TMI Tax Updates - e-Newsletter
July 12, 2012
Case Laws in this Newsletter:
Income Tax
Customs
FEMA
Service Tax
Central Excise
Indian Laws
Highlights / Catch Notes
Income Tax
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Charitable Trust - if commercial principles are applied then adjustment of expenses incurred by the trust for charitable religious purpose in the earlier years against the income earned by the trust in the subsequent year will have to be regarded as application of the income of the trust for charitable and religious purpose. - AT
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Addition on account of unvouched expenses - Salary expenses - The addition of finally made by CIT(A) comes to less than 10% of expenses claimed, accordingly, the addition on account of unvouched expenses deserves to be sustained. - AT
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Trading Liability - job work payable of earlier year brought forward - addition made u/s 41 - There is no cessation of liability merely because the assessee has not paid the amount till the completion of assessment. - AT
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Asset management company - making any addition on account of load is not justified - AT
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Taxability of income from transfer of development rights - postponement of payment does not stop accrual of income - AT
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Disallowance of Society Charges paid in respect of property given on leave and license - deduction to be allowed subject to section 24 - no other deduction is allowed - AT
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Estimation of expenditure incurred in earning the exempt income -as the assesee’s explanation is not satisfactory, therefore, provisions contained in 14A are applicable r.w.r.8D - AT
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Indo German DTAA - ISO 9000 certification income - services are mostly in the nature of 'audit work' on basis of which certificate is granted. Nowhere from such services, it can be inferred that the assessee has been providing technical, managerial or consultancy services. - AT
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Long-term Capital gains - deduction u/s 54 - for claiming deduction u/s 54, the construction of the house should be completed within the prescribed time limit and date of commencement of construction is not material for claiming deduction - AT
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Dis-allowance u/s 40(a)(ia) - there was no lessor and lessee relationship between the holding company and assessee where the provisions of section 194-I are attracted - AT
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"Prima facie" adjustment - Rectification of order passed u/s 143(1)(a) - As disallowance made without giving an opportunity to the assessee, the same is not sustainable. - AT
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Deemed income - the assessee has not written back the liability and Assessing Officer failed to demonstrate that liability has ceased. Unless the liabilities are written off in the books of account, provisions of section 41(1) cannot be applied - AT
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Profits from the sale of the property - Considering the statement of total income shows that in treating the business income, the A.O. himself has accepted (a) index cost of acquisition and (b) exemption u/s.54EC. The A.O. cannot blow hot and cold in the same breath - AT
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Treating the income from transfer of the rights enjoyed by the assessee as capital receipt -. In the absence of sale of a particular asset, revenue cannot assume that the sums are taxable on transfer of land. - AT
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Applying net profit rate of 10% on the contract receipts - Section 44AD - where the turnover was exceeding the prescribed limit, the CIT(A) was justified in estimated 10% profit on the gross contract receipts - AT
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Disallowance of detention charges - the payment is nothing but in the nature of demurrage and simply because it is paid to the custom department, the nature cannot be changed - AT
Customs
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Decisions in respect of classification/valuation of hardware and software of computers cannot be mechanically applied to hardware and software relating to telecom equipments. - AT
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Classification of Mouse Pads – regarding. - Circular
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Amends Notification Nos. 92/2009-Cus dated 11.09.2009, 93/2009-Cus dated 11.09.2009, 94/2009-Cus dated 11.09.2009, 95/2009-Cus dated 11.09.2009 and 104/2009-Cus dated 14.09.2009. - Notification
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Provisional anti dumping duty on all imports of Vitrified/ Porcelain Tiles originating in or exported from China PR - Notification
FEMA
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Risk Management and Inter Bank Dealings. - Circular
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Constitutional validity of Section 3(1) of Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 (‘COFEPOSA’) to the extent it empowers the competent authority to make an order of detention against any person ‘with a view to preventing him from acting in any manner prejudicial to the conservation or augmentation of foreign exchange’ - SC
Service Tax
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Service tax on waterfront royalty and way leave facility compensation - invocation of extended period is not based on a strong ground and the appellant has been able to make out a prima facie case as far as extended period is concerned - AT
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Invocation of section 80 - non-payment of service tax under the bonafide belief that Service Tax is not applicable to them as they were providing services of rent-a-cab operator to another rent-a-cab operator and not to clients directly - no penalty - AT
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Advertising Agency Service - Dealers/agents are promoting the business of the applicant and they are not the advertising agency - not taxable - AT
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Business Auxiliary Service - procuring blank cards, loading operating system on these cards, obtaining photo/thumb impression and other information, storing and printing the said information in the card, and ultimately dispatch the loaded cards to the customers on behalf of the transportation authority on B.O.T. basis. - Not taxable as BAS - AT
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Clarification on service tax on remittances - regarding. - Circular
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Referral charges which was the consideration received by appellant from the banks for promoting and marketing their services – Section 65 (105) (zzb) read with Section 65 (19) warrants taxation of the consideration as business auxiliary service- AT
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Taxability - discounts/incentives received by appellant as an advertising agency from the Media - will not be liable for service tax - AT
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Services of repair, renovation, widening of roads and construction of toll sheds, providing electrification of high mast poles at toll sheds etc. – not covered under the category of "commercial or industrial construction service" - AT
Central Excise
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Classification of motherboard and add on card - parts and accessories of the data processing machine falling under Heading 84.71, therefore classifiable under Heading 8473 of the Tariff. - AT
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Regarding Exemption Focus Product Scheme Duty Credit Scrip - Notification
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Regarding exemption under Status Holder Incentive Scrip (SHIS) scheme. - Notification
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Regarding Exemption under Vishesh Krishi and Gram Udyog Yojana (VKGUY). - Notification
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Regarding Exemption under Agri. Infrastructure Incentive Scrip. - Notification
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Regarding Exemption under Focus Market Scheme (FMS). - Notification
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Period of limitation - rejection of refund claim of Education and Senior Higher Education cess paid on paper and paper board - Rejection of refund claim upheld - AT
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Credit availed without any duty paying documents/on the strength of xerox copies of invoice – applicants directed to deposit the credit of amount availed without any duty paying documents - AT
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Storage of inputs outside the factory premises - Dis-allowance of Cenvat Credit - for a mere technical breach, the substantial benefit cannot be denied - AT
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2012 (7) TMI 253
Appeal against denial to admit additional evidence on ground of delay even though ground was pure legal - assessee also contending assessment to be illegal and void ab initio on ground that assessment has been made in the individual name of the appellant even though the panchnama and search warrant was in the joint names - Held that:- Fact that the panchanama has been drawn up in joint names, leads to a probable inference that the warrant in question was issued in joint names. This fact has to be verified. First Appellate authority should have admitted this additional ground, which goes into the root of the matter and adjudicated the same. It cannot be rejected on the ground of delay, as it was taken before disposal of the appeal by the CIT(A) and when it is a purely legal ground and facts are on record. CIT(A) directed to admit additional ground and adjudicate the same on merits
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2012 (7) TMI 252
Charitable Trust - carry forward and set off of losses - denial on ground that there was no provision for carry forward of the excess of expenditure of earlier years - income of the charitable trust was not assessable under the head ‘profit and gains of business’ u/s 28 in which the provision for carry forward of losses was relevant - Held that:- Income derived from the trust property has also got to be computed on commercial principles and if commercial principles are applied then adjustment of expenses incurred by the trust for charitable religious purpose in the earlier years against the income earned by the trust in the subsequent year will have to be regarded as application of the income of the trust for charitable and religious purpose. Also, assessee has been permitted to carry forward the losses and also to claim set off such losses against the income in earlier AYs, which has been accepted by Revenue. Carry forward and set off allowed. See DIT vs. Vishwa jagrithi Mission (2012 (4) TMI 289 (HC)) - Decided against Revenue
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2012 (7) TMI 251
Rejection of books of account on account of non-production of relevant registers, bills and vouchers or inventories before CIT(A) - estimation of net profits - assessee filed an affidavit that all the books of account as prescribed in Rule 6F were produced before the CIT(A) and denied the aforesaid observations of CIT(A) - Held that:- Since Revenue did not place any material controverting the averments in these affidavits and merely supported the findings of the CIT(A), hence it is find appropriate to restore these issues to file of CIT(A) for deciding the matter afresh, after verifying the genuineness of averments made in the aforesaid two affidavits - Appeal of assessee allowed for statistical purposes.
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2012 (7) TMI 250
Determination of Presumptive profit u/s 44BB - addition of reimbursement of fuel recharge received to gross receipts - assessee(foreign company) having PE in India reflected income u/s 44BB in terms of contracts with ONGC - Held that:- It has been held in case of Halliburton Offshore Services Inc ( 2007 (9) TMI 230 (HC)) that it is clear from perusal of Section 44BB that all the amounts either paid or payable (whether in India or outside India) or received or deemed to be received (whether in India or outside India) are mutually inclusive. This amount is the basis of determination of deemed profits and gains of the assessee @ 10 %. S44BB is a complete code in itself. Following aforesaid decision, action of addition of reimbursement of fuel recharge to gross receipts is upheld - Decided in favor of Revenue. Addition of reimbursement of Service tax - Held that:- Service tax which is a statutory liability, would not involve any element of profits and a service provider is collecting the same from its customers on behalf of the Government and, accordingly, same cannot be included in the total receipts for determining the presumptive income. See Islamic Republic of Iran Shipping Lines(2011 (4) TMI 637 (Tri)) - Decided against Revenue
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2012 (7) TMI 249
Addition on account of unvouched expenses - Salary expenses - partial relief in dis-allowance granted by CIT(A) on ground that assessee's books of accounts were subject to tax audit and AO has failed to record specific defects and particular vouchers in his assessment order - Held that:- Assessee, neither before CIT(A) nor before us, submitted any explanation regarding above infirmity, as noted by authorities below, despite an opportunity to submit the same. The addition of Rs.35,000 finally made by CIT(A) comes to less than 10% of expenses claimed i.e. amounting to Rs.3,90,105 and, accordingly, the addition on account of unvouched expenses deserves to be sustained. Appeal dismissed.
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2012 (7) TMI 248
Trading Liability - job work payable of earlier year brought forward - addition made u/s 41 on presumption that assessee will not pay these amount in future also - Held that:- Since expenditure does not pertain to this year, it cannot be disallowed. Further, the amount has not been written back to the P/L A/c. There is no cessation of liability merely because the assessee has not paid the amount till the completion of assessment. Only option before the AO is to consider the assessment of the years in which the amounts were debited to P/L A/c. No addition can be made in this year - Decided against Revenue Alleged bogus payments - CIT(A) deleted the addition on ground that payments have been subjected to TDS - Held that:- No evidence exist on the record of the AO to show that tax has been deducted from payments made. Relied has been given by CIT(A) without obtaining any confirmed account from this party. The assessee has also alleged that Shri A has fled away with some third party cheques lying in his office. Therefore, there is something doubtful about the transactions with Shri A. Matter restored to the file of the AO to be examined fresh.
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2012 (7) TMI 247
Addition u/s 68 - gift received from NRI friend - revenue contending assessee has not proved any evidence regarding creditworthiness and no occasion has also been mentioned for making gift - Held that:- It is clear that the identity of the donor has been proved by filing identification card from Florida authorities and the notarised declaration. The donor has mentioned that he is engaged in service. The amount of US$ 3600 is not such a big amount that a serving person in USA cannot give it as a gift. Therefore, the creditworthiness of the donor has been proved. Since donor and donee have close relationship and, thus, it cannot be said that it is a gift to a total stranger so that it defies human probabilities of conduct. The gift has been made through banking channel, thus, its genuineness has also been proved. Hence, all the three ingredients of section 68/69 have been proved on a prima facie basis. Consequently it is held that the gift is genuine - Decided in favor of assessee.
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2012 (7) TMI 246
Unexplained cash credit u/s 68 - CIT(A) deleted the additions - Held that:- The assessee has furnished the copy of confirmation, copy of income tax return and bank statement of individual to whom loan was given there cannot be any doubt about his identity or creditworthiness - letter in response to summons issued by AO clearly stated the evidence of the cheque number or the bank balance of 2004-05 adjudicating the repayment of loan received during the year under consideration, thus proving the identity and creditworthiness of party as well as genuineness of transaction - in favour of assessee.
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2012 (7) TMI 245
Deduction u/s 10A - assessee contending communication expenses and insurance expenses attributable to the delivery of software, which is reduced from export turnover in the numerator then the same is to be excluded from the total turnover in the denominator - Held that:- Amount attributable to export which is to be reduced from export turnover, should also be reduced from total turnover while working out the deduction u/s 10A of the Act. Assessing Officer is directed to recompute deduction u/s 10A. See ITO vs Sak Soft lTd (2009 (3) TMI 243 (Tri)) - Decided in favor of assessee.
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2012 (7) TMI 244
Dis-allowance u/s 14A of expenditure incurred in earning dividend income - application of Rule 8D - AY 07-08 - Revenue contesting restriction of dis-allowance by CIT(A) - Held that:- It has been held in case of Godrej & Boyce Manufacturing Co. Ltd. vs. DCIT (2010 (8) TMI 15 (HC)) that provisions of Rule 8D would apply with effect from AY 2008-09. In the case before us the AY involved is AY 2007-08. Therefore, Rule 8D will not be applicable in the case of the assessee. However, disallowance can be made in relation to exempt income on reasonable basis. The assessee had himself disallowed Rs.1,73,98,255/- in the proportion of exempt and taxable income earned by way of dividend and interest income, which is reasonable. Since Rule 8D is not applicable for AY under consideration, the disallowance made by the assessee on proportionate basis of exempt income and taxable income in our considered opinion is justified - Decided against Revenue.
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2012 (7) TMI 243
Asset management company - addition made on account of Load charges received in respect of management of different schemes of Mutual Fund - assessee contended that load had been collected on behalf of the mutual fund and does not belong to the assessee - Held that:- Assessee had only received load which had been accounted separately and adjusted for various expenses of the scheme to which it was entitled. Balance amount had been transferred to the Mutual fund, from time to time. As per regulation 52(2) of SEBI Regulations and agreement between the asset management company and mutual fund, the assessee as an asset management company is entitled to advisory fees at a specific rate and reimbursement of certain expenses as specified in regulation 52(4). The assessee is not entitled to any other benefit. Under these circumstances, making any addition on account of load is not justified - Decided in favor of assessee.
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2012 (7) TMI 242
Jurisdiction of Assessing Officer to revisit issue while giving effect to direction of High Court, when the same was not a subject matter before the High Court - assessee contending adoption of sale consideration actually received as against amount receivable under the agreement that was later cancelled and adopted by AO - Held that:- Matter of actual sale consideration received was not a subject matter neither before the Tribunal nor before the High Court, therefore, it cannot be said that the AO ought to have considered the same in the assessment completed pursuant to the High Court’s judgement dated 13/12/2007. Therefore, as rightly pointed out in the CIT(A)’s order in the set aside assessment proceedings, the Assessing Officer did not have the jurisdiction to revisit this issue. Appeal of assessee dismissed.
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2012 (7) TMI 241
Levy of penalty u/s 158 BFA(2)- addition made by AO to the undisclosed income as substantial gold/diamond jewellery had been found at the time of search - Held that:- Considering the statement of the father at the time of search that the shortage found represented gifts given to various family members is no acceptable as it was not supported by any gift tax paid nor full details/particulars of items gifted - assessee submission that 140 gms jewellery had been declared in VDIS but no VDIS certificate had been produced and even if VDIS declaration was made, the jewellery declared therein had merged with the jewellery declared in the returns for assessment year 1992-93 - explanation of the assessee cannot be considered as bonafide as diamond/ gold jewellery are precious items which are carefully kept by any person and it cannot be accepted that a person will not keep accounts of the same - mere confirmation even if given is not enough as there is no supporting evidence in the form of gift tax return nor there are details of purchase of items gifted or the source thereof - as in case of silver items the amount being small (Rs.4258/-) it will not be appropriate to levy penalty in respect of such addition - penalty confirmed on gold/diamond jewellery - partly allowed in favour of assessee.
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2012 (7) TMI 240
Levy of penalty u/s 271(1)(c) - AO disallowed the loss as claimed by assessee on redeeming the units on 26- 03-2004, purchased back on 26-12-2003 - invoking provisions of section 94(7)- Held that:- As the basis of dispute is whether the transactions dated 26-12-2004 and 26-03-2005 fall within the period of three months or not, because the Act, under section 94(7)(b)(i) uses the words “after such Date”, and the revenue authorities have used this expression against the assessee, which even the assessee has not denied, but the revenue authorities could not point which could lead to omission, concealment or inaccurate and certainly nothing has been found to be “false” - mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee - decided in favour of assessee.
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2012 (7) TMI 239
Additions on account of undisclosed income - Held that:- Since income of assessee was below taxable limit, therefore, no return was filed, thus in view of the decision of in the case of SURENDRA KUMAR LAHOTI Versus ACIT [2006 (4) TMI 68 (HC)] the income below taxable limit may not be treated as undisclosed income On account of difference in value of car and undisclosed interest the assessee could not explain the source of deposit, thus the addition made by AO is confirmed for the assessment year 1988-89, whereas in view of the income assessed in assessment year 1988-89 till 1993-94, the assessee was having sufficient cash for deposit in the Bank account. Accordingly, the addition made by the Assessing Officer is not sustainable. As for unexplained investment in gold ornaments and unaccounted rental income the assessee could not explain the source of acquisition of gold ornaments, the AO has correctly made addition. Addition in respect of purchase of tanker - Held that:- As the AO has not properly evaluated the documents filed to explain the source of investment in tanker, restore this ground back to the file of the Assessing Officer for deciding afresh
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2012 (7) TMI 238
Taxability of income from transfer of development rights - assessee jointly with the trust granted development rights to party in respect of part of the land for a consideration in which the share of the assessee was @ 32% receiving a sum of Rs.92.00 lacs during the assessment year and balance in instalments in subsequent years - assessee offering income from transfer of development rights @ 25% of the receipt taking the transfer as integral part of the development project - Held that:- The assessee had development rights in respect of certain piece of land, but instead of developing the land he transferred the development rights in respect of part of the land to a separate construction company and as per the agreement, the assessee jointly with the trust was required to convey the land to the proposed buyers and possession of the land had also been given during the year along with development rights. Thus parting away with the development rights in respect of part of the land forever, conclusion is derived that this was an independent activity having no connection with the development of the remaining part of the land. As the assessee was following mercantile system of accounting as per which income accrues when it becomes due for payment, thus the entire amount became due to the assessee in the relevant year on signing of development agreement and on handing over of the possession of the land - postponement of payment does not stop accrual of income - alternate claim of the assessee that in case the entire income was assessed, the cost of acquisition of development right has to be allowed as deduction is acceptable - partly in favour of assessee.
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2012 (7) TMI 237
Disallowance of Society Charges paid in respect of property given on leave and license - amount is being claimed as deduction from profit of his business by assessee - Held that:- As per the provisions of section 23 the Annual Letting Value of the property is determined, and as per the fiction created in section 23(1)(a) the fair market value also can be treated as the annual letting value if the same is more than actual rent received or receivable. Section 24 provides the rights of the assessee to claim the deduction on some equal to 30% of the annual value and Interest on the borrowed capital if the same is used for acquiring, constructing or renovating the property and other than this, no other deduction is allowed - rightly denial of deduction claim of assessee - against assessee. Disallowance of Generator Running Expenses - no evidence was produced by the appellant for expenses having incurred genuinely for the diesel expenditure - Held that:- Considering submissions made by assessee that Diesel Generator was for the warehouse of appellant, that all bills were produced before the AO and (DR) relied upon the orders of the lower authorities - from the details filed by the assessee and admitted that payments were made in violation of Sec. 40A(3) for purchasing diesel disallowance is restricted to Rs. 1,51,315/- out of the disallowance upheld by the CIT - partly in favour of assessee.
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2012 (7) TMI 236
Allowance of claim of deduction under section 80IB (10) - assessee are engaged in the business of builders and developers - Held that:- In terms of provisions of clause (d) of section 80IB(10) inserted in the Finance Act 2004, and effective from 1.4.2005, deduction under section 80IB(10) cannot be allowed in case built-up area includes commercial area exceeding 5% of the aggregate built-up area or 2000 sq.ft. whichever is lower - that the amended provisions will not apply to the project approved prior to 1.4.2005 and would apply prospectively - as the project under question had been approved long before the cut-off date of 1.4.2005, and therefore, respectfully following the above rulings no infirmity in the order of CIT(A)- in favour of assessee.
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2012 (7) TMI 235
Estimation of expenditure incurred in earning the exempt income - applicability of Rule 8D by AO disallowing 10% of the income - assessee submitted that no expenditure can be identified which has been incurred for earning the dividend from units - Held that:- The total of the investments when compared at the beginning of the year with the end of the year clearly shows that substantial activity has taken place in purchase / subscription, and sale / redemption of the units. Therefore, it will be naïve to accept that such activities have been undertaken merely at the advice of the bank and without any substantial participation of the managerial personnel in this behalf - Such investments require constant monitoring and undoubtedly expenditure has been incurred for earning income by way of management, establishment and office expenses. As the investments at the beginning of the year stood at about Rs. 14.65 crores, which were reduced to about Rs. 13.01 crores at the end of the year. The assessee has earned dividend income and capital gain, which are tax-free incomes as mentioned earlier. Therefore, these incomes have not been included in the total income - as the assesee’s explanation is not satisfactory, therefore, provisions contained in 14A are applicable r.w.r.8D - CIT(A) erred in estimating the expenditure by ignoring the mandatory provision contained in Rule 8D - against assessee.
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2012 (7) TMI 234
Levy of penalty u/s 271(1)(c) - assessee had not complied with the provisions of section 50C as per which the capital gain was required to be computed on the basis of stamp duty valuation - Held that:- As the assessee was required to compute capital gain under the clear provisions of section 50C, assessee however declared much lower capital gain on the basis of consideration received which was against the clear provisions of law - explanation of the assessee that lower declaration was by mistake cannot be considered as bonafide because the assessee did not file revised computation even during assessment proceedings when the issue was being examined and assessee filed revised computation only after the addition was made in the assessment order - explanation cannot be considered as bonafide nor the issue is debatable as the assessee did not dispute the valuation report thus Penalty has being rightly levied - decided against assessee.
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2012 (7) TMI 222
Scope of assessment u/s 153A - search and seizure - whether it encompasses additions, not based on any incriminating material found during the course of search - Held that:- In assessments that are abated, the AO retains the original jurisdiction as well as jurisdiction conferred on him u/s 153A for which assessments shall be made for each of the six assessment years separately. In other cases, in addition to the income that has already been assessed, the assessment u/s 153A will be made on the basis of incriminating material, which in the context of relevant provisions means – (i) books of account, other documents, found in the course of search but not produced in the course of original assessment, and (ii) undisclosed income or property discovered in the course of search. Deduction u/s 80IA(4) - CFS - dis-allowance on ground that ICDs, and CFSs are not ‘ports’ located on any inland water way, river or canal and therefore they cannot be classified as "inland ports" for the purpose of section 80(IA)(4) - assessee had been operating the CFS at Jawahar Lal Nehru Port Trust - Held that:- In the case at hand it is clear that the assets of the CFS are not to be handed over to the Port Trust at any point of time as it is not built on BOT & BOLT Scheme. The CFS is also not located at the Port. CBDT has furnished opinion that ICDs and CFSs are not entitled to such deduction as they do not constitute inland ports, however High Court in the case of Container Corporation of India Ltd (2012 (5) TMI 260 (HC)) held that an ICD is not a port but it is an inland port. The case of CFS is similar situated in the sense that both carry out similar functions, i.e.,ware housing, customs clearance, and transport of goods from its location to the seaports and vice-versa by railway or by trucks in containers. Thus, the issue is no longer res-integra. Respectfully following this decision, it is held that a CFS is an inland port whose income is entitled to deduction u/s 80IA(4) - Decided in favor of assessee.
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2012 (7) TMI 221
Penalty u/s 271(1)(c) - failure to deduct tax at source - assessee, a non-resident company having its principal place of business at Honkong, did not deduct tax at source on payments made to various Channel Companies, which are also non-resident companies based in Honkong - assessee contended non-requirement to deduct TDS on the payment made by a non-resident to a non-resident u/s 195 - In view of the decision in the case of Eli Lilly & CO. Ltd (2009 (3) TMI 33 (SC)), wherein it was held that if the assessee had a bonafide belief that it was not required to deduct tax at source even if the amount is held taxable later on will not result in levy of penalty u/s 271C, it is held that no penalty u/s 271C can be levied - Decided against Revenue.
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2012 (7) TMI 220
Indo German DTAA - ISO 9000 certification income - Revenue contended part of the income to be taxable as per Article 12 of DTAA as royalty and "fees for technical services" and other part of income and expenses reimbursed which are linked with FTS, to be taxable, being part of gross receipts - applicability of Section 44D - assessee( German company) having a branch in India, engaged in the business of audit and procedure of norms for ISO 9000 Certification - Held that:- The assessee's case does not in any manner comes within the meaning of 'royalties', as there is no right to use of any other items described therein. Further, services are mostly in the nature of 'audit work' on basis of which certificate is granted. Nowhere from such services, it can be inferred that the assessee has been providing technical, managerial or consultancy services. Technical services require expertise in technology and providing the client such technical expertise which in this case no technology is transferred. Managerial services is used in the context of running and management of the business of the client, which herein this case, there is no management of client's business, but evaluation of standards as per international guidelines. Consultancy is to be understood as advisory services wherein necessary advise and consultation is given to its clients for the purpose of client's business. In an audit work there may be some incidence of advise at the time of evaluation but certainly it cannot be termed as pure consultancy services as in the audit work the auditor has to only evaluate the quality system and environmental system. Thus, the entire nature of services and activities carried out by the assessee comes within the realm of 'professional services' and not within the meaning of 'FTS' as provided in the Article 12(4) and Section 9(1)(vii). Consequently income cannot be determined by applying the provision of Section 44D. It has to be computed in view of the Article 7(1) and resultantly as per Section 28 to 43 of I tax Act - Decided in favor of assessee. Interest u/s 234B - Held that:- When a duty is cast on the payer to pay the tax at source, on failure, no interest can be imposed on the assessee.
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2012 (7) TMI 219
Alleged bogus purchases on ground of discrepancies in mentioning vehicles nos. on gate pass - question of fact decided in favor of assessee by Tribunal - Held that:- Revenue could not point out any perversity in the finding of Tribunal that production and the sales have not been doubted. Payments were made to the concerned parties through cheque and the delivery of goods was duly taken from the concerned traders. It was also noted that the assessee had adopted the proper procedure for receiving the goods supported by the gate-pass and goods were subject to lab testing, weighment etc. and they were duly recorded in the stock register. The payments were made by account payee cheque which were deposited in the Bank. Thus the issue which Revenue is raising in respect of bogus nature of purchase, is concluded against the Revenue by the finding of fact which has been noted above. The appeal does not involve any question of law and is accordingly dismissed - Decided against Revenue.
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2012 (7) TMI 218
Long-term Capital gains - deduction u/s 54 - partial denial on ground that deduction is available against construction of house property, if the same is constructed after the transfer of capital asset and completed within three years from the date of transfer of the capital assets - assessee purchased and invested Rs 26.19 lacs in construction of residential property before transfer of capital asset - Held that:- It is undisputed that assessee sold his residential house on consideration of sum of Rs. 35 lacs on 03.11.2007 and has spent a sum of Rs. 30.44 lacs on purchase of plot and on construction of a residential house thereon. The construction of this residential house was completed in the month of March, 2008. Since the construction was completed within three years of transfer of capital asset, the ratio as laid down in the case of Subramaniya Bhat (1986 (6) TMI 7 (HC)) is applicable to the facts of this case as it has been clearly held in that case that for claiming deduction u/s 54, the construction of the house should be completed within the prescribed time limit and date of commencement of construction is not material for claiming deduction - Decided in favor of assessee.
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2012 (7) TMI 217
Dis-allowance u/s 40(a)(ia) - non-deduction of tax at source on reimbursement of rent by assessee to its holding company - rent for the whole premises paid directly by the holding company to the Lessors and tax deducted u/s 194-I - Revenue contended such arrangement to fall under Explanation (i) of section 194-I - Held that:- Assessee is paying rent to the holding company as reimbursement since last many years, which has been accepted by the department all through. The lease deed provides for use of the premises by the subsidiary companies. The actual payments made by the holding company to the lessor and necessary tax was deducted therefrom. The holding company has also not debited the whole of rent to its books of account. It has only debited the rent which pertains to the part of the premises occupied by it. Therefore, there was no lessor and lessee relationship between the holding company and assessee where the provisions of section 194-I are attracted. Deletion of addition made u/s 40(a)(ia) is sustained - Decided against Revenue
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2012 (7) TMI 216
Additions made by AO u/s 68 - CIT(A) deleted the additions - Held that:- The donor was real sister of donee and she received the amount from her NRI son who was doing business in Hong Kong with a proper license of business and the assessee not only established identity, creditworthiness of the donor but also established her source of funds showing her genuine capacity to donate Rs. 10 lakh to the donee assessee - thus establishing genuineness of gift it cannot be treated to be from undisclosed sources u/s 68 - in favour of assessee.
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2012 (7) TMI 215
Rectification of order passed u/s 143(1)(a) - AO adjustments in regard to the particulars of capital expenditure written off (debited under operational expenses)on the basis of observations of the auditor in the tax audit report - CIT(A) deleted additions made by AO - Held that:- Considering the provisions of sec. 143(1)(a) that unless the return or the accompanying documents or accounts show that the deduction, allowance or relief claimed therein is prima facie inadmissible on the basis of information available in the said documents, such deduction or allowance claimed cannot be disallowed. Only those adjustments can be made under the said clause which on the basis of return and documents accompanying it are "prima facie" inadmissible - it is not open to the AO to make any adjustment in the returned income by disallowing any claim for deduction, allowance or relief, unless he is satisfied on the basis of information available in the return, documents, and the accounts accompanying it that such a claim is inadmissible on the face of it and there is no possibility of any debate thereon on such claim. As disallowance is made without giving an opportunity to the assessee to explain his view point in support of the deduction or allowance, and additional tax on the increased amount is charged from him arbitrarily neither proof in support of a claim can be requisitioned nor nature of expenditure can be judged in proceedings u/s 143(1)(a) no basis to interfere with the findings of the CIT(A) - in favour of assessee.
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2012 (7) TMI 214
CIT(A) deleted the addition made by the AO u/s 144 - Held that:- As the assessee did not produce any books of account before the AO despite number of notices issued seeking various details and documents as a result assessment was completed u/s 144 - AO attributed 10% of the stock of glass sold outside the books by way of profit while the CIT(A) without giving an opportunity to the AO reduced the addition by 50% on the ground that the business of trading in glass was discontinued. There is nothing to suggest as to whom the stock was sold and what was the margin- Despite being fully aware that assessment was completed in this case u/s 144 CIT(A) did not allow any opportunity to the AO before reducing the addition by 50% or deleting the addition on account of commission from trading in shares or allowing telescoping the income on sale of glass and returned income, against unexplained cash deposited in the bank. CIT(A) while allowing set off of amount of Rs. 2 lacs on account of sale of old stock of glass and returned income of Rs. 5,06,170/- did not refer to any evidence that sale of old glass or returned income had any nexus with the cash deposited in the bank account ,especially when the assessee did not produce relevant books of account - order of the CIT(A) while disposing of the appeal shall be in writing and shall state the points for determination, the decision thereon and the reason for the decision - decided in favour of revenue.
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2012 (7) TMI 213
Trading liability - addition made u/s 41 on belief that liabilities have ceased to exist whereas assessee contended them to be existing liability - Held that:- Section 41 applies where a trading liability was allowed as a deduction in earlier years in computing the business income of the assessee and the assessee has obtained a benefit in respect of such trading liability in later year by way of remission or cessation of the liability. In the present case, the assessee has not written back the liability and Assessing Officer failed to demonstrate that liability has ceased. Unless the liabilities are written off in the books of account, provisions of section 41(1) cannot be applied - Deletion of addition justified - Decided in favor of assessee.
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2012 (7) TMI 212
Profits from the sale of the property - AO treated it to be as business income pointing to the object clause of the partnership deed which include objects such as carrying on business as dealer, contractor, proprietor and the dealer in land, building, shops - assessee treated it as “Long Term Capital Gain” - Held that:- As the partners have resolved to discontinue the business after 1994 and replace the same with the objective of investment in the real estate or other investment in which the benefits of receiving the income from such investment as well as appreciation in the investment is more. During the said period of the business activity, the assessee had undertaken only one project. Thereafter, the assessee has not done any activity except for purchasing the property at Khetwadi with 72 tenants in November, 1997 - as decided in CIT vs. Suresh Chand Goyal [2007 (1) TMI 90 (HC)] that an isolated transaction or activity can also be part of business, but to consider the question of business, there must be regular activity of purchasing and selling. Considering the statement of total income shows that in treating the business income, the A.O. himself has accepted (a) index cost of acquisition and (b) exemption u/s.54EC. The A.O. cannot blow hot and cold in the same breath - in favour of assessee.
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2012 (7) TMI 211
Applicability of Rule 8D - dividend income - assessee claimed the same as a case of exempt income u/s 10(33) of the Income Tax Act, 1961 – Held that:- AO has not specifically dealt with the claim of the assessee to the effect that no expenditure had been incurred in the AY in hand particularly in view of the fact that the shares in question had been purchased long back - issue in hand has to be remitted back to the AO who shall re-decide the instant ground in view of the evidence if any lead by the assessee by following the principles of reasonable computation as it existed before the insertion of Rule 8D after affording the assessee opportunity of hearing. Interest free security deposit - assessee company had received non-interest bearing security deposit - Refundable at the time of termination of lease - assessee has included the amount as miscellaneous income. But immediately after realizing the mistake it also filed its revised computation – Held that:- Interest free security deposit to be paid back, the same can never termed as income - AO has also not examined this issue – matter remanded to AO
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2012 (7) TMI 210
Dis-allowance u/s 14A of interest expenditure under Rule 8D(2)(ii) and 0.5% of the average value of investments under Rule 8D(2)(iii) - Held that:- It is observed that major portion of interest is paid on vehicle loan taken by the assessee and the other payments are either to the tax department or to the bank. Thus, Rule 8D(2)(ii) is not applicable in the instant case and hence disallowance of proportionate interest expenditure is not in accordance with law. However, since assessee made huge investments in shares, it is not possible to ascertain the ratio of expenditure which is relatable to exempt income, it is found that AO has rightly applied the formulae of 0.5% of the average value of investment for dis-allowance, which is in accordance with law - Decided partly in favor of assessee Foreign travel undertaken by the Director and his wife for business purpose - dis-allowance - travel scheduled from 22.04.2008 to 05.05.2008 - AY 08-09 - Held that:- Following matching principle, expenditure deserves to be considered in subsequent year and not in the year under consideration. Dis-allowance of amount paid to SEBI for non compliance of certain regulations of SEBI on the ground as levy for infraction of statutory law - assessee contended that non-compliance do not result in any harm to investors, promoters or any other parties - Held that:- No material was placed to contradict the claim of the assessee. In light of decision in case of CIT vs. Prasad and Co (2012 (2) TMI 124 (HC)) amount paid to SEBI is allowable as deduction.
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2012 (7) TMI 209
Treating the income from transfer of the rights enjoyed by the assessee as capital receipt - AO stated that the income should be taxed under the head capital gain - Execution of will - dispute over property - assessee in the capacity of Administrator - Held that:- sale proceeds and advances were accumulated over the years and during the relevant year assessee received certain sums out of distribution of such sale proceeds as well as advances. The assessee had not sold any particular piece of land during the year and, therefore, Ld. CIT(A) has correctly held that the receipts would not be chargeable to income tax. In the absence of sale of a particular asset, revenue cannot assume that the sums are taxable on transfer of land. Liability of beneficiary to tax where administrator has paid tax - Held that:- once the taxes are paid by the estate, naturally, the beneficiary receiving any distribution of such sale receipts could not have been taxed again by the revenue, thus, it is clear that sale receipt against which conveyance deed was already executed and which were assessed in the hands of estate of EFD, were not subjected to tax again. constituting the transaction as adventure in the nature of trade there has to be some business relationship or some commercial features in the transactions. Since assessee was not owner of the properties, there is no question of transferring any rights in such properties. Further, the administrator could not distribute the proceeds from sale of the properties unless the administration was complete i.e. expenses and taxes of the estate were paid - mere receipt of sale proceeds by the assessee from the estate of EFD would not amount to any extinguishment of his rights and, accordingly, the receipt of the sum cannot be taxed under the head ‘capital gains'- the assessee had invested in 55 companies during the year and these figures, by no stretch of imagination, would lead us to a conclusion that the assessee is not the investor but a trader in shares - decided in favour of assessee.
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2012 (7) TMI 208
Applying net profit rate of 10% on the contract receipts declared by the assessee - the assessee did not produce books of account nor furnished the details called for - Held that:- The assessee's claims to derive income from contractor ship business is not acceptable as no proof of having done any contract work was submitted by the assessee - as per provisions of Section 44AD even if assessee does not maintain books of account where the turnover is less than Rs. 40 lakhs, maximum profit which can be estimated is 8 %. However, in the instant case there exists no dispute to the fact that the assessee was engaged in civil construction work and even no proper books of accounts are maintained, where the turnover was exceeding the prescribed limit, the CIT(A)was justified in estimated 10% profit on the gross contract receipts - against assessee.
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2012 (7) TMI 207
Deduction u/s 80HHC - reduction of export turnover to the extent of the amount not received in convertible foreign exchange within the statutory period - assessee in view of aforesaid contending proportionate reduction in direct cost and indirect cost in relation to trading of goods in export - Held that:- Expenditure both direct and indirect are incurred for export of the commodity and nothing of it is attributable to the receipt of amount through banking channels. Petition of assessee dismissed.
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2012 (7) TMI 206
Petition against dismissal of stay application filed u/s 220(6) during pendency of appeal before the Tribunal - Held that:- Since appeals are pending consideration before the third respondent for more than one year, hence, it is for the third respondent to consider the appeals and pass final orders on merits. Petition dismissed.
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2012 (7) TMI 205
Denial of deduction u/s 80IB(10)- Held that:- As exists no dispute to the provisions of law relevant to assessment year 2007-08 and 2008-09 that for claim of deduction u/s 80IB(10) the housing project which have been approved prior to 31st March, 2005, the same are required to be completed by 31st March, 2009, and certificate of completion is to be issued by the Municipal Authorities in this regard - Since the certificate for giving approval of the project was dated 29.3.2005, assessee’s eligibility for claim of deduction u/s 80IB(10) is to be judged with reference to the date of this certificate and merely because certificate provides issue of no dues certificate issued subsequently on 1.4.2005 and dispatched to the assessee on 5.4.2005, it cannot be held that building permission was given only after 1st April, 2005 - Thus as per this permission letter dated 29.3.2005, the assessee was required to complete project by 31st March, 2009, whereas the assessee has completed the project by 31st March, 2010 - denial of deduction is hence warranted - decided against assessee.
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2012 (7) TMI 204
Disallowance of detention charges - A.O. stated that such detention charges are penal in nature and therefore cannot be allowed as deduction - Held that:- The expenditure incurred by the assessee for delay in returning the containers is a normal and regular procedure of custom and as such the payment is nothing but in the nature of demurrage and simply because it is paid to the custom department, the nature cannot be changed - the disallowance made by the AO was not justified - favour of assessee. Disallowance of commission - Held that:- As the assessee has duly explained the nature of services rendered by the companies to whom commission was paid by account payee cheques. Such commission is a normal business expenditure keeping in view the nature of business the assessee was engaged, dis - allowance is not warranted - in favour of assessee. Treatment of profit of sale of shares - whether as Short term capital gain or business income - Held that:- As the AO himself has accepted that the assessee had made investment in limited number of shares and that profit on shares held for more than 12 months as long term capital gain no point to treat the gain arising out of same class of shares held for less than one year as business income - in favour of assessee.
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2012 (7) TMI 203
Addition on account of unexplained deposit into bank as reduced by CIT(A)- Held that:- As the A.O. asked for details of persons from whom the cheques were received by the assessee and to whom the cheques were issued by the assessee so that peak credit in her account could be arrived at and the same be taken for making addition for deposits made by the assessee in her bank account through cheques. Since this information was not given by the assessee, the addition was curtailed to give relief to the assessee simply by accepting the submission of the assessee - remand the matter back to issue speaking order.
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2012 (7) TMI 198
Credit availed without any duty paying documents/on the strength of xerox copies of invoice – Application for waiver of pre-deposit of duty, interest and penalty in view of the financial hardships - Held that:- The applicants availed credit of Rs.4362547/- without any duty paying documents and remaining credit on the strength of Xerox copies of invoices which is not a case for total waiver of dues – in METAL BOX INDIA LTD. Versus COMMISSIONER OF CENTRAL EXCISE, MUMBAI[2003 (4) TMI 111 (SC)] it was held that waiver of pre-deposit covered under Sec.35F of the Central Excise Act does not fall under any of the enumerated categories in Sec.22 of the Sick Industrial Companies (Special Provisions) Act, 1985, protection thereunder not available to the assessee - the applicants are directed to deposit the credit of amount availed without any duty paying documents within a period of eight weeks - on deposit of the aforesaid amount, pre-deposit of the remaining amount of duty, interest and penalty is waived for hearing of the appeal.
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Customs
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2012 (7) TMI 233
Whether ADG DRI was competent to issue the impugned show-cause notices - there is both appointment as Collector/Commissioner and special authorization by the Board to issue show-cause notices in respect of cases investigated by DRI – Held that:- All persons appointed as officers of Customs under sub-section (1) of Section 4 before the 6th day of July, 2011 shall be deemed to have and always had the power of assessment under section 17 and shall be deemed to have been and always had been the proper officers for the purposes of this section. Whether there is violation of principles of natural justice in not allowing the cross-examination of the group of scientists involved in preparing the CAIR report - There is no absolute right for cross examination of any witness in the adjudication proceedings – Held that:- When cross examination was sought for, apparently, not all the members of the Team were available with CAIR. Therefore, the cross examination of the Team from CAIR was not given. Instead, BAL was requested to give a questionnaire, which was answered by the Team-Head, which is part of the adjudication proceedings. Further, the Commissioner has permitted expert opinions of two experts to be were produced by the appellants, and considered the same as well – there is no violation of principles of natural justice in this regard. What are the nature/characteristics of goods imported by the assessee/appellants as hardware and software separately - What is the true nature of transactions involved in such imports - import is of telecom equipment system - They did not disclose preloading of software in the factory in Sweden - comprising both hardware and software units – Held that:- Not only the software has been preloaded in flash memory or hard disc but a backup of the same was taken and stored in the hardware imported - What was imported as software separately was lying in original packing condition, without being opened and therefore, without being used for a few years. That does not mean that the hardware was not put into use. Hardware was installed and tested by the officials of EIL and the system was put into operation. They did not find any need for use of the software imported separately - it is not proper to consider the telecom equipments as a specialized computer as claimed by the appellants - decisions in respect of classification/valuation of hardware and software of computers cannot be mechanically applied to hardware and software relating to telecom equipments. Whether the value of software preloaded at factory in Sweden before shipment took place requires to be excluded from the value of hardware as claimed by the assessees or to be included as held by the department – Held that:- Without the preloaded software, the imported equipments cannot get the identity as telecom equipments and cannot serve the purpose - software preloaded in the equipments imported and which is undisputedly essential not only for its functioning but for giving identity to the equipments cannot be treated as presented with the equipments - no justification to pull out or disintegrate the preloaded software from the imported equipment and grant it separate status and to classify it under Chapter sub-heading 85.24 and to exclude its value (which was artificially split from the composite value of the equipment) to arrive at the value of the equipment - it is a case of importing equipments which contained essential software/intrinsic software giving the functional identities to the imported equipments Whether the decision of the Tribunal in the case of Vodafone is applicable to the facts of the present case or not – Held that:- In the case of Vodafone came to the conclusion that the software was contained only in Winchester hard disc and therefore, could not be considered as embedded or etched software - In the present case, software meant for BTS is contained in the flash memory which is a form of EEPROM - facts of the present cases are different from the facts of Vodafone case - software in the form of tapes/CDs having come separately in CDs and Tapes was not embedded or etched - there is fraud in preparation of ODs and CDs and sending them to Sweden and re-importing the same to be dumped as e-waste - It is settled law that fraud nullifies everything - This crucial fact also distinguishes the present case from Vodafone case. Whether all the imported goods are liable to confiscation or only goods which were seized by the department are liable to confiscation – Held that:- Goods are offending in nature and they are liable to confiscation - confiscation under Section 111 applies to any goods in respect of which offences have been established and not necessarily to all goods which have been seized - there is no restriction under Section 124 to issue show-cause notice proposing confiscation of only the seized goods - provisions of Sections 110 and 124 are independent, distinct and exclusive of each other - imported goods are offending in nature due to deliberate misdeclaration of value of the goods, they are liable to confiscation - goods were imported over a long period August 2001 to April 2006 and that the order of confiscation was made in April 2008, and that the goods were meant for the importers own use for rendering services and not for sale, we are of the view that there is some scope for reducing the quanta of redemption fines imposed by the Commissioner Whether the quantum of duty has been correctly worked out - assessee submitted that the department, instead of valuing the software on the basis of payments made to the supplier, computed the value on a completely notional basis and the same was against the provisions of the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 – Held that:- Adoption of software value for the full capacity of the imported hardware based on the appellants own documents cannot be held to be erroneous. The appellants claim to rely on value mentioned in corresponding software orders is not acceptable - appellants have deliberately split the value of equipments between hardware and software without any basis. Whether extended time limit is applicable and whether penalties are liable to be imposed - There is clear evidence of deliberate underdeclaration of value of the imported equipments by the assessee-appellants through a grossly deceptive method with intention to evade payment of duty - invocation of extended period for demand of duty, confiscation of the imported goods, and imposition of penalties on the assessees are justified
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2012 (7) TMI 201
Alleged wrong classification and wrong availment of benefit of Notification - Lichi juice imported by assessee contended not to be fruit drinks - Held that:- It is undisputed that appellants have declared the goods as Lichi Juice, which has been declared in Packing list, and confirmed by Test report. Commissioner(appeals) has brushed aside the test report only on the ground that it does not confirm to the standard of PFA Rules, 1955. Revenue sought to classify the product on the basis of the ingredients declared on the bottle and on the ground that the goods are known in the market as per the contents mentioned on the bottle. However, no evidence has been produced by the department that these goods were sold as other than fruit juice. Also, department has not challenged the test report of the Regional Food Laboratory. In these circumstances the same is set aside with consequential relief - Decided in favor of assessee.
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FEMA
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2012 (7) TMI 202
Constitutional validity of Section 3(1) of Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 (‘COFEPOSA’) to the extent it empowers the competent authority to make an order of detention against any person ‘with a view to preventing him from acting in any manner prejudicial to the conservation or augmentation of foreign exchange’ - petitioner contending that repeal of FERA and enactment of FEMA (FEMA did not regard its violation of criminal offence) an act where no punitive detention (arrest and prosecution) is even contemplated or provided under law, such an act cannot be made the basis for preventive detention and any law declaring it to be prejudicial to the interest of the State so as to invoke the power of preventive detention is violative of Articles 14, 19 and 21 of the Constitution. Held that:- It is true that FEMA does not have provision for prosecution and punishment like Section 56 of FERA and its enforcement for default is through civil imprisonment. However, insofar as conservation and/or augmentation of foreign exchange is concerned, the restrictions in FEMA continue to be as rigorous as they were in FERA. Although contravention of its provisions is not regarded as a criminal offence, yet it is an illegal activity jeopardizing the very economic fabric of the country. On the touchstone of constitutional jurisprudence, as reflected by Article 22 read with Articles 14, 19 and 21, impugned provision cannot be rendered as unconstitutional. There is no constitutional mandate that preventive detention cannot exist for an act where such act is not a criminal offence and does not provide for punishment. An act may not be declared as an offence under law but still for such an act, which is an illegal activity, the law can provide for preventive detention if such act is prejudicial to the state security. After all, the essential concept of preventive detention is not to punish a person for what he has done but to prevent him from doing an illegal activity prejudicial to the security of the State. In complete agreement with the position stated in UOI vs. Venkateshan S.(2002 (4) TMI 789 (SC))“if the activity of any person is prejudicial to the conservation or augmentation of foreign exchange, the authority is empowered to make a detention order against such person and the Act does not contemplate that such activity should be an offence”, no merit is found in challenge to the constitutional validity of impugned part of Section 3(1) of COFEPOSA - Decided against the Petitioner.
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Service Tax
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2012 (7) TMI 258
Service tax on waterfront royalty and way leave facility compensation - extended period of five years has been wrongly invoked - Held that:- Commissioner has come to the conclusion that there was suppression of facts only on the ground that the agreement was drafted in a complicated manner with intention to evade payment of duty. For this, there is no evidence forthcoming and it was submitted that agreement was entered into before the liability of Service Tax arose. This submission would show that invocation of extended period is not based on a strong ground and the appellant has been able to make out a prima facie case as far as extended period is concerned - as extended period should not have been invoked and stay was granted directing the appellant to deposit an amount of Rs.25 lakhs, as condition of hearing of their appeal - in favour of assessee
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2012 (7) TMI 257
Invocation of section 80 - Service of Rent-A-Cab scheme to another operator of rent-a-cab – non-payment of service tax under the bonafide belief that Service Tax is not applicable to them as they were providing services of rent-a-cab operator to another rent-a-cab operator and not to clients directly as per circular of CBEC bearing F. No. B 43/7/97-TRU dated 11.07.97 - Additional Commissioner's denial of benefit on the ground of non-segregation of amount fortifies the reason of their bonaflde belief that their service was not taxable - Additional Commissioner did not show any reason why the appellant's appeal and grounds for invocation of section 80'could not be given any cognizance to – Held that:- They paid the tax and interest when non-applicability of the said notification was pointed out to them without going into any dispute. This bona fide conduct as also argument of the appellant showing sufficient and reasonable cause for the failure certainly call for invocation of I section 80 of the Act – Commr. (Appeals) has rightly invoked Section 80 of the Finance Act.
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2012 (7) TMI 256
Waiver of pre-deposit - Demand of service tax - Advertising Agency Service - For the selling activity in Ukraine, the applicants have appointed dealers/agents for promoting the sale of the applicant's products – Held that:- Dealers/agents are promoting the business of the applicant and they are not the advertising agency, therefore, the demands in the category of advertising agency is not sustainable. In favor of appellant.
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2012 (7) TMI 255
Business Auxiliary Service - procuring blank cards, loading operating system on these cards, obtaining photo/thumb impression and other information, storing and printing the said information in the card, and ultimately dispatch the loaded cards to the customers on behalf of the transportation authority on B.O.T. basis.- assessee contested that it operated under a contract to build a system for benefiting the Regional Transport Authority and District Transport Authority as well as the consumers - Held that:- Looking into the functional specifications and reading all these clauses states that the appellant carried out specific independent activities with different kinds of remuneration, package for such works. There was also no split of the contract made to examine different aspects to ascertain taxability - when there is no effort made to judge the activity carried out by the appellant in accordance with the letters of law, adjudication fails to sustain. Revenue also fails to get helping piecemeal reading of the law without proving that the services provided by the appellant was auxiliary in nature to serve the purpose of business of client - in favour of assessee.
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2012 (7) TMI 254
Demand of service tax - 'consulting engineers service' - payments made to the foreign consultant - services having been provided before 18.04.06 – Held that:- no clear findings given by adjudicating authority in spite of all relevant documents presented before him. Law has undergone evolution. Authority should be very specific to bring out what was the activity carried out, nature of same. Matter remanded.
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2012 (7) TMI 227
Referral charges which was the consideration received by appellant from the banks for promoting and marketing their services – Held that:- Adjudicating authority found that agreements were entered into by the appellant with ICICI Bank, HDFC Bank and Oriental Insurance Company to provide them infrastructural facility by its dealers and authorized service centres to promote their business extending the credit facility and insurance service to the prospective customers identified by appellant - Facts and evidence aforesaid when tested on the touch stone of Section 65 (105) (zzb) read with Section 65 (19) of the Act that warrants taxation of the consideration received by the appellant from banks and insurance company as business auxiliary service provider and the service so provided becomes input service for banks to provide the output service of banking and financial service as well as insurance service by insurance company. Thus, the business auxiliary service provided by the appellant during the impugned period was liable to be taxed and that has rightly been done in adjudication without calling for interference in this appeal. Regarding penalty – Held that:- knowable breach of law made the appellant to suffer adjudication. Accordingly, no immunity from penalty is possible to be granted on the plea of tax compliances made which was found to be a case no payment of tax on the impugned services provided during the relevant period - penalty under Section 78 will meet the ends of justice and hence separate penalty under Section 76 is set aside - appeal is dismissed except for allowing the cum-tax benefit, and setting aside penalty under Section 76.
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2012 (7) TMI 226
Taxability - discounts/incentives received by appellant as an advertising agency from the Media - Held that:- Issue has been decided in favor of assessee in earlier year, wherein it was held that discounts/incentives received by the assessee from the print media will not be liable for service tax under the category of advertising agency services. If that be so, the said discounts/incentives itself cannot be considered for the purpose of taxability under the head business auxiliary services as the amounts which are received are in respect of the services provided under the category of advertising agency services and the amount are discounts and incentives and not as charges for services - Decided in favour of assessee.
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2012 (7) TMI 225
Cenvat credit - service tax paid on GTA for outward transportation – Held that:- In the definition of 'input service' the term 'upto the place of removal' is substituted by 'from the place of removal' w.e.f 01.04.2008. Matter remanded to the original adjudicating authority for denovo adjudication.
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2012 (7) TMI 224
Demand of service tax - 'Commercial or Industrial Construction Service' - services of repair, renovation, widening of roads and construction of toll sheds, providing electrification of high mast poles at toll sheds etc. – Held that:- in the view of Board's Circular No. 110/4/2009-ST dated 23.2.2009. Activity undertaken by the appellant is not covered under the category of "commercial or industrial construction service"
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2012 (7) TMI 223
Cenvat credit - outward transportation of goods up to the place of their buyers - supplies made by them to their buyers of FOR destination basis – Held that:- Assessee is eligible for cenvat credit for the period prior to 1.4.2008. Appeal is allowed
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2012 (7) TMI 199
Stay petition - appellant herein has already deposited an amount towards service tax liability, interest and penalty – Held that:- Amounts deposited by the appellant as enough deposit to hear and dispose the appeal - Stay petition is allowed and application for waiver of pre-deposit of balance amounts is allowed - If the appellant is able to satisfy the lower authorities they are eligible for the benefit of small scale service provider under the Notification No 6/005-ST, than the service tax liability on the appellant would reduce considerably - matter remanded back to the adjudicating authority to reconsider the issue afresh
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Central Excise
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2012 (7) TMI 232
Classification of motherboard and add on card - Held that:- Add-on card and motherboard cannot be considered as automatic data processing machines. Same are parts and accessories suitable for use with the machine falling under Heading 84.72. As the goods in question are parts and accessories of the data processing machine falling under Heading 84.71, therefore being parts and accessories are classifiable under Heading 8473 of the Tariff. Appeal of Revenue allowed.
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2012 (7) TMI 231
Whether refund claim is liable to be rejected on ground of unjust enrichment u/s 11B - Held that:- As the respondent has not disputed the computation of assessable value of cigarettes after the decision of the Delhi High Court that duty at only concessional rate was deductible from the cum-duty price for determination of assessable value as the respondent has not challenged deduction of amount of Rs. 20,33,381.53 from the total refund of Rs.35,57,094.53. Therefore, the decisions relied upon by the respondents do not support their claim which is rejected on the ground of unjust enrichment. The invoice price charged to the buyers from 30.11.82 to 07.12.82 includes the duty amount calculated at the rate of 440% Adv. plus Rs. 32/- specific amount of duty paid and the duty paid in the ARI is calculated and paid under Notification No. 30/79 dated 01.03.79 plus 50% of the disputed amount shown in ARI and less than the duty amount charged in the invoices, thus it is clear that although duty has been charged at tariff rate from the buyers in the invoice, the total amount of duty paid to the Central Excise department as is evident from the ARI assessment is less than the amount recovered as duty from the buyers, the respondent has not been able to prove that the amount sought to be refunded by the assessee was not recovered from buyers - against assessee.
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2012 (7) TMI 230
Legality of reduction of penalty leviable u/s 11AC even on proven and admitted shortage of stock - Appellate authority made contradictory approach by admitting shortage on one side and negating clandestine removal on other side - Held that:- It is clear that assessee failed to adduce evidence before the appellate authority to defend the adjudication. There was no controversy of the fact found by investigation when physical verification resulted in discrepancy in stock and more particularly, shortage of raw material. Possible inference that may arise is either the raw materials were removed as such or those must have been instrumented to make finished goods for clandestine removal. It would be proper, if the first appellate authority thoroughly re-examines the facts and evidence and come to a rationale conclusion about the veracity of the SCN - matter remanded back.
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2012 (7) TMI 229
Non-inclusion of the loading and forwarding charges in the assessable value - demand and equal amount of penalty – Held that:- The issue relates to the period from March, 01 to Nov. 02, whereas the show cause notice has been issued on 21.12.04, i.e. beyond the time limit prescribed under Section 11A - extended period of limitation cannot be invoked by reasons of willful mis-declaration of assessable value as it is clear that all the relevant information was available with the department appellant was filing monthly statutory returns like RT-12/ER-1 indicating that no duty has been paid by the appellant on the loading and forwarding charges while clearing the goods from the factory and therefore, the allegation of suppression of relevant facts is totally without any basis – in favour of assessee.
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2012 (7) TMI 200
Period of limitation - rejection of refund claim of Education and Senior Higher Education cess paid on paper and paper board - period April,2004 to February,2009 - claim filed on 30.03.2010 - Held that:- Since appellants could not produce any evidence that they have challenged the payment of Cess at any time and first time they have approached the department vide their letter dated 18.03.2009 and the letter of Superintendent claimed to be order is no order on leviability of Cess and otherwise and the appellants have undisputedly filed refund claim only on 30.03.2010 which is after almost six years after the payment of Cess and which is well beyond the period prescribed u/s 11B. Rejection of refund claim upheld - Decided against assessee.
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2012 (7) TMI 197
Storage of inputs outside the factory premises - Dis-allowance of Cenvat Credit - imported inputs viz. Ferro Manganese, Silico Manganese, Ferro Chrome and Ferro Manganese Slag - Held that:- The Circular No. 206/40/96 CX., dated 1-5-96 issued by the CBEC permit storage of inputs outside the factory premises - The storage of goods outside the licensed factory premises and the credit was permissible - for a mere technical breach, the substantial benefit cannot be denied as decided in M/s. Mangalam Enterprises Vs. Commr. of Central Excise & Customs, Vadodara [2002 (12) TMI 164 (Tri)] - deviations from normal practice necessitated by business exigencies are no ground for denial of legally available facility - The storage of inputs outside the factory premises, prior to being brought to the factory, is specifically recognized by the aforesaid Circulars of the Board and the Commissioner as acceptable to allow for Cenvat credit- the impugned order is set aside and the case is remanded to Ld. Commissioner to decide the case afresh.
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Indian Laws
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2012 (7) TMI 228
Narcotic Drugs and Psychotropic Substances Act, 1985 - appeal against acquittal of respondents of the charges framed against them under said Act primarily for the reason that no evidence regarding the destruction of opium allegedly seized from the respondents had been provided by the prosecution - appellant emphasizing need for a proper and prompt exercise of the power to destroy the seized contrabands, failure of which resulting in accumulation of the seized drugs and narcotics in large quantities thereby increasing manifold the chances of pilferage for re-circulation in the market from the stores where such drugs are kept - Held that:- While fight against production, sale and transportation of the NDPS is an ongoing process, it is equally important to ensure that the quantities that are seized by the police and other agencies do not go back in circulation on account of neglect or apathy on the part of those handling the process of seizure, storage and destruction of such contrabands. Immediate steps are, therefore, necessary to prevent the situation from going out of hand. Therefore, it is considered necessary to direct collection of the information from the police heads of each one of the States through the Chief Secretary concerned on the following aspects: Seizure, Storage, Disposal/ Destruction, Judicial Supervision
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