TMI Tax Updates - e-Newsletter
July 27, 2012

Case Laws in this Newsletter:

Income Tax Customs FEMA Service Tax Central Excise CST, VAT & Sales Tax Wealth tax

Articles

1. APPRENTICES ENGAGED UNDER APPRENTICE ACT, 1961 WILL NOT BE AN EMPLOYEE UNDER EPF ACT, 1952.

   By: DR.MARIAPPAN GOVINDARAJAN

2. DELIVERY OF GOODS ON HIRE PURCHASE / INSTALLMENT.

   By: Dr. Sanjiv Agarwal

3. “Manufacture or production of goods” – an exemption or a litigation in negative list

   By: Pradeep Jain

News

1. Admission Notice for the Company Secretaries Executive Programme.

2. For the First Time A Commemorative Postage Stamp and Coffee Table Book on Customs to be Released Tomorrow to Mark 50 Years of Achievements under the Customs Act 1962.

3. Anand Sharma to Attend Global Investment Conference in London Tomorrow.

Notifications

DGFT

1. 07 (RE – 2012)/2009-2014 - dated 23-7-2012 - FTP

Amendment in ITC (HS) 2012 Schedule 1 – Import Policy.

VAT - Delhi

2. F.7(450)/Policy/VAT/2012/361-371 - dated 23-7-2012 - DVAT

Security Waiver to Dealers in Registration.

Circulars / Instructions / Orders

VAT - Delhi

1. F 7 (420)Policy/VAT/2012/PF/372-374 - dated 23-7-2012

Agenda for discussion in the meeting held on 04.07.2012 at 3.30 P.M. with the Sales Tax Bar Association.

Companies Law

2. 18/2012 - dated 26-7-2012

Filing of Cost Audit Report and Compliance Report in the eXtensible Business Reporting Language (XBRL) mode.

3. 17/2012 - dated 23-7-2012

The Investor Education and Protection Fund(uploading of information regarding unpaid and unclaimed amounts lying with companies) Rules 2012.

Highlights / Catch Notes

Income Tax

• Court Allows Offsetting Carried-Forward Business Losses Against Rental, Hire Charges, and Commission Income.

  Case-Laws - HC : Entitlement to set off the brought forward business loss against the rental income, car and computer hire charges and the commission income - set off allowed - HC
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• High Court clarifies Section 68: Assessing Officer not obligated to prove source of unexplained share application money.

  Case-Laws - HC : Unexplained share application money - whether AO to establish with the help of material on record that the share monies had come or emanated from the assessee's coffers. Section 68 of the Act casts no such burden upon the Assessing Officer. - HC
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• Tribunal's Error: Ad Hoc Liability Provision Wrongly Qualified for Tax Deduction, Challenged for Misclassification in Tax Law.

  Case-Laws - HC : Provision for ascertained liability or contingent liability - Tribunal committed a serious error in law in holding that such ad hoc provision would nevertheless qualify for deduction - HC
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• Subvention aid from BHW Holding AG to assessee ruled taxable as revenue receipt.

  Case-Laws - HC : Subvention assistance received from Holding Company - thus amount infused by BHW Holding AG, Germany to the assessee by way of subvention assistance, is taxable as a revenue receipt - HC
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• Exemption Claim Denied: Salary Accrued in Japan, Not for Services in India; Portion Paid by Motorola India.

  Case-Laws - AT : Denial of Exemption claim on Salary - the salary accrues to the assessee in Japan and the accrued salary is partly delivered by Motorola India in India. Hence, there is no accrual of salary in India - as the salary is not earned for rendering services in India - AT
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• India-US Treaty: Payment to Assessee Taxable as Fees for Included Services Under Article 12.

  Case-Laws - AT : Fees for Included Services in terms of Article 12 of the India US treaty - the payment received by the assessee from Lucent is taxable in India under Article 12 as fees for included services. - AT
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• Retirement Payouts from Partnership Firms: Understanding Tax Liabilities on Capital Gains from Goodwill Payments.

  Case-Laws - AT : Capital Gains - amount received from partnership firm on retirement - payment of consideration in cash - share of goodwill - there was a liability to tax on account of capital gain. - AT
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• Time Share Income Must Accrue Over Service Period, Not Recognized Upfront, to Avoid Distortion in Accounting.

  Case-Laws - AT : Business of selling time share units - accrual of income - mercantile-system of accounting. - holiday facilities to its members - recognizing the entire receipt as income in the year of receipt can lead to distortion. - AT
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• Penalty Not Imposed u/s 271B Due to Inadvertence and Bona Fide Belief, Non-Compliance With Section 44AB Explained.

  Case-Laws - AT : Levy of penalty u/s 271B - it is not the case of persistent default but due to inadvertence and bonafide belief and having lack of knowledge, the assessee could not comply with the provisions of sec 44AB - no penalty - AT
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• No Penalty for Delayed Document Submission u/s 272B with Rule 114B and 114D Considered.

  Case-Laws - HC : Penalty u/s. 272B read with rule 114B and 114D - belated production of documents - penalty not to be levied. - HC
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• Section 40(a)(ia) Disallowance Not Applicable When TDS Deducted, Even with Short Deduction Allegations.

  Case-Laws - AT : Disallowance u/s 40(a)(ia) of the Act - disallowance cannot be made when there has been deduction of tax at source on the allegation that there is a short deduction of tax - AT
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• High Court Rules Casual and Contractual Workers Count Toward Section 80-IB Employment Requirement for Tax Deductions.

  Case-Laws - HC : Deduction u/s 80-IB - condition of employment of ten or more workers – Casual or contractual worker are workers. - HC
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Customs

• Duty Confirmed and Penalty Imposed for Exemption Claim u/ss 28(2) and 114A of Notification No. 32/2005-Cus.

  Case-Laws - AT : Duty confirmed u/s 28(2) and penalty imposed u/s 114A - claim of exemption under Notification No.32/2005-Cus. dt. 08/04/2005 under the Target Plus Scheme - c.c. copper rods imported by the assessee - AT
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DGFT

• DGFT Updates ITC (HS) 2012 Schedule 1: Import Policy Changes Affecting Goods Categorization and Compliance for Importers.

  Notifications : Amendment in ITC (HS) 2012 Schedule 1 – Import Policy. - Notification
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Corporate Law

• Companies Must File Cost Audit & Compliance Reports in XBRL Format for Better Transparency & Compliance.

  Circulars : Filing of Cost Audit Report and Compliance Report in the eXtensible Business Reporting Language (XBRL) mode. - Circular
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• Companies Must Disclose Unclaimed Funds Under Investor Education and Protection Fund Rules 2012 to Boost Transparency.

  Circulars : The Investor Education and Protection Fund(uploading of information regarding unpaid and unclaimed amounts lying with companies) Rules 2012. - Circular
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Indian Laws

• Indian Tax Law: Defining "Manufacture or Production of Goods" for Exemptions and Compliance in Business Activities.

  Articles : “Manufacture or production of goods” – an exemption or a litigation in negative list - Article
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Wealth-tax

• Taxpayer's Market Rates Match Revenue Authorities for Wealth Tax Valuation Purposes: Consider as Standard Rates.

  Case-Laws - AT : Wealth tax - Valuation - The market rates referred to by the assessee with regard to other properties which are almost at the rates fixed by the Revenue Authorities should be market rates - AT
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• Assessee denied Wealth Tax exemption u/s 5(1)(vi); house deemed uninhabitable due to missing essential features.

  Case-Laws - AT : Wealth tax - the assessee is not entitled to exemption u/s. 5(1)(vi) of the Wealth Tax Act,1957, for the reasons that the house is not habitable in view of the fact that plastering, flooring, drainage and electricity is not done, doors and windows are not installed, the ceilings are in damaged condition. - AT
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Service Tax

• Commissioner Confirms Inclusion of Statutory Fees in Service Tax Valuation, Denies Appellant's Request for Exemption Benefits.

  Case-Laws - AT : Valuation - inclusion of statutory fees and levied -no benefit can be given to the appellant on account of statutory levies and charges and the confirmation of demand on these charges by the Commissioner is liable to be upheld. - AT
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• Aircraft Maintenance Engineering Coaching Now Taxable; No Vocational Service Exemption Applies.

  Case-Laws - AT : Commercial Coaching or Training Services and Management, maintenance and repair services - training in Aircraft Maintenance Engineering - held as taxable services - exemption on account of vocational services not available - AT
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• Tribunal Must Adhere to Authority for Advance Rulings Decisions in Similar Cases.

  Case-Laws - AT : Applicability of Ruling of AAR in another issues - the status of AAR is higher than that of this Tribunal and therefore, this Tribunal cannot ignore the ruling by the AAR in a case where the facts are similar/identical and the questions of law are identical. - AT
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• Discrepancy in Revenue Recognition Under AS7 Leads to Waiver of Pre-Deposit for Service Tax Dispute.

  Case-Laws - AT : Difference between gross receipts shown in the profit and loss account and the value of service rendered by them as declared in their service tax return. - Revenue recognition as per AS7 - pre deposit waived - AT
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• Court Rules Compliance Services Not Subject to Service Tax as Management Activities; Clarifies Tax Obligations for Businesses.

  Case-Laws - AT : Short payment of service tax on Compliance Services - though compliance with laws is part of the responsibilities of management such responsibility per se cannot bring it into the ambit of the words "in connection with the management of any organisation" - AT
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Central Excise

• Cenvat Credit: Re-Crediting Wrong Debits Requires Authorization, Self-Initiated Adjustments Are Non-Compliant and Recoverable Under Central Excise Laws.

  Case-Laws - AT : Admissibility of Cenvat credit - various issues - re-credit of amount wrongly debited - suo motto credit taken is not proper and is recoverable. - AT
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• Is Denaturing Alcohol in Tankers Considered Manufacturing Under Central Excise Law? Tax Implications Explored.

  Case-Laws - AT : The process of denaturing in the tanker / manufacture of denatured alcohol - This is a case where two views are possible - AT
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• Court Rules No Impact on Assessable Value in Ice Cream Brand Name Transaction Between Unrelated Companies Under Central Excise Law.

  Case-Laws - AT : Related persons – assessable value – Merely because ice cream was manufactured using brand name acquired by HLL and entire product was sold to BILIL/HLL, that did not make them related person - AT
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• CNC Wire Cut Machines Qualify for Cenvat Credit as Capital Goods Under Central Excise Law.

  Case-Laws - HC : Cenvat credit on the CNC wire cut machine - Capital goods can be machines, machinery, plant, equipment, apparatus, tools or appliances. - HC
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VAT

• High Court Upholds Validity of Section 5(2) of Delhi VAT Act and Rule 3 of Delhi VAT Rules.

  Case-Laws - HC : Section 5(2) of Delhi VAT Act and Rule 3 of Delhi VAT Rules cannot be declared to be invalid. - HC
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• Court Upholds Legislative Authority on Sub-Contractor Turnover Deductions under DVAT Act; No Double Taxation Concerns Found.

  Case-Laws - HC : Disallowance of the deduction of sub-contractor's turnover - Once it is concluded that there is no basis for apprehension that mechanism provided under the DVAT Act and Rules can lead to double taxation it is advisable to agree with the contention of the learned ASG that the manner in which deduction and exemptions are to be granted is the legislative prerogative - HC
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• Sales Tax Bar Association Discusses VAT Circulars, Recent Changes, and Alerts for Practitioners at 2012 Meeting.

  Circulars : Agenda for discussion in the meeting held on 04.07.2012 at 3.30 P.M. with the Sales Tax Bar Association. - Circular
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• Dealers Granted Security Waiver for VAT and Sales Tax Registration to Simplify Processes and Boost Compliance Efforts.

  Notifications : Security Waiver to Dealers in Registration. - Notification
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Case Laws:

• Income Tax

• 2012 (7) TMI 666
  Entitlement to set off the brought forward business loss against the rental income, car and computer hire charges and the commission income - question on proper interpretation of Section 72(1) - assessee submitted that according to MOA it is in the carrying of business of leasing, selling and renting of real estate properties - Held that:- With regard to the hiring of car and computers the CIT(A) has found that they were hired out as they remained idle and assessee thought it prudent to exploit them by letting out temporarily to others. The commission income received by the assessee from Tulika is for obtaining or procuring business for the latter which undoubtedly is a business activity though it may be a single instance only. As decided in CIT v. R. Dalmia (1973 (5) TMI 23 - DELHI HIGH COURT ) that the brought forward business loss was sought to be set off against the dividend income earned by the assessee in the subsequent year as since the dividend income was derived from the shares held as stock-in-trade, the brought forward losses could be set off against the same notwithstanding that the Act required that the dividend income should be assessed under the head “income from other sources" - in favour of the assessee

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• 2012 (7) TMI 665
  Addition made on account of unexplained share application money - Tribunal remitted the issue on account of unexplained share application money to AO to verify the source of money of the shareholders and make additions in the hands of persons who provided the monies - Held that:- It is unable to uphold the view of the Tribunal that it is incumbent upon the AO to establish with the help of material on record that the share monies had come or emanated from the assessee s coffers. Section 68 of the Act casts no such burden upon the Assessing Officer. The Tribunal, however, may be justified in directing the AO to afford an opportunity to the assessee of cross-examining the persons who had allegedly given statements before the Investigation Wing implicating the assessee in the modus operandi adopted by them, namely, giving of accommodation entries for commission - The assessee appears to have sought cross-examination of those persons but that opportunity was not given by the Assessing Officer as found by the Tribunal - in favour of the Revenue

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• 2012 (7) TMI 664
  Penalty levied u/s 271(1)(c)- Held that:- The provision made for advance tax debited in the P&L account not added back to income is bonafide mistake - It is the first time that provision was debited in P&L account. Had there been any intention to file inaccurate particulars then the assessee could not have paid the advance tax in the last month of assessment year - the assessee had made a claim for deduction of the provision for the first time in the year under appeal as there was no history of furnishing such accurate particulars by the assessee for the previous years - in favour of assessee.

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• 2012 (7) TMI 663
  Determination of Arm’s Length price to the Transfer Pricing Officer - Held that:- Any changes in the most appropriate method of computing the arms length price is to be dealt with by way of a speaking order. T.P.O. is also at liberty to collect independent relevant information of comparable uncontrolled transactions. Let the revenue authorities determine fresh ALP in the light of above observation and in accordance with the regulations.

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• 2012 (7) TMI 662
  Provision for ascertained liability or contingent liability - Treatment of the provision for installation and service charges - Tribunal treated it as an ascertained liability and hence an allowable deduction - Held that:- The provision for the service charges payable by the assessee by way of warranty provision is not made on any scientific data. Admittedly, the provision made was only on ad hoc basis, a fact which is recorded by the Tribunal. - The said fact is further strengthened by the fact that even though the warranty period is for one year and the assessee has to make payment to the service provider as and when a demand is made, normally such payment claim has to come during the period of warranty or within a reasonable time. Even though the agreement that the assessee had with the service provider is not placed before this Court, nor was it placed before the authorities below, nevertheless, a reading of the Commissioner's order relating to the assessment year 1992-93 makes the facts clear by reason of the fact that more than 60% of the provision remained unpaid even after more than two years since the date of sale. Provision was made for the service charges based on past obligation - Held that:- If really the provision made was otherwise based on past experience, certainly, the figures would not have stayed as having a correlation to the sales, or for that matter, as the Commissioner of Income Tax (Appeals) observed, more than 60% of the provision would not have remained unpaid even after more than two years from the date of sale - setting aside the order of the Tribunal thereby restoring the order of the AO as Tribunal committed a serious error in law in holding that such ad hoc provision would nevertheless qualify for deduction - in favour of Revenue.

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• 2012 (7) TMI 661
  To consider claims made in a revised return which was filed beyond time - the transaction of inter divisional transfer between one Unit and another is not by way of sale - Held that:- As the revision of the book results on the changed nature of transaction was itself on account of the objection raised by the Regional Director, Department of Company Affairs, thus contention of the Revenue is not acceptable that the revised results do not merit any consideration. Even if the revised return is treated as a time barred one, when once the assessment is made under Section 143(2) based on the materials gathered, the department cannot deny of considering the materials coming in the form of the Regional Director's direction and its effect on the account results. As the revised profit and loss account and balance sheet were approved by the shareholders in the annual general meeting to be treated as revised claim it cannot be read as an intention that the revision was done with a view to revise the liability of the assessee under the Act - no hesitation in remanding the matter back to the Assessing officer to examine the issue once again as regards the valuation - against revenue.

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• 2012 (7) TMI 660
  Subvention assistance received from Holding Company - Revenue contested against considering the receipt as a revenue receipt - Held that:- The amount subvention money was received by the assessee from its holding company not as trader, but to recoup the losses likely to be suffered by it. The amount was received by virtue of their relationship of parent and subsidiary company and not stemming from any business considerations. If the object of the subsidy scheme was to enable the assessee to run the business more profitably then the receipt is to the revenue account. On the other hand under the subsidy scheme, if the object is to enable the assessee to set up a new unit or expand it then the receipt of the subsidy is to the capital account, thus as it is not in dispute that the assessee did incur losses , thus amount infused by BHW Holding AG, Germany to the assessee by way of subvention assistance, is taxable as a revenue receipt - in favour of assessee.

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• 2012 (7) TMI 659
  Reopen the assessment u/s 147 - issue of notice u/s 148 - case is reopened after the expiry of four years - Held that:- On perusal of the reasons recorded shows that there is nothing whatsoever to indicate that there is any failure on the part of the petitioner to disclose fully and truly all material facts - AO on an arithmetical calculation of the turnover of the previous years and raw material consumed as against raw material consumed in the year under consideration concluded that the turnover should be higher than that stated by the petitioner and formed any belief that any income chargeable to tax has escaped assessment - is settled legal position that section 147 cannot be exercised for making a roving inquiry and that the Assessing Officer, before reopening the assessment has to form a belief that income chargeable to tax has escaped assessment - the petitioner had placed all relevant material on record - in favour of assessee.

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• 2012 (7) TMI 658
  Penalty u/s 271(1)(c) - concealment of income - held that:- just because assessee has an explanation- whatever be its worth and credibility, it does not cease to be a case in which concealment penalty can be levied. The explanation of the assessee has to be considered on merits and one has to take the call as to whether the explanation so given by the assessee can be treated as an acceptable explanation or not. Learned counsel for the assessee has also laid a lot of emphasis on the fact that the assessee's explanation has not been found 'false' but then this plea overlooks the fact that when an assessee's explanation is found 'false', this case falls in category (A) of Explanation 1 to Section 271(1)(c) whereas the present case is in category (B) thereof and it covers a situation when assessee offers an explanation and not able to prove its bonafides. These two situations are mutually exclusive situation and just because conditions in part (A) of Explanation 1 are not satisfied, the revenue's case in (B) also does not come to an end. The plea of the assessee does not, therefore, merit acceptance. Penalty confirmed.

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• 2012 (7) TMI 657
  Denial of Exemption claim on Salary - DTTA between India and Japan - the assessee had aggregate stay in India for 83 days - appellant was working as Managing Director of Motorola, Japan - Held that:- Assessee being a full time employee of Motorola Japan was wholly and exclusively working for Motorola Japan and his entire salary was earned in Japan. Even under the Indian Income Tax Act, 1961, the assessee being governed by the provisions of section 9(1)(ii), was not taxable in India as, having exercised his employment in Motorola Japan - As per Article 15(1) of the DTAA between India and Japan, the tax resident of Japan can be taxed in India only if the assessee is present in India for more than 183 days whereas from the assessment order it is clear that the assessee was present in India only for 83 days and hence, the assessee cannot be taxed in India for any part of salary for services rendered to Motorola Japan. As for the assessee, the normal place where the employment services rendered is in Japan and not in India. His visits to India are in connection with business and not for rendering employment services for any Indian entity. There is no employment agreement for having rendered any services for Indian entity. In the instant case, the salary accrues to the assessee in Japan and the accrued salary is partly delivered by Motorola India in India. Hence, there is no accrual of salary in India - as the salary is not earned for rendering services in India. Therefore, salary for the entire year is not taxable - in favour of assessee. As no argument was raised by the assessee with reference to levy of interest under section 234D hence no ground in appeal is dismissed.

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• 2012 (7) TMI 656
  Fees for Included Services in terms of Article 12 of the India US treaty - appellant has not made available technical skill, Knowledge etc. to Lucent. - held that:- The assessee has not been able to produce the records to show the total number of employees employed with Lucent, amount of salary paid and the terms and conditions between the employees and the assessee. In absence of any details, we do not find any merit on this aspect of the matter that technical personnel supplied by the assessee are not its employees, especially in the light of the agreement as have been referred to above which clearly negates the contention of the assessee. The assessee has requisite and technical skills in providing solutions in technology relating to telecom sector. The Lucent, an Indian company wants technical experts, who have experience and skill, which here in this case undoubtedly belongs to the assessee, for its purpose of contract for commissioning and supply of telecom equipments in India. These services clearly fall within the illustration given in the Example 3 and, hence, the services rendered by the assessee falls within the clause 4(b) of Article 12 of the Treaty. Therefore, we hold that the payment received by the assessee from Lucent is taxable in India under Article 12 as fees for included services.

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• 2012 (7) TMI 655
  Payment of interest on investment in equity shares - deduction u/s 36(1)(iii) - held that:- It is evident from the referred record that the assessee was having interest free funds available more than investments in question. - it is clear that the assessee had sufficient interest free funds. - AO directed to allow the interest as claimed. Deduction u/s 10B - Aemendment - 9th year of claim. - unexpired period of ten consecutive AYs. - whether in the light of the amended provisions of sec. 10B, the assessee who started manufacturing in the year 1994, availed first tax rebate benefit in the year 1997-98 is entitled for getting the deduction in the AY in hand i.e. 2005-06. - held that:- the first part of the legislation cannot be read in isolation. The entire stature or provision has to be read or referred conjointly. A word here or clause there cannot be relied on by excluding the entire provision. Ten consecutive Assessment Years start from Assessment Year relevant to the previous year in which the undertaking begins manufacture / production. The assessee herein commenced its production on 1.1.1994. We observe that said period of ‘ten Assessment Years’ can’t cover the Assessment Year in hand which is in fact the 12th Assessment Year from the date of manufacturing. - Decided against the assessee.

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• 2012 (7) TMI 654
  Disallowance u/s 14A read with rule 8D - expenditure on earning dividend - held that:- Departmental Representative could not bring any material on record to show that the estimate of expenditure at 2% by the Commissioner of Income Tax(A) as expenditure for earning the dividend income was lower than the actual expenditure incurred by the assessee in earning the said income. - Order of CIT(A) confirmed. Gain due ot exchange difference - business profit - held that:- the facts emerging from the order of the Commissioner of Income Tax (A) are not that the exchange difference was earned by the assessee out of EEFC account. On the other hand, the facts are that the assessee submitted that the exchange fluctuation difference arose due to difference in exchange between the date of accounting of sale and the date of actual realization of the sale proceeds and therefore, the same should be treated as profits of business. - Decided against the revenue. Expenditure on account of entry tax on raw materials and other inputs that are brought into the assessee’s factory - AO disallowed deduction of Rs. 2,30,30,088/- on account of entry tax paid by the assessee under the Karnataka Tax Entry of Goods Act, 1979 on the ground the same was allowable against sales tax paid by the assessee. - held that:- deduction allowed. Reassessment proceedings - disclosure - held that:- A reading of the above recorded reasons show that there is no such failure as mentioned in the proviso to Section 147 of the Act exists in the instant case. It is an established position of law that the assessee is required to disclose all primary facts fully and truly and thereafter, it is not the duty of the assessee to tell the Assessing Officer as to what inference is to be drawn from those primary facts or what other secondary facts are required to be examined.

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• 2012 (7) TMI 653
  Penalty u/s 271(1)(c) – Held that:- Assessee has presented a wrong, incorrect and non-genuine claim of gift - assessee has presented incorrect and untrue facts regarding the amount received claiming as gift, which was found as not genuine - when the claim of the assessee was found factually incorrect, untrue and not genuine, then the benefit of bonafide explanation is not available to the assessee for the purpose of levy of penalty u/s 271(1)( c) of the Act - penalty u/s 271(1)( c) is upheld – Against assessee

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• 2012 (7) TMI 652
  Capital Gains - amount received from partnership firm on retirement - payment of consideration in cash - share of goodwill - capital asset u/s 2(14) - transfer u/s 2(47) - held that:- it was a case of lump sum payment in consideration of the retiring partner assigning or relinquishing her share or right in the partnership and its assets in favour of the continuing partners. - the manner of the retirement in case of the assessee is such that it can be regarded as assigning or relinquishing by the retiring partner of her share or right in the partnership firm and its assets in favour of the continuing partners. - the assessee satisfies the parameters and, therefore, there was a transfer of interest of the retiring partner over the assets of the partnership firm on her retirement and, therefore, there was a liability to tax on account of capital gain.

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• 2012 (7) TMI 651
  Business of selling time share units - accrual of income - mercantile-system of accounting. - holiday facilities to its members for a specified period each year, over a number of years, for which membership fees is collected either in full or in installments. - held that:- there is a definite liability cast on the assessee to fulfil its promise and, therefore, it cannot be said that the entire fee received by it has accrued as income. - the peculiar nature of the activity along with the complexity attached to it as a result of which no reasonable provision for the liability can be made. Therefore, recognizing the entire receipt as income in the year of receipt can lead to distortion. The entire amount of timeshare membership fee receivable by the assessee up front at the time of enrolment of a member is not the income chargeable to tax in the initial year on account of contractual obligation that is fastened to the receipt to provide services in future over the term of contract. - Decision of Special Bench of the Tribunal in assessee’s own case ACIT Versus Mahindra Holidays & Resorts (India) Ltd. (2010 (5) TMI 524 - ITAT, CHENNAI) followed. Expenditure on salary, rent, interest, repairs and furniture. - there is no material on record to show the entire amount of Rs. 1.6 crores are on account of revenue expenditure like salaries, interest, rent etc. and no part of the expenditure under the head ‘construction expenses pending allocation’ includes any expenditure incurred for acquiring new capital asset. In the above circumstances, in our considered view, the CIT(A) was justified in directing the Assessing Officer to allow revenue expenditure after verifying if the amounts were for salaries, rent, interest etc. Therefore, this ground of appeal of the assessee is dismissed.

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• 2012 (7) TMI 650
  Penalty u/s 271(1)(c) - concealment of income - held that:- it is a clear cut case of concealing and furnishing inaccurate particulars of income of proprietary potato business of the assessee which was systematically run through bank account. The assessee was very much aware about this income of potato which is subject to tax in accordance with law. Inspite of this fact, he tried to operate this business under the name and style of two proprietary concerns by introducing bank accounts. These facts clearly show that the assessee has concealed the particulars of his income, furnished inaccurate particular of his income with his knowledge and intention to conceal his income. - penalty confirmed.

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• 2012 (7) TMI 649
  Restricting trading addition to Rs. 997 - applying the G.P. rate @ 2.3% - Held that:- No justification for applying GP rate of 2.3 % in this case in the absence of any specific defects in the books of accounts. The only difference is of Rs. 998 and therefore trading addition of Rs. 997/- is justified, but the remaining addition by applying GP rate of 2.3% is not justified - partly in favour of assessee. Addition on account of interest income - Held that:- Addition without proper examination of the facts by AO as intimated by appellant the sum of Rs. 7,72,314/- is the net figure of interest paid and received from various parties and includes interest received from Indusind Bank & ITC Ltd. Complete details of interest account are available in the ledger of appellant which has not been considered by A.O -direction to delete the addition - in favour of assessee. Addition on account of commission received from IDEA Telecommunication Ltd. and IDEA Cellular - Held that:- As the commission or brokerage received by assessee from Idea Cellular has already been shown - on examination of necessary evidences by Ld. CIT (A) it was found that the AO has made the addition without applying mind or without understanding accounting system followed by assessee consistently - in favour of assessee. Addition on account of bogus unsecured creditors - Held that:- CIT (A) has ascertained the factual aspects that due to clerical error, postings were made in the wrong name. However, they were rectified. Only thereafter the additions were deleted by Ld. CIT (A) - in favour of assessee. Addition on account of winning from Lottery - Held that:- As AO himself had made enquiry u/s 133(6)from ITC Ltd. regarding this payment and the company confirmed payment of performance incentive to the assessee as well as to other parties of Rajasthan on the basis of turnover achieved by them. Therefore, CIT (A) found that there is no winning from lottery or from puzzle as this is a regular income which has already been accounted for by the assessee in its accounts book - in favour of assessee. Addition on account of income of M/s. Aman Enterprises - Held that:- This addition has been made by A.O. without properly verifying the facts as per ledger account of appellant, total interest of Rs. 37,89,273 is paid. This amount is inclusive of sum of Rs. 11,80,780/- paid to M/s Aman Enterprises. Therefore observation of A.O. that appellant paid interest to this party without recording the same in his books of accounts is factually incorrect - - in favour of assessee.

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• 2012 (7) TMI 648
  Levy of penalty u/s 271B - non compliance with the provisions of sec 44AB - Held that:- No penalty shall be levied if the assessee proves that there was a reasonable cause for the failure on his part in compliance with the provisions of the Act. There is no dispute regarding the fact that this is the first year during which the assessee carried out the share trading activity and the assessee is not highly qualified or educated person to have the knowledge of all the relevant provisions of law and it is not the case of persistent default but due to inadvertence and bonafide belief and having lack of knowledge, the assessee could not comply with the provisions of sec 44AB - assessee is entitled for the benefit of sec. 273B - in favour of assessee.

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• 2012 (7) TMI 647
  Initiation of re-assessment proceedings - excessive claim allowed u/s. 80HHE - No assessment u/s. 143(3) and only the return was processed u/s. 143(1) - Held that:- As per clause (b) of Explanation 2 to proviso to section 147 where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the AO that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return, the AO is entitled to reopen the assessment - as decided Rajesh Jhaveri Stock Brokers (P) Ltd [2007 (5) TMI 197 - SUPREME COURT] that the Assessing Officer is having jurisdiction to issue notice u/s 148 for bringing to tax income escaping assessment on the ground that the assessee claimed excessive relief or deduction - against assessee. Reducing deduction claimed by the assessee u/s. 80HHE - grounds raised by assessee against aggregation of the profits of the 100% EOU with the losses of the training division for purposes of calculating the deduction u/s 80HHE - Held that:- From the business profits figure the AO has reduced 90% of the commission, brokerage, etc. as also interest receipt which he has considered to be income from other sources and has arrived at a figure and thereafter applied the formula to determine the 80HHE deduction ignoring assessee’s contention that the total turnover of only the eligible business should be taken note of for the purpose of applying the formula laid down in sub-section (3) - the view canvassed on behalf of the assessee is to be preferred over the view put forth on behalf of the income tax department as it is only the profits of the eligible business which have to be split in the same proportion as the export turnover in the said business bears to the total turnover in the said business Thus, the total turnover for the purpose of section 80HHE only the turnover of the computer software both in Indian and abroad has to be considered and turnover of business not connected with software business cannot be considered to include in the total turnover. Similarly amount received towards employee’s compensation cannot form part of the total turnover - in favour of assessee.

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• 2012 (7) TMI 646
  Disallowance of proportionate amortised amount of lease premium paid - leasehold land treated as capital expenditure – Held that:- As per the clause 6 of the said agreement, the assessee paid Lease premium for grant of lease for the term of 80 years from the date of grant of possession of land - price paid by the assessee was for acquisition of rights to a capital asset and, therefore, cannot be allowed as revenue expenditure - similar expenditure was capital in nature - expenditure in respect of lease from MMRDA in the nature of premium paid was capital in nature – appeal dismissed Disallowance of direct expenses in the form of interest - by assuming the same as expenditure incurred in relation to earning of the tax free income, by invoking the provisions of Section 14A of the Income Tax Act – Held that:- Borrowed funds on which interest was paid had not been used for making investments which yielded tax free income. Therefore, disallowance of direct expenses was rightly deleted by the Ld. CIT(A). Administrative and other expenses – Held that:- It is a case where estimation was required to be made - estimation at 5% of the dividend income made by the Ld. CIT(A) is reasonable Interest charged under section 234C of the Income Tax Act - plea of the assessee was that due to circumstances beyond its control and because of the events that happened after the date of payment of third installment of advance tax, there was a short fall in payment of advance tax leading to levy of interest u/s.234C of the Act – Held that:- Circumstances set out by the assessee have to be considered only in an petition for waiver of interest made to the administrative authorities and cannot be made in the appellate proceedings in which only liability to tax can be subject matter of the proceedings Deduction of contribution to the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) - deduction is claimed by the assessee under the provisions of section 36(1)(xii) of the Act - whether the Trust Deed by which CGTMSE was constituted and the contribution made by the assessee to CGTMSE fall within the objection purpose authorized by the Act by which the assessee was constituted or established - matter remanded to AO Deduction on account of bad debts written off u/s.36(1)(vii) of the I.T. Act - which was not claimed by the assessee in the return of income – Held that:- Provisions of Sec.36(1)(viia) applies to the Assessee - no credit balance in the provision account and therefore whole of the bad debts written off would in effect be in excess of the credit balance (which is nil) in the provisions account - whole of the bad debts written off would be deductible u/s.36(1)(vii) of the Act - sum has been omitted to be claimed in the return of income has been amply demonstrated by the Assessee. Even in the reassessment proceedings the AO has no answer to the claim of the Assessee in this regard and has merely observed in his order that there is no evidence produced by the Assessee. The book entries and the return of income before the AO are enough evidence to come to the conclusion that the amount in question was not claimed in the return of income though the Assessee could have claimed it legitimately - appeal by the Revenue is dismissed.

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• 2012 (7) TMI 645
  Unexplained investment - search and seizure – alleged that expenses on account of construction are not completely recorded in the books of account - As per the report of the DVO, total construction of the property was estimated higher than as against the cost of construction shown by the assessee – Held that:- Additions made in the hands of the respective owner companies of the aforesaid projects, as unexplained investment, have been deleted, year by year - Assessing Officer in this case also has not pointed out any specific defect in the books of accounts of the appellant company as well as those of the owner companies which are regularly maintained and audited - any difference between the cost of construction shown by the respective companies as per their books of accounts and as estimated by the DVO, which is otherwise insignificant and is within the acceptable range of error margin, cannot be made the basis either for making any addition u/s 143(3) r.w. Section 153A of the IT Act in the hands of the owner companies, as unexplained investment, or for estimating notional profit in the hands of the appellant contractor company – additions deleted

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• 2012 (7) TMI 644
  Addition as unexplained investment u/s 69B - valuation - Assessee company had purchased two pieces of land - Assessee company has disclosed full purchase cost whereas the Assessing Officer has taken difference of purchase cost as undisclosed cost which was taken treated as unexplained investment u/s 69B of the IT Act – Held that:- Lands purchased by the appellant company as well as M.s Bhagyanagar Metals Ltd are adjacent to each other - Sri Madhu Venkateshwar who is the owner of the third site which was sold to M/s Bhagyanagar Metals Ltd had received rs 25,000 per acre and the total consideration of Rs. 163,75,000/- for Ac. 6.22 guntas the appellant could not have purchased for a throw away price of Rs 20,00,000 for Ac. 3 guntas and Rs 22,50,000 for Ac. 3.37 guntas - sale price of the plots of Rs.150 per square yard would clearly indicate the price at which the property could have been purchased, as it is natural that no businessman would sell at a price lesser than the purchase price thereby incurring a loss - Assessing Officer directed to adopt the rate of Rs.150 per square yard as purchase cost of land by the assessee - appeal of the Assessee is partly allowed.

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• 2012 (7) TMI 643
  Penalty u/s. 272B read with rule 114B and 114D - default in not complying with the provision of 139A of the Act - bank manager was unable to produce requisite material particularly proof of address and permanent account number of many account holders and depositors in FD - belated production of documents - Held that:- The explanation given by the respondent assessee of late production of these documents after a fortnight was found justifiable by the Tribunal. Therefore, it clearly held that this was not a case where by the non-production of material at the relevant time rendered back liable for the penalty under section 272(B). - Decided in favor of assessee.

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• 2012 (7) TMI 642
  Writ Petition – Held that:- When a statute creates a right or liability or also prescribes the remedy or procedure for enforcement of that right or liability, resort must be had to the said statute remedy rather than invoking the extraordinary and prerogative writ jurisdiction of the Court under Article 226 of the Constitution - petitioner has already availed the alternate remedy of appeal - Writ Petition dismissed

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• 2012 (7) TMI 628
  Addition u/s 69 B as additional purchase cost of his property - assessee had purchased the flat at Rs.62 lacs but Stamp Valuation Authority had valued the said flat for stamp duty purposes at Rs.63,40,500 - Held that:- AO has not brought on record any other evidence except the report of the DVO that the assessee has paid more than agreed consideration - assessee filed comparable cases of the same society or nearby area whereas the DVO has taken comparable cases of quite far away area. Therefore no addition could be made u/s 69 in the absence of any cogent evidence, thus the addition confirmed by the learned CIT(A)is deleted - in favour of assessee.

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• 2012 (7) TMI 627
  Disallowance of interest expenses - CIT(A) allowed it - Held that:- The assessee is continuing getting commission income from Pharma Agencies through sub-letting the agency. The loans were taken in earlier years for business purposes. Out of some of the loans given to sister concerns, part amount was outstanding due to debtors part has not been recovered during the year due to the financial position of the debtors. The assessee’s business is interconnected, interlacing, inter-dependent and there was one unit, thus warrants confirmation of the deletion made by the learned CIT(A) on old loans Excessive rate of interest in case of directors covered u/s 40A (2) (b) - Held that:- The rate of interest between 15% to 18% was allowed by the AO in the preceding assessment years which is also reasonable in view of prevailing market rate - As during the year the assessee has taken loan of Rs.12 lacs which was utilized for purchase of raw materials and same is not connected with the old business and also manufacturing has not been started during the year. Therefore, the AO is directed to re-calculate the disallowance of interest on Rs.12 lacs only on the basis of interest paid or provided in the loan account - against revenue.

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• 2012 (7) TMI 626
  Disallowance of interest expenses and Management expenses u/s 14A - CIT deleted the disallowance - re opening of assessment - Held that:- The A.O. did not establish any nexus between the borrowed funds and the investments. Nothing has been brought on record by the A.O. to rebut the assessee’s contentions that the investments have been made from own interest free funds and not borrowed funds. The assessee has submitted that he has not incurred any expenses for earning the income but the A.O. has not given any clear finding of incurring of expenses, and has not established nexus of expenses incurred with the earning of exempt income - invoking Rule 8D to disallowance is not warranted as AY under appeal is 1999-2000 and Rule 8D is to be applied prospectively from Assessment Year 2008-09 onwards - against revenue. Deletion of disallowance of software expenses by CIT(A) - Held that:- CIT (A) has given a finding to the effect that the issue of software expenses was disallowed by A.O. in the original assessment and CIT (A) had allowed the assessee’s appeal. In the second round, in reassessment proceedings, the A.O. has again raked up that very issue of disallowance of software expenses which had already reached to the finality in favour of the assessee by the order of ITAT - against revenue.

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• 2012 (7) TMI 625
  Addition on account of unexplained cash credit - CIT(A) deleted the addition - Held that:- The assessee has discharged the onus cast upon him by proving the identity of the creditor, the capacity of the creditor and the genuineness of the transaction. Nothing has been brought on record by the Revenue to controvert the submissions made by assessee - no need to interfere with the order of CIT (A) - against revenue. Addition on account of loss of goods - CIT(A) deleted the addition - Held that:- Goods were destroyed in floods for which the assessee lodged claim with the insurance company and the claim was settled for Rs.16,70,100 - The claim of loss has also been certified by the Assistant Commissioner, Food & Drug Department, thus the view of the CIT (A) that the loss of goods is nothing but deduction made by insurance company as per the policy conditions and therefore the same has to be considered as allowable deduction - against revenue Addition on account of low G.P - CIT(A) deleted the addition - Held that:- The business of assessee is governed by the regulation of Food and Drug Control Act and all records of purchase and sales are subject to verification by those authorities. No discrepancies have been noticed by them. The reasons for fall in GP have not been controverted by the Revenue nor have they brought on record any contrary facts. Though there has been fall in GP but there is increase in the rate of net profits. The Revenue has not pointed out any defects in the books of accounts of the assessee and has accepted its book results - no need to interfere with the order of CIT (A) - against revenue.

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• 2012 (7) TMI 624
  Addition on account of unaccounted income - the credit entries in the books of the assessee in the form of share application as unexplained - Held that:- As procedures has been prescribed for increasing the authorised capital of the company and there is nothing on record to prove that the Assessee has complied with the prescribed procedures especially with respect to the increase in authorised capital and for forfeiture of the share application money - thus the share application transaction is nothing but a design to bring in Assessee’s own unaccounted income into the books without payment of taxes. As AO had issued summons u/s 131 to the Managing Director but there was no compliance - the share application money received from the investors were forfeited by the Assessee and for which nothing is on record to prove that the notice was issued to investors to indicate the intention of the Assessee to forfeit the share application money - the assessee had received premium on the share to be allotted though it was a loss making company - A.O. has rightly added the amount to its income - against assessee.

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• 2012 (7) TMI 623
  Disallowance of short term capital loss on sale of mutual funds - invoking provisions of section 94(7) - Held that:- The Statute of 94(7) states that where any person buys any units within a period of three months prior to the “record date” and such person sells such unit within a period of nine months after such “record date”, then loss if any arising on account of such purchase and sale of unit to the extent of dividend received would be ignored for the purpose of computing the income chargeable to tax - units have been purchased within a period of three months prior to the record date, therefore one of the condition applies on such transaction. Then it is not in dispute that the sale was made on 06/02/2006, i.e. within the period of nine months from the record date, i.e. 20/01/2006, therefore within clause(b)(ii) of section 94(7) -as the relevant conditions have been cumulatively satisfied therefore stand of the Revenue is upheld - against assessee. Addition on account of deemed divided - declaration of trust claimed to be executed on 16/11/2005 by assessee - revenue stated it to be after thought - Held that:- After the search, Dy.Commissioner of Investigation submitted that the assessee has furnished the complete details of the said declaration and explained that in the absence of any other transaction or earning of NIL income, there was no necessity to open a bank account and further, about the registration of the shares, it was explained that as per section 153 of the Companies Act, 1956, a company is not permitted to include the name of the Trust in the register because trusts are not required to be entered in the register. Due to this reason, the name which was earlier noted as shareholders remained the same, however through a Board Meeting it was resolved to acknowledge the change in the vesting of the shares - that a deeming provision has to be applied strictly, so that a fiction so created by a Statute should not cover within its ambits more than what is subscribed - deemed dividend need not be taxed in the hands of the assessee on an un-established hypothecation - in favour of assessee. Addition on account of sale of Ampad land on the basis of seized papers - CIT(A) deleted the addition - Held that:- The actual execution of the sale deed and parting of the possession of land took place during AY 2009-10, the same has been treated as sales in AY 2009-10 and the gains arising therefrom were treated as income for AY 2009-10 - the transaction made with Mr.Kanubhai Patel clearly states the land was transferred to him for conversion from agricultural land into non-agricultural land and the transaction was cancelled and the amount received from him was returned back - As per law since the transaction did not materialize the same cannot be treated as income of the Appellant - no reason to reverse the findings of ld.CIT(A) as if the action of the AO is affirm then the natural consequences should be to adjust the income which has already been taxed against the addition made for the year under consideration. Since double taxation is not permitted - against revenue. Addition made on account of non-genuineness of the gifts - Held that:- AO has connected the impugned gift with the sale of Gotri land and that issue is yet to be decided in AY 2009-10, therefore the CIT(A) has rightly held that the gift being transferred “in kind” hence not to be taxed for the year under consideration - against revenue. Addition on account of sale of “Gotri Land” - Held that:- As the land was sold on the price near to one of said amount of the offer made by one of the buyer through a broker the document is also suggesting that certain options were available to the assessee and those options were not acceptable. The assessee has noted on those papers that variation in the price was expected. Since the said noting was found in existence when the paper was seized, such a noting cannot be ignored - That noting is rather a proof which supports the contentions of the assessee that the figures were nothing but certain offers which were made in respect of the Gotri land - Had it been a noting of a single transaction, the presumption could be in favour of the Revenue but by the very presence of three dates on the said paper gives an indication that out of the three offered price, one of them was materialized - as on one hand, the Revenue has picked-up the highest figure of the three and the assessee has picked-up the figure which was documented plus the difference of Rs.3 crores so as to match with one of the cited figures the Revenue Department should not have disputed the offer as made by the assessee.

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• 2012 (7) TMI 622
  Addition made on account of excess process loss - Consumption of gold casted - Held that:- Comparing to AY 2006-07, the consumption of gold casted items went down in assessment year 2007-08 and the percentage of process loss has gone up. In the present year even the percentage of consumption of gold casted items was almost at par with such percentage in assessment year 2006-07 but percentage of process loss in the present year is more than 1.5 times of the process loss in assessment year 2006- 07. This working goes to show that when the consumption of casted gold items is more in total consumption, the percentage of process loss goes down when we compare the same for assessment year 2006-07 and 2007- 08 but in the present year, even when consumption of gold casted items is at par with such consumption in assessment year 2006-07, the percentage of process loss is very high. For this reason the A.O. was justified in making disallowance of excess process loss declared by the assessee. Even if this addition is upheld then the assessee is eligible for exemption u/s 10A - Held that:- Section 10A (4) states that the claim to be allowed u/s 10A should be worked out on the basis of total profit to the extent of proportion of export turnover to total turnover of the assessee. In the present case, the export turnover of the assessee is Rs.4,68,34,166/- and domestic turnover has been worked out by the A.O. at Rs.7,52,740/- being the addition made by him on account of alleged sale outside the books. After inclusion of this amount of domestic sale, total turnover comes to Rs.4,75,86,906/-. Total profit from business assessed by the A.O. is Rs.12,24,878 - thus as per the provisions Section 10A(4) the exemption allowable u/s 10A comes to Rs.12,50,503/- and net taxable income stands at Rs.19,375 - direction to AO to recompute the liability - quantum appeal partly in favour of assessee Penalty u/s 271(1)(c) - Held that:- Penalty levy is not justified because the entire addition was made by the A.O. on the basis of assumption without bringing any concrete material on record in support of any outside books sale made by the assessee and hence, penalty is not justified even for this part addition upheld - in favour of assessee.

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• 2012 (7) TMI 621
  Assessment u/s 143(3) - assessee contented that there being no notice to the assessee - Held that:- No where in the assessment proceedings before the AO, the assessee appeared to have disputed about non-service of notice and the validity of the assessment order. However, the issue non-receipt of notice was agitated before the learned CIT(A), who called for a remand report from the AO in this behalf. The AO filed his remand report before the CIT(A) and confirmed that the notice under Section 143(2) was served on the assessee on 17.3.2004. Presence of the assessee’s representative and Committee official from time to time and also filing written submissions on different dates as mentioned in the assessment order, carry undisputable fact that the assessee is present and fully aware of the proceedings being taken place in the department, and therefore the assessee should be estopped from raising the issue that the assessment was framed without any statutory notice, and therefore not convinced that no notice under Section 143(2) of the Act was issued and served - in favour of assessee.

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• 2012 (7) TMI 620
  Challenge the search - Held that:- The order of the Tribunal stated that the contentions made by the assessee that the mother represented the minor child, who was the legal representative of the deceased. Thus the estate of the deceased was represented by the minor through the mother. In the circumstances no hesitation in holding that the assessment based on the search made in the premises of the deceased and the warrant in the name of the mother as a representative of the legal heir of the deceased, is proper. The purpose of search was to find out the undisclosed income of the deceased and on his demise, the estate was represented by the legal heirs, one of whom happened to be the minor son and the property represented by him - confirm the order of the Tribunal. Challenge the assessment as barred by limitation - Held that:- As going by the factual details as are available that the two year time limit commencing from 30.11.1997 the last of the panchnama evidencing the conclusion of search with reference to the authorization was issued ended on 30.11.1999, thus no hesitation in holding that the assessment made herein under Chapter XIV-B is well within the period of limitation, as provided for under Section 158BE (1)(b) - against assessee.

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• 2012 (7) TMI 619
  Addition on depreciation claimed in P&L account - assessee excluded the same entirely including the profits of SEZ unit while working out the profits in IT computation – Held that:- CIT (A) considered that there is no need for making any adjustment and allowed the ground - there is no merit in AO’s observation that assessee has claimed excess deduction. Claim of depreciation on motor car – Held that:- vehicles acquired by assessee eventhough had not been used in the business of running them on hire but for that reason depreciation @ 50% cannot be denied as entry in Dep Schedule covers the case of commercial vehicles acquired between the period 1.4.2001 to 31.3.2002 and put to use in this period for the purposes of any business or profession - no condition in this entry that the commercial vehicle shall be used in the business of running it on hire. Admittedly the vehicles are registered as commercial vehicles and falls within the entry for claim of depreciation at 50% – In favor of assessee Reopening under section 147 - reopening was made after four years from the end of relevant Assessment year – Held that:- Reopening per se is bad in law as there is no failure on the part of assessee in furnishing necessary details at the time of filing the return or completion of the assessment originally under section 143(3) - mere change of opinion on existing facts available on record by AO which cannot be upheld Foreign exchange realization - Assessee has claimed total turnover which include the exchange rate difference - CIT (A) excluded the amount and took the income from export realization and restricted the claim – Held that:- Foreign exchange realization is on the export proceeds which are to be included in the ‘total turnover’ and also in ‘export turnover’ which assessee had done - foreign exchange realization being part of export proceeds are to be included in the export turnover. Therefore, the CIT (A) to that extent is not correct - Revenue appeal is dismissed.

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• 2012 (7) TMI 618
  Addition on account of commission paid to Directors of the company – Held that:- Commission paid to both the directors was wholly and exclusively based on performance of assessee’s business and commercial expediency. There is no violation to sec. 36(1)(ii) of the Act - directors are assessed to tax at maximum rate and commission received has been shown in their returns as taxable income - no reduction of tax liability either by the assessee or by the directors – In favor of assessee Reopening of assessment u/s 147 - Since the commission paid to directors was not allowable under the provisions of Section 36(1)(ii), the assessment was reopened by invoking the powers under Section 147 – Held that:- Reopening was made after four years from the end of the relevant assessment year - notice under section 148 based on the recorded reasons supplied to the petitioner as well as the consequent order were without jurisdiction as no action under section 147 could be taken beyond the four year period – In favor of assessee

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• 2012 (7) TMI 617
  Addition under section 69 as unexplained investment - source for the construction amount - Assessing Officer made addition as per the valuation determined by the Department Valuation Officer - appellant has submitted a reason for the purchase of adjoining small piece of land. The land owned by him and on which Hotel Hill View was constructed an unapproved one – Held that:- Construction was done by Mrs. A.K. Singh and there is no evidence brought on record that the construction was done by the assessee. No material evidence was brought on record to prove that the assessee had source for the construction and therefore, no addition is warranted in the hands of the assessee towards cost of construction – addition deleted

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• 2012 (7) TMI 616
  Addition - unexplained cash credits under section 68 of the Income Tax Act - genuineness of the sundry creditors - Commissioner of Income Tax (Appeals) held that in his opinion addition could not have been made u/s. 68 of those amounts which appear as opening balances on 1.4.2006, which were as follows - examination of the earlier year’s accounts show regular business dealings – addition deleted Addition - unexplained cash credits under section 69 of Income Tax Act - assessee has furnished the confirmations – Held that:- Bank accounts have been produced to show that the amount have been received by cheque - considering that the amounts have been confirmed by the parties concerned, the additions deleted. Addition - unexplained cash credits under section 68 of Income Tax Act - assessee has received advances/ payments by cheque during the year - Commissioner of Income Tax (Appeals) held that the payments were received by cheque and the transactions appear to be in nature of regular business dealings – Held that:- Assessee was prevented by sufficient cause from submitting the evidences during the assessment proceedings - no infirmity in the order of the Ld. Commissioner of Income Tax (Appeals) in deleting the addition - appeal filed by the Revenue stands dismissed.

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• 2012 (7) TMI 615
  Condonation of delay - delay of 529 days - sole reason given for the delay in filing this cross objection is that assessee was adviced to file this cross objection, as the re-opening was a mere change of opinion – Held that:- Assessee was not able to properly explain the reasons for the delay in filing the cross objection - grounds raised by the assessee dismissed Denial of Deduction under section 80IA of the Income Tax Act – business of cold storage - Assessing Officer denied the deduction partially on the ground that – (i) the service charges credited was on account of pasteurisation and packing of milk and cold storage – Held that:- Quantum of service charges was being calculated on the basis of quantum of milk packed but was charged only for cold storage - Assessing Officer has not understood the fact clearly. Packing and pasteurisation are not done by the assessee but only a place is given to Dudh Sungh - functions of Dudh Sungh and the assessee are defined in clear terms vide these agreements - it is only the methodology devised for quantifying the charges and it does not indicate that the assessee is rendering services other than cold storage - ground raised by the Revenue dismissed. Income derived from redemption of units of mutual funds - simply observed in the order that such an income bears the character of interest and as such has to be brought to tax under the head ‘Income from Other Sources’ – Held that:- Assessing officer is therefore directed not to treat the income as interest taxable under the head ‘Income from other sources’. The income shall continue to be taxed as capital gains as claimed by the appellant.

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• 2012 (7) TMI 614
  Disallowance was made under section 40(a)(ia) of the Act - payments made to “field agents” for conducting market research surveys – Held that:- TDS was deducted at 2.24% under section 194C and whereas it is the Assessing Officer’s case that deduction should have been made @ 5.61% under section 194J and, hence, a proportionate disallowance was made - disallowance cannot be made when there has been deduction of tax at source on the allegation that there is a short deduction of tax – Matter remanded to AO - ground is allowed for statistical purpose. Reopening of assessment - reopening was made within a period of four years – assessee submitted that no notice was given under section 143(2) – Held that:- Appellant has treated letter as the notice u/s. 143(2) of the Act - assessee has appeared during reassessment proceedings in response to the notice/letter dated 16-11-10 and cooperated in the assessment proceedings. Therefore, it would be deemed that the notice under the provisions of l.T. Act has been duly served upon the assessee in time - appellant cannot take any objection in any proceedings or enquiry under this Act as the appellant has not raised such objection before the completion of said reassessment proceedings - ground of appellant dismissed

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• 2012 (7) TMI 613
  Addition made by AO on the ground of cessation of liability of sundry creditors – Held that:- Once the liability exists in the books of assessee and the creditor has right to claim over the same as per law, AO could not make addition on account of cessation of liability by invoking provision of section 41(1) of the Act – addition deleted Disallowance of salary by invoking the provision of section 40A(2) of the Act - salaries paid on account of employment of Shri Siddhartha Jalan who is doing consultancy work, accounts and used to visit customers for marketing of assessee – Held that:- No doubt the employee Shri Siddhartha Jalan is related to one of the directors but it is an admitted fact that Shri Siddhartha Jalan has actually worked for the assessee company - no disallowance can be made by invoking the provision of section 40A(2) of the Act Addition by applying net profit rate @8% on contract receipts - assessee company claimed receipt as Annual Maintenance Charge from one Tata Libert Limited - assessee paid the entire receipt received from Tata Libert Ltd. to OMPCL as the entire job work was assigned to OMCPL - assessee has not earned any penny from this sub-contract and the entire payment was debited to OMCPL – Held that:- Lower authorities erred in estimating the profit rate on the receipt which has never given any profit to assessee - addition deleted Depreciation allowance - assessee has purchased a new car on 22.03.2002 and it was used for six months, the admissible depreciation was only 50% of the WDV as on 31.03.2002 - According to AO the assessee’s calculations are not correct but he has not given any basis for the – matter remanded to AO - assessee is allowed for statistical purposes. Addition of profit on sale of old car – Held that:- Assessee has purchased a new car and also sold this car and the excess of WDV has been invested in purchase of new car - no gain will be charged to tax as Short Term Capital gain or profit of the business Addition of advances received from customers - assessee could not compute interest on the above advances from customers and could not obtain confirmations, the AO disallowed the liability holding the same as bogus – Held that:- Assessee has filed complete details before AO as well as before CIT(A) and this liability pertains to Assessment year 1998-99 and these advances received from customers are almost paid by account payee cheque in subsequent years - Once the payment is made by cheque and there is no outstanding liability standing as on the date of assessment, the sundry creditors are not in the control of the assessee but it is the duty of AO to issue notice u/s 133(6) and call for information and AO has miserably failed in doing his duty – addition deleted - appeal of assessee is allowed in part for statistical purposes.

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• 2012 (7) TMI 612
  Disallowance of claim under section 80IB of the Act - assessee has failed to establish beyond doubt that there is no other activity other than manufacturing activity - assessee had admitted trading activity and of undertaking job work apart from manufacturing activity - Duty drawback receipts and DEPB benefits do not form part of the net profits of eligible industrial undertakings for the purpose of the deduction under section 80-I / 80-IA / 80-IB of the Income-tax Act, 1961 - Profits derived by way of incentives such as DEPB/Duty drawback cannot be credited against the cost of manufacture of goods debited in the profit and loss account and they do not fall within the expression "profits derived from industrial undertaking" under section 80-IB - profits and gains in question cannot be said to have been derived from the industrial undertaking and, hence, the assessee would not be eligible for relief under section 80IB of the Act - assessee’s appeal is dismissed.

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• 2012 (7) TMI 611
  Long term capital gain - Valuation - the assessee contended that where the AO proposes to adopt the stamp duty value as full value of consideration, he has a right to question such adoption by asking the AO to refer the matter of valuation to the valuation officer, which right was never given by the AO – Held that:- AO is directed to refer the matter of valuation to appropriate valuation officer after giving reasonable opportunity of being heard to the assessee - Revenue is allowed for statistical purposes

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• 2012 (7) TMI 610
  Additional evidence - Rule 46A - Addition under the head “advertisement and publicity” expenses - Disallowance of reimbursement of expenses to holding company – Held that:- From the index to paper book, it emerges that certain details and documents have been furnished/produced before CIT(A) in support of the appeal on this issue and CIT(A) has not only admitted such material, but also considered the same for granting relief to the assessee without associating the Assessing Officer with appeal proceedings or calling for remand report form the Assessing Officer. - there is a clear violation of Rule 46A of the I.T. Rules in this regard - set aside the orders of the authorities below - matter back on the file of the AO.

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• 2012 (7) TMI 609
  Denial of deduction under section 80-IB of the Act on the ground that the respondent-assessee had not employed ten or more workers – Held that:- Though the workers employed by the assessee directly were less than ten, it is not in dispute that the total number of workers employed by the assessee directly or hired through a contractor for carrying on the manufacturing activity exceeded ten and - workers including casual and contractual workers were working in the direct supervision and control of the respondent-assessee - assessee complied with the condition set out in section 80-IB(2)(iv) of the Act.

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• Customs

• 2012 (7) TMI 640
  Duty confirmed u/s 28(2) and penalty imposed u/s 114A - claim of exemption under Notification No.32/2005-Cus. dt. 08/04/2005 under the Target Plus Scheme - c.c. copper rods imported by the assessee - Held that:- For claiming the benefit of exemption under Notification No.32/2005-Cus. dt. 08/04/2005 under the Target Plus Scheme, it was not necessary for the assessee-appellants to establish that the goods imported as input by them were usable in the manufacture of the goods exported by them as it was enough for them to establish a broad nexus between the imported input and the exported products with reference to the respective Export Product Groups - that M/s. Gimpex Ltd. were not eligible for exemption under Notification No.32/2005-Cus. in respect of the c.c. copper rods imported by them inasmuch as there existed no nexus between the said goods and the exported products of Chemical & Allied Products Group whereas M/s. Sree Enterprises were eligible for exemption as they could establish a broad nexus between the said goods and the exported products. Challenge the extended period of limitation - Held that:- The extended period of limitation under the proviso to Section 28(1) was not invokable as duty credit certificates used by the assessee under the TPS to secure duty-free clearance of the imported goods, the assessee can hardly be said to have done so with any intent to evade payment of duty and non-production of copies of Shipping Bills, which documents were already in the Department's possession, cannot amount to suppression of the documents by the assessee - consequently, the demands of duty on GL and SE are entirely time-barred. Consequent to demand being quashed the penalties imposed on GL and SE u/s 114A are liable to be set aside and that the penalties imposed on other appellants u/s 112 are also liable to be set aside.

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• FEMA

• 2012 (7) TMI 641
  Condoning delay, taking recourse to the power of this Court under section 52(2) proviso of the Foreign Exchange Regulation Act, 1973 (FERA) - held that:- the application under Section 5 of the Limitation Act for condonation of delay for a period exceeding sixty days, as mentioned in the proviso of Section 6 of the General Clauses Act, is not entertainable. In other words, the High Court cannot condone delay for a single day exceeding sixty days, as mentioned in the said section, simply because, the High Court is not conferred with such power. If there is no power question of granting relief does not arise. - the views taken by the earlier Division Bench is the correct position of law. The earlier Division Bench in the case of Union of India and Anr. –vs- M/s. SMP Exports Pvt. Ltd. and Ors. and other three matters, held that Court’s power to condone delay against the judgment and order of the Appellate Tribunal is governed by the provision of section 35 read with proviso of FEMA, even if the appeal has been preferred in relation to contravention of any provision of FERA after repeal.

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• Service Tax

• 2012 (7) TMI 670
  Valuation - inclusion of statutory fees and levied - Transport of passengers embarking in India for International journey by Air Service - Demanding Service Tax amounting to Rs. 1,22,91,57,595/- for period 1.5.2006 to 30.9.2007 and Rs. 6,16,96,722/- for tickets sold prior to 1.5.2006 but used for journey afterwards - held that:- In the present case appellant has not come forward to show that it fulfilled all the conditions of Rule 5(2). Therefore under Section 67 of the Finance Act and Rule 5 of the Service Tax (Determination of Value) Rules, 2006 no benefit can be given to the appellant on account of statutory levies and charges and the confirmation of demand on these charges by the Commissioner is liable to be upheld. - Decided against the assessee. Levy of service tax on tickets sold before 1.5.2006 and used after 1st May 2006. - held that:- Tribunal in the case of CCE v. Krishna Coaching Institute (2008 (10) TMI 34 - CESTAT NEW DELHI) has held that since service tax liability on commercial training and coaching institutes arising from 1.7.2003, tax on advance received prior to such date for service provided after said date is leviable, Tribunal in the case of CCE v. Ashok Singh Academy (2009 (8) TMI 288 - CESTAT, NEW DELHI) following the decision of the Krishna Coaching Institute (2008 (10) TMI 34 - CESTAT NEW DELHI) upheld the demand on advances received prior to 1.7.2003 holding that taxable event in service tax is providing of the service. Following these decisions accordingly, we uphold the confirmation of demand of service tax and cess by the Commissioner with regard to the air ticket sold prior to 1.5.2006 and journey undertaken on 1.5.2006 or thereafter. - Decided against the assessee. Self adjustment of excess service tax paid by the appellant on account of cancellation of tickets - held that:- Since the appellant is ready to produce all the details, this finding of the Commissioner on denial of the self adjustment is set aside and the matter is remanded back to the Commissioner on the issue of self adjustment of the service tax paid by them on account of cancellation of tickets after giving an opportunity of hearing to the appellant. Penalty - held that:- appellant was collecting the service tax on basic fare from the passengers but not depositing the amount with government and then service tax was deposited with government after 15 months attracting the provisions Section 76 of the Finance Act. Similarly taxable value showing the service in tax Returns filed by appellant to the department was also suppressed and in some of the months no value of the taxable service was shown in the Returns. Therefore, there was clearly suppression of the taxable value attracting provisions of Section 78 of the Finance Act. - Penalty levied but an option given to pay the penalty equal to the 25% of the deposited tax amount within 30 days The penalty with regard to levy of service tax on fuel and insurance charges, on tickets issued prior to 1.5.2006 and on the component of statutory levies and charges is set aside.

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• 2012 (7) TMI 669
  Commercial Coaching or Training Services and Management, maintenance and repair services - training in Aircraft Maintenance Engineering - maintenance and repair of air-crafts owned by their members. - held that:- What is recognized under the law is the licence issued by the DGCA and not course completion certificate issued by the appellant. With that certificate, the student can not get any employment or engage in self-employment, without clearing the examination conducted by the DGCA. - Decided against the assessee. Charitable institute - Since the appellant is a charitable institution, can they be considered as a commercial training or coaching centre? - held that:- Here again the answer is negative. - Merely because the appellant is registered as a Charitable Institution under the Income Tax Act, 1961, that does not entitle the appellant to claim exclusion from the ambit of service tax. - Decided against the assessee. Exemption under notification No.24/2004-ST dated 10-9-2004 - vocational training institute - held that:- on completion of the training by the appellant, the trainee can not seek any employment or undertake self-employment directly after such training or coaching. - Therefore, prima facie we are of the view that the appellant is not eligible for the benefit under the aforesaid exemption. Applicability of Ruling of AAR in another issues - held that:- the status of AAR is higher than that of this Tribunal and therefore, this Tribunal cannot ignore the ruling by the AAR in a case where the facts are similar/identical and the questions of law are identical. Overhauling work of the aircrafts - held that:- prima facie, the activity of overhauling for a consideration comes under the purview of "management, maintenance or repair service" and is liable to service tax. Part per-deposit ordered.

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• 2012 (7) TMI 668
  Difference between gross receipts shown in the profit and loss account and the value of service rendered by them as declared in their service tax return. - Construction of Residential Complexes - held that:- The amounts are confirmed with reference to figures shown in profit and loss account as per AS7 standards prescribed by the Institute of Chartered a Accountants for maintaining accounts of Construction companies. This standard is for ascertaining the profit and loss of a construction company and does not straight away reflect the position of receipt of payments which is the relevant factor for paying service tax. Amounts received against taxable activities can be arrived at only if the accounts are examined diligently by a person having some knowledge about accounting methods which is not done in this case. - Pre condition of pre-deposit waived.

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• 2012 (7) TMI 667
  Short payment of service tax on Compliance Services - assessee is paying service tax on activities for Management Consultancy Service - adjudicating authority stated that meaning of management covers Compliance Services - assessee contested demand to be time barred - Held that:- The Tribunal in the case of Futura Polyesters Ltd. (2011 (7) TMI 802 - CESTAT, CHENNAI) clearly stated to the effect that most of the impugned activities could not fall under the definition of Management Consultancy Service - though compliance with laws is part of the responsibilities of management such responsibility per se cannot bring it into the ambit of the words "in connection with the management of any organisation" used in section 65(105)(r) and section 65 (65) of Finance Act, 1994 to tax such services - clarification given by CBEC circular dated 27-06-2001 that the ordinary meaning of management will not cover Compliance Services & a taxing entry should be understood in the same way in which these are understood in the ordinary parlance. As the demand is time-barred because the appellants were acting on the basis of a circular issued by CBEC, invoking the powers under section 37B of Central Excise Act - If the public act relying on such circulars and still the charge of suppression is slapped on them it can be the worst travesty of justice. So there is no case for invoking suppression in this case - allowed in favour of assessee both on merits as well as on the ground that the notice is barred by time limit specified under section 73 of Finance Act, 1994.

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• 2012 (7) TMI 633
  Demand of Service tax, interest and penalty – site survey, designing, foundation, fabrication of steel structures, transportation, assembly and erection of structures on the foundation, roofing, installation of lighting, false ceiling, painting etc. - whether their activity was 'Commercial or Industrial construction service' taxable w.e.f. 10/9/04 or the same was "erection, installation and commissioning" service (erection of structures) which became taxable only from May 2006 – Held that:- plea of the appellant which has a bearing on the quantum of duty demand is that during period w.e.f. 1/5/06 they were paying service tax as the gross amount received by them after availing abatement, not just on the job charges. This plea of the appellant has not been considered by the Commissioner - matter remanded to the Commissioner for denovo adjudication

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• 2012 (7) TMI 632
  Refund of unutilized CENVAT credit on input services - partial refund to the claimant - Held that:- Commissioner (Appeals) passed order directing the original authority to refund CENVAT credit on the input services in question subject to production of Chartered Accountant's certificate as per the Board's Circular dated 19.1.2010 - the order passed by the Commissioner (Appeals) can hardly be said to be remand order.

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• 2012 (7) TMI 631
  Waiver of pre-deposit – Service Tax demand along with interest and various penalties - appellant was receiving income by way of incentives from media in form of volume discount – Held that:- Appellant cannot function as a business auxiliary service agent of the media who can promote the business of the media - incentive is received by way of discount, whether prompt payment discount or volume discount - discount is the reduction in the price given to the buyer/receiver of the goods/services - Merely because the transaction is routed through the advertising agency, should the treatment be different - definition of “business auxiliary service” given in the Finance Act, 1994 does not warrant such a view - service tax is not leviable on the iscounts/incentives received by the advertising agency from the media - waiver of pre-deposit of the entire dues has been granted to the applicants during the pendency of the appeal

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• 2012 (7) TMI 630
  Regarding demand for service tax under the category of ‘Intellectual Property Right Services' - horse race club - licensed book makers (bookies in short) accept bets from public - Club conducts live telecast of races which can be viewed from other racing clubs in India - neither the show-cause notice nor orders-in-original gives a clear proposal or findings as to what is the intellectual property rights involved in the transactions – Held that:- No categorization or findings by the learned Commissioners in any of the orders and, therefore - appellants have made out a strong case in their favour against the demand of service tax under the category of ‘Intellectual Property Right Services'. Regarding Broadcasting Services - horse race club - licensed book makers (bookies in short) accept bets from public - Club conducts live telecast of races which can be viewed from other racing clubs in India – Held that:- Duty demand is for the period 01.04.2007 to 31.03.2009, they will not be, prima facie, liable to service tax during this period and would come under the service tax net only from 2010 onwards. Regarding Business Support Services - horse race club - licensed book makers (bookies in short) accept bets from public - Club conducts live telecast of races which can be viewed from other racing clubs in India – Held that:- Neither of services rendered by the race course to the book makers will come under the category of ‘Business Support Services” - unconditional waiver of dues granted

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• 2012 (7) TMI 629
  Manpower Supply Service - Appellant had undertaken the job of feeding of husk into the boiler in the factory of manufacturer and received consideration for the service provided - whether the appellants were undertaking the job of feeding husk into boiler or whether he was supplying man power – Held that:- There was confusion in understanding the scope of the levy – penalty and demand set aside – appeal allowed

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• Central Excise

• 2012 (7) TMI 639
  Admissibility of Cenvat credit - various issues - re-credit of amount wrongly debited - Credit on Part/Component of Capital goods - Disallowance of Credit Adjustment Entry - Restoration of Provisional Debit Due Negative Price Variation - held that:- appellants made two debits for the same clearance by mistake. Whether a refund application is required to be filed to reverse such wrong debits is an issue on which contrary decisions of the Tribunal exists. We follow the decision of the Larger Bench of the Tribunal in the case of BDH Industries (2008 (7) TMI 78 - CESTAT MUMBAI) and hold that the suo motto credit taken is not proper and is recoverable. The duty payment was made without availing the exemption under notification 108/95-CE later they reversed the entry showing duty payment on the ground that they were eligible for the exemption. - This type of re-credit clearly amounts to taking refund of excise duty paid. Such refund has to pass through the test of time bar and unjust enrichment. So assessee could not have re-credited the amount in his account on his own without filing a refund claim.

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• 2012 (7) TMI 638
  SSI Limits - Computation of turnover - Notification No. 8/2003-CE - the process of denaturing in the tanker / manufacture of denatured alcohol - held that:- The fact that the tanker was brought by the buyer and denaturant was also brought by the buyer and assessee simply poured the impure spirit into the tanker and mixed denaturant with it to manufacture denatured spirit cannot be said to be undertaken with an intention to evade duty. This is a case where two views are possible. - Demand set aside - Decided in favor of assessee.

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• 2012 (7) TMI 637
  Related persons – assessable value – Held that:- Merely because ice cream was manufactured using brand name acquired by HLL and entire product was sold to BILIL/HLL, that did not make them related person - Revenue merely issued SCNs making allegation that price was not sole consideration of appellant s products. Persons behind manufacturer and the buyer were not proved to be one and the same through corporate shells. HLL was concerned with KFRL in commercial terms and KFRL having facility of manufacture, such facility was availed by HLL to get its branded goods manufactured by the former. That does not make them related persons - Manufacturer and buyer had their separate commercial interest without being related to each other. Merely bringing machineries for upgradation does not make parties related persons when object of each other is different. Trade practice many a times call for advance payments to meet requirement of trade. That also does not make them inter-dependent to depress the assessable value.

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• 2012 (7) TMI 636
  Disallowance of cenvat credit on the CNC wire cut machine on the ground that it is used for manufacture of intermediary products and not the final products – Held that:- Capital goods can be machines, machinery, plant, equipment, apparatus, tools or appliances. Any of these goods if used for producing or processing of any goods or for bringing about any change in any substance for the manufacture of final product would be 'Capital goods', and therefore, qualify for availing Modvat credit - appellant is entitled to Modvat Credit under Rule 57Q of the Rules - in favour of the appellant

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• 2012 (7) TMI 607
  CENVAT Credit in respect of inputs manufactured and cleared from a 100% EOU - Interpretation of the formula and the manner in which the calculations to be made - Commissioner stated that the appellant cannot take the credit of cess relating to Customs duty - Held that:- What is required to be done for the purpose of calculating the duty payable by a 100% EOU is to calculate the Customs duty payable (by calculating 25% of the normal rate as per the exemption notification), add CVD and thereafter treat the amount as Excise duty and pay cess on the same, which would be the cess payable on Central Excise duty worked out as per the formula - - the amount of Rs.1,159/- and Rs.580/- being education cess and SHE cess, are the cess paid on Customs duty worked out for the purpose of calculating the total customs duty payable to arrive at the Excise duty payable by the assessee as per the formula, thus the appellant has not taken the credit of Rs.1,159/- and Rs.580/- being the education cess on customs duty - decided in favour of assessee.

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• 2012 (7) TMI 606
  Demand of CENVAT credit and penalty u/r 15 r.w.s 11AC - the appellant had availed CENVAT credit in excess of the permissible credit - Held that:- While the show cause notice says that wrong formula has been applied under Rule 3(7) of CENVAT Credit Rules, 2004 resulted in excess availment of credit it does not say what is the correct formula - a simple worksheet has been given without indicating any formula and the original adjudicating authority has also not indicated what was the formula has to be adopted that there was an excess availment CENVAT credit but no information about the fact that whether it was because of calculation mistake or because of application of wrong formula - as that appellants paid CENVAT credit under protest as soon as it was pointed and subsequently after going through the relevant provisions, made the calculations and submitted the calculation sheet to the department would show that appellant have acted in a bonafide manner, as there was no intention to evade duty or avail wrong credit and what was happened appears to be a bonafide mistake - thus, imposition of penalty under Section 11AC is not warranted - decided in favour of assessee.

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• 2012 (7) TMI 605
  Penalty - Clandestine removal of goods - shortage of input in comparison to the balance shown in the Cenvat Credit Register - appellant had paid the duty on the said shortage – Held that:- Admission of shortage cannot be straightway taken as admission of clandestine removal -charge of clandestine removal is a serious charge which is required to be proved by reliable evidence - stock found short could not be considered as a case of clandestine removal unless supported by any other corroborative evidence

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• 2012 (7) TMI 604
  Rejection of Application for waiver of pre-deposit in accordance with Section 35 F - Held that:- To consider the issue of waiver of pre-deposit, the appellate Tribunal is required to apply its mind and record a definite finding as to whether in the given set of facts the assessee would suffer "undue hardship" if waiver of pre-deposit is not allowed - in the present case the Tribunal has not considered and has not recorded any finding with regard to the issue as to whether the petitioner would suffer undue hardship if he is made liable to deposit amount of Rs.100 Lakhs - mater deserves to be remitted back to the appellate Tribunal for deciding the application afresh - in favour of assessee.

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• 2012 (7) TMI 603
  Cenvat credit paid on furnace oil - demand for the period involved is from April 2003 to February 2005 - reversal of CENVAT Credit on the furnace oil consumed for the clearance of steam to their sister concerns - Show Cause Notice for the period April 2003 to June 2004 is issued on 26.07.2005 and for the period July 2004 to February 2005, is issued on 28.7.2005 – Held that:- Show Cause Notice dt.26.7.05 is belatedly time barred - Revenue was aware of the issue and the Show Cause Notices were issued to the appellant on 28.04.2004 by invoking extended period of limitation - Revenue could not have invoked extended period of limitation for the demand the duty - demand for the period April 2003 to Jun3 2004 set aside Cenvat credit paid on furnace oil – demand for the reversal of CENVAT Credit on the furnace oil consumed for the clearance of steam to their sister concerns - For the period July 2004 to February 2005 - Show Cause Notice was issued on 28.7.2005 – Held that:- SCN is within the period of limitation and on merit – against assessee Cenvat credit paid on furnace oil - demand for the reversal of CENVAT Credit on the furnace oil consumed for the clearance of steam to their sister concerns - Show Cause Notice is issued on 12.08.2005 for the period December 2001 to March 2003 – Held that:- Show Cause Notice dt.12.08.2005 is belatedly time barred, inasmuch as the very same issue was in question in the earlier Show Cause Notice dt.28.04.2004 and hence the Revenue could not have invoked the extended the period of limitation in this Show Cause Notice Cenvat credit paid on furnace oil – demand for the reversal of CENVAT Credit on the furnace oil consumed for the clearance of steam to their sister concerns - Show Cause Notice was issued on 13.01.2006 for the period March 2005 to 15..05.2005 – Held that:- Entire period is within limitation and no extended period is involved – Against assessee Imposition of penalty on the appellant for the period wherein confirmation of demand within limitation – Held that:- Appellant has been under the bonafide belief that he need not reverse CENVAT Credit used for the purpose of manufacturing of steam which is supplied to their sister concern, till the issue was decided against them by the Tribunal – Penalty set aside

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• CST, VAT & Sales Tax

• 2012 (7) TMI 671
  Disallowance of the deduction of sub-contractor's turnover - no provision or mechanism under DVAT Rules or DVAT Act and that the petitioner had failed to produce the books as records labour and service charges - assessee contested the absence proper mechanism to compute the taxable turnover after deducting 'turnover of sub contractors' - Held that:- At no stage the petitioner had produced the books of accounts or other records to show the extent of actual labour, services and other like charges. Even in the writ petition the petitioner has sought to give justification for non-production of records relating to labour services and other like charges on the ground that the records would run into 2-3 truckloads. In the absence of any records being produced by the petitioner, the assessing officer had no option but to allow the charges towards labour and services as per the table appended to the proviso to rule 3 (2) of the Delhi VAT Rules, 2005 Whether the absence of mechanism in the Rule viz. not allowing the deduction of the sub-contract turnover in the hands of the main contractor leads to multiple taxation - Held that:- The net tax liability remains the same. Furthermore, once such a tax is paid by the contractor, sub-contractor can always claim that tax stand paid at the hands of the contractor and, therefore, sub-contractor is not liable to make the payment all over again. To ensure this, the contractor like the petitioner while making payment to the sub-contractor can recover the tax from those payments and issue TDS Certificate on the basis of which sub-contractor can always claim credit, thus no point of double taxation. Once it is concluded that there is no basis for apprehension that mechanism provided under the DVAT Act and Rules can lead to double taxation it is advisable to agree with the contention of the learned ASG that the manner in which deduction and exemptions are to be granted is the legislative prerogative - the edifice of the petitioner's case questioning the validity of the impugned provision is built on the so called adverse consequences which may follow in the absence of deduction mechanism of sub-contractor turnover. On the basis of so called difficulties, a particular provision of a statute cannot be invalidated - There is no provision like Section 4 (7) of the Andhra Pradesh VAT Act in Delhi VAT Act also cannot be a ground for declaring statute as arbitrary or ultra vires - it would be for the Legislature to look into this aspect and decide whether to incorporate any such provision or not, Section 5(2) of Delhi VAT Act and Rule 3 of Delhi VAT Rules cannot be declared to be invalid.

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• Wealth tax

• 2012 (7) TMI 672
  Wealth tax - agriculture land - Urban Land u/s 2(ea) of the Wealth Tax Act, 1957 - held that:- the urban land is one, which is situated in any area which is comprised within the jurisdiction of municipality of any other corporation mentioned therein, if the population of that city/town is not less than ten thousand and falls in the area within such distance, not being more than 8KM from the local limits of any municipality or cantonment board referred to in sub-clause(1) that the Central Government may having regard to the extent of and scope of urbanization of that area may notify in the Official Gazette. There is no dispute about the fact that the land in question falls within the definition of “Urban Land’ i.e. it is in the city having population of more than ten thousand. - Decided against the assessee. Valuation of agriculture land - held that:- The market rates referred to by the assessee with regard to other properties which are almost at the rates fixed by the Revenue Authorities should be market rates and, therefore, assessee has rightly claimed the said rate and the ld. CIT(A) has rightly allowed the appeal of the assessee.

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• 2012 (7) TMI 634
  Liability to Wealth tax on land as an “asset” within the meaning of section 2(ea) of the Wealth tax Act,1957 - assessee contested that the land along with the superstructure can be considered as “residential house” and therefore can be considered to be an exempted asset u/s. 5(vi) - that the assessee had purchased land measuring 3059.50 sq. mts. from five different parties and consolidated into one single final plot for commencing construction of residential house - Held that:- On reading the provisions of Sec. 5(1)(vi), it becomes evident that exemption from wealth tax u/s. 5(1)(vi) is available in respect of one house or part of a house belonging to an individual or and Hindu Undivided Family. Exemption from wealth tax is also available to a plot of land comprising an area of 500 sq. mts or less as it is not considered as an “asset” within the meaning of section 2(ea). In the present case, the assessee is not entitled to exemption u/s. 5(1)(vi) of the Wealth Tax Act,1957, for the reasons that the house is not habitable in view of the fact that plastering, flooring, drainage and electricity is not done, doors and windows are not installed, the ceilings are in damaged condition. Even the English translated copy of the sales deed which has been signed by both, the sellers and the buyer, states that to use the house for residence, entire fresh construction will have to be put up. Thus present condition of the house in which it exists cannot be considered to be a habitable house. Since in the present case, the area of land is 3059.50 mts. which is in excess of the prescribed limit of 500 sq. mts and the house is incomplete, the assessee will not be entitled to deduction on the incomplete construction and accordingly the assessee would be liable to wealth tax on value of plot exceeding 500 sq.mts along with the cost of incomplete construction. The A.O. is directed to recompute the net wealth of the assessee accordingly. Thus this ground of the assessee is partly allowed. Challenge the authority of the A.O. to value the taxable asset - Held that:- That the assessee has not filed valuation report along with the return nor was it made available to the WTO during the course of assessment. In such a situation the W.T.O. was left with no other option but to estimate the net wealth based on the material on record, thus the estimate made by the WTO is reasonable - against assessee.

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