TMI Tax Updates - e-Newsletter
June 28, 2012
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Highlights / Catch Notes
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Income Tax:
Income form sale of land - Business Income or Capital gains - assessee, engaged in the business of real estate, constructing flats, sale of land - considered as income from business. - AT
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Income Tax:
Deduction u/s 10A - STPI undertaking - a mere organizational change was not a ground for the AO to hold that the assessee was not entitled for deduction u/s. 10A within the meaning of section 10A(2) - AT
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Income Tax:
Interest u/s.244A - self assessment tax paid u/s.140A should also be taken into consideration while determining the interest u/s.244A. - AT
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Income Tax:
Penalty under section 271(1)(c) - penalty immunity - if income has not been declared before the expiry of time under sub-section (1) of section 139, then immunity is not available. - AT
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Income Tax:
Royalty payment - in the nature of expenditure incurred for carrying on business with available know-how - revenue expenditure - HC
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Income Tax:
TDS credit of tax - the assessees are entitled to credit of tax based on the very same TDS certificates in the year in respect of which the subject-matter of deduction of tax is assessed. - HC
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Income Tax:
Rejection of books of accounts - estimation of deduction u/s 10A - there is undisputed and excess mistakes in the accounts. - AO has rightly rejected the books as per the provisions of section 145(3) of the Act. - AT
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Income Tax:
Levy on interest u/s 234B, 234C on arrears of tax payable due to retrospective amendment - amendment to Section 115JB of the Act - not liable to pay interest on the amount due as per the amended provision - HC
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Income Tax:
Illegal payment commission paid to private doctors for referring patients for diagnosis could not be allowed as a business expenditure. - HC
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Income Tax:
Exemption u/s 11 - Violation u/s 13(1)(c) - amount withdrawn from the assessee-Trust and held by one of the trustees for two days - It will not be reasonable to take a view that any benefit could have been derived by trustee in such a short period of two days. - HC
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Income Tax:
Payment made for surrender of tenancy rights - deduction allowed u/s 37(1) - AT
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Income Tax:
Gains arising on sale of Agricultural land Assessee might not have paid agricultural income-tax but is paying land revenue and village records clearly showed the land to be agricultural - AT
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Income Tax:
Disallowance u/s 40A(3)- trade creditors outstanding - amounts paid otherwise than by a/c. payee cheques or drafts - provisions for different assessment year analyzed - AT
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DGFT:
Amendments in the Vishesh Krishi and Gram Udyog Yojana (VKGUY) and Focus Product Scheme (FPS) of Chapter 3 of Foreign Trade Policy 2009-14 - Appendix 37A and Appendix 37D of Handbook of Procedures (Vol. I). - Public Notice
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Indian Laws:
RETROSPECTIVE EXEMPTIONS IN SERVICE TAX - Article
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Indian Laws:
Dismissal of appeal of revenue by Bombay High Court about disallowance under Section 14A in case of Delite Enterprises - need proper understanding- an analysis. - Article
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Indian Laws:
ATTENTION: All DIRECTORS of ANY COMPANY Updating of Income Tax PAN details in MCA21 DIN DATA
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Service Tax:
Club or Association Services - in view of the mutuality and in view of the activities of the club, if club provides any service to its members may be in any form including as mandap keeper, then it is not a service by one to another as foundational facts of existence of two legal entities in such transaction is missing - HC
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Service Tax:
CENVAT credit - Rule 6 - Even if sub-rule (3) prescribes a limit of 20% for availment of service tax credit, sub-rule (5) provides for whole of the service tax credit in respect of the specified input services - sub-rule (5) prevails over sub-rules (1),(2) and (3) - AT
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Service Tax:
As the applicant is engaged in the construction of flats for Indian Army and WBPDCL and the residential complex are for the personal use of the army and WBPDCL - in favour of assessee. - AT
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Service Tax:
Earthwork and excavation for making civil foundation for windmill towers - works undertaken by the appellant were preparatory to erection, commissioning and installation of windmills Pre-deposit ordered. - AT
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Central Excise:
Extended period of limitation once the facts necessary to permit the department extended period of limitation are established on record, thereafter, the question of initiating proceedings within one year from the date of knowledge of the department, is not relevant - HC
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Central Excise:
SSI exemption - there is no bar to availing SSI exemption if the unit is using a trade mark belonging to the foreign firm so long as the said unit is exclusive owner of the said trade mark in India - AT
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Central Excise:
SSI Exemption - brand name - as there are various decisions of Tribunal and Apex court against revenue, merely because, the Apex Court subsequently in the case of Grasim Industries Ltd(2005 (4) TMI 64 (SC)) ruled to the contrary, it could not be said that the assessee had suppressed material facts - HC
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Central Excise:
Recovery of deemed Cenvat Credit availed through fraudulent bills - penalty under Rule 27 imposed - liability of bank - no penalty can be imposed on the banking company - AT
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VAT:
Delhi Value Added Tax Act, 2004 -in case multi functional machine is a duplicator or a photocopying machine, which incidentally can be used as a printer or a scanner etc., the said machine would not qualify and cannot be treated and regarded as input or output unit of automatic data processing machine and will be covered by the residuary tax rate - HC
Articles
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2012 (6) TMI 633
Income form sale of land - Business Income or Capital gains - assessee, engaged in the business of real estate, constructing flats, sale of land - Held that:- In the present case, property has been committed to a trade and the assessee earned profit in the course of carrying on the business. Assessee never intended to be owner of the land in question and it was not a simple purchase and sale transaction. Rather, the assessee facilitated the development and sale of land in question apart from taking responsibility of getting the process of disputes with respect to the land settled expedited. Therefore, it is clear that the assessee was carrying on business with the above business objectives in mind. Hence, having regard to the nature of activities carried on by the assessee it has to be construed as trading activity of the assessee and the income emerged from this transaction has to be considered as income from business. Non-allocation of indirect expenditure other than interest to the projects under construction - 84% of the work of the company during the year related to the projects under construction - Revenue apportioned indirect expenditure to to Work-in-progress - Held that:- Non allocation of the indirect expenses to the work-in-progress truly affects correct reflection of the profit and loss of the assessee-company. Being so, AO is justified in reallocating the indirect expenses to the capital project of the assessee. Depreciation of centring material - dis-allowance - Held that:- The assessee claimed all this depreciation is relating to the project under construction. The project under construction being the capital asset, depreciation cannot be allowed - Decided in favor of Revenue
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2012 (6) TMI 632
Deduction u/s 10A - denial on ground of non-satisfcation of conditions of Section 10A - change in organization status of STPI undertaking - assessee company entirely held by M/s. Samsung Electronics Company Ltd., South Korea (SECL), engaged in the business of software development for its parent company - Held that:- Assessee undertaking existed in the same place, form and substance and did carry on the same business before and after the change in the legal character of the form of the organization. Formerly it was a branch establishment of a non-resident company/foreign company, but later on it was converted into a subsidiary company. However, for the above change of organization status, same unit continued to function throughout the time and even Software Technology Parks of India (STPI) authority gave the approval for transfer of STP activities of M/s. SECL to the assessee w.e.f. 01.12.2005. Therefore a mere organizational change was not a ground for the AO to hold that the assessee was not entitled for deduction u/s. 10A within the meaning of section 10A(2) - Decided in favor of assessee. For the purpose of computation of deduction u/s. 10A, if any expenditure is excluded from the export turnover, the same has to be excluded from the total turnover also.
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2012 (6) TMI 631
Whether CIT(A) is right in allowing interest u/s.244A of the Act where refund arose on account of payment of self-assessment tax without appreciating that the words in any other case occurring in section 244A(1)(b) cannot be construed to include in clause (a) of section 244A(1) of the Act Held that:- in the case of CIT vs. SIV Industries Ltd. (2007 (2) TMI 130 (HC)) held that self assessment tax paid u/s.140A should also be taken into consideration while determining the interest u/s.244A. order of ld. CIT(A) confirmed. Whether CIT(A) is right in holding that no interest u/s. 234D is chargeable for A.Y. 2001-02 - DR submitted that there was no provision in the Act for allowance of interest on interest Held that:- in the case of Sandvik Asia Ltd.( 2006 (1) TMI 55 (SC)) has clearly held that when amounts are wrongfully retained by the Government, then, on general principle, interest has to be paid. AO directed to allow interest on interest in accordance with the decision of Honble Supreme Court in the case of Sandvik Asia Ltd. (supra).
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2012 (6) TMI 630
Block assessment search undisclosed income - assessment orders under section 158BC were passed in these cases on 6-7-2007 - satisfaction note/letter was written on 13.7.2007 - Revenue has placed no material on record to show any undisclosed income Held that:- in the case of Mukta Metal Works (2011 (2) TMI 250 (HC)) was held that according to the provisions of section 158BD of the Act the satisfaction has to be recorded between the initiation of the proceedings u/s 158BC and before completion of block assessment u/s 158BC of the Act in the case of person searched. It could not be after the conclusion of the block assessment as there was no occasion for an AO to examine the seized material or documents of the person searched when the block assessment proceedings had concluded and no other proceedings were pending before him. order passed was contrary to the provisions of section 158BD of the Act and needs to be quashed. Decided in favor of assessee.
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2012 (6) TMI 629
Validity of revisionary order passed u/s 263 - Asset Management Company - initial issue/launch expenses - revenue expenditure or capital expenditure - Held that:- It is found that SCN u/s 263 was specific and related to the question as to whether the expenditure was capital or revenue. However, while passing the order u/s.263, the CIT proceeded on a totally different directions by treating the expenditure as revenue expenditure and further examined the question as to whether the they can be claimed in one year or have to be amortized as contemplated by the SEBI Regulations and decision in case of Madras Industrial Investment Corporation. No opportunity being given to assessee to explain its stand on amortization of initiation expenses. The action of the CIT in revising the order of the AO on this basis cannot be sustained. Further, as to whether the decision in case of Madras Industrial Investment Corporation (1997 (4) TMI 5 (SC)) will be relevant in the context of an AMC which manage funds on behalf of mutual fund companies and derives income from managing a fund in the form of fee for managing the fund, is again debatable. On such debatable issues where two views are possible jurisdiction u/s.263 is not to be exercised. We accordingly hold that exercise of jurisdiction u/s.263 could not have been made. In the result the order u/s. 263 of the Act, in so far as it relates to the initial issue expenses, are hereby quashed - Decided in favor of assessee.
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2012 (6) TMI 628
Penalty under section 271(1)(c) - unaccounted sale of raw-material - addition was made on estimate basis - Held that:- It is well settled that the addition made purely by way of estimate should not be made the basis for levy of penalty for concealment of income. It is not the case of the revenue that the assessee has not disclosed the material facts relevant to the assessment. The issue of burning loss and consequential consumption of raw-material was worked out on estimation only to determine the unaccounted sale of raw material and the estimation differed at different levels of the revenue authorities. Assessing Officer has not pin-pointed any discrepancy or irregularity in the records. The possibility of sale of raw material outside the books was not based upon any material evidence but on suspicion which was created on account of non-availability of certain specific record. Mere possibility or suspicion or difference of opinion on some issue is not sufficient to impose penalty for concealment of income or filing of inaccurate particulars of income. No penalty under section 271(1)(c) was leviable on addition made on account of unaccounted sale of raw-material. Regarding penalty levied for diversion of income by sale to sister concern - addition was made due to the reason that the assessee-firm had disclosed lower profit on sale made to sister concern - Held that:- There is no definite finding that the transaction of sale made to 'ME' was a sham transaction. The figures of sale made to 'ME' (sister concern) were disclosed in the accounts statement and those figures had not been disputed by the department. The conduct of the assessee was bona fide. Material particulars with regard to the sale made to 'ME' were disclosed by the assessee, at the time of filing of its return of income with the department. Facts of the case may justify the addition made on account of low rate of profit on sale made to the sister concern but were not sufficient to sustain the penalty imposed under section 271(1)(c).
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2012 (6) TMI 627
Penalty under section 271(1)(c) - penalty immunity - search - assessee had already enhanced the income declared which was disclosed during the search to purchase peace of mind and avoid litigation Held that:- Explanation 5 to section 271(1)(c) clearly shows that if income has not been declared before the expiry of time under sub-section (1) of section 139, then immunity is not available. Provisions of section 153A clearly show that rule of abatment applies to an assessment or re-assessment which is pending on the date of initiation of the search. This means all the returns filed earlier will not abate but only in cases where assessments are still pending would abate. Despite search, assessee did not want to disclose the concealed income which was found during the course of search. Legal principles are clearly applicable to the facts of the case because during the search certain bundles of bills were found which pertained to undisclosed sales which were not recorded in the books of account and this fact was admitted during the search and, therefore, offence of concealment was complete. Therefore, penalty on additional incomes declared in the returns is clearly leviable. Penalties levied by the Assessing Officer are confirmed. Revenue's appeals are allowed. Decided in favour of revenue.
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2012 (6) TMI 626
Royalty payment - in the nature of revenue expenditure or capital expenditure - Held that:- Considering the terms of the Technical Assistance Agreement entered between the assessee and MMB entitlement to use the know-how supplied by MMB for the manufacture of the products. The know-how and information received by the assessee directly or indirectly was to be kept strictly confidential and was entitled to use the trade mark "Golden Eagle" of MMB. The payment of royalty was, therefore, in the nature of expenditure incurred for carrying on business with available know-how rather than for accretion to the capital base or gain an advantage in the capital field of the assessee - in favour of assessee.
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2012 (6) TMI 624
TDS denial credit of tax based on TDS certificates Held that:- respondents-assessee are not entitled to credit of tax on the interest income based on TDS certificates issued by the banks, the assessees are entitled to credit of tax based on the very same TDS certificates in the year in respect of which the subject-matter of deduction of tax is assessed. Decided in favour of revenue.
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2012 (6) TMI 623
Deduction of interest - Investment of interest free funds - commercial expediency - held that:- it is clear that no interest bearing funds were utilized by the assessee for the purpose of subscribing to the share capital of its subsidiary company. So long as the interest bearing funds are used for the business purpose, whether for investment in fixed or circulating capital, the amount of interest shall be allowed as deduction. If answer to stage (a) turns out to be in negative, only then the question of examining the stage (b) arises as to whether investment for non-business purpose was made out of interest free funds. If such investment for non-business purposes is out of interest free funds, then there cannot be disallowance of interest and vice versa. The second stage arises for consideration on the assessee's failure to succeed in the first. As in the instant case, the assessee failed to amply prove the business purpose in terms of S.A. Builders Ltd. [2006 (12) TMI 82 (SC)], but succeeded in proving that interest free funds were utilized for subscribing to the share capital of its subsidiary company, in my considered opinion the addition cannot be sustained. - Decided in favor of assessee. - Third member bench decision.
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2012 (6) TMI 622
Rejection of books of accounts - estimation of deduction u/s 10A - there is undisputed and excess mistakes in the accounts. - It is a fact the said inaccuracy amounts to ₹ 124.04 lakhs and works out to nearly 6% of the profits and the assessee describes the same as trivial and ignorable. Stand of revenue in this regard is that the AO has only to establish the inaccuracy in the books of accounts maintained by the assessee and the triviality of otherwise is not the issue. - held that:- the triviality of the default is no excuse as per the amended provisions of section 145 of the Act. Further, the default, which is quantified to be around ₹ 1.24 cr in our opinion, cannot described trivial in this case as it is the case of exemption u/s 10A of the Act and the assessee is expected to be extremely responsible in matters of maintenance of the books of such exempt undertakings. Without going into the reasons, whether bona fide or otherwise, we are of the considered opinion, the AO has rightly rejected the books as per the provisions of section 145(3) of the Act. Best judgement assessment - Estimation of Profits of the STP Units - held that:- the AO and the CIT(A) have not done the best judgment in the manner provided in section 144 of the Act. There are large number of judicial precedents in operation on the issue of 'best judgment' referred to in section 144 of the Act. In principle, the best judgment does not mean wild and unreasonable estimations. The very expression 'best judgment assessment' imply the judgment of the AO and the said judgment must be supported by the material or data gathered by him for this purpose both from internal as well as the external sources. Thus, we can not approve the 'best judgment assessment' made by the AO and sustained by the CIT(A) in the present form. Therefore, we are of the considered opinion, the AO must make 'best judgment assessment' as per the manner provided in section 144 of the Act and for this we have decided to set aside the order of the CIT(A) for this limited purpose. It goes without saying that the AO must grant reasonable opportunity of being heard to the assessee.
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2012 (6) TMI 621
Levy on interest u/s 234B, 234C on arrears of tax payable due to retrospective amendment - amendment to Section 115JB of the Act - held that:- liability to pay interest would only arise on default and it is in the nature of a quasi-punishment. - Such liability although created retrospectively could not entail punishment by payment of interest with retrospective effect. such a liability could be created retrospectively, when such a liability is retrospectively created, the assessee cannot be accused of committing default and he cannot be charged with interest for such default. As the assessee was under no obligation on the date of the alleged default to pay tax at that particular rate, he cannot be accused of having committed default and made to pay interest as compensating the revenue for having not paid the money. assessee is liable to pay advance tax as per the amended provisions of Section 115JB for the relevant period. However, he is not liable to pay interest on the amount due as per the amended provision. no liability to pay interest on the difference in the tax paid. - Decided in favour of the assessee and against the Revenue
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2012 (6) TMI 620
Commission paid by the assessee to the doctors - illegal payment Held that:- commission paid to private doctors for referring patients for diagnosis could not be allowed as a business expenditure. The amount which can be allowed as business expenditure has to be legitimate and not unlawful and against public policy - In favour of the Revenue
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2012 (6) TMI 619
Bad debt disallowance of deduction - assessee had created a provision for bad and doubtful debts under section 36(1)(viia) of the Act Held that:- Assessee is entitled to the deduction of any bad debt which is written off in its books of account to the extent it exceeds the credit balance in the provision for bad and doubtful debts accounts - Provision created by the assessee and claimed as deduction under section 36(1)(viia) will also be considered while computing the deduction under section 36(1)(vii) In favor of Revenue
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2012 (6) TMI 618
Reassessment - Search and seizure undisclosed income tuition work - additional income not been declaring in the return of income Held that:- Seized document, annexure A 20, it is clear that the assessee had been carrying on tuition work at a large scale - submission of the assessee that he undertook such work for coaching some brilliant students is without any merit - assessee had undisclosed income from tuition work and the additions to the extent noticed in the order on that account was justified.
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2012 (6) TMI 617
Powers of Commissioner under section 263 of the Act - condition precedent for exercise of power - Commissioner did not reach any firm conclusion about evasion of tax - Commissioner called for record Held that:- Nothing in section 263(1) to show that before passing the final order under that section, the Commissioner must necessarily and in all cases record final conclusions about the points in controversy before him - assessment was to be freshly made by the Income-tax Officer, the only proper course for the Commissioner was not to express any final opinion as regards the controversial points - In favour of the Revenue
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2012 (6) TMI 616
Reassessment income escaped assessment under section 147 of the Act Addition subsequently in the course of assessment proceedings Held that:- Explanation 3 to section 147 clearly depicts that the Assessing Officer has power to make additions even on the ground on which reassessment notice might not have been issued in case during the reassessment proceedings, he arrives at a conclusion that some other income has escaped assessment which comes to his notice during the course of proceedings for reassessment under section 148 of the Act. The provision no where postulates or contemplates that it is only when there is some addition on the ground on which reassessment had been initiated, that the Assessing Officer can make additions on any other ground on the basis of which income may have escaped assessment Against Assessee.
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2012 (6) TMI 615
Expenditure - illegal gratification commission paid to directors for awarding construction contract In the revised return filed by the assessee the said commission was shown under commission account - seizure of books of account by the Department Income-tax Officer disallowed the said claim for commission Held that:- expenditure incurred in such immoral acts cannot be construed as expenditure incurred for the purpose of profits and gains of business or profession and the benefit of deduction or allowance under Parliamentary legislation cannot be extended to such persons or to such expenditure - commission not deductible under section 37 of the Act - appeals are dismissed.
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2012 (6) TMI 602
Exemption u/s 11 - denial on ground of entity being not an educational institution - assessee, running a Distance Education Programme for Annamalai University, on Hotel Management and Catering Technology resulting in grant of Diploma and graduation, based on a Memorandum of Understanding (MOU) entered with Annamalai University - Revenue contended assessee to be only technical collaborator for the Distance Education Courses and not doing any charitable activity - alleged contravention of section 11(5) and 13(1) - Held that:- On perusal of Memorandum of Understanding entered by the assessee with Annamalai University and objects of the Trust it is clear that ex-facie the objects are nothing but educational and assessee was imparting a type of oral education and students studying in assessee's institution were being awarded formal Diploma/degree. There is no case for the Revenue that Annamalai University was existing for any commercial purposes. In our opinion, if Annamalai University was an educational institution, then assessee, which was conducting classes for the said University under its authority, was also an educational institution. Whether the substantial surplus generated by the assessee for the relevant previous year would make it a commercial entity - Held that:- Merely because the education activity had resulted in a surplus, would not be a ground to hold that assessee was not carrying on charitable activity. There is no case for the Revenue that surplus generated by the assessee on account of its activities were divided among the trustees or taken by the trustees but, for certain violation allegedly falling under Section 13(1)(c). Therefore, assessee could not have been denied the eligible exemption u/s 11 and 12 for a reason that it was not doing charitable activity as defined u/s 2(15). Violation u/s 13(1)(c) - sum of ₹ 30 lakhs withdrawn from the assessee-Trust and held by one of the trustees for two days - Held that:- It will not be reasonable to take a view that any benefit could have been derived by trustee in such a short period of two days. No violation could be established. Further, A.O. is directed to verify the explanations given by the assessee insofar as alleged violation u/s 13(1)(c) was concerned. If these are explained satisfactorily, assessee shall be given exemption claimed u/s 11 and 12 - Decided in favor of assessee for statistical purposes.
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2012 (6) TMI 601
Income from the activities rendered in connection with prospecting for, or extraction or production of, mineral oils - Non-resident - assessbility u/s 44BB or 44DA - AY 07-08 - revenue contended such receipts as royalty or FTS, assessable u/s 115A, falling out of purview of S 44BB - Held that:- Amendment by Finance Act, 2010, excluding the application of Section 44BB in cases where Section 44DA applies, is prospective and applies from AY 2011-12. Thus, in as much as in the present appeal the AY is 2007-08 is involved and admittedly the income earned by the assessee is effectively connected with the permanent establishment, even if the income is indeed in the nature of 'fee for technical services', still assessment cannot be made under Section 115A. Further, the AY being 2007-08, Section 44DA is also not applicable. For this reason alone, the impugned Assessment Order which has assessed the income u/s 115A is liable to be set aside - Decided in favor of assessee. Further, reimbursements of expenses being customs duties paid by the Assessee on behalf of its clients, equipments lost in hole etc cannot be included within the scope of receipts for purpose of determining income of the Assessee. Interest u/s 234B and 234C - Held that:- Since income of the assessee (a non resident) is subject to TDS u/s 195, hence the interest liability u/s 234B and 234C does not arise.
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2012 (6) TMI 600
Deduction u/s 80IB - dis-allowance on ground that assessee is developer and not the owner of the land - Held that:- Ownership of property is not a condition precedent for granting deduction u/s 80IB(10), hence, appellant as a developer is entitled to claim aforesaid deduction. See CIT vs. Radhe Developers(2011 (12) TMI 248 (HC)), ACIT v. Smt.C Rajini (2010 (12) TMI 248 (Tri)) - Decided in favor of assessee. Dis-allowance of expenditure - Held that:- It has been observed that AO had resorted to make lump sum additions under each head, however, the basis or yardstick for such additions have not been spelt out. At the same time, the assessee had also failed to bring any documentary evidence on record to belie the AOs stand. Hence, there is no justifiable scope to interfere with the AOs action on this point.
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2012 (6) TMI 599
Income from sale of shares - Business Income vs Long term Capital gains - assessee- company, purchased shares of MABL(unlisted company) having accumulated losses - shares purchased @ Rs.21.30 per share when the book value was nil - infusion of borrowed funds - Held that:- Obvious intention of the assessee in purchasing the shares was to make profit on resale of the shares as the share price could rise because of strong market reputation and goodwill of the other promoters. This conclusion is further supported by the fact that the assessee within the lock-in period sold shares to the other promoters at high profit despite mounting losses. The assessee was not expected to earn any dividend from the investment because of huge losses. No person will purchase shares from borrowed funds for investment when no dividend is expected. Therefore, merely because the shares were shown as investment in the books, it could not be accepted as investment. Hence, the purpose behind the purchase of shares was to earn quick profit on resale of shares and not for earning dividend income. It is a settled legal position that even a single and isolated transaction can be considered as adventure in the nature of trade. In our view, the purchase and sale of the shares on the facts of the case has to be considered as adventure in the nature of trade and profit has to be assessed as business income - Decided in favor of Revenue.
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2012 (6) TMI 598
Payment made for surrender of tenancy rights - dis-allowance on ground of absence of any tenancy agreement - Held that:- From the registered agreement entered into between Mr.Mehta and the assessee, it stands proved that the assessee got the tenancy of the premises in question surrendered from the hands of Shri Mehta. The fact that the said agreement is a duly registered document, always carries presumption of correctness, cannot be lost sight of. So far as the plea of Revenue that there is no agreement of tenancy as such between the assessee and so-called tenant is concerned, it is well settled law that tenancy could be a contract written as well as oral. It is the inter-se conduct of the parties i.e. landlord and tenant in particular case which is the relevant factor to determine the relationship of tenant and landlord. Therefore, the same is allowed as business expenditure - Decided in favor of assessee. Dis-allowance u/s 37 in respect of payment made against purchase of materials from certain parties - expenditure alleged to be bogus on ground of non-furnishing of PAN number and non-production of parties to prove the genuineness of the transactions - Held that:- In view of PAN being furnished, we find that instead of question no evidence in support, the case in hand is only regarding factual verification of the payments made. Hence, issue remitted back to AO to decide the issue afresh - Decided in favor of assessee for statistical purposes.
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2012 (6) TMI 597
Transfer Pricing - adjustment to ALP - assessee, joint-venture company between Mastek Ltd and Deloitte Consulting, formed for establishment and operation of an offshore development centre for provision of both offshore and on site information technology and other related services - various international transactions entered into by the assessee includes reimbursement made to Deloitte, on account of marketing services rendered by way of assignment of three senior managers by Deloitte to undertake full-time marketing only for assessee - Cost incurred on assignment of said managers consisted of their salary and related expenditure, charged by Deloitte on actual basis - TPO held that marketing costs incurred and allocated by Deloitte to assessee did not result in rendering of any service to assessee and, therefore, determined ALP for same, at Nil assessee contesting the same - Held that:- It is very imperative on the part of the assessee, to establish before the TPO, that the payments made were commensurate to the volume and quality of services and such costs are comparable. No such efforts was made. No ALP was computed by the assessee. In present case, Deloitte is responsible for generation of sales management, delivery of projects, maintaining customer relationship and billing and collection. The assessee has no market risk. In fact, assessee company has no revenue which has been derived as a result of these marketing expenses. Under similar circumstances a uncontrolled comparable company would not incur such expenditure. Hence, the ALP is rightly determined at "nil". On contention of assessee that TPO is not empowered to disallow the expenditure and that the very reference to the TPO by the AO presumes that the amount in question is allowable u/s 37 it is held that Assessing Officer has no discretion in the matter, in view of the binding nature of CBDT instructions dated 20th May 2003, directing for referral of matters to the TPO for determination of ALP where the aggregate value of international transactions exceeds ₹ 5,00,00,000. Further, TPO has not disallowed any expenditure, only the ALP was determined. It was the Assessing Officer who computed the income by adopting the ALP decided by the TPO at "nil". It is also held that 'ALP' has to be determined irrespective of any contractual/legal obligation undertaken by parties. Deduction u/s 10A - dis-allowance in respect of income arising out of the adjustment - Held that:- Since income arising out of the adjustment is not derived by the undertaking from expert. Hence, requirement of section 10A, have not been compiled with resulting in non-entitlement of deductions u/s 10A - Decided in favor of Revenue
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2012 (6) TMI 596
Gains arising on sale of Agricultural land Revenue added the sale to LTCG as assessee could not prove that the land was agricultural in nature Held that:- There is no doubt that the assessee was unable to produce any records regarding purchase of seeds,inputs,fertilizers or insecticides for the casuarina plants stated to have been grown in the said land this by itself would not convert agricultural land in which factually there were cultivated casuarina plants a non-agricultural one - letter of Assistant Commissioner (Urban Land Ceiling, Alandur, Chennai clearly shows that the land had cultivation of casuarina plants therein and as per the Tehsildar, the land was agricultural in nature - Assistant Commissioner (Urban Land Ceiling) had dropped the proceedings for levy of urban land tax - Tehsildar, Chengalpattu,had also certified in his letter that irrigation was done through ground water facilities - Assessee might not have paid agricultural income-tax but is paying land revenue and village records clearly showed the land to be agricultural other two conditions being satisfied, impugned land is hereby held to be Agriculture land in favour of assessee.
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2012 (6) TMI 595
Exemption under section 10B - Expenses attributable to delivery of goods outside India exclusion of the expenses both from the export turnover and the total turnover Held that :- As decided in Commissioner of Income-tax Versus Tata Elxsi Ltd.[2011 (8) TMI 782 (HC)] that while computing the exemption u/s 10A, if the export turnover in the numerator is to be arrived at after excluding certain expenses, the same should also be excluded from the total turnover (denominator) - since the export turnover forms part of the total turnover, if an item is excluded from the export turnover, the same should also be reduced from the total turnover - in favour of assessee.
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2012 (6) TMI 594
Disallowance u/s 40A(3)- trade creditors outstanding - revenue appeal amended provisions of section 40(A)(3) w.e.f. 01.4.2008 are to be considered for disallowance - assessee contested the purchases were made in year 2004, and as the transactions related to that year, only 20% of disallowance should be made of the amounts paid otherwise than by a/c. payee cheques or drafts, as per provisions of section 40A(3) - Held that:- Considering the provisions applicable in assessment year 2004-05 and year 2008-09, there are three major differences:- (i)as per the provisions of assessment year 2004-05, the assessee is required to make payment by way of crossed cheque/crossed bank draft whereas as per the provisions of assessment year 2008-09, the assessee is required to make payment by way of a/c payee cheque / a/c payee bank draft. (ii)as per the provisions applicable in assessment year 2004-05, the disallowance was to be made to the extent of 20% of payments made in contravention to the prescribed mode whereas, as per the provisions applicable in assessment year 2008-09, such disallowance is to the extent of 100% of such payment in contravention to the prescribed mode - disallowance made by the A.O. cannot be sustained (iii) As per the provisions applicable in assessment year 2004-05, the disallowance was to be made in the relevant year in which the expenditure was incurred whereas as per the provisions of assessment year 2008-09, addition is to be made in the year in which payment in contravention to prescribed mode was made by the assessee irrespective of the fact as to whether the expenditure was incurred in an earlier year. if we apply the provisions of Section 40A(3) as applicable in assessment year 2004-05, we find that no addition in the present year is justified and no disallowance can be made in assessment year 2004-05 also because as per the provision of Section 40A(3) as applicable in assessment year 2004-05, the payments are required to be made by a crossed cheque/crossed bank draft and the assessee has made the payment by way of crossed cheque and, therefore, no disallowance is called for in the present case as per the provisions of Section 40A(3) as applicable in the assessment year 2004-05 - in favour of assessee.
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2012 (6) TMI 593
Whether Appellate Tribunal is right in law and on facts in setting aside the order passed by the CIT u/s. 263 of the Act - Assessing Officer finalized assessment of the respondent-assessee - Commissioner was of the opinion that the Assessing Officer did not carry out proper inquiries. There was nothing on the record to show that the books of account, bills, vouchers, cash book, etc., were produced by the assessee before the Assessing Officer at the time of assessment proceedings Held that:- during the course of framing of the assessment, the Assessing Officer had access to all the records of the assessee, after pursuing such record the Assessing Officer framed the assessment, such assessment could not have been re-opened in exercise of revision power under Section 263 of the Act for making further inquiries. Tax Appeal dismissed.
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2012 (6) TMI 592
Applicability of section 80-I(9) - section 80-I(8) could apply only where the goods had been transferred from one unit to other unit at less than the market price Held that:- since there was no difference between the transfers from the combing unit to the spinning unit, there was no justification for making any adjustments as made by the Assessing Officer - Tribunal on appreciation of evidence concluded that there was no difference in the rate adopted by the assessee in respect of transfers from the combing unit to the spinning unit and that the provisions of section 80-I(8) and (9) were not attracted in the present case - In favour of the assessee.
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2012 (6) TMI 591
Condonation of delay - assessee had not been keeping well and hence, he could not pursue and attend the assessment proceedings and file the appeal within time before the Commissioner of Income-tax (Appeals) Held that:- assessee had not been able to fortify the above cause. The plea of the assessee has not been accepted to be bona fide - Assessing Officer also clearly shows that the assessee had not been co-operative in getting the assessment finalized and had not even filed the return - assessee had not been appearing and answering to the questionnaire issued by the Assessing Officer - prayer of the assessee for condonation of delay rejected
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2012 (6) TMI 590
Whether Tribunal was right in upholding the disallowance of 50 per cent. of the sales promotion expenses for free distribution of gift articles along with the appellant's product are based on any material or evidence and/or have been arrived at by ignoring and not considering the relevant material Held that:- Gift articles were purchased and the same were sent to depots of the appellant at various places and the depot registers are maintained. Payments to the supplier were made by account payee cheque or otherwise. If this evidence is considered then it is established beyond doubt that the gift articles were purchased, and there has been no evidence that the same could not be utilized - order of Tribunal is not sustainable
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Customs
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2012 (6) TMI 614
Appeal against reduction of redemption fine and penalty by Commissioner (Appeals) - assessee alleged of violating provisions of Rule 23 of the Drugs and Cosmetics Rules, 1945 - permission to re-export goods stands granted - Held that:- Issue stands rejected by the Tribunal in case of same assessee earlier AY wherein it was held that finding of Commissioner that there is no malafide on the part of the importer does not stand rebutted by the Revenue. Need to re-export of the impugned goods arose only because the importer could not get licence from the Drugs Controller of India. There is no dispute that the goods were correctly declared by the by the appellant. Following the earlier decision, we find no infirmity in the impugned order of reducing redemption fine and penalty - Appeal rejected.
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2012 (6) TMI 589
Dismissal of Appeal - delay of 2(two) days - Held that:- The bill of entry is dated 13.02.2006 and the date of challan is 13.02.2006 - Commissioner (Appeals) rejected the appeal on the premise that the Cheque is dated 10.02.2006 not giving any finding regarding the date of challan which is 13.02.2006 - it cannot be held that appeal is filed after time limit prescribed - case is remanded o decide the issue on its merit - in favour of assessee.
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Corporate Laws
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2012 (6) TMI 613
Scheme of arrangement - Petitioners herein are the creditors of the Company-in-liquidation - all creditors have approved the scheme of arrangement, but on the other hand, the two shareholders have voted against the scheme - Held that:- One of the shareholders of the company in liquidation is the first petitioner in this company petition who has identified the second petitioner to revive the company in liquidation. This clearly shows that he is not the propounder of the scheme of arrangement for revival of the company. The second petitioner is neither a member nor a creditor of the company. He is willing to settle the claims of the creditors of the company with a view to revive the company in liquidation, provided the entire share capital of the company is transferred in his favour and his nominees. In order to attract section 391 it is necessary that a compromise or arrangement between a company and its creditors or any class of them, or between the company or its members or class of them should propose a compromise or arrangement, which was not present here. The petitioners herein are not the actual propounders of the scheme so as to revive the company for the benefit of the company or its members. The petitioners being few among the investors for purchase of flats, thereby having become the creditors as they have not been allotted the flats have lent their names to a propounds who does not qualify under section 391 - Mere settling the outstandings of certain class of persons to the detriment of the company or its members is not the object. In any event, the recovery and disbursement would be done in the process of winding up - prayer made by the petitioners is therefore rejected.
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2012 (6) TMI 612
Winding up - dispute in respect of goods supplied - non-payment Held that:- company did not raise any dispute contemporaneously in respect of demand raised by winding up petitioner - details of the description of the goods/materials supplied by the petitioner to the consignee are mentioned in the name of the respondent-company is shown as consignor and the said delivery notes are said to have been signed in acknowledgment of the receipt-delivery of the goods by the representative of the respondent-company - document at annexure E, i.e., copy of the Form C supplied by the petitioner supports the petitioner's contention - petition seeking winding up of respondent-company was to be admitted
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2012 (6) TMI 588
Winding up petition filed u/S 433(e) and (f) of the Companies Act - petitioner, Director of the respondent Company, and also employed as CEO in the respondent company seeking to realize the amount due towards annual bonus with 15% interest and towards balance of Consultancy fee - in respect of the other claims the petitioner has initiated Arbitration proceedings as per the terms of the agreement - Held that:- Settled position of law is that the dispute would be substantial and genuine, if it is bona fide and not spurious, speculative, illusory or misconceived, it is also the position that the company Court at that stage is not expected to hold a full trial of the matter and it must decide whether the grounds appear to be substantial. In the background of facts, dispute raised by the respondent company will have to be considered as substantial and not spurious, illusory and misconceived. The petitioner will have to therefore establish his claim in an action. In any event, the petitioner has admittedly raised a claim before the Arbitrator wherein he can secure complete adjudication. At this stage, since it cannot be classified as an admitted debt, no reason is seen to exercise the discretion vested in this Court to entertain the petition - Petition dismissed.
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2012 (6) TMI 587
Winding up petition seeking advertisement - before admitting winding up petition and directing publication of company petition, it is necessary to consider question whether any prima facie case is made out by petitioning creditor Held that:- when the learned judge has held that there was sufficient compliance of section 433(a), before ordering advertisement, the learned judge ought to have afforded opportunity to the appellant to put forth their case so as to be convinced about the prima facie case of the first respondent - statutory provisions regarding the inbuilt safeguard under the Act has not been complied with and the impugned order directing the effecting of advertisement and the appointment of the official liquidator as a provisional liquidator cannot be sustained - advertisement and publication of the winding up petition in the Official Gazette of Tamil Nadu and local dailies is set aside
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Service Tax
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2012 (6) TMI 637
Imposing of penalty u/s 76 - assessee contested that entire amount of service tax liability, interest thereof stands paid by the appellant before the issuance of show cause notice - Held that:- As decided in COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX Versus M/s ADECCO FLEXIONE WORKFORCE SOLUTIONS LTD [2011 (9) TMI 114 (HC)]that Sub-Sec.(3) of Sec. 73 of the Finance Act, 1994 categorically states that after the payment of service tax and interest is made and the said information is furnished to the authorities, then the authorities shall not serve any notice under Sub-Sec.(1) in respect of the amount so paid - Therefore, authorities have no authority to initiate proceedings for recovery of penalty u/s 76 - in favour of assessee.
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2012 (6) TMI 636
Denial of liability to pay service tax under "Mandap Keeper's Services" or under the 'Club or Association Services" by assessee, i.e.Club - The petitioner is giving service to its members but the club is formed on the principle of mutuality - Held that:- As considered by the Hon'ble Supreme Court in the case of Joint Commercial Tax Officer, Harbour Division, II-Madras v. The Young Men's Indian Association[1970 (2) TMI 87 (SC)]that in spite of the definition contained in Section 2(n)of the Madras General Sales Tax Act, 1959 read with Explanation I of the Act if there is no transfer of property from one to another there is no sale which would be exigible to tax. If the club even though a distinct legal entity is only acting as an agent for its members in matter of supply of various preparations to them no sale would be involved as the element of transfer would be completely absent. This position has been rightly accepted even in the previous decision of this Court. Members' clubs to which category the clubs in the present case belong cannot be made subject to the provisions of the Licensing Acts concerning sale because the members are joint owners of all the club property including the excisable liquor. The supply of liquor to a member at a fixed price by the club cannot be regarded to be a sale - Where such a club has all the characteristics of a members' club consistent with its incorporation, where every member is a shareholder and every shareholder is a member, no licence need to be taken out if liquor is supplied only to the members. sale and service are different but the basic feature common in both transaction requires existence of the two parties - in view of the mutuality and in view of the activities of the club, if club provides any service to its members may be in any form including as mandap keeper, then it is not a service by one to another as foundational facts of existence of two legal entities in such transaction is missing - in favour of assessee.
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2012 (6) TMI 635
Refund of unutilized CENVAT credit availed on input services - original authority rejected the refund claims in toto holding that the services which were claimed by the parties to be input services did not have any nexus with the export of output services - Board's Circular dated 19.1.2010 required those who claimed refunds of the kind involved in these cases, to produce Chartered Accountant's certificate in support of such claim Held that:- Original authorities will have to re-examine the question whether the refund-claimants have been able to establish a nexus between the input services and the output services - parties need to be given a reasonable opportunity of producing Chartered Accountant's certificates and the original authorities should examine the same in the light of the Board's Circular - orders are set aside and all these appeals are allowed by way of remand
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2012 (6) TMI 634
Input services - Recovery of excess of CENVAT credit availed - Held that:- Even if sub-rule (3) prescribes a limit of 20% for availment of service tax credit, sub-rule (5) provides for whole of the service tax credit in respect of the specified input services - sub-rule (5) prevails over sub-rules (1),(2) and (3) - in favour of assessee.
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2012 (6) TMI 607
Construction of residential complex for Army and West Bengal Power Devp. Corpn.- Service tax demand - Held that:- Board vide Circular No. 332/16/2010-TRU Dated 24/5/2010 and as decided in KHURANA ENGINEERING LTD. Versus COMMR. OF C. EX., AHMEDABAD [2010 (11) TMI 81 (Tri)]that service provided to Govt. of India directly for end use of residential complex by Govt. of India discovered by the definition of personal use and therefore no Service Tax is leviable on them - as the applicant is engaged in the construction of flats for Indian Army and WBPDCL and the residential complex are for the personal use of the army and WBPDCL - in favour of assessee.
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2012 (6) TMI 606
Cenvat credit Process Outsourcing and Collection of Services - appellant availed input service credit, but as their service was exempt by Notification No. 8/2003 dated 20/06/2003 they could not utilise the CENVAT credit - refund claim under Rule 5 of the CENVAT Credit Rules, 2004 - Held that:- Once the taxable service is exported and various input services have been utilised for providing the output service: the appellants could be entitled for the rebate, which is equal to the service tax paid on the input services. appellants had fulfilled the five conditions of Notification No. 12/2005 already enumerated in the submission of the appellants. appellants are entitled for the rebate in respect of all the rebate claims filed by them during the relevant period. appellant are entitled for input service credit which they have availed for providing the service, which is exempt by way of Notification No. 8/2003 but have been exported. Appeal allowed
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2012 (6) TMI 605
Waiver of pre-deposit - Services to Local Self Government bodies in the field of e-governance - contention of appellant is that they were discharging only a sovereign function of the State and hence their activity was not chargeable to service tax Held that:- Recovery of service tax from service-recipients is ipso facto in the nature of demolishing the plea of sovereign function. Amount of over Rs.44 lakhs was collected by the appellant from the service recipients (local bodies) but only 50% thereof was paid to the Central Government as service tax. The balance amount required to be deposited.
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2012 (6) TMI 604
Waiver of pre-deposit - demand of Service Tax - Erection, Commissioning or Installation Service - earthwork and excavation for making civil foundation for windmill towers and did not install or erect such towers, which work was done by their clients Held that:- works undertaken by the appellant were preparatory to erection, commissioning and installation of windmills Pre-deposit ordered.
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Central Excise
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2012 (6) TMI 611
Delay in payment of duty,interest and penalty Revenue appeal that the Commissioner had no authority or power to accept the payment made beyond the period of one month from the date of communication of the order assessee contested that the bankers did not accept the payment because there was no registration number and there was delay in giving temporary registration number by the Assistant commissioner - Held that:- As there is no provision in the law u/s 11AC to condone the delay in payment of duty, interest and penalty for whatever reason by any authority, therefore Commissioner (Appeals) has clearly travelled beyond his powers vested in him under the law as the OIO clearly mentions the assessees registration number, his written submission have not explained what happened to the registration number they already had and on what date they approached the Assistant Commissioner and what date temporary registration number was given to them as there is one year of delay in payment of duty, no question of condoning the delay arise in favour of assessee.
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2012 (6) TMI 610
Penalty imposed under Rule 25(1)(b) revenue stand that appellant has knowingly received goods which did not suffer of central excise duty and did not account for the same even though he was a registered dealer Held that:- In the absence of any evidence to show that cenvat credit has been passed on in respect of these goods and there was an intention to pass on cenvat credit, merely because the appellant received the goods which were not duty paid, imposition of such harsh penalty is not justifiable - the submission of appellant that no proceedings were initiated against the manufacturer also would provoke for a lenient view as regards penalty - as no allegations of improper maintenance of accounts or improper passing on cenvat credit against the appellant who is a registered dealer the penalty imposed equal to the duty is very harsh and is reduced to Rs 10,000.
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2012 (6) TMI 609
Dismissal of appeal by first appellate authority - non-compliance of the Stay Order directing to deposit 50% of the penalties imposed - appellant have filed application declaring their unit as a sick unit - Held that:- As decided in the case of CCE Vs. Saurashtra Cement Ltd.[2010 (9) TMI 422 (HC)] it is settled law that unless the first appellate authority records some findings on the merits of the case, Tribunal should not venture into the merits of the case - as appellant company has filed an application for being declared as a sick unit, pre-deposit of any amount would create undue hardship to the appellants - appeals are remanded back to the first appellate authority, to reconsider the issue afresh without insisting upon any further pre-deposit, as the appellants have already deposited entire amount of duty along with interest.
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2012 (6) TMI 608
Extended period of limitation respondents filed an application for amendment in the registration certificate - respondents also filed return with the department which showed that appellants had cleared goods at a concessional rate of duty and in view of the fact that registration certificate had been amended, department cannot be said to be unaware of the fact of clearance of Stock manufactured prior to 17-4-1997 - Held that:- Even after the visit of the officers on 8-5-1997 for preventive checks, the show cause notice could have definitely been issued within one year or six months extended period of limitation was not available to the department In case of Neminath Fabrics Pvt. Ltd. (2010 (4) TMI 631 (HC) ), once the facts necessary to permit the department extended period of limitation are established on record, thereafter, the question of initiating proceedings within six months/one year from the date of knowledge of the department, is not relevant
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2012 (6) TMI 586
Whether appellant is required to reverse the Cenvat credit availed on the inputs and the capital goods, while clearing the same to its sister unit or is required to pay duty on the higher rate, applicable at the time of clearance of the same - Held that:- Issue is no longer res integra. It is held in various decisions that during the relevant period, reversal of Cenvat credit originally taken is required to be followed, at the time of clearance of inputs/capital goods as such. See Eicher Tractors Vs. CCE, Jaipur (2005 (9) TMI 340 (Tri))
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2012 (6) TMI 585
Denial of SSI exemption - the specified goods manufactured by assessee are affixed with the brand name of a foreign person, or a trader who is not a manufacturer appellants contention that that the impugned brand names were owned by the 100% holding companies of the appellant-company which should not be considered completely different from its subsidiary - Held that:- Following the judgment of the Single Bench of the Calcutta High Court in the case of ESBI Transmission Pvt. Ltd. v. CCE - 1997 (1994 (9) TMI 99 (HC)) stating that it has been held that there is no bar to availing SSI exemption if the unit is using a trade mark belonging to the foreign firm so long as the said unit is exclusive owner of the said trade mark in India - in favour of assessee. Whether the price at which the respondent sold the product should be treated as cum duty price and therefore the excise duty should be deducted from the price for arriving at the assessable value Held that:- The case to be remanded back to the Commissioner for re-quantification.
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2012 (6) TMI 584
SSI Exemption - brand name - Invoking extended period of limitation u/s 11AC - technical know-how agreement entered between the assessee and the West German Company were not disclosed to the Department the goods manufactured by the assessee have been cleared by the assessee with an endorsement in collaboration with the West German Company which constitutes user of the brand name - Held that:- Inscribing words in technical collaboration with West German Company would not constitute user of the brand name of the West German Company deserves acceptance - The fact that the assessee did not disclose the 1975 agreement does not enhance the case of the revenue, because the said agreement was only a technical know-how agreement and not an agreement for user of the brand name - the technical know-how agreement entered into by and between the assessee and the West German Company has expired in the year 1980 and the same has not been renewed thereafter as there are various decisions of Tribunal and Apex court against revenue, merely because, the Apex Court subsequently in the case of Grasim Industries Ltd(2005 (4) TMI 64 (SC)) ruled to the contrary, it could not be said that the assessee had suppressed material facts - against revenue.
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2012 (6) TMI 583
Recovery of deemed Cenvat Credit availed through fraudulent bills - penalty under Rule 27 imposed - liability of bank - Held that:- The act of discounting export bills or sending export bills for collection as part of normal banking operations by the appellant bank would not render the export goods liable to confiscation and the bank liable to penalty - a banking transaction would not normally violate the Central Excise law or the Rules, especially when the same is carried out as part of the normal banking operations - no penalty can be imposed on the banking company as the maximum penalty under the said Rule is only Rs.5,000 whereas Commissioner imposed a penalty of Rs.5 lakh u/r 27 which show clear non-application of mind and ignorance - in favour of assessee.
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CST, VAT & Sales Tax
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2012 (6) TMI 603
Delhi Value Added Tax Act, 2004 - taxability of multi functional printers/copiers/scanners and their spares and consumables - Entry no. 41A of the third Schedule at 4% or under the residuary head @ 12.5% - Period of dispute 01.04.05 to 31.03.07 - Held that:- In respect of the period prior to 30.11.2005, it is held that multi function machines may or may not be computer peripheral, depending upon the main purpose or function which the machine was designed and manufactured to perform. If the principal and predominant purpose was to act as a computer printer or scanner or as an input or output devise of the computer, the multi functional machine would qualify and fall under entry 41A clause XXIII. However, if the machine was designed and manufactured for some other primary purpose, then it would not be covered by Entry 41A clause XXIII. With regard to the period after 30.11.2005, it is held that the doctrine of dominant purpose of the multi functional machine will determine/decide whether it is an input or output unit of an automatic data processing machine. In case the principal or dominant purpose is to act as input or output unit, then it would qualify and will be covered by Entry 41A at Sr. No.3. However, in case multi functional machine is a duplicator or a photocopying machine, which incidentally can be used as a printer or a scanner etc., the said machine would not qualify and cannot be treated and regarded as input or output unit of automatic data processing machine and will be covered by the residuary tax rate - Decided partly in favor of assessee.
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