TMI Tax Updates - e-Newsletter
July 14, 2012
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
Highlights / Catch Notes
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Income Tax
Principle of mutuality - assessee is a cooperative society engaged in the construction of flats - assessee has failed to satisfy the basis of mutuality on various grounds - AT
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Maintainability of appeal - revisionary proceedings under Section 263 - It was only an order passed in compliance of the directions of CIT - against such an order, appeal was maintainable before CIT(Appeals) - AT
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Mandatory reference to Valuation Officer when assessee objects to valuation adopted by Assessing officer on invocation of Section 50C - in accordance with the provisions of section 50C(2)(a), he should have made a reference to the Valuation Officer - AT
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Expenditure on Scientific Research - Expenditure on purchase of car cannot be accepted as expenditure whether capital or revenue incurred on in-house research & development. - AT
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Provisions of section 40(a)(ia) of the Act are applicable only to the amounts of expenditure which are payable as on the date 31st March of every year and it cannot be invoked to disallow which had been actually paid during the previous year, without deduction of TDS - AT
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Prior period expenditure - recognition on the basis of finalization of negotiations - deduction is not permissible in assessment year 2007-08, but, it is permissible in assessment year 2006-07 - AT
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Capital gains tax - sale of shares before listing - sale through public offer - the transaction would not be eligible for payment of capital gain tax at the lower rate of 10%. - HC
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The trust is not an “association of persons”, the provisions of Section 40A(2) are not attracted to the transaction between the trust and the assessee company. - HC
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Dis allowance of lease rental paid to the Trust - Enhancement of lease rent allowed as revenue expenditure - - HC
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Deleting penalty u/s 13 of Interest Tax Act. 1974 - ‘bill discounting charges’ have to be computed and included in interest - Penalty levied - This is not the case of a bonafide, honest or even plausible different interpretation. - penalty confirmed - HC
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Difference in the investment as shown by the assessee and as ascertained by DVO - addition u/s 69 or 69B - the condition precedent for making a reference to the DVO is not satisfied in the instant case - AT
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Apportionment of income - An estimate of 15% ratio fixed 10 years back cannot be applied now in the name of consistency especially keeping in view the increase in globalization increase in Indian passengers originating from India and the facts that assessee is not in losses - AT
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Revenue expenditure versus capital expenditure - expenditure incurred on ERP Software – allowed as revenue expenditure - AT
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Disallowance of conveyance expenses, staff welfare expenses, sundry expenses and traveling expenses - certain expenses were not supported by third party vouchers, disallowance is warranted - AT
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Accrual of income - Taxability of advance license benefit receivable - assessee could not contend while filing the return of income that such income should not be treated as having accrued in the year under consideration, as duty-free raw material had not actually been imported till the end of the relevant year but it should be treated as income accrued in the year, when raw material had actually been imported - AT
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Though there was no manufacturing and sales activity, but there certainly was some “business activity” - the revenue authorities were incorrect in disallowing the claim of expenses and depreciation - AT
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Disallowance u/s 40A(3) - cash payment of legal tender fees to the ‘South Western Railway’ which is a part of the Government was covered in the exceptions provided in clause (b) of Rule 6DD and the provisions of sec. 40A(3) as wrongly invoked - AT
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Customs
Illegal import into India in violating the provisions of Section 11 - the burden of proof is either on the claimant or on the person from whose possession the goods were seized, to show that the goods were not smuggled - AT
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Challenge import of toxic wastes from industrialized countries to India - Central Government is directed to issue a notification to ban the import of such identified hazardous substances - SC
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DGFT
Deferment in the date of effect for implementation of bar-coding on Primary and Secondary level packaging on export consignment of pharmaceuticals and drugs for tracing and tracking purpose. - Public Notice
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FEMA
Non Resident Deposits- Comprehensive Single Return. - Circular
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Foreign Exchange Management Act, 1999 – Submission of Revised A-2 Form. - Circular
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Corporate Law
Companies (Central Government's) General Rules and Forms), 2012 - New Form 24AAA. - Notification
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Notifying certain sections of Companies (Second Amendment) Act, 2012. - Notification
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Sections 51, 63-65 of LLP Act,2008 notiifed. - Notification
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Delegation of powers of Central Government to Regisrar of Companies. - Notification
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Delegation of Powers of Central Government to Regional Director. - Notification
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Company Law Board (Fees on Application and Petitions) (Amendment) Rules, 2012. - Notification
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Indian Laws
Suggestions on proposed amendments in the CESTAT Forms-reg.
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Service Tax
Construction services - in the absence of relationship of service provider and service recipient , the question of providing taxable service to any person by any other person does not arise at all - AT
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Denial of CENVAT Credit - renting of immovable property - without utilizing the service like tours and travel agent services, security service, air ticket booking services,etc. mall could, not have been constructed and therefore the renting of immovable property would not have been possible - credit allowed - AT
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Corrigendum of Notification No. 42/2012-Service Tax. - Notification
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Storage or warehouse keeper – recipient of service from foreign party i.e. PROSAFE – Being an agent of the process of production, it was not a storage or warehouse keeper. - AT
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Reclassification of service - consulting engineer services versus maintenance and repair service – Any change in classification can only be prospective and the issue has to be raised before the appropriate authority for consideration and decision. - AT
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Valuation - transportation of passengers for International journey by air - passenger service fees (PSF) collected on behalf of the International Airport Authority of India (IAAI) not to be included - AT
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Central Excise
Re-warehousing - respondents removed the goods against CT-3 under ARE3s, however they failed to produce the re-warehousing certificates in respect of such goods - The law does not permit to go beyond the allegations made in the SCN - AT
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Disallowance of cenvat credit - The department having accepted the excise duty on the final product cannot be permitted to deny cenvat credit on the inputs used for the manufacture of the final product on a technical plea of department - AT
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Dispute regarding classification of pin mailer - printed continuous computer stationery - assessee contending the same to fall under Chapter 49 of the tariff whereas Revenue contended it to be under chapter 48 - AT
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VAT
CHARGING OF INTEREST UNDER THE DVAT ICST ACTS. - Circular
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2012 (7) TMI 315
Disallowance of purchases - goods were available in the bonded warehouse - Held that:- The AO's objection that assessee has not taken physical delivery of Insulated Kraft Paper is imaginary as the goods were in bonded warehouse which technically is in the custody of the assessee. Therefore, this objection of the Assessing Officer is not correct. No mention of insulating paper in the closing stock was also not correct as the raw materials were shown at the value of Rs. 88,37,636/- whereas work-in-progress was Rs. 69,13,407/- and the total stock under head 'inventory' was shown at Rs. 1,59,22,271/-. The details of raw material show that an amount of Rs. 84,15,144/- pertains to insulating paper, which included the imported stock (72,056 KGs valued Rs. 81,79,352), thus no basis on which AO came to the conclusion that the stock was not shown in closing stock - in favour of assessee.
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2012 (7) TMI 314
Rejection of cross-objections being time barred - cross-objection that ITAT had not issued notice and that the appellant became aware of the pendency of the remitted appeals only upon noticing them in the cause list - Held that:- Tribunal could not have rejected the cross-objections without entering into the factual matrix and being satisfied itself that the appellant had not in fact filed cross-objections at the time when it could have originally when the appeals had been filed before the ITAT - the impugned order itself appears to have proceeded on the assumption that the assessee did not choose to file cross-objections despite service of notice whereas the assessee’s argument is that notice in fact was not served even after remand from this Court and that the cross-objection was filed since the pendency of appeals was noticed. Thus, the Tribunal could have examined whether the cross objections could be entertained in the facts and circumstances of the case having regard to the independent power to entertain them contained u/s 253 (5) - direction to consider cross-objections after giving due notice to the parties - in favour of assessee.
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2012 (7) TMI 313
Deletion of the disallowance by CIT(A) - repair and maintenance expenses held to be capital in nature by AO - Held that:- The expenditure was in the nature of repairs incurred in order to preserve and maintain the existing asset namely, the factory building and therefore was allowable as revenue expenditure as no new asset or enduring advantage was obtained by the assessee by incurring the expenditure. No extra capacity or space was created in the factory by repairing the roof and the floor - findings of fact recorded on the basis of the material on record and those findings have not been challenged or shown to be perverse or based on no material - no substantial question of law - in favour of assessee.
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2012 (7) TMI 312
Re-computation of the disallowance u/s 14A - Held that:- Since substantial amount of the total expense incurred by the assessee, for earning both taxable and non-taxable income, has been offered for disallowance by the assessee itself. Neither the CIT(Appeals) nor the Departmental representative who appeared before the Tribunal could point out any error or serious discrepancy in the basis adopted by the assessee for making the disallowance - Tribunal was not in error in not remitting the matter to the Assessing Officer for fresh consideration - in favour of assessee.
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2012 (7) TMI 311
Disallowance u/s 14A - expenditure incurred to earn exempt dividend income by applying the provision of Rule 8D - Held that:- Assessee submitted before the AO that all the investments made by it were through internal funds and it did not incur any expenditure having direct or indirect nexus with dividend income. Apparently, the assessee did not furnish any such details of incurring expenditure while making huge investments - for the pre-Rule 8D period, whenever the issue of section 14A arises AO has, first of all, to ascertain the correctness of the claim of the assessee in respect of the expenditure incurred in relation to income which does not form part of the total income - it is nothing in the assessment order or impugned order as to whether the assessee expressed his willingness to furnish the details desired by the AO nor the AO or the CIT(A) seems to have undertook any exercise to ascertain the details of expenditure objectively in managing and supervising the aforesaid huge investments in shares and securities - set aside the order of the CIT(A) and restore the matter to his file for deciding the issue afresh. Disallowance of donation - Held that:- Though the assessee claimed that donation was deductible u/s 37(1), but not an evidence was placed before the lower authorities as how the expenditure is related to the business of the assessee nor the activities of the SREI Foundation were narrated. Since the assessee failed to establish the nexus of the aforesaid amount with the business of the assessee, apparently the claim is not admissible Denial of the claim of allowability of leave encashment - Held that:- Disallowance of an amount n terms of directions dated 8th May, 2009 of the Supreme Court in the case of Exide Industries Ltd. [2007 (6) TMI 175 (HC)]with a rider that the assessee is free to move a rectification petition on the final out come in the case of Exide Industries Ltd., we do not find any infirmity in the approach of the ld. CIT(A) Dis allowing TDS credit - Held that:- there is no recourse available to the deductee to get credit regarding TDS for any mismatch in the departmental computer system. As per section 199(2) of the I.T. Act credit for tax deducted is automatic and there is no provision in the Income Tax Act for appeal before the CIT (A) against the non-granting of TDS credit u/s 199(2). The appellate authorities are not provided with any access to the departmental computer system to verify any of the details regarding TDS credit. Therefore, the recourse available to the appellant is to approach the concerned administrative authorities with grievance petition - against assessee.
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2012 (7) TMI 310
Disallowance u/s 40(a)(i) - reimbursement of the expense made to various overseas companies - Held that:- Since the expenditure to foreign companies was reimbursed to overseas companies for the expenses incurred on behalf of the assessee company and their margin for the services rendered outside India, therefore, such payment does not falls under the purview of “sum chargeable under the provisions of the Act”. Hence, these payments are not liable to TDS u/s. 195 and consequently the expenditure alongwith the margin reimbursed to the overseas companies for service rendered outside India becomes allowable expenditure and the same is outside the rigors of section 40(a)(i). Since the assessee has a book loss and was not subject to tax u/s. 115JB. Hence, disallowance of interest paid on TDS and service tax are of no relevance with regard to the tax calculated - in favour of assessee.
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2012 (7) TMI 309
Principle of mutuality - assessee is a cooperative society engaged in the construction of flats - Held that:- The assessee has failed to satisfy the basis of mutuality on various grounds which inter-alia included that proper bye laws were not furnished to demonstrate the existence of complete identity between the cooperative society and the members. The affairs of the society were not carried out in the manner as prescribed under the Act. In the absence thereof, it cannot be ascertained as to whether there is complete identity between the members and the assessee. Besides, the provisions about distribution of surplus in the event of dissolution of cooperative society cannot be examined or verified For quantum addition CIT(A) held that AO has erred in adding both credits and debits in the profit & loss account as income of the assessee alongwith the surplus income Officer had not brought anything so as to treat the expenditure as bogus or out of the undisclosed sources, the double additions were deleted. Interest income has been earned by the assessee by deposit of the surplus funds and there is no doubt that the interest income is to be treated as “income from other sources”. No borrowed funds have been used for earning this interest in various years. Dis allowance of expenditure - Held that:- It will be a distorted view to disallow all the expenditure only because the record is seized. Since a fair and reasonable estimate of income has to be made, the reasonable expenditure is to be allowed to the assessee in all these years Claim of exemption u/s 54F - LTCG received by the assessee on acquisition of land from GDA - Held that:- As assessee’s claim of exemption u/s 54 is devoid of merits as the concept of mutuality has not been extended to the assessee besides the constructed houses or the properties of the respective members cannot be deemed to be purchased or construction of the houses belonging to the society - set aside the issue back to the file of the AO to allow the assessee benefit of long term capital gains by indexation of cost as per law
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2012 (7) TMI 308
Admission of additional evidence by CIT(A) - Revenue contention that additional evidence on a finding about lack of sufficient opportunity, which is not borne out from the record - Held that:- Admission of additional evidence has to be in terms of Hon’ble Delhi High Court judgment in the case of Manish Build Well Pvt. Ltd. (2011 (11) TMI 35 (HC)), which mandates that when the Assessing Officer has objected to the admission of additional evidence, then the issue should be decided first and thereafter the Assessing Officer may be asked to furnish the remand report - assessee should have filed an application for admission of additional ground in this behalf and mere narration of facts in statement of facts will not suffice inasmuch as the law provides that the CIT(A) shall decide the appeal on the grounds raised by the assessee. Advances received from ATS held to be business transaction- CIT(A) has not recorded any specific finding about the aspect of MOU being genuine or otherwise. In the absence of a clear finding about the genuineness of the MOU, reference to business customs and usages are not decisive. Unexplained gifts - Ignoring the importance of relationship, occasion of gift and human probabilities in case of gift from unrelated persons, the issue is decided solely on the basis of confirmations and gift deeds - set aside the appeals back to the file of CIT(A).
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2012 (7) TMI 307
Addition on account of unexplained cash credits u/s 68 - CIT(A)deleted the additions - Held that:- After examining the relevant details and documents including bank statements of the assessee and share applicants it is to be concluded that in view of the evidences on record, the mismatch as observed by the AO is duly explained by the entries in the bank statement of the assessee as well as the share applicant and the assessee discharged its onus by establishing the identity of the share applicants, the genuineness of the transaction as well as the credit worthiness of the investors - Also DR did not place before us any material, controverting the aforesaid findings of facts recorded by the CIT(A) so as to enable to take a different view in the matter - decided in favour of assessee.
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2012 (7) TMI 306
Entitlement to deduction u/s 80IB(10) on the amount disallowed u/s 40a(ia) - Held that:- The expenditure of eligible unit stands disallowed consequently the same results in increase of the profit of the eligible unit. The deduction under section 80IB is allowable in respect of profits and gains derived from the industrial undertaking, thus any disallowance of business expenditure of the eligible unit will logically result in enhancement of deduction allowable under section 80IB - During the year as the expenditure of the eligible business is disallowed the assessee's business income derived from the eligible business of the industrial undertaking stands at increased figure and therefore, the assessee will be eligible for deduction of enhanced amount under section 801B - there cannot be a double deduction to the assessee. Since the assessee is deriving its income only from the eligible business of construction of flats in respect of which the assessee is entitled to deduction u/s 80 IB(10) there is nothing to suggest that the amount disallowed u/s 40a(ia) is not related to the business of the industrial undertaking - upholding the findings of the CIT(A) that the assessee is entitled to deduct ion u/s 80IB(10) on the amount disallowed u/s 40a(ia) - in favour of assessee.
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2012 (7) TMI 305
Addition u/s 68 - unexplained share application/capital - Assessing Officer received information from the Investigation Wing, Delhi stating that the assessee had taken accommodation entries by obtaining/arranging bogus documents etc. and thereby introduced its own unaccounted money in its account - Assessing Officer reopened the case under section 147 of the Income Tax Act – Held that:- Assessee has produced the names, address, PAN account details and affidavit, resolution of the Board of Directors and also the necessary documents failed before the Registrar of companies for the purpose of making investment in the share of the assessee company by the applicant companies –CIT(A) deleted the addition – In favor of assessee
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2012 (7) TMI 304
Disallowing u/s 40(a)(ii) of the Income Tax Act - whether amount of advance made to the contractor for acquisition of its capital asset more so when the same has been adjusted within 3 months and tax has been deducted and deposited before the filing of the return is bad in law – Held that:- Assessee had deducted tax at source out of payments made to contractor which was deposited before 8.7.2008 - due date for filing return of income of the assessee was 30.09.2008 - once the tax has been deducted and deposited by the assessee before the due date of filing return of income, there is no merit in disallowing the expenditure relatable to such tax deducted at source - appeal filed by the assessee is allowed.
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2012 (7) TMI 303
Revisionary proceedings under Section 263 – search – unaccounted money – assessee’s wife admitted that unaccounted money belongs to her - assessment stood set aside by CIT in a revisionary proceedings under Section 263 - But, revisionary proceeding under Section 263 of the Act stood quashed by this Tribunal – Held that:- Order was already available with CIT(Appeals) when he was considering appeal of the assessee. The order of CIT(Appeals) was passed on 13.3.2009 and therefore, the argument of the assessee that the order of this Tribunal quashing the order under Section 263 of the Act was already available on record - CIT(Appeals) fell in gross error in not considering the order of this Tribunal quashing the proceedings under Section 263 of the Act - revisionary order having been quashed, CIT(Appeals) was duty bound to dispose of the assessee’s appeal on merits - order of CIT(Appeals) set aside and matter remanded back to him for consideration afresh. Revisionary proceedings - deletion of addition - plea of the assessee that the money recovered from his house, purchase of real estate, recovery of gold biscuits and fixed deposits were all belonging to his wife – Held that:- Entire money had been treated by Revenue as a part of income of the wife of the assessee in her assessment - CIT(Appeals) was justified in placing reliance on the order of Hon’ble Apex Court and in deleting the addition made in the hands of the assessee – In favor of assessee Addition on account of investment made in the name of associated persons - assets belonged to his wife and not to him. However, the A.O. was of the opinion that the fixed deposits in the Punjab National Bank, though claimed as owned by assessee’s wife, was not corroborated and therefore, had to be considered in assessee’s hand – Held that:- In assessee's own case it was held that fixed deposits had to be explained only by the assessee’s wife and not by the assessee. CIT(Appeals) also noted that such additions were made substantially in the hands of the assessee’s wife also - IT(Appeals) was justified in deleting the addition for the impugned assessment year also – In favor of assessee Maintainability of appeal - revisionary proceedings under Section 263 - CIT(Appeals) held the assessment to be not appealable since such assessment was done in pursuance of the direction of CIT under Section 263 of the Act –Held that:- CIT has requested the A.O. to make a fresh assessment in accordance with law - it cannot be said that any finality has been reached by virtue of the order of the CIT with regard to the items mentioned by him in the said order - it cannot be said that fresh order passed by the assessing authority pursuant to revisionary proceedings, was an order passed for giving effect to the directions of the revisioning authority per se. It was only an order passed in compliance of the directions of CIT - against such an order, appeal was maintainable before CIT(Appeals) - Appeal of the assessee for assessment year 1995-96 is allowed for statistical purposes.
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2012 (7) TMI 302
Mandatory reference to Valuation Officer when assessee objects to valuation adopted by Assessing officer on invocation of Section 50C - Sale of property - addition on account of LTCG - assessee contended that AO should have issued notice and given an opportunity to the assessee before invoking the provisions of section 50C - Held that:- In the instant case, it is seen that the assessee’s objection, to the AO’s adoption of the guideline value of Rs. 26.40 lacs in place of the stated consideration of Rs 8 lakhs in the sale deed, were rejected by the AO and therefore we are of the view that in accordance with the provisions of section 50C(2)(a), he should have made a reference to the Valuation Officer of the Income Tax Department for valuation of the said property. Such an action of AO is in violation of the provisions of section 50C(2). In the interest of justice, matter remitted to file of AO for de novo consideration by making a reference to the Valuation Officer. Unexplained cash deposits in bank - assessee submitted that these cash deposits are savings out of money given to the assessee for expenses by her husband who is assessed to tax - Held that:- It strange that said submission of assessee is brushed aside without calling for any report in the matter from the Assessing Officer regarding the genuineness of the assessee’s claim as to the source of these cash deposits. Matter remitted to file of AO - Decided in favor of assessee for statistical purposes. Unexplained cash deposits -
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2012 (7) TMI 300
Disallowance under section 40(a)(ia) of the Income Tax Act - on the ground that the payments made by the assessee to Indian agents of foreign airlines, were not deducted to deduction of tax at source under section 194 C of the Act – Held that:- Assessee did not have any obligations to deduct tax at source - whether under section 194 C or under section 195 - from payments made to the foreign airlines for airfreight. In this view of the matter, the impugned disallowances under section 40(a)(ia) are devoid of any merits, nor can these disallowances be made under section 40(a)(i) either - appeals are allowed
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2012 (7) TMI 299
Prior period expenditure – payment/ deposit under the Over Your Telephone (OYT) scheme for securing a telephonic connection - assessee did not claim the OYT deposit as an expenditure in the year of payment and had treated it as a deferred revenue expenditure which was debited in the profit and loss account in the next three years – Held that:- Quantum of expenditure, rent payable etc. the assessee had followed the accounting practice - revenue had accepted the said proportionate set off/ expenditure in the earlier and the subsequent years - Making or adopting a change in one year will lead to anomalies and incongruities – In favor of assessee
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2012 (7) TMI 298
Sale of shares – capital gain or Business transaction – Held that:- Assessee had an intention to maximize his return on the money sought to be invested and certainly it cannot be said to be a case of undertaking any trading per se - some of the other transactions in Tech Mahindra shares have been classified by the assessee himself as business transactions primarily on account of it being carried out in smaller lots and involving very small period of holding or being squared up on the same day, would not imply that the purchase of 5000 Tech Mahindra shares cannot be claimed by the assessee as investment in nature - transactions of 5000 Tech Mahindra shares stood on a different footing and complexion than the other transactions in the same scrip carried out during the year - Assessing Officer directed to treat the transaction of 5000 Tech Mahindra shares in the nature of investment and assess the same as short term capital gain and not business income - appeal of the assessee is allowed.
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2012 (7) TMI 297
Addition on account of disallowance of interest paid for non-business purposes - similar issue was allowed in earlier year and no appeal was filed by the revenue – Held that:- An adventure in the nature of trade and therefore, the interest claimed was allowed - disallowance of interest claimed by the AO is deleted and this ground of appeal is allowed Addition on account of disallowance of rent as per provisions of sect ion 40(a) ( ia) of the Act – Held that:- Provisions of section 40(a)(ia) of the Act are applicable only to the amounts of expenditure which are payable as on the date 31st March of every year and it cannot be invoked to disallow which had been actually paid during the previous year, without deduction of TDS - AO, should verify the actual amount of rent paid by the assessee during the relevant financial year from the relevant records and adjudicate the issue afresh – matter remanded to AO - appeal of the revenue is partly allowed.
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2012 (7) TMI 296
Prior period expenditure - during the accounting year relevant to Assessment Year 2007-08 when the negotiations were finalized with the vendors it was found that the provision made for increase in the price of material during the accounting year relevant to assessment year 2006-07 fell short by Rs. 498.09 lacs. The same was claimed as deduction in assessment year 2007-08 – Held that:- deduction is not permissible in assessment year 2007-08, but, it is permissible in assessment year 2006-07 i.e., the year in which material was actually received from the vendors, then, the deduction can be claimed and allowed in assessment year 2006-07. Admission of additional grounds - Deduction on account of short provision for the discount to be given to dealers under sales promotion schemes - disallowed as prior period expenditure – Held that:- the additional ground is taken as an abundant precaution so as to take care of a situation that if while deciding the appeal for assessment year 2007-08 the ITAT takes the view that the deduction is not permissible in the year 2007-08, but, permissible in the year in which material was supplied or the vehicles were sold, then, the assessee should be entitled to make the claim in the relevant period i.e., assessment year 2006-07 - additional grounds admitted.
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2012 (7) TMI 289
Deleting the penalty u/s. 271(1)(c) - Held that:- As the assessee had purchased new plant and machinery on which it claimed additional depreciation. This fact is not controverted by Revenue nor has it brought on record any material to prove that assessee had not purchased machinery. The assessee’s claim of additional depreciation was based on the certificate of the Auditor wherein it was certified that the installed capacity has increased by more than 10% - the addition has been confirmed by ITAT on the basis of director’s report. in these circumstances, it cannot be said that the assessee has furnished inaccurate particulars of income - no penalty cannot be levied - in favour of assessee.
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2012 (7) TMI 283
Liability to pay capital gains tax on the income earned from sale of SEBI shares sold through the public offer - whether at lower rate of 10% or at the normal rate of 20% - Held that:- Shares in question having already been transferred from the demat account of the appellant to the demat account of the Registrar to the issue and then to the demat against of the applicants, by 05.01.2006, it is difficult to dispute that at the time of commencement of trading on 6.1.2006, the ownership in the shares vested in the applicants/allottees, and not in the appellant - Once the listing as well as trading approvals had been received from BSE and NSE and the shares were transferred to the demat account of the applicants on 05.01.2006, the applicants in the public issue had no right or lien over the money which they had paid for acquiring these shares - the transfer for the purpose of Income-tax Act being complete prior to 6.1.2006 and the trading in stock exchange having commenced only on 6.1.2006, it cannot be said that the transaction involved in this case had taken place in the stock exchange. capital gain tax at the rate of 10% was payable only in case of 'listed securities'. Since, these shares had been transferred to the applicants in the public offer, by 5.1.2006 before they were actually listed on the stock exchanges on 6.1.2006, they were not 'listed securities' at the time of sale by the appellant and consequently, the transaction would not be eligible for payment of capital gain tax at the lower rate of 10%.
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2012 (7) TMI 282
Dis allowance of lease rental paid to the Trust - enhanced lease rent for the period from January to March, 1992 was a capital expenditure and therefore not allowable as a deductible expenditure - AO invoked the provisions of Section 40A(2) - Held that:- The limited right which the assessee acquired under the lease was the right to purchase khair wood trees from the Government in the State of Himachal Pradesh. Assessee company would have got a right only to purchase the raw material and not the source of raw material. Therefore, that part of the lease rent, which is attributable to the right to purchase Khair wood would be a revenue expenditure and not a capital expenditure - the normal lease rental in this case would be a revenue expenditure and not a capital expenditure, as the ownership of the property as well as the plant and machinery continued to vest in the trust and in any case the lease granted to the assessee company was neither a perpetual lease nor a lease for such a long term as would bring it at par with a perpetual lease. Enhancement of lease rent attributable to improvement and modernization of plant and machinery carried out by the Trust - enhancement of lease rental from Rs.1 lac p.m. to Rs.6,70,000/- p.m., to the extent it is attributable to the expenditure incurred by the trust in the year 1989-90 on modernization and improvement of the plant and machinery which the lessee had taken on lease, would be a revenue expenditure, since it would have the effect of enhancing the lease rent of the plant and machinery in the open market Enhancement in lease rent attributable to normal appreciation in line with the lease rentals prevailing in the market - if there was any appreciation in the market in the lease rentals of such properties, the enhancement in the lease rent of the property to the extent it is attributable to such normal appreciation in the lease rentals prevailing in the market, would be a revenue expenditure. Thus it would be for the AO to determine whether there was any such appreciation in lease rentals, and if so, to what extent. Payment of non-compete fees - Increase in lease rent relatable to elimination of competition from the Trust constitutes capital expenditure as the Trust had leased whole of its production unit which was a profit generating unit to the assessee and not only the building, but the plant and machinery was also leased to the assessee along with all benefits, etc - The Trust had also relinquished its rights to purchase khairwood from the Government in favour of the assessee. Therefore, the business being carried by Trust was practically taken over by the assessee-company for an indefinite period . Therefore, this was a case of takeover of the business, coupled with elimination of competition from the rival - constitutes capital expenditure,applicability of Section 40A(2). the trust is not an “association of persons”, the provisions of Section 40A(2) are not attracted to the transaction between the trust and the assessee company.
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2012 (7) TMI 281
Deleting penalty u/s 13 of Interest Tax Act. 1974 - there could be honest or bona fide difference of opinion on whether discounting charges were in the nature of interest income for computation of the tax under the Act - assessee in the return had shown amount under the head “Interest others” and "bills discounting charges" but had not included in the said amount on which tax was payable - Held that:- Declaration or statement in the return that the said amounts were not included for the purpose of tax may show/establish absence of mens rea but in the present case this by itself does not justify cancellation or quashing of penalty as the ingredients of the provisions of Section 13 are satisfied - for the purpose of the Act, bill discounting charges have to be treated and regarded as ‘interest’.The term ‘interest’ as per the definition clause i.e. Section 2(7) amended w.e.f. 1st October, 1991 is absolutely clear and unambiguous and cannot be any doubt or ambiguity that ‘bill discounting charges’ have to be computed and included in interest for the purpose of tax payable under the Act. This is not the case of a bonafide, honest or even plausible different interpretation. Two divergent views on interpretation of Section 2(7) of the Act are not possible. Discount on promissory note and bills of exchange drawn or made in India by express stipulation have been included in the word ‘interest’. What is excluded is ‘discount on treasury bills’. There is no ambiguity or doubt in the said words. The single sentence observations of the CIT(A) and the tribunal to the contrary are unsustainable - in favour of the appellant Revenue
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2012 (7) TMI 280
Difference in the investment as shown by the assessee and as ascertained by DVO - CIT(A)deleted the addition considering disregard of legal provision of section 142A - Held that:- Provisions of section 142A can be invoked only where the assessee is first found to have made investment outside the books of accounts or where any such investment made by him is not fully disclosed in the books of accounts. It is only once this condition is satisfied, then the AO is entitled to make a reference u/s 142A to ascertain the quantum of such investment for making the addition u/s 69 or 69B. In the instant case however, there is nothing to suggest that any incriminating document was found and seized during the course of search or survey in the premises of the aforesaid groups and no reference whatsoever has been made by the AO to any material/evidence/information on the basis of which he could have found that the consideration shown by the assessee was less than the amount actually paid by him. Thus the condition precedent for making a reference to the DVO is not satisfied in the instant case - the primary burden of proof to prove the understatement or concealment of income is on the revenue and it is only when such burden is discharged that it would be permissible to rely upon the valuation given by the DVO - in favour of assessee.
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2012 (7) TMI 279
Unexplained credits under the provisions of section 68 - addition made u/s 68 during reopening of assessment u/s 147/148 - Held that:- First sentence of the socalled reasons recorded by the AO is mere information received from the Deputy Director of Income Tax (Investigation). The second sentence is a direction given by the very same Deputy Director of Income Tax (Investigation) to issue a notice u/s 148 and the third sentence again comprises of a direction to initiate proceedings u/s 148 in respect of cases pertaining to the relevant ward, it is clear that the AO referred to the information and the two directions as “reasons on the basis of which he was proceeding to issue notice under Section 148" - From the so-called reasons, it is not at all discernible as to whether the AO had applied his mind to the information and independently arrived at a belief that, on the basis of the material which he had before him, income had escaped assessment - there is no reference to any document or statement, except Annexure, which has been quoted as Annexure cannot be regarded as a material or evidence that prima facie shows or establishes nexus or link which discloses escapement of income. Annexure is not a pointer and does not indicate escapement of income - need not go into the merits of the addition made by the AO as the CIT (A) had deleted the addition on merits and the Tribunal has simply remitted the case back to the AO - in favour of assessee.
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2012 (7) TMI 278
Addition in respect of unapproved Sundry Creditors - liabilities accrued by way of royalty - CIT(A)deleted the additions - Held that:- Considering the records and balance sheets of all the creditors except one all the additions are liable to be deleted as no addition is there to the liability in this year under considerations and it cannot be said that the liability has ceased to exist as the amount has not been credited to profit and loss account. Therefore, it is held that addition in respect of this account was not justified - Looking to the fact that this is also a running account addition of closing balance was not maintainable - partly in favour of assessee. Disallowance on account of unvouched expenses - Held that:- adhoc disallowance was made on the ground that expenses are not fully vouched whereas not even a single instance of unvouched expense has not been mentioned in the assessment order - considering that the expenses are fully vouched as the AO has not mentioned even a single missing voucher no addiotns is warranted - in favour of assessee.
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2012 (7) TMI 277
Apportionment of income - CIT(A) held that the computers of the travel agents in India constitute a fixed place of business under Article 5(1) of the DTAA - CIT(A) restricted the attribution of the revenue attributable to the PE in India to 15% - Held that:- An estimate of 15% ratio fixed 10 years back cannot be applied now in the name of consistency especially keeping in view the increase in globalization increase in Indian passengers originating from India and the facts that assessee is not in losses - the Income tax proceedings are applicable from year to year depending upon facts of each year and principle of res judicata do not ordinarily apply to income tax proceedings - Estimate of 10 back years cannot said to be applicable for years to come without considering the change in facts and circumstances. The estimation of profits attributable to Indian operations should ideally be based upon number of bookings originating from India viz-a-viz total bookings in a particular year and consideration of global accounts - remit the matter back to the file of the AO for fresh consideration by adopting a reasonable and commercial test for estimation of business attributable to India and net taxable income which could have been said to have accrued to appellant due to bookings from India - in favour of revenue.
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2012 (7) TMI 276
Justification on restricting the addition u/s 14A - AO applied Rule 8D in order to disallow interest expenditure relatable to the investments - Held that:- For AY 2007-08 which is under consideration provisions of Rule 8D are not applicable and held that prior to Rule 8D the AO was bound to examine the application of sec. 14A(2)as decided in GODREJ AND BOYCE MFG. CO. LTD. Versus DCIT AND ANOTHER [2010 (8) TMI 77 (HC)] - CIT(A) has agreed with the contention of the assessee without examining the case whether out of Rs.31.5 crores only expenditure of Rs.2 crore was out of borrowed funds. Since the CIT(A) has not examined the issue and has accepted the contention of the assessee without verification it is proper to set aside the issue to the file of the AO with the directions to examine the issue afresh - in favour of revenue.
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2012 (7) TMI 275
Penalty u/s 271(1)(c)- reduction in loss on account of additions/ disallowances - Held that:- Issue of claim of depreciation, penalty imposed under similar facts has been deleted by the ITAT in preceding year considering the claim of depreciation being a debatable issue, penalty cannot be imposed - in regard to LTCG on sale of investments and sale of vehicles all the relevant details were filed by the assessee along with the return of income and a change in claim of head of income cannot be considered as concealment or furnishing inaccurate particulars of income - in respect of PF and ESI only mistake committed by the assessee is in not giving proper effect to P&L A/c can be held to be of technical or venial in nature and not to concealing particulars of income or inaccurate particulars - for 43B disallowance assessee has given satisfactory explanation that revised return was prepared which was not filed by the Chartered Accountant due to dispute on payment of professional fees - no point of concealment or inarticulateness proved - in favour of assessee.
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2012 (7) TMI 274
Penalty levied u/s 272A(2)k) - late filing of the returns - CIT(A) deleted the levy - Held that:- The reasons put forth by the assessee i.e. incapacity and absence of the accountant and the director being not aware of the intricacies penalty levied are liable to be deleted. Penalty levied u/s 271C - non-deduction/ short deduction of TDS - CIT(A)deleted the levy - Held that:- The late filing of e-return assumes a character of technical default and delay in filing such return without any loss of revenue cannot be a held a deliberate default looking at the facts and circumstances and pleas raised by the assessee CIT(A) has rightly considered it to be a reasonable cause - in favour of assessee.
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2012 (7) TMI 273
Revenue expenditure versus capital expenditure - expenditure incurred on ERP – Held that:- In case the software becomes obsolete with technological innovation and advancement within a short span of time, it can be said that where the life of the computer software is shorter or say less than 2 years, it may be treated as revenue expenditure - software programme without which the computer cannot work and with the advancement of technology, the programme changes during short period and this change is requirement of the business of the assessee i.e. share - assessee's appeal is allowed Deduction being 150% weighted deduction u/s. 35(2AB) of the Act in respect of capital expenditure on motor cars and interest – Held that:- Capital expenditure incurred by the assessee on purchase of motor cars cannot be considered as expenditure incurred by the assessee on in-house research & development and therefore, the same is not eligible for weighted deduction u/s. 35(2AB) of the Act - capitalized interest on purchase of car is also not eligible for this benefit for same reasons because it is equal or similar to cost of car – Against assessee Disallowance made u/s 14A of the Act - disallowance made merely on the basis of estimation of administrative expenses earned to tax free income - contention of the appellant that earning of dividend income does not require any specific/special administrative efforts, as even where company presumes to have not invested in single penny of money in shares /scripts, company would have to pay salary to its employees – Held that:- Proportionate disallowance u/s. 14A should be limited to only interest liability and not overhead or administrative expenditure, which should be considered for disallowance under Rule 8D of the I.T. Rule, 1962 from 2007-08 - addition made on account of administrative expenses deleted - assessee's appeal is partly allowed.
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2012 (7) TMI 272
Income from undisclosed sources - the assessee had deposited in cash in his savings account - AO denial that the cash deposited and withdrawn in question was the same - Held that:- Viewing the affidavit in question dated 16.4.2012 clearly proves that the cheques in question had been encashed by the assessee himself, thus to that extent CIT(A)'s finding that the cheques are issued to their party is not correct - there is also no evidence against the assessee that the money deposited in bank account was not drawn earlier - There is evidence on record that assessee owned property which had 33 tenants with the negotiations going on to vacate the property, but the sudden death of Counsel who was acting in this behalf, assessee had no option than to stop the negotiations and redeposit the cash. The cash withdrawal by company at the same time was also accepted, source of cash withdrawal cannot be doubted - accept the assessee’s plea that he had withdrawn the amount earlier also which was redeposited later on - in favour of assessee.
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2012 (7) TMI 271
Disallowance of conveyance expenses, staff welfare expenses, sundry expenses and traveling expenses - Held that:- As immediately preceding assessment year 2004-2005 AO disallowed 10% of above mentioned expenses and that too for a year prior to that i.e. assessment year 2003-2004, and the assessee admitted that he did not file any appeal against the disallowance made by the A.O. in the immediately preceding year - thus, considering the facts that the assessee itself admitted, that certain expenses were not supported by third party vouchers, disallowance is warranted - decided against assessee. Disallowance being 20% out of cash expenses incurred on behalf of customers - Held that:- As assessee had issued Debit notes to its principal companies for Rs.5.36 crore towards service charges and commission income to the tune of Rs.3.07 crore and reimbursement of expenses worth Rs.2.29 crore. The Assessing Officer deduced the figure of Rs.5.36 crore from the accounts of the principals appearing in the ledger account of the assessee, this amply proves that the amounts were promptly displayed in the books of account - bedrock for making any addition u/s 69C is that there must have been some expenditure incurred by the assessee, the source of which is not disclosed is not proved here - incurring of such expenses by the assessee in cash etc. calling for disallowance cannot be warranted - When the principal companies have reimbursed the expenditure to the tune of `2.29 crore there cannot be any presumption that the assessee must have saved some money out of the same - decided against revenue.
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2012 (7) TMI 270
Justification of re-assessment proceedings initiated u/s 147 - non payment of TDS - Held that:- As decided in ACIT Vs. Rajesh Jhaveri Stock Brokers (P) Ltd.[2007 (5) TMI 197 (SC)]the intimation u/s. 143(1)(a) is not an order of assessment and therefore the question of change of opinion does not arise - the assessment in this case was made u/s.143(1)(a) and not u/s.143(3)with the re-assessment notice issued by the AO within four years from the end of the relevant assessment year - thus re - assessment proceedings are warranted - against assessee. Disallowance made u/s. 40(a)(ia)- Held that:- As provisions of section 40(a)(ia)are applicable only to amounts of expenditure which are payable as on 31st March of every year restore the issue to the file of the AO with a direction to verify the accounts and disallow the amount which is payable as on 31st March of the impugned assessment year - in favour of assessee by way of remand.
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2012 (7) TMI 269
Taxability of advance license benefit receivable - whether the value of such ALBR by the assessee could be treated as income accrued to them in the year when the exports were actually made or such income would accrue only in the year when the duty-free raw material was actually imported pursuant to such import licenses - Held that:- ALBR benefit is contingent and it materializes only when the relevant imports are made and not earlier and therefore the same cannot be said to accrue prior to the import of raw material - The assessee had maintained their accounts on accrual basis, accounted for the value of such benefit only in the year in which the corresponding export obligation had duly been dis-charged - the income represented by the value of ALBR by the assessee had been accounted for in the books of account in the year when the exports had actually been made, which was in conformity with one of the alternative recognized methods of accounting. The choice of choosing one of the recognized alternative methods of accounting rested with the assessee,the assessee could not thereafter contend while filing the return of income that such income should not be treated as having accrued in the year under consideration, as duty-free raw material had not actually been imported till the end of the relevant year but it should be treated as income accrued in the year, when raw material had actually been imported - CIT(A) had rightly held that the income by way of ALBR duly accounted for as income in the books of account maintained by the assessee in the year under consideration on accrual basis could not be excluded from the taxable income of the year under consideration. Dis allowance of claim in respect of deduction paid to GIDC as premium on leasehold land - Held that:- As Coordinate Bench decision in assessee’s own case is against them, thus following the same ground raised by assessee is dismissed - against assessee. Dis allowance of miscellaneous expenses in respect of leasehold land - Held that:- Considering the nature of the expenditure incurred on the land being utilized in the business the amount is allowable as revenue expenditure - in favour of assessee. Disallowance on account of depreciation - Held that:- Considering the assessee's submission that he has furnished revised statement of depreciation after excluding depreciation on interest capitalized in earlier year and in the A/Y 1992-93 the interest capitalized but claimed as revenue was not allowed and accordingly the depreciation had to be increased on a higher written down value - AO is directed to examine whether the interest capitalized in the books was allowed as revenue expenditure in that year. If it is allowed as revenue expenditure, the ground will become infructuous, else AO is directed to allow depreciation on the capitalized interest portion - in favour of assessee for statistical purposes. Allowing deductions u/s 80I and 80IA after deducting depreciation eligible u/s 32 - decided against assessee. Interest u/s 244A - Held that:- Held that:- As interest under section 244A was granted for the period upto 31/3/1994 although refund order was issued on 25.4.1994,claim is in favour of assessee for granting of one month interest. Computing the deduction u/s 80HHC - Held that:- Even under section 80HHC(3)(c)(i) the profit is to be the adjusted profit of business. The adjusted profit of the business means a profit as reduced by the profit derived from business of exports out of India of trading goods. Thus, in calculating the profits under sub-section (3)(c)(i) one necessarily has to reduce the profits under subsection (3)(c)(ii)- AO is directed to work out the deduction accordingly as the loss derived from export of traded goods should be added back to the profits of the business while computing the adjusted profits of the business as required by clause (b) of the Explanation below section 80HHC(3) for arriving at the amount of deduction eligible under sub-section 3(c)(i)- in favour of assessee.
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2012 (7) TMI 268
Disallowance of expenditure there was no business activity - Held that:- As both the revenue authorities had restricted their thought process in the “manufacturing activity and sales” whereas from the details in Statement of Facts supplied by assessee and schedules as appended along with the Balance Sheet, it is found that not only the assessee had received advances from its customers, but had also paid advances to its sub contractors, which goes to prove that there was some movement in business, if not full business activity - though there was no manufacturing and sales activity, but there certainly was some “business activity” - the revenue authorities were incorrect in disallowing the claim of expenses and depreciation - decided in favour of assessee.
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2012 (7) TMI 267
Additions on account of Gift - Held that:- Considering affidavits filed by the donors, the assessee has discharged the onus cast on him., but the revenue has failed to bring relevant material on record to dislodge the deposition made in the affidavits - decided in favour of assessee. Addition on account of cash deposits made with bank - Held that:- The assessee has withdrawn money from bank account, where his business receipts were credited and deposited in another bank account. There is small gap of time in the withdrawal and deposits of such amounts, thus,containing withdrawal and deposits of amounts from the relevant bank accounts, it is evident that no findings can be sustained on the ground of gap of one month, between withdrawal and deposit in such transactions - decided in favour of assessee.
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2012 (7) TMI 266
Cancellation of registration u/s 12AA(3)- the assessee has been carrying on activities in the nature of trade, commerce, business etc. and is hit by the proviso to section 2(15), applicable from assessment year 2009-10 - Held that:- Considering the Order cancelling registration it is noted that DIT(E) has nowhere recorded any satisfaction that the activities of the assessee trust are not genuine or are not being carried out in accordance with the objects on which it was granted registration u/s 12AA. In absence of such satisfaction, registration u/s 12AA cannot be cancelled. Cancellation in view of the amended provisions of section 2(15) read with proviso with effect from 01-04-2009 the assessee cannot be held to be carrying out activities of charitable purposes. The insertion of proviso would not have any bearing on section 12AA (3) since it does not extend to the objects of the trust or institution but only to its activities as stated therein. Registration granted u/s. 12AA(1) cannot be subjected to cancellation u/s. 12AA(3) to re-examine or review the objects - that the activities of the assessee are not governed by “principles of mutuality” or it has been dealing with non members, thus, from this aspect also new proviso does not apply to the case of the assessee - decided in favour of assessee.
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2012 (7) TMI 265
Best judgement assessment passed u/s 144 - sale of property - proceedings initiated u/s 147 against assessee on ground of information obtained from assessment of assessee's brother that assessee is co-owner of property and capital gains accrued to it - non-filing of return by assessee and no response to notice issued u/s 142 - consequent denial of exemption u/s 54F - Held that:- It is found that assessee, a lady, who was not previously assessed to tax clearly establishes that her failure to suitably respond to notices issued by the AO was due to her ignorance of the provisions of the Act. Also, assessee’s claim for deduction u/s 54F was also denied by the AO, by holding that the assessee had violated the conditions mentioned in the proviso to section 54F(1). However, whether or not the proviso to section 54F(1) was applicable in her case has not been examined. In these circumstances, in the interest of justice, Assessing Officer is directed to consider the entire matter de novo - Decided in favor of assessee for statistical purposes.
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2012 (7) TMI 264
Disallowance u/s 40A(3) - assessee contested that he is fully covered by the exceptions provided in rule 6DD of the I.T. Rules - assessee had purchased railway scrap material from South Western Railways - Held that:- Considering the exceptions are laid down in Rule 6DD(b)that payments exceeding twenty thousand rupees to be made to Government and, under the rules framed by it, such payment is required to be made in legal tender - As the meaning of legal tender has not been defined in the Income-tax Act, however, the dictionary meaning of ‘legal tender’ is “the coinage of a county in which the debts may be paid and which the creditor is bound to accept”. As the assessee made the payment in cash i.e in Indian currency because it is not the case of the department that the payment was made in foreign currency to the ‘South Western Railway’ towards purchase of scrap by the assessee, giving a confirmed view to the fact that the payment made in cash by the assessee was actually made in legal tender to the ‘South Western Railway’ which is a part of the Government was covered in the exceptions provided in clause (b) of Rule 6DD and the provisions of sec. 40A(3) as wrongly invoked - decided in favour of assessee.
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Customs
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2012 (7) TMI 295
Illegal import into India in violating the provisions of Section 11 - lower authority on the basis of bills of entry dropped the proceedings for reason that the goods which were seized are those very which had been imported under the bills of entry - Held that:- The seized goods were synthetic fabric, made wholly or mainly of synthetic yarn, there are goods which are covered by section 123 , the burden of proof is either on the claimant or on the person from whose possession the goods were seized, to show that the goods were not smuggled and that except for forwarding the bills of entry which are for import of viscose knitted fabrics no other evidence has been produced to rebut the presumption under section 123.
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2012 (7) TMI 263
Challenge import of toxic wastes from industrialized countries to India - Writ Petition - Ministry of Environment and Forests permitting import of toxic wastes under the cover of recycling - Held that:- Interim directions given with regard to the handling of hazardous wastes and ship breaking in the various orders passed in the writ petition from time to time and, in particular, the orders dated 13th October, 1997 and 14th October, 2003 to issue a notification to ban the import of such identified hazardous substances - The Central Government is also directed to ban import of all hazardous/toxic wastes which had been identified and declared to be so under the BASEL Convention, aimed and protecting marine biology and countries having coast-lines alongside seas and oceans and its different protocols - The Central Government is also directed to bring the Hazardous Wastes (Management & Handling) Rules, 1989, in line with the BASEL Convention and Articles 21, 47 and 48A of the Constitution - that without adequate protection to the workers and public the aforesaid Rules are violative of the Fundamental Rights of the citizens and are therefore unconstitutional is however rejected in view of what has been discussed.
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Service Tax
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2012 (7) TMI 320
Waiver of pre-deposit - recalling of final order - COD application - appellants have raised a point of limitation in their memo of appeal which does not stands considered while rejecting the appeal - appellant s contention is that the period involved if 01.04.2000 to 31.03.2007 and the show cause notice stands issued on 27.10.07. During the relevant period, there was conflicting orders of the Tribunal on the said issue and there was utter confusion. As such invocation of longer period was not justified - appellants to deposit an amount of Rs.1.50 lakhs balance amount of duty and entire amount of penalty shall stands waived.
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2012 (7) TMI 319
Construction services - taxability - Construction activities undertaken on own land for residential complexes, which are further sold to the prospective buyers - Held that:- In view of decision in case of Magus Construction P.Ltd (2008 (5) TMI 18 (HC)), wherein it has been held that when a builder, promoter or developer undertakes construction activity for its own self, then in such cases, in the absence of relationship of service provider and service recipient , the question of providing taxable service to any person by any other person does not arise at all - Decided in favor of assessee.
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2012 (7) TMI 318
Waiver of predeposit of service tax - appellant had filed the appeal after more than three years – Held that:- Appeal is filed before the ld. Commissioner (Appeals) after condonable period of three months, the ld. Commissioner (Appeals) has rightly dismissed the appeal on the ground of limitation.
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2012 (7) TMI 317
Application for waiver of penalty - entire amount of Service Tax along with interest paid by assessee before issuance of Show Cause Notice – Held that:- It is a fit case for invoking section 80 of Finance Act, 1994. Accordingly the appeal is allowed
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2012 (7) TMI 316
Denial of CENVAT Credit - demand of service tax under the category of renting of immovable property after the mall was opened was discharged by utilizing the CENVAT credit in respect of tours and travel agent services, security service, air ticket booking services, etc - Held that:- Credit of duty paid on inputs is available when the inputs are used for providing an 'output service'. In the case of 'input service', the definition includes input services used by a provider of taxable service for providing an output service. Therefore the definition of input and input service are pari materia as far as the service providers are concerned. As decided in CCE, VISAKHAPATNAM-II Versus SAI SAHMITA STORAGES (P) LTD.[2011 (2) TMI 400 HC)] that that without use of cement and TMT bars for construction of warehouse assessee could not have provided 'storage and warehousing service'. In the present case also, without utilizing the service like tours and travel agent services, security service, air ticket booking services,etc. mall could, not have been constructed and therefore the renting of immovable property would not have been possible - in favour of assessee.
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2012 (7) TMI 288
Taxability - Overseas commission agent services received – period prior to 18.04.2006 - Held that:- Liability under Finance Act 1994 for availing service of foreign agents arise after 18.04.2006 following Apex Court decision in case of Indian National Shipowners Association v. Union of India (2010 - TMI - 78723 - Supreme Court of India) - Decided in favor of assessee.
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2012 (7) TMI 287
Storage or warehouse keeper – recipient of service from foreign party i.e. PROSAFE – Held that:- In terms of the agreement, PROSAFE was responsible for maintaining floating storage and offloading unit system and was to operate the system efficiently to receive storage and deliver correctly in accordance with the specification and operating requirements. That does not bring the activity of PROSAFE squarely within the fold of Section 65 (105) (zza) as a storage or a warehouse keeper - Being an agent of the process of production, it was not a storage or warehouse keeper. Therefore, service was not provided by the foreign agency as storage or warehouse keeper - appellant shall not be liable to pay service tax as the recipient of service of the nature not falling within the purview of Section 65 (105) (zza) of Finance Act 1994 read with Section 65 (102) - appeal is allowed
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2012 (7) TMI 286
Penalty under Section 76 and 78 - non-payment of service tax – due to financial hardship – after being pointed out, discharged their service tax liability along with interest – Held that:- case is covered by the provisions of Section 73(3) of the Finance Act and, hence, penalty under Section 76 and 78 is not called for.
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2012 (7) TMI 285
Reclassification of service - maintenance and repair service – Held that:- appellant has never disputed the classification of service and they have been discharging the service tax liability under the category of “Consulting Engineers” right from the beginning. Issue of classification of service was never a point for decision before the adjudicating authority and the only point for decision was the valuation of the services rendered. Any change in classification can only be prospective and the issue has to be raised before the appropriate authority for consideration and decision. Miscellaneous application is non-maintainable. Value of such taxable service - electricity is supplied free of cost by the service receiver – Held that:- electricity is required for rendering the service of operation and maintenance of the plant, then the cost of supply of electricity is a consideration for the service rendered and such cost will have to be included in the value of the taxable services rendered. Appellant directed to make a pre-deposit of Rs.1.00 Crores.
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2012 (7) TMI 284
Valuation - transportation of passengers for International journey by air along with other services to its clients - While issuing tickets to the passengers, they were collecting passenger service fees (PSF) on behalf of the International Airport Authority of India (IAAI) and remitting it to IAAI - They had not included these amounts collected from the passengers, in the value of their services – Held that:- As per Section 67 of the Finance Act, 1994, the value of any taxable service shall be the gross amount charged by the service provider for such service provided or to be provided. The amount in question is not paid for the services provided by the appellants. Wavier of pre-deposit granted.
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Central Excise
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2012 (7) TMI 294
Re-warehousing - respondents removed the goods against CT-3 under ARE3s, however they failed to produce the re-warehousing certificates in respect of such goods – duty demanded along with interest and penalty - respondent before the lower authorities had produced the evidence of re-warehousing these goods which were cleared against ARE-3s - Revenue contended that since there was only paper transaction and no physical movements of the goods had taken place in the instant case, the re-warehousing certificates furnished by the respondents were found to be bogus/ fake – Held that:- There are no such allegations in the SCN that there was only paper transaction and no physical movements of the goods taken place In the instant case and the re-warehousing certificates furnished by the respondents were bogus/ fake. The law does not permit to go beyond the allegations made in the SCN - In favor of assessee
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2012 (7) TMI 293
Cenvat credit - Reversal of 10% value of the exempted goods cleared by the appellants, manufactured by using common inputs - Adjudication authority has held that reversal of cenvat credit on the inputs itself is enough and sufficient for compliance of the provisions of Rule 6 of Cenvat Credit Rules, 2004 and - proceedings initiated by show cause notice for recovery of 10% of the value of the exempted goods cleared from the factory premises dropped - order is correct and legal and does not suffer from any infirmity - Appeal filed by the Revenue is rejected
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2012 (7) TMI 292
Stay petition - denial of cenvat credit on the ground that photocopy of the bill of entry which was produced by the appellant before the first appellate authority - appellant should have produced reconstructed bill of entry in order to be eligible for availing the cenvat credit – Held that:- Since this evidence was not produced before the first appellate authority - remand the matter back to the first appellate authority to reconsider this evidence and pass an order on merits. Appeal is allowed by way of remand
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2012 (7) TMI 291
CENVAT credit on furnace oil used for generation of power and transmitted to other company - Held that:- Appellant fairly agreed that first appellate authority was justified to direct the appellant to reverse the CENVAT Credit availed on the furnace oil utilised for purpose otherwise than in manufacture and transmission of such power to other units - the matter may go back to learned adjudicating authority to compute the quantum to be reversed.
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2012 (7) TMI 290
Disallowance of cenvat credit - process of printing and laminating the bare polyester / metalised film - whether amount to manufacture - appellants were using duty paid polyester film and metalized film as input for their final product - Held that:- If the department wanted to contend that the assessee has undertaken manufacture, the department was required to prove it by a cogent evidence and that the Tribunal was clearly in error in seeking to cast the burden on the assessee to show that there was no process of manufacture - the Commissioner (Appeals) has not cared to look into the process through which the finished goods were cleared by the manufacturing assessee's emerge out of the process of manufacture. It is clear that the appellant after purchasing the bare polyester/ metalised film on payment of duty, first subject those film to printing as per the requirement of the customer and thereafter those films are laminated either in two layers or three layers, thus the aforesaid process changes the character of the bare polyester film (inputs) in terms of its user as also the thickness and lamination falling within the definition of manufacture as defined under Section 2(f)- The department having accepted the excise duty on the final product cannot be permitted to deny cenvat credit on the inputs used for the manufacture of the final product on a technical plea of department - decided in favour of assessee.
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2012 (7) TMI 262
Denial of credit of CVD paid in respect of 4 Bills of Entry - Held that:- The appellants produced evidence by way of certificate from the Range Supdt. that credit had not availed by the importing unit and also produced chartered accountant's certificate that the draw back of CVD has not been claimed by the importing unit. This evidence was not before the Commissioner(Appeals), thus the impugned order denying the credit is set aside and the matter is remanded back to decide afresh - in favour of assessee by way of remand.
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2012 (7) TMI 261
No Cenvat credit can be taken if a manufacturer claims depreciation under the Income Tax Act - Held that:- The assessee submission that he had filed a revised Income Tax Return and in that he had not claimed the depreciation - Since it is not clear from this record whether the revised return is accepted by the Income Tax authority the matter is remanded back to the adjudicating authority to decide the issue afresh after taking into consideration the assessment order passed on the revised Income Tax Return - in favour of assessee by way of remand.
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2012 (7) TMI 260
Whether Cenvat credit availed on input for generation of power bartered to Haryana State Electricity Board shall dis-entitle the appellant to such credit - Held that:- As no cogent reason brought out by Revenue against motive of battering the power, appeals of Revenue is misconceived - against revenue.
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2012 (7) TMI 259
Plea for waiver of pre-deposit of duty of 99 lacs and penalty - dispute regarding classification of pin mailer - assessee contending the same to fall under Chapter 49 of the tariff whereas Revenue contended it to be under chapter 48 - assessee engaged in the manufacture of PIN mailer, stationery and other stationery items - Held that:- As explained, Pin mailer is printed continuous computer stationery which is further used by the Bank in the dot-matrix printer to print the PIN number of their customers. In these circumstances, prima facie we find that it is not a fit case for total waiver of duty. However, keeping in view the financial hardship as pleaded, the applicants are directed to deposit an amount of ₹ 15 lacs within a period of eight weeks. On deposit of aforesaid amount, recovery of remaining amount of duty, interest and penalty is stayed during the pendency of the appeals.
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