TMI Tax Updates - e-Newsletter
June 30, 2012
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
FEMA
Service Tax
Central Excise
Wealth tax
Indian Laws
Highlights / Catch Notes
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Income Tax
Dis-allowance u/s 40A(2)(a) - remuneration paid to Directors - in absence of material on record to hold that payment of remuneration @ Rs. 3 lacs pm to the director was excessive or unreasonable, no dis-allowance - AT
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Financial lease - principal payments made towards financial lease - revenue or capital expenditure - assessee is not entitled to deduction of payment of principal amount under the aforesaid financing arrangement - AT
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Levy of ‘education cess’ and ‘higher education cess’ - DTAA between India and Singapore - education cess cannot indeed be levied in respect of tax liability of the appellant company - AT
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Professional fees paid to the consultants in relation to cement project - capital expenditure or revenue expenditure? - Held as capital expenditure - HC
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MAT - Treatment of provision of site restoration fund made in accordance with the guidelines issued by the ICAI, then it cannot be said as contingent liability - held as an ascertained liability - AT
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Extended benefit of exemption u/s 10A - assessee enjoyed the benefit of 5 years from 1993-94 to 1997-98 - amended provision came into force on 1-4-1999 - benefit of extension from 5 years to 10 years tax holiday allowed - HC
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Evaluation of closing stock - at Cost price or market price - conversion of partnership firm into a private limited company - closing stock of the erstwhile firm cannot be valued at the market price - HC
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Whether a preference given to lineal descendants over the general Parsis is sufficient enough to mar the registration of a trust whose objects are otherwise charitable - registration can not be denied u/s 12AA - AT
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Unabsorbed business loss – carry forward of losses - assessee shall be entitled to carry forward unabsorbed business loss only if such loss is computed based on a return filed within the statutory period provided under section 139(1). - HC
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Deduction u/s 80IA - Rental income - letting out of Industrial park buildings - Income from House Property or of business income - AT
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Valuation of TV serials – the valuation of a news programmes done by the assessee subsequent to the first exploitation at 'nil' is a bonafide valuation. - AT
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Explanation versus bona finde explanation versus proper disclosure - Penalty under section 271(1)(c) - AT
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Partnership firm has been converted into company - no dissolution of the erstwhile firm and the company has been formed with the same partners as its shareholders - no capital gain under section 45(4) - HC
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Customs
Amends Notification No. 14/2012 – Customs (N.T.). - in the Table, against serial number 34, in column (2), for the words and brackets “Chief Commissioner of Customs (Preventive), Chennai”, the words and brackets “Chief Commissioner of Customs (Preventive), Tiruchirapalli” shall be substituted. - Notification
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Amends Notification 12/2012 – Customs - Prescribes effective rate of duty on import of goods. - Notification
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FEMA
Foreign Investment in India - Sector Specific conditions. - Circular
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Exim Bank's Line of Credit of USD 50 million to the Government of the Republic of Zambia. - Circular
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Corporate Law
Dispute about the name of the company - petition against the order directing the petitioner, registered as a company in the name of "M/s International Trade and Exhibitions India Private Limited" to change its name - HC
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Indian Laws
Draft guidelines regarding implementation of General Anti Avoidance Rules (GAAR) in terms of section 101 of the Income Tax Act, 1961.
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GENERAL EXEMPTIONS AND ABATEMENTS IN SERVICE TAX - Article
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Service Tax
Service Tax (Removal of Difficulties) Second Order, 2012. - Notification
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D.O. letter dated 29-06-2012 by Joint Secretary (TRU-II). - Circular
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Applicability of provisions of the Finance Act, 2004 relating to education cess and the Finance Act, 2007 relating to secondary and higher education cess– regarding. - Circular
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Manpower Recruitment and Supply Agency Services - gross salary - Since applicant is receiving commission on monthly salary, the applicants are covered under ‘Manpower Recruitment and Supply Agency Services'. - AT
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ST on Civil Work such as, foundation, control room, etc., and electrical work such as, earthing station, transformer etc. - They were under a bona fide belief that Works Contract was not liable to tax. - Extended period of limitation not applicable - AT
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Central Excise
Availment of cenvat credit on the basis of bill of entry, which is in the name of another unit of the appellant – credit allowed - AT
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Cenvat Credit - inputs and capital goods on which credit has been availed can be cleared without payment of duty under bond for export purposes - AT
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Marketability - excisable goods - goods in question are printed for the use of Central Railway only - No evidence to show that the goods in question are capable on being bought and sold in the market - AT
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Amends notification no. 12/2012-Central Excise - Prescribes effective rate of duty on goods falling under chapter 1 to 96. - Notification
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Demand of duty on scrap - the scrap has arisen on account of cutting of new sheets, plates, pipes for the purpose of replacing worn out pipes and it cannot be said that the respondents have manufactured the scrap so as to pay duty on the same - AT
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Paper transaction to claim Cenvat credit - carrying such a huge quantity by motor cycle or scooter is inconceivable - AT
Articles
Notifications
Central Excise-
28/2012 - dated
27-6-2012
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CE
Amends notification no. 12/2012-Central Excise - Prescribes effective rate of duty on goods falling under chapter 1 to 96.
Customs-
43/2012 - dated
27-6-2012
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Cus
Amends Notification 12/2012 – Customs - Prescribes effective rate of duty on import of goods.
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55/2012 - dated
29-6-2012
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Cus (NT)
Amends Notification No. 36/2001-Customs(N.T) - Palm oil, Palmolein, Soyabean Oil (Crude) and Brass Scrap (all grades) - Traiff Values.
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54/2012 - dated
29-6-2012
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Cus (NT)
Amends Notification No. 14/2012 – Customs (N.T.). - in the Table, against serial number 34, in column (2), for the words and brackets “Chief Commissioner of Customs (Preventive), Chennai”, the words and brackets “Chief Commissioner of Customs (Preventive), Tiruchirapalli” shall be substituted.
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F.No. 437/15/2012-Cus. IV - dated
28-6-2012
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Cus (NT)
Appointment of Common Adjudicating Authority in respect of M/s Sun Tan Trading Co. Ltd., Mumbai and others.
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F.No. 437/32/2012-Cus. IV - dated
26-6-2012
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Cus (NT)
Appointment of Common Adjudicating Authority in Respect of M/s Eastern Silk Industries Ltd., Kolkata .
Service Tax-
02 - dated
29-6-2012
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ST
Service Tax (Removal of Difficulties) Second Order, 2012.
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2012 (6) TMI 689
Dis-allowance u/s 40A(2)(a) - remuneration paid to Directors - dis-allowance of an amount of ₹ 30 lacs out of total salary of ₹ 36 lacs - Held that:- It is well settled that the provisions of section. 40A(2)(a) cannot have any application unless it is first concluded that the expenditure was excessive or unreasonable. In the instant case, there is nothing to suggest that the AO found the payment of remuneration to director excessive having regard to either (a) fair market value of the services or facilities; or (b) the legitimate needs of the business of the assessee; or (c) the benefits derived by or accruing to the assessee on receipt of such services or facilities. Hence, in absence of material on record to hold that payment of remuneration @ ₹ 3 lacs pm to the director was excessive or unreasonable, CIT(A) was justified in deleting the addition - Decided against the Revenue.
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2012 (6) TMI 688
Financial lease - principal payments made towards financial lease - revenue or capital expenditure - Held that:- A finance lease is one where the lessee uses the asset for substantially the whole of its useful life and the lease payments are calculated to cover the full cost together with interest charges. It is thus a disguised way of purchasing the asset with the help of a loan. In view of decision in case of CIT vs. The Instalment Supply Ltd(2012 (5) TMI 59 (HC)) and on analyzing various terms and conditions of the agreement with lessor, it is held that assessee is not entitled to deduction of payment of principal amount under the aforesaid financing arrangement - Decided against the assessee. On alternative contention of claim of depreciation it is held that in terms of clause 10.5 of the agreement, the assessee agreed that the assessee shall not claim any relief by way of any deduction, allowance or grant available to LPIN as the owner of the vehicle under the Income-tax Act, 1961 or under any other statute, hence in view of aforesaid, claim of depreciation is not available to assessee. Preliminary expenses - dis-allowance - Held that:- Indisputably, the assessee failed to submit necessary information in support of the claim of expenses written off. Hence dis-allowance upheld. Contribution towards Federation of Indian Mining Industries Building Fund - revenue or capital expenditure - assessee being one of the members of the said Federation - Held that:- Expenditure incurred by way of contribution towards building fund of the said federation, is for commercial consideration and it is not incurred for the purpose of securing any capital assets. Therefore, the same is allowable as revenue expenditure - Decided in favor of assessee.
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2012 (6) TMI 687
Turnkey contracts for offshore & onshore supply - assessee (China Company), filed its return of loss in respect of contracts entered for setting up of turnkey thermal power projects - Revenue contended that contracts for erection of power plants were inseparable, which were manipulated and divided into separate parts solely to suit the assessee’s purpose to understate onshore supply profits and correspondingly inflating the value of offshore supplies contract, so as to avoid tax liability in India - Held that:- Transactions are to be essentially looked at as a whole, and not on standalone basis, when the overall transaction is split in an unfair and unreasonable manner with a view to evade taxes. In order that such a situation can arise, it is sine qua non that while the assessee submits the bids for different segments (e.g. offshore and onshore in the present case) separately, these bids are considered together, as a single cohesive unit, by the other party, and this fact must be apparent from material on record. Core dispute before us is not of the ALP adjustment but of an adjustment to the value assigned to the contract for ‘onshore supplies and services’, which is alleged to have been kept for a lower amount with a view to avoid taxes in the India. Real issue is as to at what value the revenues for onshore supplies and services should be adopted so as to bring out the correct onshore profits. This in turn, proceeds on the assumption that there were profits on offshore supplies which have been outside the ambit of taxation in India. However, in view of the assessee’s claim that there are losses on overall project and that there cannot thus be any advantage by assigning lower value to onshore activities, what really needs to be examined in the first place is the working of overall losses given by the assessee. In case the Assessing Officer has no issues with this computation of overall losses, the very foundation of his action ceases to hold good in law. Hence, the matter is being remitted back to the file of the Assessing Officer for fresh adjudication.
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2012 (6) TMI 686
DTAA between India and Singapore - whether ‘education cess’ and ‘higher education cess’ can be levied in addition to the tax rates prescribed in DTAA - assessee(Singapore company), offered interest and royalty income to tax at the rate of 15% & 10% as specified in Articles 11 & 12 of the India-Singapore DTAA respectively - Held that:- Under Articles 11 & 12 of the said DTAA, tax charged on interest and royalties cannot exceed 15% and 10% respectively. The expression ‘tax’ is defined in Article 2(1) to include ‘income tax’ and is stated to include ‘surcharge’ thereon, so far as India is concerned. Article 2(2) further extends the scope of the ‘tax’ by laying down that it shall also cover “any identical or substantially similar taxes which are imposed by either Contracting State after the date of signature of the present Agreement in addition to, or in place of, the taxes referred to in paragraph 1”. "Education cess, introduced by the Finance Act, 2004, described in Section 2(11) of the Finance Act 2004, is nothing but in the nature of an additional surcharge. Accordingly, the “education cess” being in the nature of an “additional surcharge” is covered by Article 2. Accordingly, education cess cannot indeed be levied in respect of tax liability of the appellant company - Decided in favor of appellant.
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2012 (6) TMI 685
Professional fees paid to the consultants in relation to cement project - capital expenditure or revenue expenditure? - Held that:- As decided in CIT Versus J. K. Chemicals Limited [1992 (10) TMI 18 (HC)]where the expenditure is incurred for the project /feasibility report in connection with exploring the feasibility of a new business venture different from the existing line of business then such expenditure is capital expenditure and not revenue expenditure - decided in favour of the Revenue
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2012 (6) TMI 684
Whether appeal of Revenue should be admitted and await the outcome of the decision of the Supreme Court in respect of similar question, when the question has been decided against Revenue by High Court - question regarding deduction u/s 10A without setting off the carried forward business loss and depreciation - Held that:- Supreme Court has not laid down or settled the law in this regard. Though some times this Court may await the decision of the Supreme in a pending appeal before it, if the same question is involved in matter pending before the High Court, in the instant case we do not see any justification or reason to await the decision of the Supreme Court, as in the special leave petition only notice is ordered and the appeal is yet to be admitted. Impugned question decided against Revenue. Appeal dismissed.
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2012 (6) TMI 683
Disallowance of claim of deduction u/s 80IB - Both the units of assessee were integrated as one unit - the assessee claimed deduction in respect of pellet feed division, for which separate computation of income was filed submitting that conversion of mash feed into pellet feed amounts to manufacturing and not processing and both are commercially two distinct products having their own peculiar features and advantages and disadvantages - Held that:- Examining the stages through which the mash feed is converted into pellet feed there has been only processing' while the production of pellet feed is done by following various stages, namely, i) batch weighing, ii) grinding, iii) mixing, iv) conditioning with steam, v) pelleting, vi) cooling, vii) crumbling and, finally, viii) packing - doing something to the goods to change or alter their form can be termed as processing and does not amount to manufacture -CIT v. Casino (P.) Ltd.[1972 (10) TMI 17 (HC)]- doing something to substance to change or alter their form can be termed as processing and does not amount to manufacture as a production of a new substance does not mean merely to produce some change in the substance -decided against assessee. Disallowance of foreign travel expense - Held that:- As the assessee failed to prove that the expenditure incurred towards foreign travelling expenses of two persons is wholly and exclusively for the purpose of its business by way of documentary evidence, dis allowance is warranted - against assessee. Levy of interest u/s 234D - Held that:- As the provisions of section 234D having been inserted with effect from 1st June 2003, applicable only from the assessment year 2004-05. Since the assessment year under consideration is 2003-04 interest charged u/s 234D need to be deleted - in favour of assessee. Validity of the reopening of the assessment u/s 147 - Held that:- As the assessee has to initially file a return and after that the assessee can ask reasons for issuing the notices for re-assessment, but in the present case, the assessee has not at all filed the return of income in the first place to seek for reasons recorded and hence the reopening u/s 148 is valid - against assessee.
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2012 (6) TMI 682
Addition in Gross Profit - invoking the provisions of section 145(3) - assessee has declared GP ratio @ 12.67% as compared to gross profit rate ratio at 15.07% - Held that:- As the assessee did not maintain stock register of raw material, work in progress, consumable and finished products the necessary verification of the trading results cannot be made - the AO has correctly applied the provisions of section 145(3)as the GP ratio declared by the assessee for the year under consideration was on lower side as compared to GP rate of immediate preceding year failing to give any plausible explanation regarding the fall in GP ratio at 2.40% particularly when the turn over has remained almost consistent as per past year - as the GP rate at 14% estimated by the AO and confirmed by the CIT(A) is on higher side therefore, in the interest of justice same is to be reduced to 13% - partly in favour of assessee. Addition under the head Disallowance u/s 40A(2)(b) - AO noted that the assessee has paid excess salary to his son as compared to other employees - Held that:- The disallowance u/s 40A(2)(b) can be made only to the extent the payment for the services is excessive or unreasonable vis-a-vis the market price of such services but what is essentially required is that the market price of these services is established and then amount paid in excess of such market price is to be disallowed - estimate of salary made by AO @ Rs. 5,000/- per month is without any basis and against the express provisions of Section 40A(2)(b) - disallowance of Rs. 60,000/- in this case will meet the ends of justice and thus, the assessee gets a relief of Rs. 1,25,000/- on this count - partly in favour of assessee. Addition under the head Disallowance u/s 43B - payment of bonus and leave with wages after filing of return - Held that:- Payment of liability covered u/s 43B are liable to be paid before the due date of filing of the return as prescribed u/s 139(1) and there is no relevance with regard to the date of filing of the income tax return - as the assessee paid the amount in question on 8.11.2007 i.e. before the due date of filing of return i.e. 15.11.2007, which was extended time for filing the return u/s 139(1) the addition are to be deleted - in favour of assessee. Addition under the head Provision for Foreign exchange - Held that:- As a detailed reply dated 30.11.2009 was filed before the AO in support of the contention claiming the provision for foreign exchange as Revenue expenditure in the profit and loss account for the year under consideration which the authorities have ignored while deciding the issue in hand - remand this issue back to the file of the AO to consider it afresh. Addition under the head Disallowance of Telephone expenses - AO disallowed 1/5th of the expenses which comes to Rs. 31,799/- observing that the element of personal use of telephone - Held that:- Considering the assessee submission that in the computation of income, the assessee himself has disallowed 1/10th out of telephone expenses which comes to Rs. 15,900 the addition of Rs. (31,799/- minus (-) Rs. 15,900/-) = Rs. 15,899/- may of sustained - partly in favour of assessee. Addition under the head Disallowance of Vehicle Expenses - Held that:- Considering the Copies of acknowledgment of return and computation of income assessee has already added back Rs. 32,775/- being 1/5th out of car expenses of Rs. 1,63,873/- plus Rs. 68,911/- being 1/5th out of car depreciation of Rs. 3,44,553/- aggregating to Rs. 1,01,686/- in the computation of income chart under the head "Car expenses" and "Car depreciation - in favour of assessee.
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2012 (6) TMI 681
Addition on account of bogus claim of expenditure and unexplained expenditure u/s 69C - Held that:- As the assessee gave explanation reconciling the difference in the accounts pointed out by the AO along with the copies of account in the assessee’s books of account, the AO without pointing out any defect in the maintenance of books of account or in the entries recorded therein and without rejecting the assessee’s explanation reconciling the differences, which cannot be accepted - since the assessee has discharged his burden which was not controverted by the Revenue and in the absence of any material to show that the reconciliation/ explanation submitted by the assessee was not filed before the AO the additions made by the AO are need to be deleted - against revenue. Disallowance of sub-contractor expenses/purchases - Held that:- As the assessee was able to produce confirmation from one sub contractor only along with TDS certificate, with no contrary material placed on record by the Revenue against the said confirmation and keeping in view that the said material was available before the AO even during the remand proceedings the assessee has fully discharged his burden to the extent of one sub-contractor - partly in favour of assessee. Disallowance being employer’s contribution to provident fund - Held that:- As decided in CIT Versus AIMIL Limited and others [2009 (12) TMI 38 (HC)]that if the employee’s share of contribution is paid before the due date of filing of the return u/s 139(1), then no disallowance can be made - as the assessee has deposited the amount of PF before the end of the financial year 2002-03 i.e. much before the due date of filing of the return - in favour of assessee. Charging interest u/s 234B and 234D - Held that:- As the issue was not objected by the Ld. DR. AO is directed to allow consequential relief in respect of levy of interest - in favour of assessee.
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2012 (6) TMI 680
Depreciation on loss due to fluctuation of foreign exchange and capitalization u/s 43A - CIT denied the capitalization as the asset did not exist in the Block of Assets - Held that:- Considering the provisions of section 43A that if there is a change in the rate of foreign exchange after the acquisition of assets, as a result of which there is an increase or reduction in the liability of the assessee as expressed in the Indian currency, then such increase or reduction shall be added to or deducted from the actual cost of the asset and after giving effect to this adjustment the actual cost of the assets shall stand substituted with the new figure. Depreciation - Definitions contained in section 32 r.w.s.43(1) & (6) describes the depreciation is to be allowed on the actual cost of the asset less all depreciation actually allowed in respect thereof in earlier years. Thus, where the cost of the asset subsequently goes up because of devaluation, whatever might have been the position in the earlier year, it is always open to the assessee to insist, and for the Income-tax Officer to agree, that the written down value in the year in which the increased liability has arisen should be taken on the basis of the increased cost minus depreciation earlier allowed on the basis of the old cost - in favour of assessee. Loss on fluctuation of foreign currency in respect of development cost u/s 42 - AO has considered the claim of the assessee u/s 42(1)(a) whereas the claim falls under section 42(1)(b)by assessee - Held that:- Section 42(1)(b) entitles the assessee to deduction after the beginning of the commercial production and the case of the assessee is that it was working in consortium, however necessary details could not be placed to show that the assessee had commenced production - set aside this issue to the record of the CIT(A) for deciding the issue afresh in terms of the directions of the Tribunal in the earlier year - in favour of assessee by way of remand. Treatment of interest income as income from other sources claimed by the assessee for the purpose of deduction u/s 80IB(9)- department treated it as business income - Held that:- As the deduction u/s 80IB(9) is not available to the interest received from bank deposits as the receipt of interest does not comes within first decree source as derived from the undertaking, accordingly, the issue is decided against the assessee. Setting off of brought forward losses and unabsorbed deprecation against business profit a determined by AO - Held that:- As this issue is subjected to the outcome of the issue involved for the AY 2001-02 the same may be remanded back to the record of the AO to decide the issue as per the outcome of the appeal for the AY 2001-02 pending before the Tribunal. Eligibility of deduction/s 80IB on extraction of oil from oil field - Held that:- As in the case of CIT vs Sesa Goa Ltd [2004 (11) TMI 14 (SC)] the assessee in the extracting process of iron ore, the High Court came to the conclusion that extraction of iron ore and the various process would involve ‘production’ within the meaning of sec 32A(2)((b)(iii) and consequently, the assessee was entitled to the benefit of investment allowance under sec. 32A. The view expressed by the High Court that the activity of extraction and processing of iron ore constitute production has been affirmed by the Supreme Court -every manufacturer can be characterised as production, every production need not amount to manufacture - in favour of assessee. Treatment of provision of site restoration expenses - computation of the book profit u/s 115JB - Held that:- As the Site Restoration expenses are scientifically estimated by an independent agency for determining the abandonment costs of contracted area in accordance with the guidelines issued by the ICAI, then it cannot be said as contingent liability - the provision has been made as per the requirement under the Production Sharing Contract and the appellant is liable to contribute this amount to site restoration fund in each year. In view of these facts, the provision is made for an ascertained liability - in favour of assessee.
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2012 (6) TMI 679
Writ petition - exemption from the applicability of the Act under Section 10(23C)(iiiab) of the Act – Held that:- order dated 26.07.2011 is only an interim order. - Ordinarily, interim order cannot be allowed to be challenged at every stage, like present one. - The petitioner will have a right to challenge the impugned order in regular appeal against final order, in case, necessity so arises. Submission of learned counsel for the petitioner is that impugned order is final and the same cannot be challenged in any other proceedings, except by way of this writ petition is not correct and tenable.
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2012 (6) TMI 678
Deduction under section 80P(2)(e) of the Act - godown on rent - let out to the FCI or any other agency for the purposes of storage - co-operative society – Held that:- assessee was purchasing the goods and then selling the goods to the FCI and in such a situation, storing was part of business of the assessee and did not amount to letting out of storage capacity as till the goods were sold to the FCI, goods belonged to the assessee itself, and not to the FCI – income not entitled to special deduction Deduction under section 80G - income of the assessee is partly exempt and partly liable to tax – Held that:- Tribunal in the assessee’s own case (supra) direct the Assessing Officer to allow deduction under section 80G out of the taxable income of the assessee - It is not clear in the order of the Tribunal that the assessee had produced any proof – matter remanded to Tribunal for want of proof. Expenditure for construction of Sahakarita Bhawan and amount paid to Co-operative Development Federation for modernizing the printing press - construction was done on the direction of the State Government – Held that:- claim of the assessee was not controverted by the revenue - expenditure was revenue in nature was clearly distinguishable as therein tenements constructed for welfare of employees did not vest in the asses- see and the assessee did not get any benefit of enduring nature - matter remanded to the Tribunal
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2012 (6) TMI 677
Penalty under section 271(1)(c) of the Income-tax Act, 1961 – concealment - assessee understated the cost of construction - total cost of construction was Rs.12,50,000, when he filed the returns – Held that:- Assessee admits the total cost of construction as being Rs.32,05,000 as determined by the appellate authority on the original side, the difference in the amount constitutes concealed income and the main provisions as contained in section 69B of the Act is attracted. In spite of the opportunities given to the assessee, when he did not avail of the opportunity and neither offered any explanation, the finding arrived at by the authorities imposing penalty cannot be found fault. In favour of the Revenue
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2012 (6) TMI 676
Reopening of assessment under section 147 - based on the valuation report - cost of construction – Held that:- section 142A of the Act is not attracted to the facts of the present case - Initiation of reassessment proceedings on the basis of report of the DVO cannot legally be sustained - against the Revenue
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2012 (6) TMI 660
Extended benefit of exemption u/s 10A - Applicability of amendment - condition to be fulfilled is ten consecutive assessment years beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture – Held that:- assessee has commenced production in the year 1993-94 - He enjoyed the benefit of 5 years from 1993-94 to 1997-98 - amended provision came into force on 1-4-1999 - denial of the benefit runs canteen to the sprit of Section 10B and it would negate the object with which the amended provision was brought in. - The assessee is entitled to the benefit of extension from 5 years to 10 years tax holiday as provided under the amended provision for 10 consecutive years from the date of commencement of production – In favor of assessee
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2012 (6) TMI 659
Non-compete fees - capital gains or business income – Held that:- Considering the provisions of proviso to section 28(va)(a), i.e. income chargeable to income-tax under the head "profits and gains of business or profession and the clauses of the agreement that the assessee has not only transferred its entire business to TSIL but also agreed not to carry on any business in any capacity in India which competes with the business of Saffolin-DS, CIT(A) rightly held that the A.O. has not correctly appreciated the facts and the provisions of law before disallowing the claim of the assessee - when the assessee has transferred the entire business and has thereby transferred its right to manufacture or produce or process the product namely Saffolin -DS, the consideration so received has to be taxed under the head "capital gains" and not under the head "profits and gains of business or profession"- against revenue. Compensation from multilateral Fund under the Montreal Protocol for phasing out the production of Chlorinated Rubber and supply of Carbon Tetra Chloride to non feed stock sector - revenue receipt or capital receipt – Held that:- Considering the details furnished by the assessee that the compensation received by the assessee was for phasing out the use of CTC as the Govt. of India issued a memorandum to all companies which were producing or consuming 85% of Carbon Tetra Chloride, requesting them to phase out the consumption as required under the multilateral fund of the Montreal Protocol the provisions of the second proviso to section 28(va) have been fulfilled and therefore the assessee is entitled to the benefit - although the assessee has not filed full details as alleged by the A.O. in the body of the assessment order, we find the assessee filed full details before the ld. CIT(A) – compensation was not liable to be taxed as income as proposed by AO - against revenue. Disallowance towards expenses attributable to the earning of dividend income – Held that:- As the assessment year involved is 2006-07, the case is to be restored to the file of the A.O. for fresh adjudication in the light of the ratio laid down by the GODREJ AND BOYCE MFG. CO. LTD. Versus DEPUTY COMMISSIONER OF INCOME-TAX AND ANOTHER [2010 (8) TMI 77 (HC)] stating that Rule 8D is applicable from Assessment Year 2008-09 and not retrospective – in favour of assessee for statistical purpose. Treatment of the repairs and maintenance expenditure on roads - capital expenditure or as revenue expenditure – Held that: - As expenditure incurred is for repairs of existing road or construction of new roads and full facts are not coming out of the records it is proper to restore the issue to the file of the A.O. with a direction to verify as to whether there was existence of road in the past - If there was road earlier and if the expenditure is incurred for repair of the existing road then of course the assessee is entitled to claim the same as revenue expenditure - in favour of assessee for statistical purpose. Treatment of the product development expenditure - capital expenditure or as revenue expenditure – Held that:- Assessee has made only legal arguments without giving any factual data as nothing was brought to notice to establish that the consultancy charges have been paid for new products for existing business of the assessee - the consultancy charges have been paid to find out some new area for existing business is also a mere submission without any documentary evidence – against assessee. Non deletion of entire ad-hoc disallowance in respect of foreign travel expenses – Held that:-The questionnaire issued by the A.O during the course of the assessment has not called for any details under the head foreign travel expenses - since the CIT(A) without going through the assessment records did not accept the additional evidence filed before him in the interests of justice restore the issue to the file of the A.O. with a direction to decide the issue afresh - in favour of assessee for statistical purpose.
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2012 (6) TMI 658
Evaluation of closing stock - at Cost price or market price - conversion of partnership firm into a private limited company - Held that:- Considering the case of Commissioner Of Income-Tax Versus S. Koder [1996 (9) TMI 21 (HC)]the assets and liabilities of the erstwhile firm were taken over by the company with the same persons as shareholders, therefore, it was a case of succession of business in its entirety by another entity the question whether the assessee-firm, upon the transfer of its business to a limited company, was obliged to value the stocks as per the market value was answered in the negative. The assets of the erstwhile firm vested in the company and as such there was no transfer of assets by way of distribution - provisions of section 45(1) and 45(4) of the Act were not attracted even though there was a "transfer" of assets from the firm to a newly constituted com- pany on conversion of the firm to a company under Chapter IX of the Companies Act. The shareholding of the erstwhile partnership firm remained the same upon conversion of the firm into a company as there was no transfer of assets of the firm to the company it is only that the business was taken over by the company, thus the closing stock of the erstwhile firm cannot be valued at the market price - in favour of assessee.
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2012 (6) TMI 657
Suppression of sale proceeds and estimation of undisclosed income - sale consideration as per the sale deed did not tally with the actual payments made by the purchasers - assessee's contention that the receipt of on-money should be held in the name of two partners and not against the firm - additional ground of assessee that the expenditure incurred was not considered by the Revenue - Held that:- The provisions Chapter XIV-B, i.e. limit the inquiry by the Assessing Officer to those materials found during the search and seizure operation are not applicable to proceedings under Sections 153A/153C mentioning that the AO can take into consideration material other than what was available during the search and seizure operation for making an assessment of the undisclosed income of the assessee - Consequently, the principles of Section 158BB of the Act cannot be imported for the purposes of interpreting Section 153A/153C - as the interpretation of Sections 153A/153C of the Act is quite clear, no substantial question of law arises for consideration. no evidence before the AO to conclude that on-money was received by Ahura Holdings (firm) in respect of all the sale transactions - Held that:- There was adequate material before the Assessing Officer in the form of eight sale deeds and in the form of replies given by assessee to questions posed to him with regard to receipt of on-money to enable AO to come to an informed conclusion in this regard. Appreciation of the available material is within the domain of the Assessing Officer and this does not lead to any substantial question of law, unless the conclusions arrived at are perverse - CIT (Appeals) agreed with the assessee that disallowance on the cost of land was not justified and as regards legal fees and some development expenses etc., the AO was directed to have a fresh look into the matterNo substantial question of law arises nor there is any occasion to interfere with the view taken concurrently by all the authorities - against assessee.
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2012 (6) TMI 656
Whether a preference given to lineal descendants over the general Parsis is sufficient enough to mar the registration of a trust whose objects are otherwise charitable – Held that:- if the income does not enure for the benefit of the public or under clause (c) of section 13(1) where any part of such income is applied directly or indirectly for the benefit of persons referred to in sub-section (3) of section 13, that is, the author of the trust or any person who has made a substantial contribution to the trust or where author of trust is a HUF, then a member of the family or any relative of such author or any trustee of the trust or any relative of any such author, founder or any concern in which any of the above persons has a substantial interest. final amount of income exempt is the one which is determined by adding the income under section 11 with that under section 12 as reduced by the income or its such part as is covered under section 13. Registration cannot be denied. Exemption – charitable trust - in order to claim exemption of income under sections 11 and 12 as reduced by that under section 13, it is sina qua non that, inter alia, the trust must be registered under section 12AA. The sequence of events is thus, evident that the person claiming exemption must firstly apply for and get the trust or institution registered under section 12AA, then return is filed for the relevant previous year and on the basis of such registration and other relevant factors, the Assessing Officer considers the applicability or otherwise of sections 11, 12 and 13. Registration under section 12AA - after the death of the settlor, the income from the trust property is to be used for charitable purposes, which are covered under section 2(15) of the Act - It was specifically claimed that not even a single paisa was applied for the benefit of any lineal descendants of the father of the settler – Held that:- Commissioner, despite the availability of audited accounts before him for the last three years, failed to point out any single instance in which the income of the trust was not utilized for the charitable purposes set out in the trust deed or the money was applied for the lineal descendants of the father of the settlor. Even if any amount is actually spent on the relatives of the settlors, then there is section 13(3) enabling the Assessing Officer to refuse exemption under section 11 read with section 13 to that extent and that too in the year in which such amount is spent. It cannot be a reason to refuse registration under section 12AA. Commissioner was not justified in refusing the registration. Decided in favor of assessee.
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2012 (6) TMI 655
Unabsorbed business loss – carry forward of losses - belated return – Held that:- According to provisions of section 139(3) and section 80 that the assessee shall be entitled to carry forward unabsorbed business loss only if such loss is computed based on a return filed within the statutory period provided under section 139(1). Decided in favor of Revenue.
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2012 (6) TMI 654
Justification in setting aside the assessment in exercise of powers under section 263 by Commissioner - Held that:- The prerequisite to the exercise of jurisdiction by the Commissioner is that the order of the Income-tax Officer is erroneous in so far as it is prejudicial to the interest of the Revenue - the AO has passed a single order for six assessment years in question under section 148, initiating the proceedings on the basis of differences as found in the investment shown by the assessee and as per property valued by the departmental valuer - the AO shows complete non application of mind as he has not discussed as to what was the difference between the value estimated by the departmental valuer as also given by the assessee's valuer and what was the reason for determining the income at such a low figure - Tribunal had committed error in holding that the assessment order in so far as it ignored difference in the two values of two different valuers was not erroneous or prejudicial to the interests of the Revenue - against assessee.
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2012 (6) TMI 653
Deduction u/s 80IA - Rental income - letting out of Industrial park buildings - Income from House Property or of business income – Held that:- when various amenities provided by an industrial park or software technology park is predominant in letting out of the housing unit, then the rental income is to be assessed under the head "profit and gains of business or profession" and in a case where letting out of building is predominant and the other amenities are merely incidental to such letting out then the rental income is to be assessed under the head "income from house property". From the facts available on record, it is not clear that whether the letting out of the building was predominant in the transaction between the assessee and the tenants or whether predominant was of the industrial park comprised of various amenities and letting out of a building, as such park was merely incidental. Matter remanded to Assessing Officer for proper verification.
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2012 (6) TMI 652
Writ petitions – condonation of delay in selling the company shares - CBDT rejected the petitions filed by the petitioner on the ground that it has no power to condone the delay - Held that:- CBDT has sufficient powers under section 119(2)(b) of the Income-tax Act, 1961, to consider the desirability or expediency of granting relief under the Act, even after the expiry of the period of limitation provided under any specific provision and dispose of the matter on the merits in accordance with law. Writ petitions allowed.
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2012 (6) TMI 651
Block assessment – search - unaccounted gold was recovered – Held that:- Assessee's attempt to prove the source of the gold seized through the 27 goldsmiths miserably failed before the 3 authorities, namely the Assessment Officer, the first appellate authority as well as the Tribunal. No reason to interfere with the findings of the Tribunal on the additions made based on recovery of gold, the source of which could not be explained by the assessee.
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2012 (6) TMI 650
Transfer pricing - arm's length price (ALP) - selection of comparable - set-off of unabsorbed depreciation - held that:- If the findings of ld. CIT(A) are taken into consideration, which in our humble view remained uncontroverted, then the mean profit on the basis of 8 companies mentioned above are not applicable on the facts of the present case. Therefore, arm length price adopted by ld. TPO on international transactions were not correct. On application under section 154, the ld. CIT(A) has held that an addition of ₹ 40 lacs has to be sustained which is on account of opening stock and by rectifying order under section 154 has reduced the deletion by ₹ 40 lacs or odd. The issue in respect to deletion reduced by ₹ 40 lacs or odd has been restored by us to the file of ld. CIT(A) to decide the same afresh after affording reasonable opportunity of being heard to the assessee as, as per order of ld. CIT(A), no opportunity was provided to the assessee. Therefore, we hold that the order of ld. CIT(A) deleting the addition of ₹ 1 crore or odd was correct and we confirm the order to that extent. The AO disallowed depreciation for the reason that the same cannot be allowed to be set off of brought forward unabsorbed depreciation against current year's income from other sources. The ld. CIT(A) allowed the issue in favour of the assessee - brought forward unabsorbed depreciation can be allowed from the current year's income from other sources. - Decided in favor of assessee.
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2012 (6) TMI 649
Addition on account of change in the method of valuation of closing stock - valuation of TV serials – assessee, after first exploitation, has expended 90% and valued the closing stock @ 10%. After second exploitation, the assessee was valuing the TV serials @ nil - valuation is changed and the assessee has come to a conclusion that after the second exploitation, the valuation of the TV serial should be @ 3.33% - Held that:- assessee is continuing to follow the same recognized method of accounting - What is changed is the value that has to be assigned to a particular product i.e., a news programme or TV serials subsequent to exploitation of the same - there is no such undervaluation and the assessee had undertaken a bonafide exercise – the valuation of a news programmes done by the assessee subsequent to the first exploitation at 'nil' is a bonafide valuation. - In favor of assessee. Disallowance made under section 14A – stated by the appellant with evidence that the borrowed money has not been utilized for the purpose of the investment in shraes - ACIT had failed to prove that there was nexus between the borrowed money and the investment – Held that:- Disallowance made under section 14A, deleted and the ground raised by the assessee is allowed. Employees contribution of PF and employer’s contribution to PF - payments were made before the due date of filing the return – Held that:- payments are not only before the close of accounting financial year but also much before the due date for filing the return of income - in the case of employees’ contribution towards provident fund, the same should be allowed even though it is paid beyond the grace period, if the same is paid before the time allowed for filing the return of income – In favor of assessee.
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2012 (6) TMI 648
Penalty under section 271(1)(c) - explanation versus bona finde explanation versus proper disclosure - held that:- assessee claimed deduction for ₹ 33.63 crores in its Profit and loss account towards the amount paid to NOPL for use and occupation of the property. The claim was made on actual payment and the assessee did offer the explanation in support of the claim. If the claim had been not been genuine or the assessee had not offered any explanation, the case would have been covered in clause (A) of Expl. 1 itself. The Assessing Officer was not convinced with the claim and disallowed the deduction. It shows that the assessee offered an explanation about the claim of deduction but could not satisfy the Assessing Officer as to its allowability. First condition is that the assessee offers an explanation, which he is not able to substantiate or prove. It divulges that condition (i) is satisfied in this case. Penalty under section 271(1)(c) - bona fide explanation - held that:- A claim shall lack bona fide if the facts are manufactured to give a colour of genuineness to the deduction; or if there is not even a far-flung possibility of forming a legally sustainable opinion about the deduction either because of the facts prevailing in a particular case or because no judicial precedent in favour of allowability of such deduction or if an issue is still virgin and had not received attention of the Courts so far, then simple and plain interpretation of the provision leaves no chance to a reasonably prudent person to form an opinion that such a deduction is allowable. These are only some of the instances in which a claim for deduction shall be short of bona fide. - by no standard the claim of the assessee for deduction of ₹ 33.63 crores can be categorized as not bona fide in any manner. Penalty under section 271(1)(c) - proper disclosure - held that:- when the disclosure made by the assessee in its Profit and loss account and by way of Note in the Balance sheet is considered in the backdrop of ongoing litigation of the assessee with the Department for last three years on the same point, no hesitation in coming to the conclusion that the assessee made a proper disclosure of the facts material to this claim. In accordance with the opinion of the majority of members, we hold that on the facts and circumstances of the case penalty u/s. 271(1)( c) of the Act is not leviable.
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2012 (6) TMI 647
Whether Tribunal was right in law in holding that taking over of the assets of the firm by a company and allotting shares to the partners of the firm as per their holding in the firm does not give rise to profit chargeable to capital gain under section 45(4) of the Act - partnership firm has been converted into company - no dissolution of the erstwhile firm and the company has been formed with the same partners as its shareholders – Held that:- section 45(4) is not attracted as the very first condition of transfer by way of distribution of capital assets is not satisfied - no capital gain under section 45(4) of the Act would be attracted in the present case – In favor of assessee Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in allowing depreciation to the firm which stood dissolved on March 31, 1995 – Held that:- Assessee-respondent was entitled to claim depreciation on the assets for the period up to March 31, 1995, relating to the assessment year 1995-96- In favor of assessee
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2012 (6) TMI 646
Unexplained investment – during the course of survey an unexplained cash and unexplained stock have been discovered - appellant-assessee failed to submit cogent explanation – Held that:- ingredients of sections 69, 69A, 69B and 69C were satisfied in the present case because in all these provisions what is provided is that if an assessee is found to be the owner of any money, jewellery or any other valuable articles not recorded in the books of account and fails to offer any explanation about the nature and source thereof or in case any such explanation, if offered, is not satisfactory in the opinion of the Assessing Officer, then this may be deemed to be the income of the assessee for such financial year – In favor of Revenue
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2012 (6) TMI 645
TDS – payment to sub-contractors - assessee is an individual deriving income from hiring of vehicles - assessee contended in writing that the assessee is not liable to deduct TDS as there is no written or oral contract and that the assessee is not liable under section 194C as individual charges for private service vehicle will not exceed Rs. 20,000 – Held that:- material on record discloses that total amount paid towards transportation charges is roughly about Rs. 79,45,225. In the absence of any particulars, it cannot be said that there was no liability to deduct tax on that score – Assessee should have deduvted deducted TDS - authorities were justified in disallowing the said deduction and treating the said amount as the income of the assessee and claiming tax on that amount – In favor of Revenue
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Customs
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2012 (6) TMI 674
Application for early hearing of the appeal - Held that:- As appeal has been disposed by this Tribunal by way of remand in the year 2004 which shows that the departmental officers are not doing their duty properly before filing this type of application - application is dismissed as infructuous.
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2012 (6) TMI 644
Indo Sri Lanka Free Trade Agreement - Duty free clearances - Notification No.2/07-Cus dated 5.1.2007 - non-confirmation to the standard specified in the PFA ACT - Redemption fine of Rs.10 lakhs and penalty of Rs.5 lakh - Held that:- On being intimated about the discrepancies appellant immediately contacted foreign suppler who accepted the re-export of the same, thus the imposition of penalty upon the importer is not justified - reduce the redemption fine in the present case to Rs.3.5 lakhs considering subject matter of earlier proceedings in respect of the same appellant.
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Corporate Laws
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2012 (6) TMI 673
Winding up petition - Failure to make repayment of the loan - the petitioner bank had granted loan to the respondent to meet with the need of working capital against collateral security by way of postdated cheque issued as well as personal guarantee of the Directors – dishonor of cheque when placed for clearance – respondent raised dispute in in response to the petitioner's statutory notice demanding the repayment - Held that:- Having availed the loan facility and after having agreed to repay the loan amount and then after having asked for extension of time to repay the loan amount and then having again asked for further extension, the respondent company not only failed to keep its promise and fulfill its assurance and the respondent company not only went back on its written assurance in the loan agreement as well as the said two communication dated 18.5.2011 and 17.6.2011 - the dispute or defence of the respondent company is spurious, speculative, illusionary and an afterthought raised only with a view to resisting the petition and delaying the liability to make the payment of due and payable amount - respondents contention that the petitioner bank has not claimed definite and exact sum/amount which relevant to take into account the details mentioned in the statutory notice as para 1 of the statutory notice clearly mentions the amount - as the respondent's contention that the petition is filed without authority and the resolution is not acceptable as the Act, Rules or forms do not require any resolution to be passed for the purpose of initiating winding up proceedings, even where the petitioning-creditor is a Company with a Board of Directors - the legal consequence of a petition not being properly signed by the petitioner is a mere irregularity which can be cured at any time - accept and admit this petition - The petitioner is allowed time to place on record resolution of the petitioner bank to file the petition and authorizing Chief Manager to file the petition.
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2012 (6) TMI 672
Dispute about the name of the company - petition against the order directing the petitioner, registered as a company in the name of "M/s International Trade and Exhibitions India Private Limited" to change its name - name which is identical with or too nearly resembles - Powers under Section 22 of the Companies Act - Rectification of Name of company - full form of the abbreviation "ITE" in the name of the respondent no. 2 was also "International Trade and Exhibitions" and further since both respondent no. 2 and the petitioner were in the same business of Events – Held that:- the test provided in the guidelines under Section 20 could not have been applied to a rectification proceedings under Section 22 when the Legislature has not deemed it appropriate to provide for rectification of undesirable names other than those covered by Section 20(2). The remedy against undesirable names falling in any category other than Section 20(2) is not under Section 22 but would be before the Civil Court Legislature in its wisdom has confined power of Central Government to registered names and marks only and did not extend inquiry into identical with and resemblance with unregistered names and marks – Respondent no. 2 is unregistered company - power of rectification in section 22 is limited to form an opinion as to identical with and resemblance with registered names and marks only - It thus cannot be said that any case for exercising of powers for rectification under Section 22 was made out. I am unable to find any identity or resemblance between "ITE" or "ITE India" and "International Trade and Exhibitions". The alphabets "IT" and "ITE" are today identified more as "Information Technology" and "Information Technology Enabled" than with "International Trade and Exhibitions". It thus cannot be said that any case for exercising of powers for rectification under Section 22 was made out. Petition succeeds and is allowed
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2012 (6) TMI 643
Petition for Winding Up – outstanding repair, erection and commissioning charges of Gantry cranes – petitioner raised 3 invoices – respondent contested that they entrustment of work of repair and erection to a third party as the petitioner did not complete the work successfully and to the satisfaction - Held that:- Looking at the dates and events it emerges that the respondent has not brought on record any material to demonstrate that during the aforesaid period i.e. starting from 26.02.2008 when the first invoice was issued until 23.04.2010 when the last of the aforesaid communications was forwarded by the petitioner to it 30.08.2009 any grievance with regard to the petitioner's performance of contract work about any alleged delay in executing the work or unsatisfactory performance of work - though in the interregnum the respondent company issued work order in favour of the said agency on 20th October, 2009, the respondent company does not appear to have given any notice or any intimation to the petitioner about the said development as before assigning work to any other agency during operation of the contract, the principal/employer would intimate the contractor that because of its default or negligence or delay or such other reason it is compelled to award contract to other agency- Respondent’s reply to the statutory notice has not mentioned the details about the extent of work executed by the petitioner and the extent of the work left out/left incomplete - the grounds of defense raised by the respondent are "some ingenious mask invented to deprive a creditor (in present case the petitioner) of its bonafide claim" – the respondent has come out with an afterthought dispute evident from the fact that the respondent has availed CENVAT & VAT credit - arbitration clause in the LOI also would not act as a restriction or obstacle or prohibition in maintaining a winding up petition - direction to Respondent to deposit the invoice amount covered in 3 invoices raised by petitioner within 4 weeks time - in favour of petitioner.
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2012 (6) TMI 642
Amalgamation - application for recalling the order – appellants are majority shareholders – Applicants shareholders of respondent did not attend the meeting nor they received any notice of the meeting – Held that:- There is also no determination of non-service of the notices personally on the shareholders, advertisement in inconspicuous newspapers to prevent shareholders from attending the meetings, attendance by unauthorised persons, voting by unauthorised persons and the attendance register showing attendance by dead persons - since order sanctioning scheme and follow up action pursuant thereto, had become final in proceedings wherein some of present applicants were not only present but participated, same could not be agitated once again and, therefore, action of appellants was hit by principle of res judicata - even otherwise since all appellants had accepted scheme of amalgamation and companies against whom relief was sought for were no longer in existence, they could not be reverted back to their earlier position
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FEMA
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2012 (6) TMI 675
Penalty for contravention of Section 9(1) (d) read with Section 68 of Foreign Exchange Regulation Act, 1973 - Condonation of 507 days delay in filing the appeal - appellants contended that delay in filing the original appeal and in re-filing has taken place on account of the delay in normal decision making process which is bound to entail certain time at different levels and since the case of the appellants – Held that:- applications have been drafted in a most casual manner and absolutely no details have been given for the reasons as to why a delay of 507 days had occurred - appeals are bereft of any material which will persuade the Court to condone the delay either originally or in re-filing – Application for COD dismissed
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Service Tax
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2012 (6) TMI 693
Manpower Recruitment and Supply Agency Services - Plea for waiver of pre-deposit - Revenue contended that gross salary paid to the employees has to be taken into account for paying the service tax whereas applicant contended that persons, supplied by the applicant are the employees of the M/s P and the applicants are not liable to pay service tax on same, however tax on commission received is paid - Held that:- Since applicant is receiving commission on monthly salary, the applicants are covered under ‘Manpower Recruitment and Supply Agency Services'. Therefore, applicant has failed to make out a case for 100% waiver of pre-deposit of the demand. Accordingly, applicant is directed to make a pre-deposit of 50% of the service tax within stipulated time.
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2012 (6) TMI 692
‘Cable Operators Service' - re-transmission of TV signals to various cable subscribers - SCN issued for recovery of service tax and and also for commission received from their signal supplier under the category of ‘Business Auxiliary Service' - assessee contended that if the services of signal received by them is considered as ‘input service', their tax liability will be nil - Held that:- If the appellants had paid the service tax for obtaining signal from their service provider they are entitled for ‘input service' credit. If the service tax has been paid by the appellants on input service is equal to the service tax liability, the same has to be verified from the records of the appellants. In view of aforesaid, matter is remitted back to the adjudicating authority for fresh adjudication. Further, appellant is directed to pay interest on admitted under the category of ‘Business Auxiliary Service' and ‘Renting of Immovable Property Services'.
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2012 (6) TMI 691
Waiver of pre-deposit of service tax – relevant date - refund alleged to be erroneously refunded to the assessees – Held that:- date when payment for services exported was received was the relevant date. assessees have made out a case for unconditional waiver and accordingly dispense with pre-deposit of tax and interest.-
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2012 (6) TMI 690
Civil Work such as, foundation, control room, etc., and electrical work such as, earthing station, transformer etc., including material supplies - Held that:- service tax could not be demanded on Works Contract which at that time was held to be not vivisectable. They were under a bona fide belief that Works Contract was not liable to tax. Demand is time-bared and, therefore, not sustainable. Regarding Erection Charges - service tax of ₹ 3.25 crores (approx.) has already been paid out of ₹ 3.64 crores confirmed [the Commissioner has examined the claim of abatement and rejected it on the ground of certain discrepancy]. However, taking into account those discrepancies only an amount of ₹ 4 lakhs can be said not to have been paid by the assessees. Pre-deposit waiveed Regarding TNEB Infrastructure Charges - Held that:- As per the Electricity Act, 2002, it is the responsibility of the generating company to establish transmission lines, sub-station etc., and the wind mill operator is required to pay Infrastructure Development charges to the Electricity Board towards strengthening the power evacuation capability and connectivity to the power handling system of Electricity Board. These charges are paid on behalf of their clients by the assessees to the Tamil Nadu Electricity Board and, therefore, the assessee have made out a prima facie for waiver. Regarding Land Development Charges - demand was raised for tax under a particular category, while the impugned order demands tax in another category, which was not the case made out in the show-cause notice. Pre-deposit waived.
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2012 (6) TMI 667
Service tax demand on supervision, sampling and analysis services - agreement entered - Held that:- As the service tax has been paid on supervision, sampling and analysis charges, KPCL,no demand is sustainable against the appellant - as the appellant has failed to produce the invoices raised by the KPCL wherein the service tax has already been paid the matter needs re-examination at the end of the lower authorities.
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2012 (6) TMI 666
Stay Petition for waiver of the duty confirmed – Revenue has sought Service Tax under the category of Business Auxiliary Service – assessee stated that Service Tax liability for the first year needs to be computed after giving them the benefit of small scale exemption and in the second year, the amount which has not been included by them in the Service Tax returns was in respect of the services rendered on behalf of the client and that also in relation to agriculture – Held that:-As first adjudicating authority while disposing the issue of eligibility of small scale exemption, specifically records that the appellant is eligible for small scale exemption, but includes the said amount for confirmation of demand - as regards the claim in respect of the services rendered in relation to agriculture on perusal of the definition and the related notification on the tax liability under Business Auxiliary Service the appellant may be eligible for the benefit of exemption notification as regards services provided in relation to agriculture - set aside the impugned order and remand the matter back to adjudicating authority to reconsider the issue afresh, after following the principles of natural justice – in favour of assessee.
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2012 (6) TMI 665
Waiver of predeposit of service tax - Consulting Engineering Services – reimbursement amount received by their service engineers who were rendering the services of erection and commissioning of textile machineries – Held that:- Services would fall under the category of Erection, Commissioning and Installation Service and not under the category of “Consulting Engineering Services”. Pre-deposit waived.
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2012 (6) TMI 664
Waiver of pre-deposit – CENVAT Credit – Denial of credit on invoices issued by five star hotels for renting out conference rooms on the ground that invoices did not contain details as per Rule 4A of Service Tax Rules, 1994 read with Rule 9 of CENVAT Credit Rules, 2004 – Held that:- Service of providing conference rooms comes within the purview of Mandap Keeper service and aggregate value of such services is the amount received by the Mandap keeper for such service – If the amount indicates the value of food separately, the service provider is eligible for claiming rebate and if they have not claimed such rebate, Revenue cannot force such a service provider to claim abatement – Invoice for an amount of Rs. 8722 issued in the name of director doubtful, pre-deposit ordered Denial of credit on invoices issued by telecom service providers – missing details furnished subsequently - no sufficient reason to call for pre-deposit – Pre-deposit waived
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2012 (6) TMI 663
Waiver of pre-deposit – tour operator service – Held that:- appellant did not have service tax liability prior to 16.05.2008, the date on which Section 65(115) of the Finance Act 1994 was amended to widen the definition of “tour operator”. Pre-deposit waived.
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2012 (6) TMI 662
Waiver of pre-deposit – CENVAT Credit on Share Registry Services – Held that:- assessees have made out a strong prime facie case for unconditional waiver as ‘Share Registry Service' is one of the specified services in the second part of the definition of “Input Service”, the credit appears to have been availed in accordance with law.
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Central Excise
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2012 (6) TMI 671
Availment of cenvat credit on the basis of bill of entry, which is in the name of another unit of the appellant – applicability of provisions of Rule 9 (2) – Held that:- In the case of BHEL vs. CCE, Bhopal[2011 (7) TMI 974 (Tri)] it has been decided that just because the bill of entry is in the name of another unit of the same Company and the other unit did not endorse in the bill of entry, credit cannot be denied - as regards applicability of Rule 9 (2) of Cenvat Credit Rules, 2002 except for importer’s name, address and registration number which are required to be mentioned in the bill of entry when the goods are diverted, rest of the particulars were available. Difference in description and quantity between bill of entry and Lorry Receipt(LR) – Held that:- Assessee’s explanation is acceptable that Phenol’s weight has increased due to addition of water since it cannot be transported as such – as there is no indication that investigation or verification was made to see whether the goods received by the appellant was not Phenol at all – against revenue.
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2012 (6) TMI 670
Denial of credit on the duty paid on capital goods put to use in the factory of production and thereafter the capital goods were exported under bond - Held that:- As capital goods are exported under bond and the Board vide Circular No. 345/2/2000-TRU dt. 28.9.2000 clarified that inputs and capital goods on which credit has been availed can be cleared without payment of duty under bond for export purposes - decided in favour of assessee.
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2012 (6) TMI 669
Waiver of pre-deposit - Marketability - Printing of registers, accounts books, various forms, order books, receipt books and similar articles - goods in question are printed for the use of Central Railway only – Held that:- Goods are not ordinarily capable of bought and sold in the market as these are basically made to run the Railways administration and to maintain the internal records of the Railway. Therefore, the demand is not sustainable - No evidence on record to show that the goods in question which are printed by the Central Railway Printing Press are capable on being bought and sold in the market - Pre-deposit of duty, interest and penalty is waived - Petition is allowed
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2012 (6) TMI 641
Revalidating the issuance of SCNs - Wrong Classification of goods – Revenue allegation that the goods are classifiable under Heading 8537.00 and denial of benefit of Notification No.52/93-CE dt. 28.2.93 - the Commissioner quantified the demand by classifying the goods under Heading 8537 to be adopted only from 14.7.94 and would have only prospective effect - Held that:- As there was no suppression of facts the proviso to Section 11A(1) cannot be invoked for demand of duty - Revenue s prayer for confirmation of entire duty by invoking the extended period cannot be accepted as the earlier order of the Tribunal had categorically held that extended period is not available to the Revenue and demand should be restricted to six months period - Having held that the earlier order, in clear terms, restricts the demand to a period of 6 months, we need not examine the intention of the Members writing the judgement - Revenue's appeal is allowed and the matter is remanded for quantification of duty for a period of 6 months in respect of each SCNs issued to the respondents.
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2012 (6) TMI 640
Demand of duty on scrap - scrap arising in the course of cutting the new plates, pipes etc. for being replaced in the place of corroded portion of the plant, pipe, vessel - Held that:- The only work undertaken with respect to the new metal plates and pipes is process of cutting them to the required size - the Asst. Commissioner erred in assuming that the remnants in the process of cutting has arisen due to mechanical working of metals - The Asst. commissioner has not given any reason as to why he considered such scrap as arising from mechanical working as there can be no mechanical working when the new plates and pipes are cut and used as a replacement for the worn out and corroded portion of the vessels, pipes etc. - the scrap has arisen on account of cutting of new sheets, plates, pipes for the purpose of replacing worn out pipes and it cannot be said that the respondents have manufactured the scrap so as to pay duty on the same – in favour of assessee.
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2012 (6) TMI 639
Entitlement to Cenvat credit on catering service received - Held that:- Since Revenue has not placed a copy of show cause notice while filing its appeal and once the authority is satisfied that the invoices placed by learned Counsel relates to discharge of obligation under Factories Act, there shall not be difficulty to resolve the dispute - in view of the ratio laid down in COMMR. OF C. EX., AHMEDABAD-I Versus FERROMATIK MILACRON INDIA LTD [2010 (4) TMI 649 (HC)]the service tax paid on outdoor catering services by the canteen located in the respondent’s manufacturing premises has to be considered as an input service relating to business and that CENVAT credit is admissible the appellant deserves hearing - matter is remanded to the Adjudicating Authority to consider the issue in accordance with law laid down .
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2012 (6) TMI 638
Paper transaction to claim Cenvat credit - Held that:- Mode of transportation claimed by the appellants was false as the goods in question claimed to have been transported and the quantities transported shows that the same ranges from 7.180 M.T. to 20.190 M.T as carrying such a huge quantity by motor cycle or scooter is inconceivable - as no offender be allowed to retain undue benefit made at the cost of public first appellate order is reversed and the adjudication order is restored and all the five appeals are allowed in favour of Revenue - in favour of revenue.
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Wealth tax
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2012 (6) TMI 668
Exemption under wealth tax - assets u/s 2(ea) - Valuation of assets under WT Act - leasehold property - commercial complex let out on rent – Held that - By an amendment in clause (ea) of section 2, commercial buildings, which are not occupied by the assessee for the purpose of his business or profession, other than the business of letting out properties, shall be brought to tax under the Wealth-tax Act, 1957 - said amended section was in force only for two years by the Finance Act (No. 2), 1998. It is clear from the Explanatory Notes, the Central Board of Direct Taxes circular and the subsequent action of further amending the said section, that the intention was not to tax business assets used by the assessee for the purpose of his business or profession and also the business assets which are let out, if the assessee is in the business of letting out properties. All other types of commercial properties were brought to tax under the Wealth-tax Act. Assessee was justified in claiming the exclusion of the properties which are the subject of the matter of the proceedings, from wealth-tax – In favor of assessee
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Indian Laws
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2012 (6) TMI 661
RTI - Evaluation of mark sheet - re-evaluation / re-verification - Whether the instructions and solutions to questions (if any) given by ICAI to examiners and moderators, are intellectual property of the ICAI, disclosure of which would harm the competitive position of third parties and therefore exempted under section 8(1)(d) of the RTI Act? - held that:- section 8(1)(d) of the RTI Act does not bar or prohibit the disclosure of question papers, model answers (solutions to questions) and instructions if any given to the examiners and moderators after the examination and after the evaluation of answer scripts is completed, as at that stage they will not harm the competitive position of any third party. We therefore reject the contention of the appellant that if an information is exempt at any given point of time, it continues to be exempt for all time to come. Whether providing access to the information sought (that is instructions and solutions to questions issued by ICAI to examiners and moderators) would involve an infringement of the copyright and therefore the request for information is liable to be rejected under section 9 of the RTI Act? - held that:- The information sought is a material in which ICAI claims a copyright. It is not the case of ICAI that anyone else has a copyright in such material. In fact it has specifically pleaded that even if the question papers, solutions/model answers, or other instructions are prepared by any third party for ICAI, the copyright therein is assigned in favour of ICAI. Providing access to information in respect of which ICAI holds a copyright, does not involve infringement of a copyright subsisting in a person other than the State. Therefore ICAI is not entitled to claim protection against disclosure under section 9 of the RTI Act. Whether the instructions and solutions to questions are information made available to examiners and moderators in their fiduciary capacity and therefore exempted under section 8(1)(e) of the RTI Act? - held that:- nformation sought under queries (3) and (5) were exempted under section 8(1)(e) and that there was no larger public interest requiring denial of the statutory exemption regarding such information. The High Court fell into an error in holding that the information sought under queries (3) and (5) was not exempted. Whether the High Court was justified in directing the appellant to furnish to the first respondent five items of information sought (in query No. 13) relating to Regulation 39(2) of Chartered Accountants Regulations, 1988? - held that:- it is necessary to make a distinction in regard to information intended to bring transparency, to improve accountability and to reduce corruption, falling under section 4(1)(b) and (c) and other information which may not have a bearing on accountability or reducing corruption. The competent authorities under the RTI Act will have to maintain a proper balance so that while achieving transparency, the demand for information does not reach unmanageable proportions affecting other public interests, which include efficient operation of public authorities and Government, preservation of confidentiality of sensitive information and optimum use of limited fiscal resources. Appeal is allowed in part and the order of the High Court is set aside and the order of the CIC is restored, subject to one modification in regard to query (13): ICAI to disclose to the first respondent, the standard criteria, if any, relating to moderation, employed by it, for the purpose of making revisions under Regulation 39(2).
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