyer which made payment of only the net amount - reassessment proceedings - AO adopted gross invoice value on the exports as export turnover forming part of total turnover and adopted it as the denominator in the determination of eligible export profit for deduction under Section 10B(4) of the Act – Held that:- total turnover is the gross turnover which comprises of the turnover of business done domestically and the export business. For numerator and denominator export turnover has to be one and the same and the Department is bound to treat only actual export turnover which is received in convertible foreign exchange by the assessee as forming part of total turnover. In other words, the export turnover should be the same amount both as numerator and forming part of total turnover being the denominator for determining export profits under Section 10B(4) of the Act. appeal filed by the Revenue is dismissed.
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2012 (6) TMI 501
Whether Tribunal was justified in deleting the addition made under section 41(1) of the Income-tax Act - Tribunal while deleting the additions, held that there is no infirmity in the method followed by the assessee and moreover, the balance refund amount has been offered to tax in the subsequent assessment years which the Department has accepted. no reason to entertain this appeal. appeal is accordingly dismissed
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2012 (6) TMI 500
Applicability of section 36(1)(viii) to banks - financial corporation - public company and a Government Company - held that:- . The assessee is a financial corporation "within the meaning of Sec. 36(1)(viii) since it is Govt. company. However the deduction available under this section will be restricted to the amount transferred to Special reserve subject to the limit of prescribed percentage of profits derived from providing long term finance for the approved purposes mentioned in sec 36(1)(viii). Disallowance of expenditure for non-deduction of TDS at Sikkim - Held that:- if the income is not taxable under the Indian Income tax Act, the payer is not under any obligation to deduct tax and the payment cannot be disallowed for non-deduction of Tax. disallowance on account of non-deduction/ payment of TDS deleted Applicability of the provisions of sec. 115JB - appellant is not a company under Companies Act but is only deemed to be a company as per the provisions of sec. 11 of the Banking Companies (Acquisition and Transfer of Undertaking) Act, 1970 - provisions of sec. 115JB do not apply to the assessee, and, as such, the AO was in error in concluding that income had escaped assessment in the hands of the assessee Prior period expenses - expenditure disallowed as in the nature of rent, municipal taxes etc, where usually the amounts are paid after detailed negotiations and receipt of demand of the arrears amount from the parties. - held that:- even though they are treated technically as prior period expenses, it relates to a continuous flow of expenditure. Therefore, there is no justification in disallowing the expenditure, otherwise normally eligible for deduction Taxability of reversal of unrealized interest - assessee had been following similar method of accounting and the same had been accepted by the department in the earlier years. Therefore, the non-recognition of income for the year under consideration in respect of non-performing assets cannot be accepted. assessee's appeal allowed Allowability of non-rural bad debts written off - credit balance in the provision for bad and doubtful debts allowed u/s. 36(1)(viiia) exceeds the bad debts written off - The provision of section 36(1)(viia) does not apply to bad debts written off to advances made by non-rural branches. Bad debts written off by advances made by non-rural branches should be allowed in full without any restrictions or limitations. provisions of sec. 36(1)(viia) does not apply to bad debts written off to advances made by non rural branches Change in method of valuation of such securities held as stock-in-trade, by no stretch of imagination, can be said to be not bona fide. - In fact, ignoring the loss would result in distortion of the real income of the assessee during the year under appeal. The representative of the assessee also confirmed that the changed method of valuation of securities has consistently been followed in all subsequent years. We, therefore, approve the change in the method of valuation of securities held as stock-in-trade. appeal filed by the assessee is partly allowed for statistical purpose and the appeal filed by the Revenue is dismissed.
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2012 (6) TMI 484
Fringe benefit - exclusion of expenditure incurred on Sales promotion, Conveyance, tour and travel, and Gifts while computation of vale of fringe benefits on ground of no employer - employee relationship - Revenue instead relying on deeming fiction given u/s 155WB - Held that:- Aforesaid expenditure has no element of employee benefit and is a legitimate business expenditure incurred in the course of carrying on its business. The impugned expenditure was paid to third parties and not to employees. Hence, legitimate business expenditure, which does not result in any benefit to employees, is not liable for FBT. Further, CBDT Circular NO.8 of 2005 which specifies that expenditure even if not resulting in any benefit to employees is liable for FBT, cannot be relied upon to the disadvantage of the assessee since it is settled principle that circulars are not binding on the assessee, appellate authorities and the Courts. The proviso to section 119(1) states that no orders, instructions or directions shall be issued by the CBDT so as to require any income tax authority to make a particular assessment or dispose of a particular case in a particular manner so as to interfere with the discretion of the CIT(A) in the exercise of his appellate functions. Expenditure incurred on souvenir distributed to employees on the occasion of decennial celebration - assessee contended them to be in the nature of ‘Employee Welfare’ and not ‘Gifts’ - Held that:- Distribution of Souvenirs was made in consideration of and to recognize the efforts and contribution of employees. Thus, said expenditure cannot be regarded as ‘Gifts.’ and has been correctly treated as ‘employee welfare expenditure
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2012 (6) TMI 483
DTAA between India and Netherlands - Re-assignmnet of dredging contract being awarded by Gujarat Adani Ltd by assessee (Netherlands company) to its Indian subsidiary - reimbursement by subsidiary of expenses incurred by appellant treated as Fees for Technical services(FTS) by Revenue on ground that subsidiary has no technical expertise or any other wherewithal to carry out the contract - Held that:- Cost allocation agreement entered into between the assessee company and its Indian subsidiary has unequivocally declared that the Indian company does not have any sort of technical expertise or resources and ability to carry out the dredging contract assigned to it. It is in the light of the above declaration that the assessee company has undertaken to provide all sorts of services, wherever necessary, to execute the dredging contract. Such services include not only arranging the dredgers from abroad, but also application of technical mind to select and choose appropriate parties to execute the work entrusted to its Indian subsidiary. Also, assessee has not established that it had offered services to the subsidiary company on cost to cost basis at best reasonable and competent prices available at that point of time. Therefore, it is established that assessee had rendered technical services to its subsidiary in India and the payments were in the nature of fee for technical services - Decided in favor of Revenue. Existence of Permanent establishment - Held that:- If we pierce the veil of assignment contract and go to the root of the case, we find that there is interlacing of activities and interlocking of funds between the assessee and its Indian subsidiary in executing the dredging contract. Hence, relationship of agency is there and the existence of permanent establishment is also there. Validity of reassessment proceedings - original return processed u/s 143(1) - Held that:- When the facts of the case are so complicated and cumbersome and when the return was only processed u/s 143(1), the materials available on record along-with the return filed by the assessee themselves constituted sufficient materials in the hands of the AO to hold a reason that income had escaped assessment. Where the return was processed u/s 143(1), there is no room even for an earlier conviction. Hence, issue of notice and passing of assessment order u/s 147 is to be upheld - Decided in favor of Revenue.
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2012 (6) TMI 482
Disallowance in respect of compounding fee under the sales-tax Act, debited to the account head 'sales tax' - the assessee's contention that the compounding fee was not penal in nature, but only to avoid litigation - Held that:- As decided in Haji Aziz & Abdul Shakoor Bros v. CIT [1960 (11) TMI 15 (SC)]that only those disbursements as made for the purpose of business, i.e., that enable a person to carry on the business and to earn profit in that business would form a permissible deduction. An amount paid for infraction of law is not allowable, being not a normal incident of business.If a person carries on his business activity in a manner that renders him liable to penalty, it cannot be said to be a commercial loss, which could be claimed as a deductible expense - The finding/s by the ld. CIT(A), is, again, without any basis either in law or in fact/s - the composition fee being paid in addition to the amount of tax and interest thereon, is not understood as to how he holds that there is no difference in the amount that the assessee would have been liable to pay in any case, i.e., even if the impugned transactions were disclosed as inter-state sales in the first place, instead of, and as against, inter-branch transfers - assessee has not clarified this aspect providing for payment of fee at an amount equal to the amount of tax sought to be evaded, and to which his attention was specifically adverted to during hearing - in favour of revenue. Disallowance of freight on raw material - AO disallowed the same as being not verifiable - Held that:- CIT(A)considered the expenditure incurred represented unloading expenses on raw material as the entire amount had been paid to labour, and for which proper vouchers, though self- made, are available - against revenue. Deletion of disallowance of the assessee's claim for additional depreciation - AO contested non-furnishing of the eligibility certificate from the Chartered Accountant - Held that:- The assessee had filed eligibility certificate along with the return of income during the course of the assessment proceedings - the entire depreciation, including additional depreciation u/s. 32(1)(iia), is to be deducted in computing the 'written down value' of the relevant block of assets u/s. 43(6) the CIT(A), after admitting the assessee's claim has rightly restored the matter back to the file of the AO for the consideration of the same on merits - against revenue.
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2012 (6) TMI 481
Deferred revenue recognition - Administration/Contract Fees - AO stated that 75% of the receipts are spread over time share period to reduce its tax liability in the year of re operative receipt - Held that:- It cannot be denied that a major portion of services rendered by the assessee would be in the initial years of the time share period of 78 years, but AO’s view is not acceptable that all the services rendered to the members are completed in the first year itself and therefore the entire Administration / Contract Fee be recognised as 100% revenue in the first year of receipt - would result in a grave mismatch by the recognition of entire receipt as income in the first year and disregarding subsequent expenditure that the assessee would incur for services to be rendered to members the balance period of the time share - 50% of this Administration/Contract Fee is to be treated as income in the first two years of receipt and charged to tax @ 25% in each of the first two years and the balance 50% is to be treated as income and spread over in the remaining portion of the time share period Claim of Interest Expenditure - assessee contention that the CIT(A)erred in holding that the interest paid by the assessee to PHRC was expenditure not incurred wholly and exclusively for the purpose of business Held that:- The duties and liabilities of both the parties to the agreement viz. the assessee and PHRC are clearly laid out and there is nothing to mandate that the interest earned out of the fixed deposit representing Capital Bond Account was to be paid by the assessee to PHRC. The said deposits were to be maintained for the purpose of creation of mortgage over properties by PHRC - The assessee’s claim that the interest paid is out of interest earned on joint funds is unacceptable as the assessee had no liability or obligation to pay the same to PHRC and nor could the latter legally enforce payment of the same by the assessee. The interest on fixed deposits were received by the assessee only because of the failure of PHRC, as it did not mortgage the properties. If it had done so, the amount in the fixed deposits would have been returned - against assessee. Charge of interest u/s.234B and 234D - Held that:- The charging of interest u/s. 234B is mandatory and consequential in nature and there is no discretion in the matter and the charging of interest u/s. 234D considering the case of ITO Vs. Ekta Promoters P. Ltd [2008 (7) TMI 452 (Tri)]cancel the interest charged u/s. 234D as section 234D was brought on the statute w.e.f. 1.6.2003 cannot be applied to assessment year 2003-04 or earlier years having no retrospective effect.
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2012 (6) TMI 480
Penalty under section 271(1)(c) - Search - assessee had filed the return declaring additional income on the basis of the seized papers and documents and not on the basis of cash found - Held that:- The return of income filed in response to notice u/s 153A has been accepted by the assessing officer, thus it can neither be a case of concealment of income nor furnishing of inaccurate of particulars of such income - penalty u/s 271(1)(c) is not imposable where there is neither concealment of income nor furnishing of inaccurate particulars of income in return filed u/s 153A as decided in Commissioner of Income-tax Versus SAS Pharmaceuticals [2011 (4) TMI 888 (HC)] Provisions of Explanation 5 of section 271(1)(c) are applicable in the cases where during the course of search initiated on or before 1.6.2007 any money, bullion, jewellery or other valuable article or thing is found in the possession or under control of the assessee whereas in the case of the assessee the search was conducted on 22.11.2006 and cash of Rs. 1,11,45,350/- was found from the possession of the assessee - Explanation 5 cannot be invoked in assessment year 2004-05 merely on presumption that the assessee might have been in possession of cash throughout the period covered by search assessments - The income offered to tax u/s 153A for assessment year 2004-05 is based on entries recorded in the seized material, thus Explanation 5 cannot be invoked in assessment year 2004-05 in respect of entries recorded in seized material - in favour of assessee.
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2012 (6) TMI 479
Income from sale of Completely Knocked Down (CKD) Units – whether the provisions of Sec. 9(1)(i) are applicable or not – Held that:- The Assessee merely sells the raw materials/CKD units to DCIL who in turn carries out further activity of assembling the same and selling the finished cars. There are no further activities carried out by Appellant in India in this connection, as this transaction ends with the Appellant selling the raw materials/CKD, no income from such sale accrues or arises to the Assessee in India - Mere sale of raw materials/ components will not result in business connection and even if it does as per the terms and conditions of the contract between the Assessee and DCIL no income accrues to the Assessee on the basis of any activities carried out, on behalf of the Assessee in India – against revenue. Permanent establishment - Article 5(2) of the DTAA between India and Germany with regard to sale of CKD Units – Held that:- Merely acting for a non- resident principal would not by itself render an agent to be considered as PE for the purpose of allocating profits taxable in the hands of the principal. There should be some definite activity of the PE to which profits can he attributed, merely calling a person as agent acting on behalf of foreign non-resident would not by itself render him to be considered as an agency PE and pro tanto part of the profits of the non-resident is liable to be taxed in India – against revenue Deletion of income in respect of rights of SAP system – assessee submitted that there is no basis for the estimate made by the AO regarding royalties/ FTS income in respect of rights for software to be an ad-hoc amount of EURO 1,00,000 - Held that:- As the confirmation filed by the assessee that no payment by DCIPL in connection with right to use any software licensed by the assessee during the financial year was made before the CIT(A) was not confronted to the AO he should be afforded opportunity for examining the claim made by DCIPL before the CIT(A ) - set aside the order of the CIT(A) and remand the issue to the AO for fresh consideration in the light of the additional evidence filed – in favour of revenue for statistical purpose. Applicability of levy of Interest u/s 234B - duty is cast on the payer to pay tax at source – Held that:- As decided in DIRECTOR OF INCOME-TAX (INTERNATIONAL TAXATION) Versus NGC NETWORK ASIA LLC 2009 (1) TMI 174 (HC) when a duty is cast on the payer to pay the tax at source, on failure, no interest can be imposed on the payee-assessee - once the Income is subjected to TDS provision, then that Is outside the provisions of the advance tax as per the mandate of Section 209 – against revenue. Penalty u/s 271(1)(c) – Held that:- As addition made by the AO treating income from sale of CBU Cars as income chargeable to tax in India and that the assessee had a PE in India was deleted by Tribunal, the very basis of imposing penalty on the assessee no longer survives – against revenue.
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2012 (6) TMI 478
Transfer pricing - arm’s length price - addition on account of adjustment in respect of transactions with Associated Enterprises by taking profit margin at 27.84% as against margin of 20.17% of the assessee - Denial of plus / minus 5 % benefit – Held that:- TPO/AO erred and the Hon'ble DRP further erred in upholding / confirming the action of the learned TPO/AO in denying the benefit / reduction of 5 percent from the arithmetic mean as provided in proviso to Section 92C(2) of the Act while computing the adjustment to the total income of the Appellant. benefit of 5% is to be allowed to assessee even in cases where difference in value of international transactions and its ALP is more than 5%, and accordingly it was held that computation made by AO is therefore required to be reworked. Regarding direction of DRP – working capital adjustment - DRP while giving direction to AO to pass assessment order specifically directed to work out the working capital adjustment but AO has failed to comply with said direction on the ground that relevant details of comparables is required and this requires an exhaustive exercise to be done before giving working capital adjustments. AO was not justified to defy the direction of DRP and not to give working capital adjustment while making addition at ALP of the transactions of assessee with AEs. matter restored to AO to work out margin of profit at ALP of all 30 comparable companies of transactions with AEs and also to give working capital adjustment
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2012 (6) TMI 477
Valuation of stock – change of method of accounting - Held that:- according to the provisions of section 145A of the Income-tax Act, 1961, for valuation of inventory, the method to be adopted is the method of accounting regularly employed by the assessee – For the determination of income chargeable under the head "Profits and gains of business or profession", the Act requires assessee to value the stock in accordance with the method of accounting regularly employed by the assessee. Once the method has been chosen it should be employed regularly by the assessee and assessee may not be permitted to change it in the subsequent years. The assessee was regularly employing the method of valuation for valuing the stock at cost or net realizable value whichever is less. By shifting to a new ERP package, for example, SAP 2 worked out the value of the stock at cost, any reduction in the valuation of the stock is not permitted in law. Decided in favor of Revenue.
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2012 (6) TMI 476
Reimbursement of expenses - Article 7 read with Article 5 of Indo-UK DTAA – Held that:- it is an undisputed position that the payment for technical services, which is sought to be brought to tax in the hands of the assessee, is in the nature of reimbursement of technical expenses to the head office. - fee for provision of marketing and management services rendered outside India not subjected to tax in India holding that the same constituted business profit not attributable to PE in India. - Decided in favor of assessee. Reimbursement of lease line charges - held that:- reimbursement of lease line charges received by the assessee from WNS India was not chargeable to tax in India. - Decided in favor of assessee. Whether reimbursement of expenses taxable as fees for technical services under 13 of the Indo-UK tax treaty - assessee-company had incurred various expenses on the employees of WNS India on their visits abroad - amount in question was received by the assessee on account of reimbursement of expenses actually incurred by it on behalf of WNS India – Held that:- exact nature of expenses and services was not ascertainable in the absence of relevant details filed by the assessee. it is necessary to ascertain the exact nature of expenses incurred by the assessee and services rendered, for which the amount in question is claimed to be received as reimbursement in order to decide the issue relating to its taxability in India. Matter remanded to Assessing Officer. assessee's appeal allowed for statistical purposes DTAA between India and UK - article 7 of the India UK treaty - income deemed to accrue or arisen in India - assessee-company took over the assets, liabilities and business of M/s Town and Country Assistances Ltd. including the BPO contracts – Held that:- transfer or assignment of the said contracts not being the capital assets situated in India did not give rise to any income which was deemed to accrue or arisen in India. assessee-company had a service PE in India as a result of marketing and management services rendered to WNS India through the deputation of personnel in India and the said PE going by its very nature having no involvement either in the acquisition of BPO contracts or assignment/transfer thereof to WNS India, the sale consideration received by the assessee outside India for assignment or transfer of BPO contracts from (sic-to) WNS India cannot be treated as income attributable to the service PE of the assessee-company in India so as to bring the same to tax in India even as per article 7 of the India UK treaty. In favor of assessee
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2012 (6) TMI 475
Penalty u/s 271(1)(c) - revenue Challenged the deletion of addition made by CIT(A) - Held that:- If any assessee offers an explanation, which is not found to be false, he can save himself of penalty even if he were not able to substantiate his case as long as he places all the relevant material - surrender was being made with a condition that no penal action will be made and to avoid further litigation and to buy peace,hence no point to levy penalty - in favour of assessee.
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2012 (6) TMI 474
Application for condonation of delay before CIT(A) - daly of 4 days - assessee contended that the officer, who had been dealing with the work of Tax Deduction at Source was transferred on 17/04/2010 and the appeal had to be filed by 08/05/2010 and that the new person was not conversant and accustomed with the day-to-day handling of the seat and had to take out details relevant for filing the appeal – Held that:- in the case of Vedabai alias Vaijayanatabai Baburao Patil (2001 - TMI - 40328 - SUPREME Court - Income Tax), In the said year the delay was of 10 days while in the assessment year 2008-2009 the number of days for delay were the same i.e., 4 days. - Delay condoned. - CIT(A) to hear the appeal on merit.
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2012 (6) TMI 473
Treatment on purchase and sale of shares as "Business Income" as against "Capital Gain" – Held that:- assessee's transaction of shares is in the nature of investment in shares and accordingly delivery based transaction in the present case is treated as those in the nature of investment and profit received is to be treated either as short-term capital gain or long-term capital gain depending upon the period of holding. CIT(A) has rightly held the transactions of the assessee as investment in shares chargeable to capital gain by taking uniformity in treatment and observing the principle of consistency, when the facts and circumstances are identical in assessee's own case in earlier years. appeals of revenue is dismissed Whether CIT(A) was wholly wrong and unjustified in confirming the arbitrary, ad hoc and estimated disallowance of expense of Rs. 2,80,686/- u/s 14A of the I.T Act @ 5% of the exempt dividend income made in the assessment merely on presumption without considering the fact that no expenditure was incurred for earning the said income and without bringing on record any material or evidence to establish the nexus between such alleged expenditure and the earning of said income – Held that:- in the case of Godrej Boyce Mfg. Co. Ltd. (2010 - TMI - 78448 - BOMBAY HIGH COURT - Income Tax), that Rule 8D is applicable for and from assessment year 2008-09 and prior to that the Assessing Officer can make estimate in the given facts and circumstances. disallowance restricted to 1% in relation to earning of exempted dividend income and direct the Assessing Officer to calculate the expenditure on that basis. This ground of assessee's cross objections is partly allowed. appeals of the revenue are dismissed and the Cross Objections of the assessee are partly allowed
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2012 (6) TMI 472
Revision u/s 263 initiated on two grounds - (i) the A.O. had not verified the applicability of sec. 92 of the Act before allowing export turnover of the assessee; and (ii) sufficient enquiry had not been carried out in respect of the lenders while allowing receipt of unsecured loans by the assessee-company to the tune of ₹ 1.63 crores. - held that:- when on the facts and circumstances of the case and evidence on record there was no requirement of taking into consideration the list of associated enterprises, more so when there was no international transaction with them, the A.O. did not commit any mistake in not asking for such list. - Revision on first ground is not valid. C.I.T. observed that the A.O. did not make proper enquiries about the creditworthiness of the lenders before accepting the loans to the assessee. - held that:- In the case of the assessee, the ld. C.I.T. could not point out as to what was the error committed by the A.O. in not having considered the applicability of Sec. 92 of the Act and in accepting the unsecured loan taken by the assessee. The ld. C.I.T. having failed to point out such error, no error can be inferred from the order of A.O. for the simple reason that the same is bereft of details. - Revision u/s 263 on second ground is also not valid. - Decided in favor of assessee.
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2012 (6) TMI 471
Whether CIT(A) erred in deleting the addition made by the AO on account of dis-allowance of expenditure on R&D being capital in nature - expenses relating to material/consumable/spares - details of material used for lab trials for process development – Held that:- All these items are in the nature of material/consumables in the process of R&D. It is not the case of the AO that the said material was not consumed in the R&D process and some part thereof was remaining in the closing stock. Therefore, this expenditure incurred on material used for lab trials cannot in any manner be considered as expenditure being in the nature of capital. no infirmity in the order of CIT(A) vide which the assessee has been held eligible for deduction of these expenditure under both the sections either u/s 35(1)(i) or u/s 37(1) of the Act. ground of the revenue is dismissed Whether CIT(A) erred in directing the AO to allow the deduction u/s 80IB of the I. T. Act, 1961 if it is otherwise allowable without appreciating the fact that the assessee has not made any such claim in its return of income – Held that:- claim was not made by the assessee in the return of income, it was also not made during the course of assessment proceedings. The facts relating to that deduction have also not been shown to be existing on record. Ld. CIT(A) without considering this aspect has directed the AO to examine the claim of the assessee in accordance with law. When the facts regarding such deduction were not available on record and the ground was also not arising out of assessment order, CIT (A) has committed an error in entertaining such ground. ground of the revenue is allowed. appeal filed by the revenue is partly allowed
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2012 (6) TMI 470
Deduction u/s 80HH - reassessment - prohibition contained in section 80HH(9A) - earlier deduction claimed u/s 80HHA - new ground before High Court - held that:- When an entirely new issue is put forward by the assessee in an appeal under section 260A, we will not be able to decide the same because such question raised by the assessee does not arise out of the orders of the Tribunal. However, based on the facts on record, we uphold the position canvassed by the Revenue that reassessments are not time barred by virtue of the non-disclosure of the claim allowed in favour of the assessee under section 80HHA for the three preceding years which disentitled her for the claim of deduction under section 80HH for the year 1992-93 or any other year. However, in view of the new case put forward by the assessee before us which was not raised before any of the lower authorities, we vacate the orders of the Tribunal and the first appellate authority and restore the reassessments with a direction to the assessee to file rectification applications within six weeks from the receipt of this judg- ment for the Assessing Officer to consider whether in the original assess- ments 1992-93 and 1993-94 and no claim was made under section 80HH and the claim made was only under section 80HHA of the Act.
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2012 (6) TMI 469
Penalty u/s 271 - concealment of income - held that:- the assessee was having excess stock of first and second class bricks which was not accounted for in the books of account. - It is true, as contended by the learned authorised representative, that penalty proceedings are different from assessment proceedings and the confirmation of addition in question does not lead to automatic con- firmation of penalty. In such circumstances, the onus is on the assessee to prove that the mischief of section 271(1)(c) is not attracted. - deletion of penalty by the first appellate authority was not justified.
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2012 (6) TMI 468
Principal of mutuality - Association - Scope of section 28(iii) - purchase and distribution of tyres, automobile spares, etc., to its own members. - the only test to consider whether the principle of mutuality applies is whether the contributors to the club or the organisation are the participants in the benefit derived from it. - Admittedly, the beneficiaries of the little profit derived by the respondent-association as in the case of the clubs are the members. In other words, the purchases made by the members lead to profit to the association which in turn goes to the members or for their own benefit. - the principle of mutuality squarely applies to the case of the respondent-association for the transactions carried on by them. Scope of section 28(iii) - held that:- the above provision does not apply to the facts of this case. The only other exception for assessment of mutual benefit concerns is only the income falling under section 2(24)(vii) which provides for assessment of profits and gains of any business of insurance carried on by a mutual insurance company or by a co-operative society, computed in accordance with section 44 or any surplus taken to be such profits and gains by virtue of the provisions contained in the First Schedule to the Act. - This provision has no application so far as the respondent association is concerned. - Tribunal rightly upheld the respondent's entitlement for exemption from payment of income-tax by applying the prin- ciple of mutuality. - Decided in favor of assessee.
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2012 (6) TMI 467
Deduction u/s 80IC - Conditions - industrial undertaking - held that:- The words "profits and gains derived from Industrial Undertaking" occurring in section 80-IA of the Act were under consideration of this court in Liberty Shoes Ltd.'s case [2006 (8) TMI 163 (HC)]. - The assessee who was earning profit from business of trading activity or products of other con- cerns was held not to derive income from such industrial undertaking. Following the dictum laid down in Sterling Foods' case [1999 (4) TMI 1 (SC)] it was held that the assessee was not entitled to any benefit under the said provision. - Decided in favor of revenue.
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Customs
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2012 (6) TMI 498
Application for waiver of pre - deposit of duties and penalties - Held that:- Following the ratio of the Tribunal's decision in the appellants own case and after waiving the requirement of pre deposit, the matter is remanded to Ld. Commissioner to decide the case afresh as the assessee have only made a claim for benefit of Notification but have not produced any evidence in support of their claim satisfying the condition of the Notification.
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2012 (6) TMI 466
Revocation of CHA licence - alleged violation of Regulations 13(d), 13(n) and 19(8) of the CHALR, 2004 - non- verification of contents of export - Held that:- It is found that findings of the Commissioner of Customs in the case of Daroowala Bros and Co., wherein it was held that CHA has performed their job in a casual manner and CHA licence was made operative by forfeiting the security deposit, and in the appellant's case are almost identical. However, in both the cases treatments given are different. The Commissioner of Customs (General) should maintain consistency in passing the orders/decisions and should not follow the policy of pick and choose. In this case, Commissioner of Customs (General) has followed the policy of pick and choose and there is no consistency in decision while dealing the same situation, thereby he revoked the CHA licence of the appellant which cannot be permitted. We do not find any merit in the impugned order, the same is set aside.
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Corporate Laws
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2012 (6) TMI 497
Winding up petition - denial - respondent Company set up a case of adjustment and stated that M/s RMP Fabrics, being a sister concern of the appellant owed monies to M/s Indian Handicrafts, a sister concern of the respondent Company - appellant contended said defence to be highly improbable, unbelievable and a sham - Held that:- It is found that RMP Fabrics has filed petition against Indian Handicrafts for recovery of money and in which the respondent Company has also been impleaded as a defendant, for recovery of the amounts. RMP Fabrics also argued that the said defence was sham and amounted to an admission. It is undisputed that said application was dismissed and which order has attained finality. Hence, once the Suit Court has negatived the plea of the sister concern of the appellant, of the defence of Indian Handicrafts and the respondent Company being sham and amounting to admission, and which order had attained finality, no contrary view could be taken in the company petition - Petition dismissed.
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2012 (6) TMI 496
Meetings - Quorum - plaintiff has contended that there was no quorum upon she having left the board meeting and, hence, no business could be transacted – Held that:- plaintiff did attend the board meeting on 6-8-2009. Having attended the board meeting, it was the plaintiff’s bounden duty as a director and consequently as an agent of the company to go through the businesses which were sought to be transacted thereat. The plaintiff would have then been entitled to vote against the resolution sought to be passed and the resolution could not have been passed by a unanimous vote as required by the Articles of Association of the company. The plaintiff has called upon the Court to do what she could have done but failed to do. business transacted cannot be challenged Alternative director - defendant No. 12 who was the other Director present at the meeting could not have remained present as director. He was an alternate to the defendant No. 2. He was appointed when defendant No. 2 was to leave India. Defendant No. 2 is stated to be carrying on business in Singapore. After his appointment, defendant No. 2 returned to India, but had not attended any board meetings thereafter – Held that:- provision in section 313 with regard to the absence of the director from the State in which the meetings of the board are ordinarily held until the director returns to the State in which the meetings of the Board are ordinarily held as set out in sub-sections (1) and (2) thereof respectively would show not only a temporary return, but an intention to stay in that State so as to able him to transact the business of the company in the State where board meetings are ordinarily held. If a director such as defendant No. 2 merely comes to the State and leaves India again he would not be able to transact business. Hence, the alternate director would require to continue until the director appointing him would have continued. In instant case it would be permanently or until defendant No. 2 resigns or is removed is as director or otherwise vacates office under section 283. even if defendant No. 2 came to India for a week on his holiday or to visit his family, the defendant No. 12 would ipso facto vacate his office is wholly unacceptable.
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2012 (6) TMI 485
The company raised a huge amount - violation of sections 11(b) and 12(1b) of the SEBI Act, 1992, read with articles 5, 68, 73 and 74 of the Securities and Exchange Board of India (Collective Investment Schemes) Regulations, 1999 - an offence punishable under section 24 of the SEBI Act was committed. - held that:- The offence is to continue with the scheme post March 31, 2000, in spite of the scheme not being registered and the deposits not returned to the investors. - it has been averred that as directors of accused No. 1, accused No. 2 to accused No. 11 were the persons in charge of and responsible for the conduct of the business of accused No. 1 and thus were liable for the violations committed by accused No. 1, as provided by section 27 of the SEBI Act, 1992.
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2012 (6) TMI 465
Lifting of Corporate Veil - Petition against order of Trial Court decreeing the suit of the respondent on a dishonoured cheque by dismissing the leave to defend application - dishonour of cheque issued for repayment of loan - appellant denied transaction of loan and contended that same had been issued to respondent to arrange for services of a corporate consultant - appellant- company also contended that directors/shareholders could not be made liable for the dues of the company - Held that:- Trial Court has rightly held that the defence is moonshine inasmuch as admittedly there was no written agreement qua the story of appointment of corporate consultant, and it was difficult to believe that the appellants did not protest in writing to the respondent even after the services of a corporate consultant were not provided. It was also observed that the company is an alter ego of the appellants no. 2 and 3(husband- wife who own company), and on the corporate veil being lifted, it would become clear that the corporate entity was used to defraud people and not encourage trade and commerce. Hence, all the three defendants are liable to pay the cheque amount of Rs. 3 lacs jointly and severally. Also, as per Section 70 of the Contract Act, 1872, and which provision deals with quasi contract i.e. where there is no contract, it is provided that anyone who receives benefits of monies, in fact must repay back those monies. Hence, all the three defendants are liable to pay the cheque amount of Rs. 3 lacs with interest of 18% p.a jointly and severally. Trail Court's order upheld.
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2012 (6) TMI 464
Winding up - petitioner-company acted as an agent to forward and custom clear respondent's cargo for voyages to its various clients abroad. However, the respondent had failed to pay the invoices in spite of repeated requests – Held that:- no agreement between the respondent and the petitioner-company. There is an agreement between the petitioner and the 'H' for payment of freight charges and respondent is not liable to pay the amount. as per the order issued by the 'H', they will stitch the garments as per their specifications and supply the same to their agents in India, the agents in India in turn will ship the materials to its destinations and there is no responsibility of the respondent to pay any charges. in the absence of any contract between the petitioner and the respondent, the petitioner cannot insist upon the respondent to pay the debts of 'H'. company petition is to be dismissed
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Service Tax
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2012 (6) TMI 524
Waiver of pre-deposit – Manpower Supply service - receipt of manpower supply from the holding company - M/s. Bain & Company , USA – Held that:- in case of supply of manpower by an agency, the persons supplied are the employees of the supply agency who receive their salaries/wages and other allowances from such agency and not from the clients - Persons loaned by the holding company to the appellants were receiving their salaries and allowances from the appellants in foreign exchange and only their P.F. Contribution in foreign exchange was being remitted to the holding company as they were earlier working for the holding company - Persons, who are alleged to have been supplied by the holding company to the appellant can not be said to be the employees of the holding company - No services of "manpower recruitment or supply agency" has been received by the appellant from their holding company. Stay application is allowed.
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2012 (6) TMI 522
Denial of the benefit of Notification 1/2006 Dated 01.03.20062006 as the appellant has availed CENVAT credit - the appellant are engaged in providing construction services – Held that:- As the appellant has reversed the CENVAT credit availed by them, along with interest, same shall be interpreted as if appellant has not availed input service credit after introduction of notification 1/06 – in favour of assessee. Availment of CENVAT credit on outward transportation services – Held that:- As decided in COMMISSIONER OF CENTRAL EXCISE & SERVICE TAX, BANGALORE Versus M/s ABB LTD. and others[2011 (3) TMI 248 (HC)] that prior to 01.04.2008, the assessee is entitled to take CENVAT credit of outward transport agency service – in favour of assessee.
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2012 (6) TMI 521
Refund – time bar - Commissioner (Appeals) allowed the claim without time bar after holding that the amount paid by the party did not represent any tax - Commissioner (Appeals), in this connection, relied on the Board's Circular No. B/11/1/2002-TRU dated 01.08.2002 - – Held that:- no manner of challenge against the reliance placed by learned Commissioner (Appeals) on the Board's circular - application is dismissed.
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2012 (6) TMI 520
Waiver of pre-deposit - 'Franchise Service' - appellants getting branded alcoholic beverages manufactured from different contract bottling units (CBUs) on contract basis - activity of the applicants for the subsequent period, in the applicants own case, the Commissioner has dropped the demand holding that the activity undertaken by the applicants does not fall under the 'Franchise Service'. He further submitted that prior to 16.6.2005, under the exhaustive definition, it was held by the Commissioner that activity does not fall under 'Franchise Service' – Held that:- activity undertaken by the applicants cannot be covered under the restricted definition of 'Franchise Service'. Further, the issue is debatable and interpretation of law under which category the activity undertaken by the applicants shall be covered and from whom the Service Tax is to be recovered is also in jeopardy. Waiver of pre-deposit of entire demand of Service Tax, interest and various penalties granted.
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2012 (6) TMI 494
Denial of CENVAT credit on stockbroker's service - 'Input service under Rule 2(l) of CCR, 2004 - stockbroker's service used for the purpose of disposal of the shares held in another company – Held that:- The activity of sale of shares had any nexus with the business of the appellant would depend on how the sale proceeds were applied and the Working Director's affidavit does not bring out a clear picture as it contains only general averments - neither in the affidavit nor in the MOA is there anything to indicate that the shares held in another company were sold for accomplishing any purpose integrally connected with the business of the appellant – denial of CENVAT credit on stockbroker's service as service was not used in or in relation to the manufacture of goods, the burden lay on the noticee to establish that the said service was covered by the inclusive part of the input service, if not by the main part - that the expression "such as" in the definition of input service is exhaustive and is restricted to the services named therein – against assessee.
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2012 (6) TMI 493
Denial of cenvat credit of service tax paid on outward freight - Held that:- The definition of 'input service' contains both the word 'means' and 'includes', the portion of the definition to which the word ‘means’ applies has to be construed restrictively as it is exhaustive and ‘ includes’ has to be construed liberally as it is extensive - the exhaustive portion of the definition of 'input service' deals with service used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products, it also includes clearance of final products from the place of removal till it reaches its destination falls within the definition of input, service - the word transportation is included in the phrase 'clearance of final products from the place of removal' after the final products has reached the place of removal - in the later portion of the definition the words 'activities relating to business’ is used to expand the meaning of the word 'input service'- while dealing with outward transportation two words inputs' or 'capital goods' are conspicuously missing as after inward transportation of inputs or capital goods into the factory premises, if a final product emerges, that final product has to be transported from the factory premises till the godown before it is removed for being delivered to the customer, therefore, 'input service' includes not only the inward transportation of inputs or capital goods but also outward transportation – in favour of assessee.
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2012 (6) TMI 492
Denial of cenvat credit of service tax paid on outward freight - Held that:- The definition of 'input service' contains both the word 'means' and 'includes', the portion of the definition to which the word ‘means’ applies has to be construed restrictively as it is exhaustive and ‘ includes’ has to be construed liberally as it is extensive - the exhaustive portion of the definition of 'input service' deals with service used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products, it also includes clearance of final products from the place of removal till it reaches its destination falls within the definition of input, service - the word transportation is included in the phrase 'clearance of final products from the place of removal' after the final products has reached the place of removal - in the later portion of the definition the words 'activities relating to business’ is used to expand the meaning of the word 'input service'- while dealing with outward transportation two words inputs' or 'capital goods' are conspicuously missing as after inward transportation of inputs or capital goods into the factory premises, if a final product emerges, that final product has to be transported from the factory premises till the godown before it is removed for being delivered to the customer, therefore, 'input service' includes not only the inward transportation of inputs or capital goods but also outward transportation – in favour of assessee.
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2012 (6) TMI 491
"Erection and commercial and industrial construction service" as also "work contract"- the appellant has two units - demand raised as absence of option exercised by the appellant before they started paying duty under the works contract - Held that:- consideration clarification issued by the CBEC vide their D.O.F.NO.334/12/09-TRU dt.6.7.09. It stands clarified that the service provider who paid service tax prior to 1.6.07 for taxable service such as erection, commissioning or installation service, commercial or industrial construction services or construction of complexes services, as the case may be, is not entitled to change classification to single composite service for the purpose of payment of service tax prior to 1.6.07 and hence is not entitled to the benefit of composite scheme - the appellant has not been able to make out prima a case in its favour so as to allow stay petition - direct the appellant to deposit an amount of Rs.15 lakh as pre-deposit.
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2012 (6) TMI 490
Service of renting of immovable property - demand of service tax - Held that:- Considering the definition of immovable property, the same does not include building used solely for residential purposes and building used for the purpose of accommodation including hotels, hostels, boarding houses, holidays accommodation, tents, camping facility etc.- in favour of assessee.
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2012 (6) TMI 489
Waiver of pre-deposit - maintenance and repair service – applicant is engaged in repairing and overhauling various aircrafts for Indian Air Force, Indian Army, Coastguard, Navy and for other civilian customers in the Aviation Industry – whether the value of materials used for providing the said services should be included or not – Held that:- value of materials supplied while rendering such services need not be included. Pre-deposit waived.
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2012 (6) TMI 488
Waiver of pre-deposit - demand of service tax is for the period from 10.9.2004 to 31.3.2006 and the same was confirmed against the appellant by the original authority in adjudication of a show-cause notice which was issued on 26.11.2008 invoking the extended period of limitation –SCN merely mentions non-declaration of P & T charges collected from customers for providing Banking and Other Financial Services in ST-3 returns – Held that:- show-cause notice which was issued in November 2008 did not specifically allege any suppression of such fact with intent to evade payment of service tax. Hence there will be waiver of pre-deposit.
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2012 (6) TMI 487
Waiver of predeposit - On the one hand, Form No.ST-4 was used by the party and, on the other hand, Section 35 of the Central Excise Act was mentioned in the cause title of the appeal. The COD application filed before the Commissioner (Appeals) did not make any mention of sub-section 3 of Section 85 of the Finance Act, 1994 – Held that:- appellant was obviously confused as to what provisions of law were to be selectively invoked. Matter remanded to Commissioner (Appeals) to reconsider the COD application filed by the party.
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2012 (6) TMI 486
Cenvat credit on services rendered by the CHA – Input credit - Held that:- cenvat credit in respect of services rendered by CHA is admissible to the appellants.
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Central Excise
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2012 (6) TMI 526
SSI Exemption - Denial of benefit exemption - goods are manufactured with the brand name 'Universal' which belongs to M/s. Universal (India) Pvt. Ltd. - Held that:- As the casing is not traded in the market under the brand name 'Universal' and is further used in the manufacture of pre-recorded audio cassettes no infirmity in the impugned order.
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2012 (6) TMI 495
Valuation of goods - assessee, engaged in the business of manufacture and sale of various cosmetics products - Revenue contended taxability of Technical Professional Products, sold only to salon for their exclusive internal in-salon use, u/s 4 instead of Section 4A of the Central Excise Act, 1944 on ground that they are neither intended nor offered for retail sale - Commissioner (Appeals) dropped the demand in respect of aforesaid - Held that:- It is found that products under Professional product Division have been divided by the assessee into two categories, namely (i) Technical Products, (ii) Retail Products. The dispute as seen from the SCN relates only to Technical Products. However, the Commissioner has proceeded on the wrong footing that the dispute relates to both the products and accordingly Commissioner has arrived at the conclusion. In these circumstances, we set aside the impugned order and send the matter back to Commissioner with the direction that the Commissioner shall give specific findings only with respect to Technical Professional Products having regard to the provisions of Standards of Weights and Measures (Packaged Commodities) Rules, 1977 both pre and post 13.01.2007. The Commissioner shall also give finding on limitation.
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2012 (6) TMI 463
Remission of duty - loss of goods due of fire - Demand imposed on assumption that appellants have claimed insurance loss on goods, semi-finished goods and waste and combined due to fire whereas no duty is paid on the said goods - Held that:- Demand of duty is linked with the remission of duty. Undisputedly the application for remission of duty is not yet decided, hence, case is remanded to lower adjudicating authority to decide the issue after the disposal of the application for remission. Since case pertains to year 1986-87, Commissioner is directed to dispose of remission application within 4 months from the date of receipt of this order and lower adjudicating authority should decide the demand cum Show Cause Notice within 1 month from the date of disposal of the remission application.
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2012 (6) TMI 462
Plea for waiver of pre-deposit of duty and penalty of equal amount u/s 11AC - dismissal of appeal by Commissioner(Appeals) for non-compliance with the provisions of section 35F - assessee contended that CENVAT Credit has been disallowed only on the ground that their supplier which is a SEZ Unit is not required to pay duty, therefore credit is not admissible whereas no action has been taken against their supplier - Held that:- Since Commissioner(Appeals) has not decided the issues on merits. Therefore the case is remanded to Commissioner(Appeals) for deciding the issue on its merits without insisting for any further pre-deposit.
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2012 (6) TMI 461
Cenvat credit – input received in factory – Held that:- Merely because the corporate office address is given in the invoice, cannot be made the reason to deny the credit otherwise available to the assessee. Appeals allowed
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2012 (6) TMI 460
Cenvat credit - outward transportation of goods up to the place of their buyers - supplies made by them to their buyers of FOR destination basis – Held that:- Assessee is eligible for cenvat credit for the period prior to 1.4.2008. Appeal is allowed
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2012 (6) TMI 459
SSI Exemption - Deemed export - Value of clearance - Whether the value of "deemed exports" has to be included in the calculation of aggregate value of clearances for the benefit of exemption in terms of SSI Notification No.1/93 – Held that:- Value of "Deemed Exports" is to be included in the calculation of aggregate value of clearances for extending the benefit of exemption in terms of Notification No.1/93-CE – In favor of Revenue. Whether Deemed Exports can be equated with clearances for home-consumption or the same have to be treated as exports - "Deemed Exports" cannot be equated as "exports" for each and every purpose and, therefore, the benefits available for "deemed exports" shall be only those specifically provided under the EXIM Policy - In favor of Revenue.
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Wealth tax
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2012 (6) TMI 525
Determining the value of urban land - valuation to be determined based on the market value – Ignorance of agreement entered between assesse and DLF as it is self serving – Held that:- The valuation to be determined based on the market value cannot be accepted as the agreement ordains that all the transactions of sale of land are fixed at cost + Rs.2,000/- per acre, the module has been held by ITAT and by department to be at the arms’ length year after year - AO was not justified in treating the said agreement as self-serving document and should not be held as a void for wealth tax purposes, as the department itself has held it to be a valid agreement in income-tax proceedings - business assets embedded in the urban land became liable to tax with effect from 1.4.1993 and it cannot be said that this agreement, even though valid for all other purposes is void for the purposes of the Wealth Tax Act by application of this section and the value of the asset cannot be determined ignoring the agreement of 25.10.1983 - the land in question is held as stock in trade a business asset and the method of valuation as laid down in rule 14 and Schedule III part ‘D’ is also applicable and on both counts the valuation adopted by AO cannot be upheld - no scope to determine the valuation as adopted by the WTO/CWT(A) – in favour of assessee.
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2012 (6) TMI 499
Whether Tribunal was right in holding that the assessee-society was exempt under section 5(1)(i) of the Wealth-tax Act in respect of its assets consisting of the land and buildings comprised in the kalyana mandapam owned by it - assets held under trust or other legal obligation for a public purpose - a charitable or religious nature - held that:- There is absolutely no dispute on the proposition of law that the provisions under the Income-tax Act and the Wealth-tax Act are totally different. Given the fact that the income from the kalyana mandapam is treated as income from property and that the property had been admittedly held by the assessee under trust for public purpose of a charitable nature, one need not advert to the applicability of the provision herein to the facts of the case. It is not the case of the Revenue that the case of the assessee falls under section 11(4A) of the Income-tax Act, a plea which the Revenue cannot take at this stage, having regard to the income-tax assessment granting exemption under section 11 of the Income-tax Act. - , the income by letting out the kalyana mandapam as income from the property is also binding on the Revenue and it is not now open to the Revenue to take a different view.
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Indian Laws
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2012 (6) TMI 519
Complaint under section 138 of the Negotiable Instruments Act, 1881 - repayment of a loan - Dishonor of cheque - Compensation under S. 357(3) - held that:- Though a complaint under section 138 of the Act is in regard to criminal liability for the offence of dishonouring the cheque and not for the recovery of the cheque amount, (which strictly speaking, has to be enforced by a civil suit), in practice once the criminal complaint is lodged under section 138 of the Act, a civil suit is seldom filed to recover the amount of the cheque. A stage has reached when most of the complainants, in particular the financing institutions (particularly private financiers) view the proceedings under section 138 of the Act, as a proceeding for the recovery of the cheque amount, the punishment of the drawer of the cheque for the offence of dishonour, becoming secondary. As the provisions of Chapter XVII of the Act strongly lean towards grant of reimbursement of the loss by way of compensation, the courts should, unless there are special circumstances, in all cases of conviction, uniformly exercise the power to levy fine upto twice the cheque amount (keeping in view the cheque amount and the simple interest thereon at 9% per annum as the reasonable quantum of loss) and direct payment of such amount as compensation. Nature of proceedings under NI Act - Proceedings under section 138 of the Act cannot be treated as civil suits for recovery of the cheque amount with interest. Uniformity and consistency in decisions - If some courts grant compensation and if some other courts do not grant compensation, the inconsistency, though perfectly acceptable in the eye of law, will give rise to certain amount of uncertainty in the minds of litigants about the functioning of courts. Citizens will not be able to arrange or regulate their affairs in a proper manner as they will not know whether they should simultaneously file a civil suit or not. The problem is aggravated having regard to the fact that in spite of section 143(3) of the Act requiring the complaints in regard to cheque dishonour cases under section 138 of the Act to be concluded within six months from the date of the filing of the complaint, such cases seldom reach finality before three or four years let alone six months. These cases give rise to complications where civil suits have not been filed within three years on account of the pendency of the criminal cases. While it is not the duty of criminal courts to ensure that successful complainants get the cheque amount also, it is their duty to have uniformity and consistency, with other courts dealing with similar cases.
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