TMI Tax Updates - e-Newsletter
July 23, 2012
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
Wealth tax
Indian Laws
Highlights / Catch Notes
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Income Tax:
Benami Assessee - Just because her affairs are being looked after by her husband, it does not mean that she is benami.- AT
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Income Tax:
The assessee who are in the business of blending and processing of tea and export thereof, in 100% EOUs are manufacturer/ producer of the tea for the purpose of claiming exemption u/s. 10B. - AT
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Income Tax:
Taxability under the head “capital gain“ u/s 45 - receipt based or accrual based taxation - The fact that the appellant assessee adopted a mechanism in the agreement that the transferee would defer the payments would not in any manner detract from the chargeability when the shares were sold. - HC
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Income Tax:
Rule of consistency - for the period of about 15 years, assesse’s submissions the annual amortization of the initial lease consideration, as advance rent was accepted - there is no res judicata - HC
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Income Tax:
Amortization of lease premium paid by the appellant - Whether lease premium paid Noida Authority is to be treated as advance rent? - HC
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Income Tax:
An assessment by way of a settlement order passed by the ITSC cannot be reopened by a different authority, viz., the Assessing Officer - in favour of assessee. - HC
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Income Tax:
Rejection of application for approval u/s 10(15A) - the aircrafts for which lease Agreements were signed were not existing on the date of the agreement - If the two conditions are not satisfied, benefit under the said Section cannot be granted. - HC
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Income Tax:
Rsassessment u/s 147 - no return was filed by assessee - once the AO was satisfied about the income escapement no further investigation as to what was the ground for the assessee to have not filed the return. - HC
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Income Tax:
Claim of exemption u/s 80P (2) - interest derived by a Cooperative Bank from investment of funds with RBI or SBI is exempt u/s 80P (a) (i) irrespective of the fact that investment is made out of the reserve funds or working capital. - HC
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Income Tax:
Challenging reopening of assessment - notice u/s 148 - the basis of the order is completely different from the reasons recorded for reopening the assessment which is clearly not permissible - HC
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Income Tax:
Interest u/s 234B was correctly charged in the assessment order passed u/s 143(3)/147 and therefore it could be subsequently enhanced on completion of set aside assessment. - HC
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Income Tax:
Valuation - consideration of self supervision factor which lead to less value - Addition made on account of unexplained investment in cost of construction of building u/s.69B - AT
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Income Tax:
Exemption of HRA u/s 10(13A) - reimbursement is considered against the free housing accommodation provided by the employer company to the employee assessee, then this reimbursement of house rent to employer is no more available to be considered for exemption u/s 10(13A).
- AT
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Income Tax:
Revenue versus Capital expenditure - The expenditure incurred on Printer, Scanner and Web Camare cannot be said to be replacement of the spares /defective parts of the computer- AT
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Income Tax:
Determination of the cost of acquisition - computation of the period for which the asset is held by the assessee - property transferred to the assessee under a will or by inheritance - HC
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Income Tax:
Payment for know-how - deductible under Section 37 as a Revenue expenditure OR Section 35AB? - said expenditure qualifies for deduction u/s 37 - HC
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Income Tax:
Penalty u/s 271D - reasonable cause - contravention of sec. 269SS - cash was taken by discounting cheques to meet the urgent business needs of the assessee - deletion of penalty is warranted - AT
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Income Tax:
Challenging the order passing ex parte - considering the lethargic and irresponsible attitude of the assessee we hereby reject the adjournment letter filed by the assessee - AT
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Income Tax:
Appeal before ITAT - authorization - The grounds which are not arising out of the order of the CIT(A) are not maintainable - AT
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Income Tax:
Demand of interest u/s. 201(1A) of the IT Act - late deposit of TDS - The time taken for clearing of cheques and government holidays and reasonable cause etc. are not the reasons, which could be considered while levying the interest against the assessee - AT
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Income Tax:
Rent receivable - Accrual of rental income - Addition of Income based on TDS certificate whereas deductor admitted the mistake is not correct. - AT
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Customs:
Amendment Notification No. 33/2008-Customs - Anti dumping duty on Acetone imported from Chinese Taipei or Singapore or South Africa or USA or European Union from specified producers / exporters. - Notification
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Customs:
Rate of exchange of conversion of each of the foreign currency with effect from 20th July, 2012. - Notification
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DGFT:
Pending EODC cases where vehicles imported under EPCG Scheme were not registered as Commercial/Tourist Vehicle – Reference Policy Circular dated 07.05.2008. - Circular
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Indian Laws:
EXEMPTION FOR CHARITABLE ACTIVITIES - Article
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Indian Laws:
Whether revenue sharing arrangements attract service tax prior and post 1st July, 2012 - Article
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Service Tax:
Business Support Service - Interconnection, infrastructure and space facility to Basic Telephone Service Providers - demand of service tax on infrastructure charges, port charges, rent for space etc - AT
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Service Tax:
Service Tax on Profit sharing agreement - Demand of Service tax on account of business support services provided to BCCI-IPL – prima facie demand is not maintainable - AT
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Service Tax:
Cenvat credit – amount paid by the appellant has to be treated as paid under protest - original adjudicating authority's decision to allow the refund by way of credit in the cenvat account is correct - AT
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Service Tax:
Demand of service tax - they are liable to pay the Service Tax on the amount collected by them as an advance prior to introduction of Service Tax liability on said services - AT
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Service Tax:
Sale of space or BAS - the service cannot be classified under business auxiliary service as the service is more specifically covered under the heading sale of space as the activity undertaken is only sale of space in monthly news - AT
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Service Tax:
Manpower Recruitment and Supply Agency Service - the claim of the applicants that they were under bonafide belief is not sustainable - AT
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Central Excise:
Entitlement to interest on the delayed refund of the amount paid by way of predeposit - petitioner is entitled to interest @ 12% per annum - HC
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Central Excise:
Waiver of pre-deposit - Scope of term 'undue hardship' - - AT
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Central Excise:
Condonation of delay – there was an affidavit filed by a person who received the order in original and had stated that after receiving the order in original he placed it in the cupboard and forgot to handover the same to the management. - delay condoned - AT
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Central Excise:
Cenvat credit – Rule 6 - Maintenance of separate accounts - manufacturers of sugar and molasses - SCN issued in these cases are defective inasmuch as neither of the SCN indicates as to which are the input and input services used which have resulted in the generation of press-mud which was converted into bio-compost - AT
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Central Excise:
CE - Reduction of the cost freight and insurance charges incurred for carrying the goods from the depot to the customer’s end would make the wholesale price available ? - HC
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2012 (7) TMI 532
Search and seizure operation u/s 132 - orders of block assessment - Held that:- The income allegedly offered by the assessee in the statement recorded u/s 132(4) should not be relied on alone by AO for making addition in the assessments which stands modified/ withdrawn, unless there is corroborative evidence linking the statement with the undisclosed /unearthed incomes - This issue was already considered twice by the ITAT when the orders were set aside earlier. AO need to complete the assessment only on the basis of incriminating material if any, after considering assessee’s explanation with reference to the papers seized and transactions/investments found by the Department. Benami Assessee - As already evidenced on record that Smt. Sushila Malge has been filing the returns much before the search and they were scrutiny assessments in her case as well. Just because her affairs are being looked after by her husband, it does not mean that she is benami. In case AO has to hold that she is benami, it should be based on evidence and burden is on the Revenue. Unless there is evidence, no addition should be made in the hands of Shri Suresh Malge on mere conjectures, surmises and presumptions - AO should pay the cost of Rs. 20,000/- to Shri Suresh Babu Malge for making him come again in appellate proceedings - in favour of assessee.
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2012 (7) TMI 531
Denial of exemption claim u/s 10B - Revenue stated that exemption u/s. 10B applies to an assessee in which the undertaking begins to "manufacture" or "produce" articles or thing or computer software - assessee is 100% EOU for export of manufactured jute bags, packet tea, tea bags, bulk tea - Held that:- The process involved in export of blended and processed tea by the assessee which involves various steps right from the purchase of tea in bulk packaging from different Auction Centres in India and overseas to the physical stuffing of the packaged teas in containers for shipment - Assessee Company has established a new industrial Undertaking (100% EOU) for the manufacture of packet tea/tea bulk tea in the Falta Special Economic Zone, and it holds a green card issued by the Development Commissioner, Ministry of Commerce, Government of India, Kolkata. Assessee Company's said 100 Export Oriented Undertaking (EOU) is also registered with Central Excise Authorities. Section 2(r) of the Special Economic Zones Act, 2005, which is a Central Act passed by the Parliament in May, 2005, and which Act also governs the said industrial unit owned by Assessee Company herein, also defines the term 'manufacture' to include processes such as 'blending' - in CHOWGULE & CO. PVT. LTD. Versus UNION OF INDIA [1980 (11) TMI 61 - SUPREME COURT OF INDIA]the word used 'producing' in relation to the tea mixture, which was produced through the process of blending. Though Section 10A did not contain a definition for 'manufacture', the definition of the term contained in Section 2(r) of the 2005 Act was incorporated in Section 10AA with effect from February 10, 2006. Admittedly, this definition covers blending also. Therefore, blending and packing of tea done by the assessee qualifies for exemption under Section 10AA - the contention of the assessee that the scheme of income tax exemption available to units in the SEZ u/s. 10A and units in the free trade zone provided u/s. 10AA and the exemption available to 100% EOU u/s. 10B are very similar in nature and the wordings of the statutory provisions are similar in nature is correct - assessee was recognised as a 100% EOU division and the Department had no case that the assessee's unit engaged in export of tea bags and tea packets was not a 100% EOU. If exemption was denied on the ground that products exported were not produced or manufactured in the industrial unit of the assessee's 100% EOU, it would defeat the very object of sections 10B. Thus, the assessee who are in the business of blending and processing of tea and export thereof, in 100% EOUs are manufacturer/ producer of the tea for the purpose of claiming exemption u/s. 10B. Further, assessees who are in the business of blending and processing of tea in respect of undertakings in free trade zones are manufacturer/producer of tea for the purpose of claiming exemption u/s. 10A - in favour of assessee.
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2012 (7) TMI 530
Justification on taxability under the head "capital gain" u/s 45 - Share Purchase Agreement - assessee contested the entire amount was yet to be received by the assessee - Held that:- Considering the deeming fiction contained in section 45(1), it is held that the whole of consideration accruing or arising or received in different years is chargeable under the head capital gains in the year in which the transfer of shares has taken place - no material on the record or in the agreement suggesting that even if the entire consideration or part is not paid the title to the shares will revert to the seller. In that sense the controlling expression of “transfer” in the present case is conclusive as to the true nature of the transaction. The fact that the appellant assessee adopted a mechanism in the agreement that the transferee would defer the payments would not in any manner detract from the chargeability when the shares were sold. The tenor of the Tribunal's order is that the entire income by way of capital gains is chargeable to tax in the year in which the transfer took place. This is what is stated in Section 45(1). Merely because the agreement provides for payment of the balance of consideration upon the happening of certain events, it cannot be said that the income has not accrued in the year of transfer - against assessee.
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2012 (7) TMI 529
Challenging the reopening of the assessment order passed by AO - justification on the position of an order u/s 245D (4)passed by the Income Tax Settlement Commission [ITSC] - Held that:- Since the exclusive jurisdiction to exercise the powers and perform the functions of an income tax authority in relation to the case vests with the ITSC after an order is passed u/s 245D (1) till the final settlement order is passed u/s 245D (4), it is not possible to countenance a situation where it can be said that the assessee's claim for deduction under Section 80IB (10) was not the subject matter of the order passed by the ITSC u/s 245D (4) - The provisions of Chapter XIX-A suggest that all matters in relation to the case of the assessee shall be dealt with by the ITSC just as an assessing authority would deal with them while completing an assessment u/s 143 (3) and at this position, it would be difficult to sustain the argument of the revenue that the matter relating to the deduction under Section 80IB (10) was not the subject matter of the final order of settlement. It follows that the Assessing Officer had no jurisdiction to reopen the assessment for the assessment year by issuing a notice u/s 148 on the ground that the deduction was wrongly allowed - an assessment by way of a settlement order passed by the ITSC cannot be reopened by a different authority, viz., the Assessing Officer - in favour of assessee.
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2012 (7) TMI 528
Challenging a penalty levied u/s 271(1)(c ) - disallowance and consequential addition made to the total income in respect of Non- saleable/Damaged Stock written off in the Profit & Loss account - Held that:- Assessee during the course of penalty proceedings has given details of stock written off, the addition was confirmed on the ground that the assessee had not given the details of the stock written off. The un-saleable goods have been written off in the books of account. The entries made in the books of account by the assessee are bona fide and cannot be said to be furnishing of inaccurate particulars of his income. The assessee has written off various items because those products could not be sold in the market being hazardous to the health. Moreover, the assessee was exporter of the goods, the profit there from would have been exempt under sec. 10B of the Act. Therefore, no motive can be attached to prove that the assessee by writing off of the stock wanted to reduce the tax liability. The quantum addition has been upheld upto Tribunal but it would not mean that penalty should be imposed automatically - Therefore it is not a fit case for levy of penalty - the character of this written off loss was nothing but basically a provision for decrease in the value of assessee’s assets. The AO while completing the assessment has not mentioned a word that there was furnishing of inaccurate particulars or concealment of income - in fvaour of assessee.
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2012 (7) TMI 527
Block assessment order as barred by limitation - applicability of Section 129 r.w.p. to Explanation 1 to Section 158 BE as questioned by Assessee - Held that:- In present case the assessment proceedings were commenced only by the AO at Delhi by notice issued and thereafter there was no change in the incumbent of the office so as to attract the provisions of Section 129. In such a situation there is no scope for importing the proviso to Section 129 to extend the period of limitation. Even factually there is nothing on record to show that the assessee made any demand before the AO in Delhi that the previous proceedings, if any, should be reopened or that before any order of assessment is passed against her should be reheard - The assessment u/s 158BC ought to have completed on or before 30.06.2002 as per Section 158BE (1) (b) and though it was completed only on 30.07.2002, it is barred by limitation. The Tribunal has erroneously equated the notice issued u/s 158BC (a) to a notice issued u/s 148 to reopen an assessment and erred in further understanding the words “the time taken in reopening the whole or any part of the proceeding” appearing in clause (iii) of Explanation-1 to mean a reopening of the assessment under Section 148. With respect, the reasoning appears to be convoluted and untenable. The reopening of the proceeding referred to in clause (iii) of Explanation-1 is the reopening of the proceedings for the assessment which have been completed in part by an earlier incumbent of office, and not the reopening of the assessment under Section 148 - in favour of assessee.
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2012 (7) TMI 526
Amortization of lease premium paid by the appellant - whether a capital expenditure or revenue expenditure ? - Whether lease premium paid Noida Authority is to be treated as advance rent? - held that:- the payment of premium was separate and distinct from rent, and for the purpose of securing the land, a capital asset, for use of the assessee for a long period with certain proprietary right including the right over any asset found under the land - The amount was not refundable as in this case and, therefore, the same could not be considered to be advance payment of rent - against assessee. Rule of consistency - for the period of about 15 years, the income tax authorities had accepted the assesse’s submissions and permitted annual amortization of the initial lease consideration, as advance rent. - held that:- This Court notices that there cannot be a wide application of the rule of consistency. In Radhasaomi (1991 (11) TMI 2), the Supreme Court acknowledged that there is no res judicata, as regards assessment orders, and assessments for one year may not bind the officer for the next year.
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2012 (7) TMI 525
Disallowance of service tax and interest paid as liability on account of service tax has not crystallized during the year under consideration - Held that:- Once the payment of service tax has been made during the year, it does not make any difference whether the same is under dispute before the service tax authorities. This issue is no more res integra as the Hon'ble Supreme Court in the case of Kedarnath Jute Mfg. Co. Ltd. v. Commissioner of Income-tax [1971 (8) TMI 10 - SUPREME COURT ] has decided this very question in the context of provision of Section 43B that for the claim of deduction of the sum paid against the liability of tax, duty, cess, fee, etc., the year of payment is relevant which is to be taken into account. The year in which the assessee incurred the liability to pay such tax, duty etc., has no relevance and cannot be linked in the matter of giving benefit of deduction under Section 43B - the amount of service tax along with interest paid by the assessee is allowable in view of the provisions of Section 43B - in favour of assessee. Enhancement in the book value of shares - Sham transaction - cost of acquisition of the value of the investment of shares - held that:- This is a transactions solely between the parent company and the holding company, the same cannot be treated as a sham transaction as the shares have been transferred purely on the book value disclosed earlier. - addition made on account of short term capital gain by reducing the value of cost of acquisition of shares is uncalled for.
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2012 (7) TMI 524
Rejection of application for approval u/s 10(15A) - the aircrafts for which lease Agreements were signed were not existing on the date of the agreement - Held that:- On reading of Section 10 (15A) it is apparent to us that for this Section, an Indian company engaged in the business of operation of aircrafts should have acquired aircraft(s) on lease under an agreement - the twin conditions; that the agreement should have been entered into on or before 1st April, 2007 and there should be acquisition of aircraft under the lease before the said date, have to be satisfied. If the two conditions are not satisfied, benefit under the said Section cannot be granted. In the present case, there was no lease but only a possibility or an expectancy as the property or goods in question were not in existence on the date of the so called agreements. The agreements cannot be treated as leases but only as agreements for leases which will/may operate in future. This will not satisfy the need and requirements of Section 10(15A). The use of the word “lease” is significant and signifies transfer of rights by the lessor to the lessee in praesenti, i.e., on or before 1st April, 2007, which is not possible unless the aircraft is in existence - A contract for a lease is to be distinguished from a lease because lease is actually a conveyance of interest in the goods/property, whereas a contract for lease is merely an agreement that such conveyance shall be entered into or begin/operationalize on a future date - writ petition dismissed - against assessee.
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2012 (7) TMI 523
Quashing the Assessment u/s 147/143 (3) by Tribunal - no return was filed by assessee - Held that:- Tribunal in setting-aside the assessment and penalty order has adopted a hyper-technical approach in holding that the material which existed and which was relied upon by the AO were insufficient to be described as “reasons to believe” u/s 147 - As is evident the assessee had not filed any return for the succeeding year but had received a sum in excess of Rs.100 crores as consideration for transfer of business and as per Explanation 2(a) to Section 47 non-filing of return under certain circumstances could itself led to inference of escaped income - once the AO was satisfied about the income escapement no further investigation as to what was the ground for the assessee to have not filed the return. Therefore, the Tribunal ought not to have set-aside the assessment and penalty order in this case on such narrow reasoning - matter is remitted back to the Tribunal to consider the reassessment and the penalty appeals - against assessee.
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2012 (7) TMI 522
Claim of exemption u/s 80P (2) - interest earned on NSC & income from Bank interest - assessee is a Cooperative Society - Held that:- The investment is in NSC which is a government security. The income earned thereon can very well be eligible for exemption for the obvious reason that it has been done in compliance of Govt. direction and further that when the interest income earned in the deposits of the bank is allowed, on same analogy this interest income earned on NSCs can also be allowed as exemption - As decided in CIT Vs. Karnataka State Cooperative Apex Bank [2001 (8) TMI 9 - SUPREME COURT]that interest derived by a Cooperative Bank from investment of funds with RBI or SBI is exempt u/s 80P (a) (i) irrespective of the fact that investment is made out of the reserve funds or working capital. Interest earned on deposits in Post Office - Claim of exemption u/s 80P (2) - Held that:- The income earned on the leftover balances in the bank accounts of the society has a direct nexus with the main activity of the assessee for providing credit facilities to its member - income from post office is exempt under Section 10 (15)as also the CBDT Circular No.410 dated 12.2.1985, made it clear that the interest earned on saving account or CTD (Cumulative Time Deposit), the same would exempt from the income - income tax appeal is partly allowed.
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2012 (7) TMI 521
Challenging reopening of assessment - notice u/s 148 - Held that:- Issuing notice u/s 148 in the present case was based on the ground that the income earned from the non fund based activities of the respondent had been included in the fund based income so as to claim excess deduction u/s 36(1)(viii). The reasons only provide a conclusion and give no material particulars of information obtained during the course of assessment proceedings for the assessment year 1998-99. Therefore the reasons recorded do not indicate any tangible material which has led to a reasonable belief that income has escaped assessment AO while reassessing the assessee by an order has in fact taken a ground different from the grounds in the reasons recorded for reopening the assessment u/s 148 - The reasons furnished for reopening the assessment alleged that non fund income had been shown in fund based income so as to avail of a higher deduction. However, the basis of the order was that 20.1% out of the gross expenses attributed to non fund income was excessive and ought to be restricted to only 10%. Thus, the basis of the order is completely different from the reasons recorded for reopening the assessment which is clearly not permissible - the Tribunal was correct in taking the view that the reopening of assessment by notice u/s 148 is not sustainable in law - case is based on merely change in opinion on the material which was already on record and considered - in favour of assessee.
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2012 (7) TMI 520
Condonation of the delay of 2046 days for filling appeal - Held that:- Nature of the negligence does not warrant a dismissal of the appeal for it is possible in view of what is stated that the appellant who had taken steps to prosecute the appeal, legitimately expected the appeal to come up for admission on account of the objections having been removed albeit belatedly and had even appointed an advocate to prosecute the appeal - the records pertaining to the appeal were transferred to the Income Tax Department from the Ministry of Law and Justice - is the consequence of a dismissal of the appeal resulting in a possible loss to the revenue in a matter where some of the allegations especially relating to the alleged hawala transactions are serious - there is a reasonable explanation for the delay in this case.
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2012 (7) TMI 519
Challenging reopening of assessment - Held that:- If an AO calls for specific information relating to or in connection with the material before him, absent anything else, it is reasonable to presume that he had considered the material filed before him as well as the material called for by him before making the assessment order - There is no mention of the disclosure of the nature of payments in the assessment proceedings for A.Y. 2007-2008 which were absent in the proceedings for the relevant assessment year. The basis of the notice was thus unfounded on facts. Nor does he state that the absence of this unspecified lack of disclosure was not noticed by the AO. Disallowing a part of the claim under section 40A(i)for which material had been considered by the TPO and the AO in the assessment proceedings for the A.Y. 2004-2005 - held that:- Since the facts were before the Assessing Officer at the time of framing the original assessment, and later a different view was taken by him or his successor on the same facts, it clearly amounts to a change of opinion not permitting the AO or his successor to reopen the assessment of the assessee - in favour of assessee.
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2012 (7) TMI 518
Challenge against levy of interest u/s 234B - notice u/s 148 was issued to the assessee for the excess deduction claimed under Section 80HHC and 80-I - assessee contented that the assessment framed by the AO u/s 143(3)/147 was the first assessment - Held that:- The statutory provision contained in Explanation 2 to Section 234B that where an assessment is made for the first time in pursuance to proceedings under Section 147 it shall be regarded as a regular assessment for the purposes of Section 234B and the decision of the Apex Court in K. Govindan & Sons' case (1998 (7) TMI 61 - KERALA HIGH COURT ) which was binding under Article 141 of the Constitution would render the order ineffective and would not take away the right of the revenue to charge interest under Section 234B(4). Thus interest u/s 234B was correctly charged in the assessment order passed u/s 143(3)/147 and therefore it could be subsequently enhanced on completion of set aside assessment. Section 115JB is a self-contained code pertaining to MAT which imposed liability for payment of advance tax on MAT companies and therefore, where such companies defaulted in payment of advance tax in respect of tax payable under Section 115JB, it was liable to pay interest u/s 234B and 234C. Thus, it can be concluded that interest u/s 234B and 234C shall be payable on failure to pay advance tax in respect of tax payable under Section 115JA/115JB - against assessee.
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2012 (7) TMI 517
Writ petition – cash seized - It is stated in the petition that petitioner No. 1 is engaged in the business of rendering Courier Services to its clients - said was handed over to be transferred to its Head Office, which was being carried by petitioner No. 2, who was an employee of the petitioner's firm - respondent No. 1 issued a warrant of authorization in exercise of its powers under Section 132A(1) of the IT Act – Held that:- Amount in question was arranged and sent to Indore by Head Office by effecting withdrawals from the firm's bank account, no particulars of the bank account are described in the writ petition - statement of account of the petitioner firm's bank account is also not annexed to the writ petition to substantiate that money in question was withdrawn from any known sources - explanation furnished by Amish Kumar Patel from whose possession the money was seized was not found satisfactory by the department and the aforesaid material was in possession of the authority - warrant of authorization was issued - sufficient information in possession of the authority in order to enable him to form an opinion/reason to believe that the amount in question has not been or would not have been disclosed for the purpose of IT Act - writ petition fails and is hereby dismissed
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2012 (7) TMI 516
Search - Unexplained cash – seizure of cash – prayer for adjustment of seized cash towards demands – Held that:- Assessee failed to explain and justify as to how this cash pertains to the earlier years - assessee is trying to explain this amount belonging to the earlier years then definitely in view of the wealth-tax provisions, the assessee was liable to file the wealth-tax return for those years - assessee has not filed any evidence which could show that assessee has shown the amount in the wealth-tax return - CIT (A) was justified in upholding the addition up to Rs.16,16,881/- as unexplained cash for the year in which the search took place - appeals filed by the assessee stand dismissed.
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2012 (7) TMI 515
Writ petition - Search and seizure - prayer for release of the seized assets as well as two Bank guarantees deposited by the petitioner for release of a portion of the seized jewellery – Held that:- Matter was pending before the Settlement Commission - by virtue of the amendment in the Finance Act, 2007, on June 1, 2007, the pending proceedings before the Settlement Commission since abated, therefore, on March 31, 2008, in case the orders were not passed by then, the assessment was to be made thereafter by the Assessing Officer and, therefore, to give lease of life to such assessments, the Finance Act of 2007 also added the second proviso to section 153(4) of the Income-tax Act, 1961, on June 1, 2007, which in fact, enlarged the period of limitation by another one year with effect from March 31, 2008, i.e., up to March 31, 2009, for passing the assessment order - aforesaid provision provided a period of one additional year for completing the assessment, if the proceedings before the Settlement Commission abated under section 245HA - all assessment proceedings in pursuance of the search and seizure conducted by the Income-tax Department on February 9, 2000, are a nullity and are liable to be set aside - jewellery which finds mention in the panchnama dated February 9, 2000, is liable to be released forthwith along with two bank guarantees furnished by the petitioner for release of a portion of the seized jewellery - writ petition is allowed.
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2012 (7) TMI 497
India-Mauritius Double Taxation Avoidance Convention - capital gain on sale of shares - Held that:- The applicant has a Tax Residency Certificate from Mauritius is registered as a Foreign Venture Capital Investor considering Article 13 of the DTAC would govern such a transaction and under paragraph 4 of that Article, the capital gain that may arise would be taxable only in Mauritius and not in India - the buyer of the shares has no obligation to withhold taxes under section 195 of the Income-tax Act.
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2012 (7) TMI 496
Determination of the cost of acquisition - computation of the period for which the asset is held by the assessee - property transferred to the assessee under a will or by inheritance - Held that:- 50% portion of the property acquired by the respondent from his father, the cost of acquisition must be determined to be the cost at which the respondent's grandfather or in any event the respondent's father acquired the property and not the date on which the respondent acquired it. Computation of the period for which the respondent held that 50% portion of the property he acquires from his mother - Held that:- The respondent's mother also acquired the property under her husband's will. She therefore, acquired the property by a mode of acquisition referred to in section 49(1)(ii). Thus the date of the acquisition of her share in the property is not relevant. The last previous owner of her share was therefore her husband's father and at the highest her husband - If therefore a capital asset becomes the property of the assessee in the circumstances mentioned in section 49(1) and the period for which it is held as determined by section 49(1) r.w.s. 2(42A) is more than the period stipulated in section 2(42A), the case would not fall within the ambit of a short term capital asset - the respondent must be deemed to have held this 50% share in the property also from 1.4.1981 - in favour of respondent.
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2012 (7) TMI 495
Challenging taxation of undisclosed income under the provisions of Section 143(3)/153A - Held that:- As the books of account have been maintained and duly certified having been verified by the auditors who have been authorized by the provisions u/s 44AB to submit a report certifying that the books of account were verified which books resulted in computing the returned income by the assessee as per the balance sheet and P & L account annexed with the report the CIT(A) upholding the contention of the AO on having invoked the provisions of Section 145 actually had no basis - AO has accepted the Net Profit as returned by the assessee but at a higher rate which rates has no basis for enhancement insofar as the gross margin on a turnover is directly related to the sales and the expenditures claimed leading to holding of stock which valuation has not been disputed by the AO. This indicates that all the facts remaining the same, the AO has not estimated the enhanced NP on sound footings - Disallowance of expenditures claimed u/ss.30 to 37 therefore leave no meaning to consider the NP insofar as the AO has not resorted to tinker with the gross profit rate - to proceed simultaneously u/s.143(3)/153A is defective to the extent that the AO cannot roll back from the very facts for computation of income of the assessee for the purpose of his enhancing the income - in favour of assessee.
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2012 (7) TMI 494
Dis allow the claim of exemption of HRA u/s 10(13A) - the assessee has not paid the rent directly to the landlord - CIT(A)allowed the claim - Held that:- Assessee is getting twin benefit from the employer, first is of rent free accommodation provided by the employer to the assessee employee for which the employer is incurring rental expenditure of Rs. 1.70 lacs per month in addition to providing interest free deposit of Rs. 40 lacs with the land lord and 2nd being received by the assessee is this that he is getting HRA of Rs.3 lacs approximately per month including special HRA of Rs.1.70 lacs per month and out of these two benefits the assessee is making one payment i.e. reimbursement of rentals to the employer company @ Rs.1.70 lacs per month, thus this reimbursement is considered against the free housing accommodation provided by the employer company to the employee assessee, then this reimbursement of house rent to employer is no more available to be considered for exemption u/s 10(13A). Once, the housing perquisite value is worked out as 'nil' after considering this rental payment of Rs.1.70 lacs per month to the employer company, there is no rental payment made by the assessee employee for the purpose of working out exemption of HRA u/s 10(13A)and, therefore, the disallowance made by the A.O. regarding the claim of the assessee for exemption u/s 10(13A) is in order - against assessee.
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2012 (7) TMI 493
Challenging Tribunal's Order in confirming the addition of cash credits u/s 68 - assessee contested that such deposits could have been proceeded against as unexplained investments in terms of section 69 - Held that:- Even in the bank deposits on the security of which amount had been borrowed and the assessee had shown as a credit taken from several persons was a deposit jointly held by the assessee and the persons who were shown as creditors were close relatives such as kith and kin of the assessee. The circumstances weighed with the assessing authority to infer that the explanation is not satisfactory that they were not genuine cash credits, but so indicated in the books of accounts of the assessee - as three authorities below have found that the explanation offered by the assessee to claim that the amount was genuine cash credit was not acceptable find scope for reversing this finding in an appeal under section 260-A - The possibility that the amount would also attract the provisions of section 69 of the Act is not a ground for excluding the applicability of section 68 - against assessee.
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2012 (7) TMI 492
Revenue versus Capital expenditure - AO made out in the assessment order that out of the total expenditure of Rs. 32,80,058, Rs. 1,18,225 was incurred by the assessee for new hardware of the computer to be in the nature of capital - Held that:- Apart from the expenditure of Rs. 32,80,058/- the assessee has also purchased some computer, which were included in the fixed assets as clear from the Schedule C showing the fixed assets at the written down value. The parts like CD ROM Drive, Hard Disk Drive and RAM are only spares of the Central Processing Unit (CPU) of the computer and they cannot be considered as separate and independent machinery. Accordingly, replacement of the parts of the machinery is allowable expenditure. The expenditure incurred on Printer, Scanner and Web Camare cannot be said to be replacement of the spares /defective parts of the computer therefore, the expenditure of Rs. 31,250/- incurred on printer, scanner and Web Camera is capital in nature and accordingly, the addition to the extent of Rs. 31,250/- is confirmed - partly allowed in favour of assessee to the extent of the expenditure of Rs. 86,975/- as revenue expenditure u/s 37. Disallowing of repairs and maintenance expenses as “capital” in nature - out of the total expenditure of Rs. 50,35,444/- AO disallowed Rs. 1,66,423/- being capital in nature - Held that:- As regards the expenditure of Rs. 1,35,613/-, pertains to office renovation charges, the same has been incurred by the assessee to make the office premises as fit for business use of the assessee and without bringing any new capital asset into existence; therefore, the same is allowable as revenue expenditure - As regards the expenditure on split AC of Rs. 30,850/-, it is apparent that the assessee has brought into existence a new asset therefore, the same is capital in nature and only depreciation is allowable. Accordingly, we confirm the disallowance to the extent of Rs. 30,850/ towards spilt air-conditioning expenditure - partly in fvaour of assessee. Disallowance of trading loss - DR has submitted that the assessee has not even claimed trading loss in the return of income but has made a claim only during the appellate proceedings by way of a note - assessee has claimed bad debts/trading loss being non recoverable deposit given to the subsidiary company - Held that:- 0bjection raised by the ld DR that without filing the revised return the Assessing Officer has no jurisdiction to entertain a fresh claim it is to be noted that the jurisdiction of the appellate authorities is not barred as observed in the case of Goetze (India) Ltd [2006 (3) TMI 75 - SUPREME COURT] - When the assessee is holding company and both the companies are controlled by the same management then there was no such need for any deposit. Therefore, the element of commercial expediency does not exist in the case in hand - it was not a case of insolvency of the subsidiary company; but the assessee voluntarily waive off the claim; therefore, when the advance was not given either in the ordinary course of business or in connection with the business, then the loss of the same is loss of capital and is not allowable - against assessee. Since interest u/s 220(2) is consequential in nature; therefore, no specific finding is required.
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2012 (7) TMI 491
Payment for know-how - deductible under Section 37 as a Revenue expenditure OR Section 35AB ? - Held that:- As decided in CIT Versus Kirloskar Tractors Ltd. [1998 (2) TMI 117 (HC) ] wherein the assessee having entered into an agreement for execution of the turn-key project and at the request of the said client acquired technical know-how to be used in its engineering, activity the confidentiality that has to be maintained on the technical know-how obtained, it is clear that the entire expenditure incurred by the assessee was towards its profit making process qualifying for deduction as revenue expenditure. That being so, going by the provisions under Section 37 the said expenditure qualifies for deduction u/s 37 and hence Section 35AB has no application to the facts of the case - in favour of assessee.
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2012 (7) TMI 490
Deleting the addition made on account of deferment of Sales-tax by CIT - Held that:- Joint Director, District Industries Centre, Belgium, Karnataka had issued a certificate stating that the unit is eligible to avail sales tax deferment both “KST and CST” for a period of eight years with effect from 14-12-2001. This shows that this unit of the assessee is eligible for the benefit of deferment of sales tax for the sales made up to 13-12-2009 and as the relevant case falls for the previous year 2006-07 and the assessment year 2007-08 which is well within the period of sanction granted by the appropriate Authorities in the State of Karnataka. Hence, the assessee is entitled to claim the benefit of deferment of sales tax for the relevant assessment year - Further no materials are produced by the Revenue to suggest that the certificate granted by the Joint Director is withdrawn or cancelled - in favour of the assessee.
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2012 (7) TMI 489
Deletion of the penalty levied u/s. 271(1)(c)- disallowance u/s 40(a) (ia) , 40A (2) (b) & unexplained expenditure u/s 69C - Held that:- Since the various disallowance made are a debatable issue there is nothing on record to suggest that the assessee had concealed any particulars of his income or furnished inaccurate particulars of such income - merely making a wrong claim does not call for levy of penalty - in favour of assessee.
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2012 (7) TMI 488
Penalty u/s 271D - reasonable cause for contravention of the provision of Section 269SS - CIT(A) deleted the penalty - Held that:- The identity of the person, genuineness of the transaction and capacity of the person with whom the cheques were discounted is proved beyond doubt and also accepted that the party was discounting cheques of the assessee - the documents filed by the assessee that the amount of cash received through cheque discounting were either fully spent on the same day or within 2-3 days, therefore, the cash was taken by discounting cheques to meet the urgent business needs of the assessee - deletion of penalty is warranted - in favour of assessee.
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2012 (7) TMI 487
Challenging the order passing ex parte - conforming additions and dis allowances by CIT(A) - Held that:- All the notices were sent by registered post and receipts have been duly acknowledged. Despite this there was no compliance to the notices. Under the circumstances CIT constrained to decide the appeal on the basis of material available on record ex parte - considering the lethargic and irresponsible attitude of the assessee we hereby reject the adjournment letter filed by the assessee - assessee present at the time of hearing assured the Bench that the relevant necessary records shall be filed within a day and also assured the Bench to cooperate with the proceedings for speedy disposal of the case but until this date no record as suggested by the assessee was furnished - instance of the assessee for default and for not taking necessary steps showing no interest in prosecuting the appeal - against assessee.
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2012 (7) TMI 486
Valuation - consideration of self supervision factor which lead to less value - Addition made on account of unexplained investment in cost of construction of building u/s.69B - CIT(A) deleted the addition and allowed a deduction of 10% for construction under owner’s own supervision - Held that:- The assessee has shown cost of construction in balance sheet at Rs. 97,76,773/- whereas cost estimated by the valuer at Rs. 1,15,55,424/-. The difference is remained Rs. 17,76,412/-. There is own supervision in construction of bungalow which reduces the cost of construction. This benefit was allowed by the various ITATs near about 10% of the estimated cost of construction. The appellant also made expenditure after 31.03.2007. The A.O. has not brought on record any incriminating evidence found during the course of search and seizure operation for construction of bungalow. Thus considered view that the valuation made by the D.V.O. is an estimate and has variation in cost estimation. The appellant has explained the difference before the CIT(A), therefore, no reason to interfere in the order of CIT(A)as DVO has not considered self supervision factor - in favour of assessee. Rejecting the application for rectification u/s 154 and charging interest u/s 234B and 234C - Held that:- The interest u/s.234B and 234C was charged originally in the assessment order passed u/s 143(3) and in the order giving effect to the order of the CIT(A), the interest was reduced accordingly thus it is therefore, clear that there was no mistake apparent from the record in the order giving effect to the order of the CIT(A) and the AO has rightly rejected the rectification application u/s.154 against which the appeal under consideration is filed. - As the assessee has not raised any ground of appeal against charging of interest u/s. 2234B & 234C in the order passed u/s.143(3), thus through the rectification application, the appellant wants to raise the ground against the charging of interest by quoting wrong facts in the rectification application which cannot be accepted As no fault of the assessee in adjusting the cash against the advance tax even after written request had been made by the assessee, direction to the A.O. to give the credit of Rs. 23 lac as advance tax and charge interest after assuming advance tax paid Rs. 23 lac u/s 234B and 234C as per law
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2012 (7) TMI 485
Revised return – order of the CIT (A) treating the revised return filed u/s 139(5) as that of sec. 139(4), rejecting the claim on the ground, as no such claim was made u/s 139(1) - reason behind disallowance of claim made by the assessee since the assessee has not claimed deduction u/s 10A in the return filed u/s 139(1), the proviso to section 10A debars him from making any such claim in revised return – Held that:- assessee has fulfilled all the requirements of provisions of section 10A. However, this claim of the assessee not examined by the lower authorities - keeping in view the orders of the ITAT for the earlier assessment years 2006-07 and 2007-08, directing the AO to consider assessee’s claim for deduction u/s 10A - matter remanded back to the file of the AO directing him to consider assessee’s claim of deduction u/s 10A - appeal filed by the assessee is treated as allowed for statistical purpose.
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2012 (7) TMI 484
Unaccounted contract receipts - CIT(A)deleted additions made by AO - CIT(A) held that the additions made by AO are covered in the surrender of Rs.5 lacs made by the assessee during the course of assessment proceedings - Held that:- If this amount has been received in subsequent year and has been offered for tax this submission can be explained very well by furnishing the relevant abstract of books of accounts of contract receipts in the year under consideration and for the subsequent year. The assessee instead of furnishing such reasonable documents, tried to further explain which is just contrary to the earlier explanation that the amount was payable on account of E.D. royalty and others etc and also not supported by the relevant abstract of books of account which is very well in the possession of the assessee and the burden is on the assessee to furnish such information and details of documents to ascertain the correct fact - the CIT(A) has wrongly deleted the addition simply relying on assessee’s submissions without verifying the relevant facts - The set off allowed by the CIT(A) against surrender of Rs.5,00,000/- is not correct it was for deficiencies in vouchers etc - in favour of Revenue. Suppression of closing stock as it is shown in the balance sheet and not shown in the trading account - CIT(A)deleted additions made by AO - Held that:- Considering the assessee's submission that he has followed a system of accounting in respect of purchases to take net amount of repair & maintenance, part tyre tube, bitumen, diesel and material expenses verifiable from the copies of the ledger account of financial statement. Thus when purchases expenses have been debited to P/L account by net amount, naturally the stock in hand in this account remains in the respective individual account which can be said to be individual trading account. The corresponding effect of the accounting entries are shown by the assessee in the Balance Sheet - Additions made by AO deleted on above ground and not CIT's stand to set off from surrender amount - Against Revenue. Non incurring of any expense regarding the provision for legal and consultancy charges - CIT(A)deleted additions made by AO - Held that:- No infirmity in the order of CIT(A) as the assessee has surrendered Rs.5,00,000/- on account of non-producing the relevant bills and vouchers. Therefore, the separate addition is not warranted - in favour of assessee. Additions made on account of bogus liabilities - CIT(A)deleted additions made by AO - Held that:- Assessee filed a comparative chart of the result of computation of position of labour and material expenses but that does not help as the case of the A.O. was that these were outstanding liabilities for which the assessee has failed to prove that these liabilities were in fact outstanding. Further, the assessee failed to prove genuineness of these liabilities. - CIT(A) deleted the said addition without verifications - in favour of Revenue. Non Inclusion of contract receipt in work in progress - CIT(A)deleted additions made by AO - Held that:- The assessee has failed to furnish the details of closing stock as called for in the proforma the contention of the assessee that contract receipt for Rs.7,08,444/- is included in the WIP amounting to Rs.2638639/- is not acceptable because the assessee has failed to explain as how this amount is included in WIP - if this amount was included by the assessee in closing stock this amount should be appearing in the debit side of Balance-sheet but there is no entry appearing in the debit side of Balance-sheet - CIT(A)deleted the additions without finding the genuineness - in favour of revenue.
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2012 (7) TMI 483
Appeal before ITAT - authorization - The grounds which are not arising out of the order of the CIT(A) are not maintainable - According to section 253(2) of the IT Act, the Commissioner may, if objects to any order passed by Commissioner (appeals), direct the Assessing Officer to file appeal before the Appellate Tribunal against such order. Therefore, before filing of the appeal by the Assessing Officer, the directions/authorization of the Commissioner is required. The authorization of the Commissioner is available on record dated 05.09.2011 in which ground No. 1 to 5 have not been authorized by the ld. Commissioner for filing the appeal before the Tribunal. Therefore, these grounds have not been authorized by the ld. Commissioner for the purpose of filing the appeals before the Tribunal and further these are not arising out of the impugned order of ld. CIT(A).
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2012 (7) TMI 482
Demand of interest u/s. 201(1A) of the IT Act - late deposit of TDS - assessee has submitted explanation for late deposit of TDS on account of time involved in bank clearing, government holidays etc. – Held that:- Since the assessee has not deposited the amount of tax within the prescribed time, therefore, the assessee was liable for interest as per the above provisions. The time taken for clearing of cheques and government holidays and reasonable cause etc. are not the reasons, which could be considered while levying the interest against the assessee Excessive interest – Held that:- There may be some mistake in calculating the excessive interest as is demonstrated by the ld. counsel for the assessee on examining the payment of tax for the month of May, 2007 because the delay is apparently of 11 days but the AO treated the default for 60 days - to that extent, the matter remanded to CIT(A)
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2012 (7) TMI 481
Addition on account of share application money u/s 68 - CIT(A)deleted the additions made by AO - Held that:- The assessee is a Private Limited Company, accordingly all the relevant provisions of Companies Act are applicable in respect of receiving share application money and issue of shares, whereas assessee did not file relevant resolution passed by the Board of Directors or otherwise related to share application money as required under the Companies Act and CIT(A), without appreciating the facts that the assessee has failed to prove the genuineness of the transaction, deleted the addition - against assessee Rent receivable - Accrual of rental income - AO stated that assessee has shown rent for two months whereas he ought to have shown rent for ten months as the assessee followed Mercantile System of accounting - CIT(A)deleted the additions made by AO - Held that:- AO has calculated ten months rent merely on the ground that information under section 133(6) was not furnished by tenant and notices were retuned back and alleged that the assessee has failed to furnish correct address of tenant but ignored to note that the respective tenant is a Private Limited Company and the information regarding registered office would have been gathered from Registrar of Companies, if the AO was having doubt about the correct address, but no such exercise has been done by the AO - letter from Tenant confirmed the fact that the deposit of the property was given in the month of February, 2008, where he has admitted the mistake in TDS certificate and confirmed they have paid rent only for February & March, 2008 also confirmed the balance in their books of account which tallied with the books of account of the assessee - in favour of assessee.
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2012 (7) TMI 480
Disallowance out of Car and Telephone Expenses at 1/6th of the total expenditure - assessee is running the business with the help of its employees and the town of Pilkhuwa which is having narrow lanes, the places are reachable in a very short time due to less distance – Held that:- Personal use of the car and telephone could not be ruled out - disallowance out of car expenses and telephone expenses is restricted to 1/10th of these expenses on account of personal use Addition on account of gift received by assessee - income u/s 68 - gift was received through cheque and the assessee has filed copy of the gift deed in evidence of the gift having been received by the assessee - copy of the donor’s bank account on which the cheque for the amount of gift was issued was also furnished to the Assessing Officer - gift deed was executed between the donor and donee and copy of gift deed was filed during the course of assessment proceedings - donor has explained further regarding the source of the cash deposits made by her in her savings bank account and has stated that these were out of the interest income received by her from time to time which was kept at home and the interest income was declared in her returns of income – Held that:- Assessee has discharged its onus of proving the identity and creditworthiness of the donor and the genuineness of the transaction of gift. The Revenue could not bring any material on record to doubt any part of the statement on oath of the donor recorded by the Assessing Officer wherein she has explained source of the gift amount made by her - addition is accordingly deleted – In favor of assessee
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2012 (7) TMI 479
Disallowance of 50% of packing charges and labour charges - CIT(A) deleted the additions - Held that:- The assessee’s claim is cogent one that persons engaged in the packing are not skilled labourers and are paid cash as they are not having any bank account. Thus, there is no necessity to maintain detailed records of temporary workers who finished the work assigned to them in a short span of time and that as assessee has paid piece rate charges in these circumstances, the quantum of expenditure can be compared to production done by the labour - This shows that the percentage of labour charges and packing charges to the turnover compares favorably with the percentages of expenses claimed in the earlier and subsequent years. AO has made adhoc disallowance of 50% of packing charges and labour charges without pointing out the specific expenditure under those heads - in favour of assessee. Deletion of addition made on account of shortage in production by CIT(A) - Held that:- CIT(A) has given a finding that assessee is maintaining the complete details / particulars of opening stock, purchases, consumption, production and sales which were verified by the AO and accepted without pointing out any deficiency or defect in them. Thus in these circumstances provision of section 145(3) have been incorrectly resorted to by the AO. Furthermore, AO has partly rejected the books of account, which is not tenable - in favour of assessee. Addition on account of disallowance u/s 40(a)(ia) - Held that:- The assessee has made payments to the three transporters mentioned in the assessment order for each order of transport executed by them. As the assessee has no contract for transport with any transporter, thus each GR Note becomes a separate contract and since the value of such contract does not exceed Rs. 20,000/- the assessee was not required to deduct tax at source from the said payments - the Board Circular No. 715 dated 8.8.1995 comes to the rescue of the assessee - the AO has not brought on record any document to show that the assessee had contract with any transporter and thus just because the payments exceeded Rs. 50,000/- there was no implicit reason to hold that the payments were made in pursuance to a contract - in favour of assessee. Disallowance of commission paid to foreign agents - Held that:- As assessee has made the payment of commission to non-resident agents for business procured abroad. Thus, the nonresident agents operated outside the country, no part of their income arises in India. Further, since the payment was remitted directly abroad it cannot be held to have been received by or on behalf of the agent in India - Board Circular No. 786 dated 7.2.2000 & CBDT Circular No. 23 dated 23rd July, 1969 is relevant for this case - CIT(A) has given a finding that in earlier years such expenditure have been allowed in the scrutiny assessment u/s. 143(3) - in favour of assessee. Disallowance of vehicle expenses and telephone expenses - CIT restricted the diss allowance to to 1/ 10th instead of 1/5th & 1/3rd respectively by AO - Held that:- 1/10th disallowance against the impugned expenses is reasonable and has been also so held by the tribunal in assessee’s own case in earlier year assessment year 2001-02 no point of rejecting the order of the Ld. CIT(A) - in favour of assessee. Deletion of addition on account of household expenses by CIT(A) - Held that:- Addition in this case has been made by the AO, in a purely arbitrary manner and without any basis and documentary evidence, thus deletion is warranted - in favour of assessee.
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2012 (7) TMI 478
Addition on account of expenses incurred by the appellant on its foreign visit on business visa to Melbourne - Business trip to expand present business offsore at Melbourne – Held that:- where the existing business is to expand or set up a new unit in the same fold, the expenditure incurred in setting up such a unit of existing business is admissible business expenditure - management of its aforesaid overseas unit at Melbourne and its old proprietary business Jeevan Enterprises here in India is the same – In favor of assessee
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Customs
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2012 (7) TMI 514
Power or authority - Commissioner of Customs Custom House Agents Licensing Regulations, 2004 - disagreement with the report of the Inquiry Officer - Held that:- No dispute that the rank of the Commissioner of Customs is higher than the rank of Assistant Commissioner of Customs / Deputy Commissioner of Customs. Under Regulation 22(1), it is the Commissioner who is empowered to issue notice to the CHA setting out the grounds on the basis of which he proposes to suspend or revoke the CHA license and require the CHA to submit his written statement of defense to the Deputy Commissioner of Customs or Assistant Commissioner of Customs nominated by the Commissioner of Customs - the Commissioner is empowered to direct the Deputy Commissioner of Customs or Assistant Commissioner of Customs to inquire into the grounds which are disputed by the CHA - Regulation 22(3) to Regulation 22(5) set out the mode and the manner in which the inquiry is to be conducted by the inquiry officer and submit the report to the Commissioner. It is the Commissioner who is empowered to pass 'such orders as he deems fit' after considering the inquiry report and the representation of the CHA, if any - , whether the inquiry report is in favour of the CHA or not, it is the Commissioner who has to pass the final order as he deems fit on the showcause notice issued by the Commissioner - . The argument that under Regulation 22(6), the CHA is required to make representation only to the extent the findings in the inquiry report that are against the CHA cannot be accepted - the Commissioner is empowered to disagree with the findings recorded in the inquiry report and pass such orders as he deems fit and if the CHA is aggrieved by the order of the Commissioner, he is entitled to challenge the said order by filing an appeal.
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2012 (7) TMI 477
Confiscation of the goods on the charges of mis-declaration and for imposition of penalty – Held that:- Declaration was in accordance with the papers issued by the foreign supplier, the appellant himself came forward indicating presence of rerollable scrap and the appellant's request for mutilation of the same - no justifiable reasons for confiscation of the imported consignment or for imposition of penalty upon the appellant - same is accordingly set aside and appeal is allowed
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Corporate Laws
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2012 (7) TMI 534
Misuse of the machinery provided under the SICA - continuous and systematic abuse of process resorted to by respondent with the sole motive of delaying and defeating the rights of its creditors - Held that:- It was felt that the existing institutional arrangements and procedures for revival and rehabilitation of potentially viable insolvent industrial company were both inadequate and time consuming and a comprehensive law was needed - Section 22 (1) provides that in case the inquiry under Section 16 is pending or any scheme referred to under Section 17 is under preparation or consideration by BIFR or any appeal under Section 25 is pending then certain proceedings against the industrial company are to be suspended or presumed to be suspended and if it is intended by the concerned party that the proceedings are to be continued against the sick industrial company then prior consent or approval of BIFR should be taken. Once the enquiry under Section 16 is treated to be pending, the provisions of Section 22 are attracted and the company court cannot proceed further the matter. In present case it appears to be one where prima facie the provisions of Section 22 of the SICA are taken undue advantage of. Therefore, at least in those cases where the reference was rejected in previous years on merits by the BIFR, guidelines can be issued to ensure that fresh references in subsequent years should not be mechanically entertained - direction that BIFR should formulate necessary Practice Directions as where the references were rejected previously, the BIFR can pass appropriate directions refusing to extend the benefit of Section 22 of the SICA.
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2012 (7) TMI 513
Challenging the scheme of Arrangement by Objector holding 0.001% of the total share capital of the Transferee Company - scheme is propounded to avoid capital gains tax that would have arisen if the Transferor Companies would have directly transferred their shares to the Promoters & colourable device to evade tax - Held that:- Scheme involves merger of Transferor Companies with Transferee Company with consequent cancellation of the shares held by the Transferor Companies in the Transferee Company and consequent reduction in share capital of the Transferee Company by issuance of shares of the Transferee Company to the shareholders of the Transferor Companies.The purpose of the Scheme is to provide long term stability and transparency in the Transferee Company as it was felt that it would be in the interest of the Transferee Company to merge the five Transferor Companies with the Transferee Company, and to enable the Promoter thereof to hold shares directly in the Transferee Company rather than indirectly. The object of the Scheme is not to avoid any tax - Under the Scheme the only difference is that the Promoter will now hold shares directly in the Transferee Company. It is correctly submitted by the Transferee Company that there is nothing illegal or unlawful or dubious or colourful in the Scheme and the same is a perfectly legitimate scheme and permissible by law. Therefore, the objection of the Objector that the Scheme is a tax avoidance device and ought not to be approved, stands rejected. Scheme shall become null and void and be of no effect if the same is not sanctioned by this Court by March 31, 2012 - Held that:- Transferor Companies and the Transferee Company have passed resolutions on 01st May, 2012 and 9th May, 2012 respectively, extending the time for securing the sanction of this Court in respect of the Scheme to May 31, 2012 and on 11th May, 2012 and 12th May, 2012 respectively, passed further resolutions extending the cut off date from May 31, 2012 till the time the Scheme is sanctioned by appropriate Court and filing the Court order with the Registrar of Companies for the Scheme to become otherwise effective. Therefore, the submission of the Objector that the Scheme has become null and void, cannot be accepted. Company Secretary of the Transferee Company was not authorized to file the Affidavit in Rejoinder - Held that:- Considering certified true copy of the resolutions passed at the Board Meeting of the Transferee Company held on 14th May, 2011 that Company Secretary is interalia authorized to file Affidavits in this Court in connection with the Scheme. In view thereof, this objection also stands rejected. Transferee Company in its Affidavit filed before the Regional Director, has failed to disclose certain proceeding where prosecution was launched against the Transferee Company and its Chairman and Managing Director - Held that:- Transferee Company has filed an Affidavit dated 26th March 2012 of its abovenamed Company Secretary, explaining why some of the proceedings were not mentioned in the Affidavit filed before the Regional Director. The explanation is accepted. In view thereof, the said objection is rejected. Challenging the Valuation report - Held that:- Valuation Report has been obtained to comply with the provisions of the Listing Agreement and there is no change in the shareholding pattern of the Transferee Company, as it will issue equivalent number of shares to the Promoters as already held by the Transferor Companies. The pre and post shareholding pattern of the Transferee Company, including Promoters and Mr. Shailesh Mehta will remain unchanged as disclosed in the Notice and Explanatory Statement. Thus no substance in this objection and the same is rejected. Valuation of the shares of the Transferor Companies which are unlisted was not done as per the rules prescribed under the Wealth Tax Act - Held that:- Provisions of the Wealth Tax Act, does not apply in the instant case. Again, the only assets (apart from cash and bank balance) of the Transferor Companies were the shares held by them in the Transferee Company. As such, it was reasonable and proper to value the Transferor Companies on the basis of the value of their shareholdings in the Transferee Company. No pending cases for infringement of Trademark or Patent filed against the Transferee Company and as such there is no question of providing any contingent liability. Transferee Company that by virtue of Regulation 3(1)(i) of the "SEBI Takeover Regulations 1997" and Regulation 10(1)(d) of the SEBI (Substantial Acquisitions and Takeover) Regulations, 2011, the provisions thereof do not apply to the acquisition of shares under a scheme of arrangement or merger - there is nothing illegal, unlawful, dubious or colourful in the Scheme and the same is a perfectly legitimate Scheme, which is permissible in law - decided against objector.
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Service Tax
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2012 (7) TMI 508
Penalty - stockbroking services - defaulted in making payment of service tax liability – Held that:- Service tax liability was duly reflected in ST-3 Return filed with the Department before being pointed out by the Department - It also indicates his bona fideness in discharging service tax liability - Service tax liability was not discharged on being detected by the Department, but paid voluntarily pursuant to the disclosure already made in the ST-3 Returns - case covered under section 80 of the Finance Act and the penalty on the appellant is not warranted - Appeal is allowed
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2012 (7) TMI 507
Effect of amended notification change - Notification No.41/2007 - Held that:- The impugned Notification No.41/07 is a different kind of notification essentially granting a refund of service tax paid on services used in relation to export of goods - the cited notification has been amended to facilitate Indian exports to be freed from domestic taxes and to make them competitive in the international market and the Board in its circular dt. 12.3.2009 clarified that the amended provision as in existence on the date of filing the refund may be applied in preference to the legal position that normally the provisions as applicable at the time of export be applied.
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2012 (7) TMI 506
Rejection of appeal on the ground of time bar - Held that:- Contention of assessee for delay in filing the appeal has occurred due to correspondence with the corporate office for legal advice as to whether or not an appeal is to be filed is not plausible one for allowing the petition for condonation of delay as it was not a matter beyond the control of the appellant - Commissioner (Appeals) has no power to condone the delay beyond the period of 30 days - against assessee.
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2012 (7) TMI 505
Business Support Service - Interconnection, infrastructure and space facility to Basic Telephone Service Providers - demand of service tax on infrastructure charges, port charges, rent for space etc - Held that:- Space and infrastructure provided by the Appellant to the private operators enabling them to carry out their activity falls under the perview of business support service in terms of definition of such service in Section 65(104c)that brought it to the fold of Section 65(105)(zzzq) and tax liability arose - thoroughly examining the ST Circular No. 46/09/2002 dated 8.8.2002 clarified that when space is used, rental thereof shall not be liable to service tax but such a clarification was mis-interpreted by the appellant to claim immunity from taxation - the appellants could not bring out any material to suggest that this is out of ambit of that section - against assessee.
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2012 (7) TMI 504
Service Tax on Profit sharing agreement - Demand of Service tax on account of business support services provided to BCCI-IPL – Held that:- prima facie demand is not maintainable because they were not providing any services to the BCCI-IPL and the whole activity is carried out on the basis of profit sharing agreement between the appellants and CCI-IPL. Payment made to players for business promotion activity - held that:- it will be sufficient to call for a deposit of Rs. 1 lakh on this account. Reversal in terms of Rule 6(3)(i) of the Cenvat Credit Rules for providing exempted services – Held that:– activity of organizing matches is not taxable and part of this cost is recovered through gate collections. The appellants could not have taken cenvat credit on the input services availed by them for organizing matches. It is proper to call for a pre-deposit of Rs.18 lakhs on this count.
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2012 (7) TMI 503
Cenvat credit – refund – duty paid under protest - department took objection for the debiting of interest amount in the cenvat account - refund claim for the excess amount paid – Held that:- Original debit in the cenvat account was under protest and the second payment was made since, the department objected to debiting of interest in the cenvat account - Second payment has to be taken as part of the payment made originally and it cannot be said that there was no protest as regards the second payment when it was rectification of an error committed in debiting the interest amount in the cenvat account - amount paid by the appellant has to be treated as paid under protest - original adjudicating authority's decision to allow the refund by way of credit in the cenvat account is correct – pre-deposit waived
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2012 (7) TMI 502
Demand of service tax, interest and penalty - Collection of advance fee from students - services were brought into the Service Tax net w.e.f . 01.07.2003 - appellant has been collecting the advance fees from the students during the period from April 2003 to June 2003 – Held that:- they are liable to pay Service Tax on the amount collected as advance fees by them from their students prior to the said services came into the Service Tax net. appellant is liable to discharge the Service Tax liability and interest thereof on the amount collected by them and considering the said amount as cum tax value. Regarding penalties under Section 76 & 78 – Held that:- in the mind of the assessee during the relevant period as to the taxability of the amounts which were collected in advance. Appellant has made out a case for invokation of Section 80 of Finance Act, 1994 and by invoking the provisions of Section 80 of Finance Act, 1994, penalties imposed under Sections 76 & 78 of Finance Act, set aside. lower authorities will calculate the Service Tax amount, interest thereof payable by the appellant, considering the amount collected by the appellant as cum tax amount.
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2012 (7) TMI 501
Club or association services – demand of service tax – Held that: - Rejection of the appellant’s appeal for a refund claim as per section 96J on the ground that the matter is pending before the Tribunal. It was submitted that the appeal filed by them against the rejection is pending with Commissioner (Appeals). Therefore no concern with service tax liability on subscription collected by the appellant from their members under club or association service. Business auxiliary service - collecting advertisement charges from manufacturers of medicines for publishing the details of the medicines manufactured in the "Chemist News" in monthly publication of the appellant – Held that:- The activity undertaken by the appellant cannot be considered as promotion or marketing or sale of goods produced AS details such as name of the company, name of the product, packing details, category, VAT payable, stocks price, retailer price, MRP and whether the price includes local tax or not are of use only to the chemists and druggists - the purpose is to help the members of the association to know the margins and also to ensure that by at correct price and get the proper margins in their business - mere publication of name of the company and the details explained above cannot amount to sale or promotion. Sale of space - it is quite clear that the activity undertaken by the appellant is nothing but sale of space - details of "Chemist News" submitted by them for the purpose of registration to support this submission that the monthly news is nothing but a newspaper - the service cannot be classified under business auxiliary service as the service is more specifically covered under the heading sale of space as the activity undertaken is only sale of space in monthly news - in favour of assessee.
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2012 (7) TMI 500
Goods Transport Service – no service tax paid – Held that:- When the transporter is same and recipient is respondent and there is no contradiction that tax was collected from the transporter, double taxation on the same transaction is inconceivable under the present provisions of Finance Act, 1994 - no loss of Revenue - Revenue appeal dismissed.
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2012 (7) TMI 499
Manpower Recruitment and Supply Agency Service - stay application for demand of service tax along with interest and various penalties - Held that:- As prima facie the activity undertaken by the applicant is covered under Manpower Supply Services and the applicants are under bonafide belief that their demand for the extended period is not sustainable, therefore, the applicant has failed to make out a case for 100% waiver of pre-deposit for the normal period - against assessee.
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Central Excise
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2012 (7) TMI 512
Entitlement to interest on the delayed refund - @ 6% per annum in terms of the notification bearing No.67/03-CE(NT) dated September 12, 2003 issued for the purposes of Section 11BB as decided by the Assistant Commissioner - Held that:- As decided in Commissioner of Central Excise vs. ITC Limited [2004 (12) TMI 90 - SUPREME COURT OF INDIA] interest was payable @ 12% per annum for delay in refund of the amount paid by way of predeposit - the Revenue is trying to take advantage of the fact that this Court while referring to the circular No.802/35/2004-CX dated December 8, 2004 directed the respondent to pay interest to the appellant in terms of the circular on the pre-deposit of the delayed refund within two months from today it has to be construed that this Court meant the rate of interest which was awarded by the Supreme Court in the case Commissioner of Central Excise vs. ITC Limited which was the rate quantified by the Supreme Court in absence of any statutory provision in the said Act. contention of the Revenue that the Central Government is the only authority to fix the rate of interest and that Section 35FF was brought in by providing rate of interest on payment of pre-deposit delayed refund and quantified the rate of interest to be the same as in Section 11BB would not apply to the petitioner’s case as Section 35FF has been introduced in the Act by way of an amendment inserted with effect from May 10, 2008 by Section 85 of the Finance Act, 2008 (18 of 2008). Therefore, we clarify that the petitioner is entitled to interest @ 12% per annum on the amount of refund - in favour of assessee.
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2012 (7) TMI 511
Application made u/s 35 -(H)(1)- denial of benefit of MODVAT credit on capital goods without issuing SCN - Held that:- Commissioner of Appeals held that since no show cause notice was served on the assessee before denying them the benefit of claiming modavat credit such order of adjudicating authority is bad in law and liable to be set aside and was accordingly set aside - to allow the application u/s 35 -(H)(1) it is necessary for this Court to record a finding that question of law proposed by the applicant is a question of law, secondly it arise out of the case and third it is a referable question by the Tribunal to this Court for its answer on merit - as order of adjudicating authority was rightly set aside by the Commissioner of appeal and Tribunal no substantial question of law arises.
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2012 (7) TMI 510
Waiver of pre-deposit of duty - SCN was issued to the appellant demanding duty with interest and for imposition of penalty on the basis of electric consumption of their rolling mill - Commissioner (Appeals) directed the appellant to deposit whole of the duty amount – Held that:- Commissioner (Appeals) has not decided the appeal on merits and now the applicant undertook to deposit 25% of the duty confirmed for hearing of the appeal, therefore, the impugned order is set aside and the matter is remanded to the Commissioner (Appeals)
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2012 (7) TMI 509
Waiver of pre-deposit – Valuation - manufacture and sale of cars - dealers were given fixed discount for selling cars of the appellant company and dealers have to provide Pre-Delivery Inspection (PDI) and two free services from such dealers' margin - Whether charges in respect of PDI and free service charges are to be added to the transaction value of the cars – Held that:- Charges towards Pre-Delivery Inspection and after sales services by dealers from buyers of the cars are to be included in the assessable value of the cars in the light of the definition of transaction value given in Section 4 (3) (d) of the Central Excise Act, 1944 - In favour of the Revenue - applicant directed to deposit 50% of the duty Waiver of pre-deposit - Scope of term 'undue hardship' - held that:- Two significant expressions used in the provisions are “undue hardship to such person“ and “safeguard the interests of revenue”. Therefore, while dealing with the application twin requirements of considerations i.e. consideration of undue hardship aspect and imposition of conditions to safeguard the interest of Revenue have to be kept in view.
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2012 (7) TMI 476
Waiver of pre-deposit - Appellant is required to pay 8% or 10% of the amount of exempted products cleared by them from their factory premises, as per the provisions of Rule 6 of Cenvat Credit Rules, 2002/2004 – Held that:- Appellant cleared exempted product falling under Chapter 31 of Central Excise Tariff Act, 1985, at the nil rate of duty - appellant has taken cenvat credit on the inputs and used them for manufacturing bulk drugs and this product Penmycellium Meal has arisen as a waste during the process of manufacturing – Decision in the case of Rallis India Limited (2008 (12) TMI 46 - BOMBAY HIGH COURT) followed. – Appeal is allowed
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2012 (7) TMI 475
Stay - condonation of delay – Held that:- There was an affidavit filed by a person who received the order in original and had stated that after receiving the order in original he placed it in the cupboard and forgot to handover the same to the management. Any statement on oath, whether it is of a Clerk or a Managing Director, needs to be considered in a proper perspective. In our view, in application for condonation of delay such affidavit should have been considered in an objective manner and not in narrow - justifications given by the appellant before the first appellate authority for delay in filing appeal are to be accepted – delay condoned - Stay petition allowed and appeal is allowed by way of remand.
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2012 (7) TMI 474
Cenvat credit – Rule 6 - Maintenance of separate accounts - manufacturers of sugar and molasses - two waste products are generated pressmud and waste water which for complying with the environmental regulations, are mixed together and converted into bio-compost which is sold by them – alleged that since bio-compost is an excisable product under Chapter 31 of the Central Excise Tariff with nil rate of duty, same would be an exempted goods as defined in Cenvat Credit Rules, 2004 - no separate account and inventory have been maintained - appellant required to pay an amount equal to 5% of the sale value of bio-compost – Held that:- Show cause notices issued in these cases are defective inasmuch as neither of the show cause notices indicates as to which are the input and input services used which have resulted in the generation of press-mud which was converted into bio-compost - orders are set aside and the appeals are allowed
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2012 (7) TMI 473
Reduction of the cost freight and insurance charges incurred for carrying the goods from the depot to the customer’s end would make the wholesale price available ? - Held that:- The assessee become liable to pay excise duty at the time of removal of the manufactured goods from its factory, but such duty is leviable on the wholesale price of the manufactured goods. The assessee does not have any wholesale market either outside its factory gate or at anywhere else, the Law authorizes reduction from the retail price, such amount, as is necessary and reasonable to arrive at wholesale price - while there is no direction that the freight and insurance charges for carrying the goods from the factory to the depot is to be reduced from the retail price, there is no bar in reducing the same and, while doing so, as provided in the proviso, the proper officer is required to take note of the nature of the excisable goods, the trade practice in that commodity and other relevant factors. The instant matter stood closed as far back as in 2003 decided in favour of the assessee, it would not be appropriate to interfere with the judgment of the Tribunal - but in future it will be permissible for the revenue to go into the question whether the entire freight and insurance, as paid by the assessee, for carrying the goods from its factory to different depots would stand the test of necessity and reasonableness having regard to the nature of the goods dealt with, the trade practice in the commodity and other relevant factors.
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Wealth tax
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2012 (7) TMI 533
Valuation of immovable property – Open Land - land in question was declared surplus land under the Urban Land [Ceiling & Regulation] Act, 1976 which was having depressing effect on the value of the asset – Held that:- Revenue, having already accepted the depressed valuation during the Assessment Years 1988-89 to 1990 and then for Assessment Year 1991-92, it was not open to the Revenue to assess the property on the basis of the market value, which normally could have fetched without any restriction or prohibition, but ought to have accepted the value of open land with such restriction and prohibition at Rs. 1,44,146/-, as assessed by the Govt. Regd. Valuer - Appellate Tribunal was incorrect in holding that immovable property should be valued as per the open market rate, without any restriction and prohibition - in favour of the Assesee
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Indian Laws
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2012 (7) TMI 498
Prohibition of horse-racing on unlicensed race- courses - Validity of the demand notice was questioned by the appellant as delegation of powers u/s 11 to the Lt. Governor to fix the licence fee without any guidelines is excessive delegation of legislative power and is therefore ultra vires and in the absence of an element of quid pro quo, the licence fee charged was not in the nature of a fee but a tax and the ten fold increase in licence fee was highly excessive - Held that:- In the instant case, it is plain from the scheme of the Act that its sole aim is regulation, control and management of horse-racing. Such a regulation is necessary in public interest to control the act of betting and wagering as well as to promote the sport in the Indian context. To achieve this purpose, licences are issued subject to compliance with the conditions laid down therein and violation of the conditions is penalised under the Act besides a provision for cognizance by a court not inferior to a Metropolitan Magistrate. To ensure compliance with these conditions, the 1985 Rules empower the District Officer or an Entertainment Tax Officer to conduct inspection of the race club at reasonable times. For the purpose of enforcement, wide powers are conferred on various authorities to enable them to supervise, regulate and monitor the activities relating to the race course with a view to secure proper enforcement of the provisions. Therefore, by applying the principles, it is clear that the said levy is a 'fee’ and not 'tax’. A licence fee imposed for regulatory purposes is not conditioned by the fact that there must be a quid pro quo for the services rendered, but that, such licence fee must be reasonable and not excessive. It would again not be possible to work out with arithmetical equivalence the amount of fee which could be said to be reasonable or otherwise. If there is a broad correlation between the expenditure which the State incurs and the fees charged, the fees could be sustained as reasonable. The object of the Act, as synthesized from its provisions, is to regulate, monitor, control and encourage the sport of horse-racing. For this purpose, licences are issued subject to certain conditions. The compliance with the licence conditions is inevitable for renewal of the licences as well as significant to avoid any penalty under the Act. To ensure such compliance, as aforesaid, district officers/ entertainment tax officers are entrusted with the duty of inspection it is not of a general nature but requires expertise and training and also constant vigil on the activities of the race course. The expenses incurred in carrying out such regular inspections have to be considerable. Hence, in our opinion, the licence fee imposed in the present case is a regulatory fee and need not necessarily entail rendition of specific services in return but at the same time should not be excessive Quantum of the licence fee was increased by the Government on account of non revision of the same since the commencement of the Act. Evidently, the inflation during this period was taken as the criterion for increasing the quantum of the fee. It is a reasonable increase keeping in view the fact that the expenditure incurred by the Government in carrying out the regulatory activities for attaining the object of the Act would have proportionately increased
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