TMI Tax Updates - e-Newsletter
July 28, 2012
Case Laws in this Newsletter:
Income Tax
Customs
FEMA
Service Tax
Central Excise
CST, VAT & Sales Tax
Wealth tax
Highlights / Catch Notes
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Income Tax:
DTAA - Agreement for Avoidance of Double Taxation and Prevention of fiscal evasion with foreign countries - Estonia - Notification
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Income Tax:
The fact that the trust had borne the tax at maximum marginal rate on its income has also not been controverted. Therefore the addition cannot be upheld on the applicability of clause (vi) of sub-section (2) of section 56 as the money received by the assessee is not "without consideration". - AT
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Income Tax:
Deduction u/s. 80IB(5) - assessee engaged only mining and crushing into small pieces - not a manufacturing activity - AT
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Income Tax:
Carry forward of investment allowance - unabsorbed depreciation of Amalgamating Company - Section 72A - Claim allowed - HC
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Income Tax:
Merely because part of the share capital is used as a working capital, the character of the receipt would not become a revenue receipt. - the gains on account of foreign exchange fluctuations, in the event such share capital collected in foreign exchange, hence is only capital receipts - HC
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Income Tax:
Assessment proceedings relating to AY 1988-89 - Date of remand back by ITAT to AO 5.7.1994 - No fresh assessment thereafter by the AO - Period of limitation - Section 153(2A) - HC
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Income Tax:
Rate of TDS on transportation charges paid to the transporter for carriage of goods from one location to another location - Rate of TDS on payment of hire charges paid for LMV and Buses - AT
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Income Tax:
Notice u/s 148 in which no assessment year is mentioned cannot be treated as legal and valid notice. Further there is no material on record to show that the advocate of the dissolved firm had any authority to receive notice on behalf of the partners of the dissolved firm. - AT
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Income Tax:
Capital receipt or revenue receipt - Compensation as business profit u/s 28(va) - what was transferred was a right to carry on business and that being so, application of the main section 28(va)(a) is foreclosed and forbidden, by the use of the words “shall not” in the Proviso. - AT
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Income Tax:
Depreciation on goodwill - Treatment of Goodwill Arising on Amalgamation - This is only a book entry and it is only another way of disclosing the intrinsic value of the fixed asset of the company. - AT
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Income Tax:
Exemption u/s. 10(23C)(iiiad) - even if the assessee has not deposited the TDS on the payment of rent, but if the assessee has satisfied the requirement of section 10(23C)(iiiad) of the IT Act, then the assessee would be entitled for exemption. - AT
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Income Tax:
Accrual of income on government bonds - 8% GOI Bonds - interest for the period from 1/4/2006 to 31/3/2006 would only accrue on 30th June as per the scheme - AT
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Income Tax:
Entitlement to set off the brought forward business loss against the rental income, car and computer hire charges and the commission income - set off allowed - HC
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Income Tax:
Unexplained share application money - whether AO to establish with the help of material on record that the share monies had come or emanated from the assessee's coffers. Section 68 of the Act casts no such burden upon the Assessing Officer. - HC
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Income Tax:
Provision for ascertained liability or contingent liability - Tribunal committed a serious error in law in holding that such ad hoc provision would nevertheless qualify for deduction - HC
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Income Tax:
Subvention assistance received from Holding Company - thus amount infused by BHW Holding AG, Germany to the assessee by way of subvention assistance, is taxable as a revenue receipt - HC
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Income Tax:
Denial of Exemption claim on Salary - the salary accrues to the assessee in Japan and the accrued salary is partly delivered by Motorola India in India. Hence, there is no accrual of salary in India - as the salary is not earned for rendering services in India - AT
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Income Tax:
Fees for Included Services in terms of Article 12 of the India US treaty - the payment received by the assessee from Lucent is taxable in India under Article 12 as fees for included services. - AT
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Income Tax:
Capital Gains - amount received from partnership firm on retirement - payment of consideration in cash - share of goodwill - there was a liability to tax on account of capital gain. - AT
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Income Tax:
Business of selling time share units - accrual of income - mercantile-system of accounting. - holiday facilities to its members - recognizing the entire receipt as income in the year of receipt can lead to distortion. - AT
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Income Tax:
Levy of penalty u/s 271B - it is not the case of persistent default but due to inadvertence and bonafide belief and having lack of knowledge, the assessee could not comply with the provisions of sec 44AB - no penalty - AT
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Income Tax:
Penalty u/s. 272B read with rule 114B and 114D - belated production of documents - penalty not to be levied. - HC
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Customs:
Merely because the conditions provided for adjustment of credit in the DEPB scrips, it cannot be stated that either there was no exemption from payment of customs duty or that the Central Government was levying and collecting customs duty from the importers in form of adjustment of credit in the DEPB scrips - HC
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Customs:
Duty confirmed u/s 28(2) and penalty imposed u/s 114A - claim of exemption under Notification No.32/2005-Cus. dt. 08/04/2005 under the Target Plus Scheme - c.c. copper rods imported by the assessee - AT
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DGFT:
Amendment in FTP (RE-2012)(2009-2014) - Notification
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DGFT:
Agencies authorized to issue Certificate of Origin - (Non Preferential)Addition in Appendix 4C-regarding. - Public Notice
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DGFT:
Amendment of HBP Vol I (RE 2012)/ 2009-14 - Public Notice
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SEZ:
SEZ notified at Kalapatty Village, Coimbatore District in the State of Tamil Nadu - Notification
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FEMA:
Ultra vires - Member and Chairperson of appellate tribunal - As the appointment of part time Member was quashed, as a logical corollary, such a person could not be allowed to be appointed to the post of Chairperson. - SC
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Corporate Law:
Filing of Cost Audit Report and Compliance Report in the eXtensible Business Reporting Language (XBRL) mode. - Circular
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Corporate Law:
The Investor Education and Protection Fund(uploading of information regarding unpaid and unclaimed amounts lying with companies) Rules 2012. - Circular
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Indian Laws:
Verification Certificate - Certificate under provisions of rule 114(4) of Income Tax Rules, 1962
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Wealth-tax:
Wealth tax - Valuation - The market rates referred to by the assessee with regard to other properties which are almost at the rates fixed by the Revenue Authorities should be market rates - AT
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Service Tax:
Tour Operator's Service - as the assessee were running the buses on predetermined routes in scheduled hours under such permit can be held to have undertaken the business of planning, scheduling, organizing or arranging tours squarely covered by the main part of the definition of "tour operator" under Section 65(115). - AT
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Service Tax:
Refund of service tax by way of self adjustment under rule 6(4A) / 6(4B) - In the present case the claim for refund has arisen on account of interpretation of law and therefore such refund cannot be claimed refund under Rule 6 (4A) - AT
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Service Tax:
Short payment of service tax - whether the information stands given by the assessee, in response to the query by the Department or suo motu the fact remains that the information becomes available to the Department. - benefit of extended period of limitation granted. - AT
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Service Tax:
Valuation - inclusion of statutory fees and levied -no benefit can be given to the appellant on account of statutory levies and charges and the confirmation of demand on these charges by the Commissioner is liable to be upheld. - AT
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Service Tax:
Commercial Coaching or Training Services and Management, maintenance and repair services - training in Aircraft Maintenance Engineering - held as taxable services - exemption on account of vocational services not available - AT
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Service Tax:
Applicability of Ruling of AAR in another issues - the status of AAR is higher than that of this Tribunal and therefore, this Tribunal cannot ignore the ruling by the AAR in a case where the facts are similar/identical and the questions of law are identical. - AT
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Service Tax:
Difference between gross receipts shown in the profit and loss account and the value of service rendered by them as declared in their service tax return. - Revenue recognition as per AS7 - pre deposit waived - AT
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Service Tax:
Short payment of service tax on Compliance Services - though compliance with laws is part of the responsibilities of management such responsibility per se cannot bring it into the ambit of the words "in connection with the management of any organisation" - AT
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Central Excise:
Manufacture - Classification - “Iron Ore“ or “Iron Ore Concentrate“ - processes undertaken by the Respondents do not result in the manufacture of a different commercial commodity, not liable to duty of excise duty. - SC
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Central Excise:
Confiscation of excess stock seized - excess found raw materials cannot be confiscated. - AT
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Central Excise:
Classification of the product Taped Sheets for Mattresses - the claim of the assessee that the product is to be classified under 5810 has to be sustained. - AT
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Central Excise:
Marketability - Excise duty on Intermediate products - Captive consumption - manufacture of edible biscuit which became exempt - the sugar syrup and glucose flavour comes into existence at intermediate stage. - AT
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Central Excise:
Admissibility of Cenvat credit - various issues - re-credit of amount wrongly debited - suo motto credit taken is not proper and is recoverable. - AT
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Central Excise:
The process of denaturing in the tanker / manufacture of denatured alcohol - This is a case where two views are possible - AT
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Central Excise:
Related persons – assessable value – Merely because ice cream was manufactured using brand name acquired by HLL and entire product was sold to BILIL/HLL, that did not make them related person - AT
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Central Excise:
Cenvat credit on the CNC wire cut machine - Capital goods can be machines, machinery, plant, equipment, apparatus, tools or appliances. - HC
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VAT:
Method of payment of tax, interest or penalty. - Notification
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VAT:
Section 5(2) of Delhi VAT Act and Rule 3 of Delhi VAT Rules cannot be declared to be invalid. - HC
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VAT:
Disallowance of the deduction of sub-contractor's turnover - Once it is concluded that there is no basis for apprehension that mechanism provided under the DVAT Act and Rules can lead to double taxation it is advisable to agree with the contention of the learned ASG that the manner in which deduction and exemptions are to be granted is the legislative prerogative - HC
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2012 (7) TMI 703
Denial of claim Head office expenses - invoking the provisions of section 44C - DTAA between India and UAE - determining the profits of PE in India - Held that:- The insertion of phrase, "in accordance with the provisions of and subject to the limitations of the tax laws of that State", the mandate of applicability of the domestic law has been provided, in allowing the deduction of expenses of the PE and determination of profit under the Income Tax Act. Consequently section 44C becomes applicable. Cardinal principle is that when two sovereign nations enter into an agreement and have come to an understanding regarding the terms, views expressed in the agreement, such terms cannot be unilaterally changed. Once the Government of India and Government of UAE had not used the limitation clause of applicability of domestic law in determining the profits and deduction of expenses of PE under Article 7(3), the same cannot be read into even impliedly, that such a provision existed. One has to see the merits of the word and its meaning understood when the two high sovereign nations entered into an agreement. When a particular provisions in the agreement has been brought from a particular date, it has to be, prima facie, taken to be prospective in operation, unless it is expressly or by necessary implication provided or made to have retrospective operation - Here in this case, if any such interpretation is given for retrospective operation of this Article, it creates new obligation and disturbs the assessability of the profit of the PE. Thus, the amendment brought in Article 7(3) w.e.f. 1-4-2008, will not apply retrospectively - that income of the PE of the assessee should be computed as business income after allowing all the expenses attributable to its business in India including the head office expenses - in favour of assessee. Calculation of interest u/s 244A - Held that:- CIT (A) has not gone into the question of correctness of method adopted by the AO who has calculated the interest by reducing the refund of tax already granted to the assessee but decided the issue on the ground that the method adopted by the AO is being consistently followed in respect of all assessee. Therefore, the impugned order of the CIT (A) qua this issue is not sustainable in law and liable to be set aside - direct the AO to calculate the interest on the refund due to the assessee without reducing the interest under section 244A which is part of the refund earlier granted from the refund due - in favour of the assessee Exemption u/s 10(15) - Held that:- Section 10(15)(iv) are very clear and unambiguous and what is exempt under the said section is 'interest payable' and not the income by way of the interest; and hence, the revenue's grievance is devoid of any substance - in favour of the assessee. Addition in respect of guarantee commission - Held that:- If any assessee acquires a right to receive income, the income can be said to accrue to him though it may be received later on. Unless and until there is created in favour of an assessee a debut due by somebody, it cannot be said that income has accrued to him. A mere claim to income without an enforceable right thereto cannot be regarded as accrued income for the purpose of income-tax Act. When the bank gives a guarantee, its obligation extends to the entire period for which guaranty is given. In exchange of this obligation, the bank receives a commission. It is wrong to say that such commission accrues to the full extent the moment when the bank stands as a guarantor. Since the obligation is spread over a period of time, so should be the guarantee commission - in favour of assessee. Addition made in the computation of total income - difference between cost and book value of investment - Held that:- As the method of valuation followed by the assessee to value its investment was cost or market value whichever was lower. The assessee had shown a higher value and paid the tax at a higher rate in the assessment year 1996-1997. Such valuation was reversed as per its method of accounting and the differential amount has been claimed as loss. Thus, such a claim is duly allowable deletion of addition is thus warranted - in favour of assessee. Challenge allowability of bad debts without setting of the provision for bad debts - Held that:- The total income of the assessee can be computed at the end of the previous year and in computation of such income deduction u/s 36(1)(viia) has to be allowed. If bad debts are written off in the books of account during the course of the previous year, such bad debts must be deducted as admissible u/s 36(1)(viia). Apparently, the deduction allowable under clause (viia) in respect of bad debts will have to be taxed against the opening credit balance in the provision of account to arrive at the quantum of deduction allowable while computing the total income - no infirmity in the reasoning given by the CIT(A) for allowing the assessee's claim - in favour of assessee.
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2012 (7) TMI 702
Liability for TDS u/s.195 - secondment agreement - India-U.K. Treaty - Disallowance u/s.40(a)(i) - an agreement of UK based company with M/s. Msource (India) Pvt. Ltd. to outsource the provision of certain process and call centres - Held that:- The assessee was the real and economic employer of the secondees under the secondment agreement entered into between Abbey National Plc, UK and the assessee. Fees for technical services - Payments to Abbey National Plc., UK falls under section 9(1)(vii) - UK DTAA - Held that:- Section 9(1)(vii) is attracted if there is a rendering of service for which a consideration should follow. In the instant case, it was specifically agreed by the parties that Abbey National Plc, UK would only second staff to the assessee as per the secondment agreement. No services were rendered by it to the assessee. 'Fees for technical services' as per section 9(1)(vii) means any 'consideration' for rendering of managerial, technical or consultancy services (including the provision of services of technical or other personnel) whereas in the instant case, what was paid to Abbey National Plc. UK by the assessee was reimbursement of salary costs and other administration costs, relating to seconded personnel/staff, which was initially paid by Abbey National Plc, UK - the use of the words 'services of' in the above expression u/s.9(1)(vii) of the Act mandates the rendering of some sort of work through the act of the services of technical on other personnel, thus the assessee cannot be categorized as 'fees for technical services' u/s.9(1)(vii) - in favour of assessee. Fees for technical services falls under Article 13 of DTAA between India & U.K - Held that:- The technical or consultancy service rendered should be of such a nature that it 'makes available' to the recipient technical knowledge, know how and the like. The service should be aimed at and result in transmitting technical knowledge, etc. so that the payer of the service could derive an enduring benefit and utilize the knowledge or know how on his own in future without the aid of the service provider - Unless the service provider makes available his technical knowledge, experience, skill, know how or process to the recipient of the technical service, in view of the clauses in the DTAA, the liability to tax is not attracted - the reimbursement of salary and other costs by the assessee to Abbey National Plc, UK cannot be regarded as 'fees for technical services' under Article 13 of the India-UK Treaty. This Agreement shall have the effect of constituting the Secondees as employees of Abbey India and the Secondees shall be and remain employees of Abbey UK during Secondment. The Secondees shall not be entitled to any remuneration nor employment benefits from Abbey India and it is agreed that Abbey UK shall, as employer of the Secondees, be responsible for all such remuneration and benefits (including without limitation Pension Contributions) and all other liabilities as employer and for accounting to the Inland Revenue in the United Kingdom and all other authorities for all taxes, National Insurance or similar contributions - the reimbursement of salary costs and other expenditure was without any profit element and hence cannot be regarded as income chargeable in the hands of Abbey National Plc, UK under Article 13 of the India-U.K. Treaty - questions are answered in favour of the assessee and against revenue as the reimbursement of salary and other expenditure made by the assessee to Abbey National Plc, UK under the secondment agreement were not liable for TDS u/s. 195 and consequently the said payments are not liable for disallowance u/s.40(a)(i) - appeal decided in favour of assessee.
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2012 (7) TMI 701
Trust dissolution proceedings added to the income of the assessee - invoking section 56[1] and 56[2][vi] - assessee contested against the applicability of the provisions of Section 2[24][iva]treating income in the hands of the Appellant - Held that:- For applicability of Clause (vi) of s/section (2) of section 56 there should be a sum of money (ii) that its aggregate value exceeds Rs. 50,000 (iii) that it should be received "without consideration" by an individual or HUF and (iv) in any previous year, from any person, between the period 1st April 2006 and 1st October 2009. The assessee has received this amount on dissolution of trust in the capacity of beneficiaries as already been accepted by the Commissioner (Appeals),therefore, the amount received by the trust is in pursuance of dissolution of trust. The amount received in pursuance of dissolution of trust cannot be termed to be an amount received by the beneficiaries "without consideration". The fact that the trust had borne the tax at maximum marginal rate on its income has also not been controverted. Therefore the addition cannot be upheld on the applicability of clause (vi) of sub-section (2) of section 56 as the money received by the assessee is not "without consideration". Disallowing expenses u/s 14A - Held that:- As disallowance has been computed with reference to rule 8D, which is not applicable to the year under consideration therefore, this issue has to be restored to the file of AO to re-compute the same in accordance with the judgment of Hon'ble Jurisdictional High Court rendered in Godrej & Boyce Mfg. Co. Ltd. v. DCIT [2010 (8) TMI 77 - BOMBAY HIGH COURT]Rule 8D not retrospective and is applicable from Assessment Year 2008-09.
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2012 (7) TMI 700
Reopen the assessment - notice u/s 148 - excess deduction u/s 80IB had been allowed - Held that:- The reasons recorded by AO shows that it was upon verification of the return of income for the relevant assessment years that it was found that the petitioner had other income which was not eligible for deduction under section 80 IB and that the same had not been considered at the time of assessment under section 143(3) r.w.s 147 - that by not doing so excess deduction had been allowed to the assessee under the said section. Thus, it is apparent that the Assessing Officer has not come across any new material, which the petitioner had failed to disclose - nothing whatsoever on record to indicate that there was any failure on the part of the petitioner to disclose fully and truly all material facts necessary for its assessment - in favour of assessee.
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2012 (7) TMI 699
Validity of initiation of re-assessment proceedings u/s. 147 - allowance of excess deduction u/s. 80IB(5) - Held that:- As the assessment was reopened on noticing that excess deduction to u/s. 80IB(5) was granted to the assessee. This re-opening of assessment is falling under the purview of clause (b) to Explanation 2 to proviso 2 of section 147 and considering the ratio laid down by the tribunal in the case of M/s. Kernex Micro Systems (India) Ltd. [2012 (7) TMI 647 - ITAT HYDERABAD ]that where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the AO that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return, the AO is entitled to reopen the assessment no infirmity in the order of the CIT(A) - against assessee. Disallowance of deduction claimed u/s. 80IB - AO stated that assessee was not manufacturing any new article or thing as required u/s. 80IB - Held that:- When the change or a series of changes lakes one commodity to the point where commercially it can no longer be regarded as the original commodity, but instead is recognized as a new and distinct article, then it can be said that 'manufacture' takes place. In the present case, the assessee had broken the boulders in small pieces, but there is no change in the composition of the boulder. Only the big size had been reduced to small size. So, it cannot be said that breaking of boulders into small pieces of stone is a manufacturing activity - the assessee has not carried on the integrated activity of mining, processing and polishing and it is engaged only mining and crushing into small pieces - against assessee. Dis allowance of claim for grant of TDS - Held that:- If the TDS is relating to the assessment year under consideration and AO whenever determines an amount of tax due from the assessee, he should consider the TDS certificate relevant to assessment years under consideration. Accordingly, we direct the Assessing Officer to consider the TDS certificate filed by the assessee relating to these assessment years and give credit for the same - in favour of assessee. Disallowance being employee share of contribution to PF - Held that:- As decided in CIT vs. ANZ Information Technology Pvt. Ltd. [2007 (7) TMI 169 - KARNATAKA HIGH COURT ] that as contribution made towards provident fund belatedly but before the due date of furnishing return of income u/s. 139(1) dis allowance need to be deleted - in favour of assessee. Levy of interest u/s. 234B and 234C - Held that:- As Levy of this interest is consequential and mandatory in nature and interest has to be computed by the AO in accordance with law - against assessee.
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2012 (7) TMI 698
Carry forward of investment allowance - unabsorbed depreciation of Amalgamating Company - held that:- Section 72A is a specific provision to deal with cases of carry forward and set off of accumulated loss and unabsorbed depreciation allowance in cases of amalgamation or demerger. As per sub section (1), the accumulated loss and unabsorbed depreciation of the amalgamating company is deemed to be the loss or the allowance of depreciation to the amalgamated company for the previous year in which the amalgamation is effected. Unabsorbed depreciation is defined in the Explanation to mean share or allowance of an amalgamating company which remains to be allowed and it would have been allowed to the amalgamating company under the provisions of the Act as if the amalgamation had not been effected. The benefit available under Section 72A was also considered by the Bombay High Court (1990 (7) TMI 44 - BOMBAY HIGH COURT). - Decided in favor of assessee. Regarding investment allowance - the transferor company had not created any reserves in compliance of the provisions of Section 32A(6) - Decided against the assessee. Amortization of expenses - section 35D - held that:- expenditure incurred in connection with the additional issue of share and this was directly relatable to the expansion of the capital base of the company. - deduction allowed - Decided in favor of assessee.
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2012 (7) TMI 697
Research & Development expenses as well depreciation claimed on the assets engaged in carrying out this work. - Section 35 - whether a company not in the manufacturing activity but only in the trading activity is entitled for claim of deduction u/s.35 of the I.T.Act. Section 35 is in respect of expenditure on scientific research and prescribed deduction to an eligible claim. - held that:- assessee changed the stand and contested for allowance as revenue expenditure - . This subtle change in the stand of the assessee cannot be entertained at this stage of second appeal unless and until duly verified as also investigated by the Revenue Authorities. - matter remanded back. Foreign exchange fluctuation loss - held that:- the statement of account of “exchange rate variation” needs to be verified by the Assessing Officer. - matter remanded back.
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2012 (7) TMI 696
Revision u/s 263 - Nature of receipts on account of exchange fluctuations - expenditure on issue of shares under the Employees Stock Option - AO treated the receipts on account of exchange fluctuation as a capital receipt and the same was reduced from the profits and gains while working out the relief under Section 80HHE. Held that:- any and every erroneous order cannot be the subject matter for revision under Section 263 of the Act, unless the second requirement of it being prejudicial to the interest of the Revenue exists. - Having thus agreed with the assessee as well as with the Assessing Officer, the Commissioner of Income Tax however issued a letter dated 21.1.2004 taking the view that the receipt arising on account of exchange fluctuation was revenue in character. There are no reasons indicated as to why he suddenly shifted his stand as regards the character of the receipt from capital to revenue. - there are no materials to show that as to how the order of the Officer was erroneous to become prejudicial to the Revenue to initiate jurisdiction under Section 263 of the Act. Merely because part of the share capital is used as a working capital, the character of the receipt would not become a revenue receipt. Thus, once this aspect becomes clear and the entire money raised through issue of equity shares is to be treated as share capital, the gains on account of foreign exchange fluctuations, in the event such share capital collected in foreign exchange, hence is only capital receipts and the determination as to whether it is to be treated as capital receipt or revenue receipt cannot depend upon the end use of the share capital. - Following the decision in CIT v. JAGATJIT INDUSTRIES LIMITED (2009 (9) TMI 62 - DELHI HIGH COURT), decided in favor of assessee. Regarding ESOP - the assessee had to follow SEBI direction and by following such direction, the assessee claimed the ascertained amount as liability for deduction. - the expenditure on issue of shares under the Employees Stock Option could be allowed as staff welfare expenditure - Decided in favor of assessee.
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2012 (7) TMI 695
Reopen the assessment u/s 147 - notice u/s 148 - expenditure incurred by the petitioner before the commencement of production was of capital nature and not revenue expenditure - Held that:- As the petitioner has not failed to furnish return under section 139 or in response to a notice under section 142(1) or under section 148, thus on reading of the reasons recorded, it is evident that there is no allegation to the effect that there is any failure on part of the petitioner to disclose true and correct facts - nothing which is indicative of any default on the part of the petitioner in furnishing any material particulars leading to income chargeable to tax having escaped assessment The expenditure claimed as revenue expenditure in the computation of income remained unconsidered by the Assessing officer during the course of assessment proceedings which was capital in nature as the material was available on record at the time of first assessment, no conscious consideration of the material was made by the Assessing Officer and the mistake had been committed - thus impugned notice after the expiry of a period of four years cannot be warranted - In favour of assessee.
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2012 (7) TMI 694
Refund of excess tax paid - Assessment proceedings relating to AY 1988-89 - Date of remand back by ITAT to AO 5.7.1994 - No fresh assessment thereafter by the AO - Period of limitation - Section 153(2A) - held that:- the Assessing Officer was required to pass a fresh order of assessment which was necessary on account of an order passed by the Tribunal under section 254 of the Act cancelling the assessment framed by the Assessing Officer. The period of limitation prescribed in section 153(2A), therefore, would apply. While such an order was served on the Commissioner on 3.8.1994, within a period of two years of the end of such financial year, a fresh order of assessment had to be passed by the Assessing Officer. The same not having been done, in our view, such proceedings have become time-barred. The assessment placed before the Assessing Officer by the Tribunal's order, therefore, must be treated as having abated. The excess tax paid by the petitioner under original assessment framed by the Assessing Officer must be refunded with consequential effect. By way of abundant caution, it is clarified that the self-assessed tax paid by the petitioner despite no assessment having been framed, cannot be disturbed as held by the Apex Court in case of Commissioner of Income Tax, Bhopal v. M/s Shelly Products and another, (2003 (5) TMI 4 - SUPREME COURT).
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2012 (7) TMI 693
Non remittance of TDS to Government account - Demand raised u/s 201(1) & interest u/s 201(1A) - survey u/s. 133A - AO issued the notice dated 21.12.2011 and claimed that the same was served on the assessee on the same day whereas claim of the assessee is that the said notice was received on 29.12.201 - Held that:- In the copy of the said notice, it is mentioned that “received on 29.12.2011”, however nothing is brought on record that in fact the said notice was received on 29.12.2011 because no other independent document like postal envelope or copy of the acknowledgement was produced before us to substantiate that claim. We therefore, in the absence of proper evidence, are unable to conclude as to whether the said notice was received by the assessee on 21.12.2011 as claimed by the department or on 29.12.2011 as claimed by the assessee. Letter of adjournment by assessee - Held that:- As assessee vide letter dated 19.12.2011 written to the AO sought an adjournment and requested to adjourn the case to some time after 05.01.2012, however nothing is brought on record as to whether the said request was rejected or accepted by the AO. It is well settled that nobody should be condemned unheard as per the maxim “audi alteram partem. Reasonable time for opportunity of being heard was required to be given to the assessee as the AO decided the issue in haste and the time allowed to the assessee was not sufficient, particularly when an adjournment was sought by the ld. counsel for the assessee for 05.01.2012 - the orders u/s. 201(1) & 201(1A) have been passed on 30.12.2011, even when the present case was not a time barring case where orders were to be passed within a short period - thus, it is advisable set aside the impugned order and remand the same to the file of AO for fresh adjudication in accordance with law, after providing due and reasonable opportunity of being heard to the assessee - in favour of assessee for statistical purposes.
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2012 (7) TMI 692
Payment of Cash to the Creditors out of unaccounted income - retraction of statement - held that:- No claim was made during the course of survey or even 8-9 months from the end of survey that the payments have been made out of the cash balance available as per books of accounts. This claim was made first time during the course of assessment proceedings vide letter dated 6.12.2006. The Ld. CIT (A) opined that the explanation of the assessee was an after thought and lacked credibility. He has given a finding that the entries in the diary and the ledger accounts of the parties as per books of accounts filed by the Assessee do not match. The payment dates as per diary are completely different from the payment dates in the ledger accounts even in respect of the amounts claimed to have been paid out of cash in hand. - Addition sustained. Estimation of gross profit - rejection of books of accounts - held that:- It is an undisputed fact that the assessee submitted to AO the detailed explanation with respect to fall in GP. However the same was not examined by the AO. Based on the details furnished by the assessee before CIT (A), CIT (A) was satisfied with the explanation of loss to the extent of Rs 10.9 lacs that contributed to the fall in GP. The assessee however did not provided satisfactory explanation for increase in direct expenses neither before CIT(A) nor before us. - Order of CIT(A) upheld.
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2012 (7) TMI 691
Rate of TDS on transportation charges paid to the transporter for carriage of goods from one location to another location - held that:- the arrangement for transportation of petroleum products was essentially a contract for transportation of goods and not an arrangement of hiring of vehicles. In view thereof, tax is required to be deducted at source from the payments to the carrier in terms of provisions of sec. 194C of the Act and not u/s 194-I of the Act. Rate of TDS on payment of hire charges paid for LMV and Buses - held that:- the assessee had hired the cars on fixed rent payment owned and maintained by contractor. The Assessee paid vehicle hire charges and all the expenditure are borne by the contractor. It is also admitted fact that vehicle charges were paid in connection with plying of employees from one place to another. Thus, it implies that the passengers were transported by the drivers and vehicles of the vehicle owner/contractor and in consideration of that the vehicle owners/contractors were paid by the assessee the fixed amount. - provisions of section 194-I has been wrongly applied in the matter by the AO. - provision of section 194C would apply.
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2012 (7) TMI 690
Accrual of income in India - ITAT earlier decided that 75 percent of the offshore supply activities have happened in India given the fact that the entire manufacturing activity has happened outside India which has not been disputed by the Tribunal - HC remanded the matter back to ITAT - held that:- The assessee except filing chart showing net profit margin by different parties in similar power projects, did not file profit and loss account etc. of the subsidiary and other comparative figures as was asked by the Tribunal at the time of hearing in first round. - The assessee in this case has not been able to file any material or evidence even on the direction of the Hon’ble High Court when the assessee was allowed opportunity in this regard as directed by the Hon’ble High Court to furnish documents and the Tribunal was directed to receive such documents for the limited purpose of enabling the Tribunal to work out the percentage. - Appeal of assessee dismissed.
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2012 (7) TMI 689
Reassessment proceedings u/s 147 - Held that:- Notice u/s 148 in which no assessment year is mentioned cannot be treated as legal and valid notice. Further there is no material on record to show that the advocate of the dissolved firm had any authority to receive notice on behalf of the partners of the dissolved firm. The condition of service of a valid notice u/s 148 was not satisfied in this case - during reassessment proceedings the AO was satisfied with the explanation submitted by the assessee in respect of reasons recorded and did not make any addition on the basis of any of the recorded reasons but instead made additions on certain other points by making roving enquiries. As decided in RANBAXY LABORATORIES LIMITED Versus CIT [2011 (6) TMI 4 - DELHI HIGH COURT ]though AO had jurisdiction to reassess the income other than the income in respect of which proceedings u/s 147 were initiated, but he is not justified in doing so when the very reasons for initiation of those proceedings seized to survive - legislature could not be presumed to have intended to give blanket powers to the AO that on assuming jurisdiction u/s 147 regarding reassessment of escaped income he would keep on making roving enquiries and thereby including different items of income not connected or related with the reasons to believe on the basis of which he assumed jurisdiction - in favour of assessee.
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2012 (7) TMI 688
Capital receipt or revenue receipt - Compensation as business profit u/s 28(va) - discontinuance of her proprietary business - slump sale u/s 2(42C) - held that:- The assessee, in fact, is correct in contending that the case is covered by the Proviso (i) to section 28(va). - This Proviso, it is seen, as applicable to the facts of the present case, provides that section 28(va)(a) shall not apply to any sum received on account of transfer of a right to carry on business, which is chargeable as capital gains. Herein, as discussed in the preceding paras, what was transferred was a right to carry on business and that being so, application of the main section 28(va)(a) is foreclosed and forbidden, by the use of the words “shall not” in the Proviso.
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2012 (7) TMI 687
Unexplained investment - Difference in cost of construction between the value of Departmental Valuation Officer and Assessee’s cost of construction - held that:- in the instant case Assessing Officer observed that the books of accounts of the assessee for cost of construction of the building is not reliable on the grounds that many items of expenses are not supported by bills or vouchers and there are also no proper bills for purchase of materials. On the above facts, we agree with the Departmental Representative that books of accounts of the assessee in respect of cost of construction of building were rejected by the Assessing Officer. However, we find that such a rejection was not made after pointing out any specific defect in the books of accounts of the assessee and was rejected merely on the basis of generalized statement. The rejection of books of account by the Assessing Officer is untenable and cannot be sustained. - Decided in favor of assessee.
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2012 (7) TMI 686
Depreciation on goodwill - Treatment of Goodwill Arising on Amalgamation - held that:- If the assessee had paid more than the fair market value of assets minus the fair market value of liabilities, then the company would have a case to claim that certain amounts were incurred for goodwill. In the absence of such an exercise, we are of the considered opinion that there is no goodwill in the nature of commercial rights purchase by the assessee. This is only a book entry and it is only another way of disclosing the intrinsic value of the fixed asset of the company. - Decided against the assessee.
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2012 (7) TMI 685
Enhancing the capital gains - adopting the rate of the land - Revision u/s 263 - held that:- in our view, having regard to the facts and material on record the cost of acquisition as on 01/04/1981 adopted by the assessee for determination of capital gains cannot be considered as erroneous so as to be prejudicial to the interest of the Revenue within the meaning of Section 263 of the Act. Thus, the order of the Commissioner is set aside and that of the Assessing Officer dated 25/07/2006 is restored qua the issue relating to the determination of long term capital gain on sale of plots of land. - Decided in favor of assessee.
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2012 (7) TMI 684
Undervaluation of stock of silver - held that:- It is not in dispute that the assessee did not make purchase of silver during the assessment year under appeal. The assessee had gained the silver while doing job work for others, part of which was sold and the balance was taken as part of the closing stock. Thus, the assessee is justified in contending that the cost in the hands of the assessee of gained silver was nil. The assessee followed the same method of accounting of closing stock of gained silver in earlier years as well as in assessment under appeal. It is well settled law that whenever the closing stock is disturbed, it would enhance the opening stock of the next year. Method of accounting adopted by the assessee consistently, should not have been disturbed by the AO without any just cause / reason.
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2012 (7) TMI 683
Reassessment - Assessee claimed exemption of income u/s. 10(23C)(iiiad) of the IT Act and challenged the addition of Rs.16,18,000/- u/s. 40(a)(ia) of the IT Act. - AO accepted the claim of the assessee that the assessee is an educational society and running school and therefore, the income of the assessee was found to be exempt u/s. 10(23C) of the IT Act because the receipts of the assessee were below Rs. 1.00 crore. Held that:- since in the case of the assessee, the annual receipts were not exceeding Rs. 1.00 crore, therefore, instead of applying provisions of section 10(23C)(vi), in which the approval of the CCIT is required, the provisions of section 10(23C)(iiiad) would be attracted. Therefore, the order of the ld. CCIT dated 15.09.2008 would be wholly irrelevant to the matter in controversy. The AO and the ld. CIT(A) should not have been influenced by the order of ld. CCIT dated 15.09.2008. The orders of the authorities below further reveal that the authorities below have not examined the issue of grant of exemption to the assessee U/s. 10(23C)(iiiad) of the IT Act in proper perspective. As long as an institution exists solely for educational purposes it would qualify for grant of exemption under section 10(23C)(vi) of the Act. Merely because profits have resulted from the activity of imparting education that would not change the character of the institution existing solely for educational purposes. Therefore, even if the assessee has not deposited the TDS on the payment of rent, but if the assessee has satisfied the requirement of section 10(23C)(iiiad) of the IT Act, then the assessee would be entitled for exemption. Regarding reassessment - The reasons for reopening of assessment have, therefore, been properly recorded by the AO, which was in accordance with the provisions of section 40(a)(ia) of the IT Act. At that stage, there was nothing before the AO to prove whether the amount was paid or payable or whether the assessee’s income was exempt u/s. 10(23C) of the Act. - the AO has properly invoked the jurisdiction u/s. 147/148 of the IT Act and the AO had genuine reasons to believe that income chargeable to tax had escaped assessment and at the stage of reopening, sufficiency of reasons could not have been challenged.
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2012 (7) TMI 682
Disallowance of traveling and conveyance expenses - incurring foreign travelling expenses - Held that:- The expenditure have been carried out as per the Board Resolution of the assessee company authorizing Shri Bhawnani to undertake the tours for promoting the business of the company - that similar expenditure were accepted by the department in earlier years - argument of the AO that assessee had made purchases mostly from Singapore and USA and hence the travel expenses to other countries are not allowable is not correct - attending trade fairs and exhibitions in the line of the assessee’s business in other countries cannot be said to be not related with the assessee’s business - in favour of assessee. Disallowance of business promotion expenses - Held that:- Since all the vouchers and books of account were produced before AO but he has not pointed out any mistake in the account and has disallowed the above amount on adhoc basis - although the matter had been remanded to the AO he has not given any comment on it - in favour of assessee.
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2012 (7) TMI 681
Addition upon rejection of the assessee's books of accounts u/s. 145 - Held that:- In the present case no basis for the estimate as made by the two authorities below the CIT(A) merely reducing the addition as made by the AO by half. The assessee has disclosed a much higher gross profit than that for the earlier two years. No other comparable case has been again cited by the Revenue. The addition of income is not a concomitant of the rejection of books of accounts, as explained by the hon'ble high court in the case of CIT vs. Gotan Lime Khanij Udyog (2001 (7) TMI 19 - RAJASTHAN HIGH COURT ) and, as such, in our view no addition in the instant case is called for and thus decided accordingly. Addition u/s. 68 - Held that:- The assessee has stated per his written submissions of having rendered the affidavits complete before the ld. CIT(A), who, though, has ignored the same - the fact remains that the incompleteness of the affidavits are stated by the assessee to have been removed and as such, the same constitutes a valid material on record, i.e., something more than a bald assertion - restore the matter back to the file of the ld. CIT(A) for carrying out the required verification - The addition is consequently deleted. Disallowance u/s. 40A(3) - Held that:- AO only from its reporting per the auditor’s report in Form 3CD disallowed the claim whereas assessee though has rendered an explanation that the payment was made by depositing cash in the bank account of the supplier to secure the supply of goods pleading for business expediency as a reason for making the payment in cash - do not think that any disallowance u/s. 40A(3) in the instant case is sustainable in law as this is as the purchase under reference is on trading account, the result of which stands estimated by the Revenue after invoking the provision of sec. 145(3)- appeal of assessee allowed.
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2012 (7) TMI 680
Whether a transaction of sale and purchase of shares were trading transactions or whether they were in the nature of investments -Treatment in the books by an assessee will not be conclusive. If the volume, frequency and regularity with which transactions are carried out indicate systematic and organized activity with profit motive, then it would be a case of business profits and not capital gain – Held that:- Purchase without an intention to resell where they are sold under changed circumstances would be capital gains - Purchase with an intention to resell would render the gain profit on sale business profit depending on the circumstances of the case like nature and quantity of article purchased, nature of the operation involved – matter needs reexamination - Revenue authorities have proceeded on wrong facts and figures - issue remanded to the AO for fresh consideration Income from House Property – addition on account of notional rent - appellant was owning three flats - claim of self occupied property - matter remanded back for correct ascertainment of facts. Accrual of income on government bonds - 8% GOI Bonds - assessee submitted that the interest as per scheme of GOI Bonds would accrue on 30th June and 31st December of every year and interest accrued and received as on 31/12/2005 was offered for taxation and the interest for the period from 1/4/2006 to 31/3/2006 would only accrue on 30th June as per the scheme and, therefore, the appellant has not accounted for the same and the said interest is offered for taxation as and when accrued and due to the appellant's wife – Held that:- AO has not incorporated the explanation of the appellant on this point in the assessment order - Without a legally enforceable right, it cannot be said that the income has accrued. As the interest relating to the period 1/1/2006 to 31/3/2006 was not yet accrued as on 31/3/2006 but would accrue only on 30th June, 2006 - AO directed to delete the addition and the same will be brought to tax in the next year on accrual basis.
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2012 (7) TMI 666
Entitlement to set off the brought forward business loss against the rental income, car and computer hire charges and the commission income - question on proper interpretation of Section 72(1) - assessee submitted that according to MOA it is in the carrying of business of leasing, selling and renting of real estate properties - Held that:- With regard to the hiring of car and computers the CIT(A) has found that they were hired out as they remained idle and assessee thought it prudent to exploit them by letting out temporarily to others. The commission income received by the assessee from Tulika is for obtaining or procuring business for the latter which undoubtedly is a business activity though it may be a single instance only. As decided in CIT v. R. Dalmia (1973 (5) TMI 23 - DELHI HIGH COURT ) that the brought forward business loss was sought to be set off against the dividend income earned by the assessee in the subsequent year as since the dividend income was derived from the shares held as stock-in-trade, the brought forward losses could be set off against the same notwithstanding that the Act required that the dividend income should be assessed under the head “income from other sources" - in favour of the assessee
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2012 (7) TMI 665
Addition made on account of unexplained share application money - Tribunal remitted the issue on account of unexplained share application money to AO to verify the source of money of the shareholders and make additions in the hands of persons who provided the monies - Held that:- It is unable to uphold the view of the Tribunal that it is incumbent upon the AO to establish with the help of material on record that the share monies had come or emanated from the assessee‟s coffers. Section 68 of the Act casts no such burden upon the Assessing Officer. The Tribunal, however, may be justified in directing the AO to afford an opportunity to the assessee of cross-examining the persons who had allegedly given statements before the Investigation Wing implicating the assessee in the modus operandi adopted by them, namely, giving of accommodation entries for commission - The assessee appears to have sought cross-examination of those persons but that opportunity was not given by the Assessing Officer as found by the Tribunal - in favour of the Revenue
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2012 (7) TMI 664
Penalty levied u/s 271(1)(c)- Held that:- The provision made for advance tax debited in the P&L account not added back to income is bonafide mistake - It is the first time that provision was debited in P&L account. Had there been any intention to file inaccurate particulars then the assessee could not have paid the advance tax in the last month of assessment year - the assessee had made a claim for deduction of the provision for the first time in the year under appeal as there was no history of furnishing such accurate particulars by the assessee for the previous years - in favour of assessee.
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2012 (7) TMI 663
Determination of Arm’s Length price to the Transfer Pricing Officer - Held that:- Any changes in the most appropriate method of computing the arms length price is to be dealt with by way of a speaking order. T.P.O. is also at liberty to collect independent relevant information of comparable uncontrolled transactions. Let the revenue authorities determine fresh ALP in the light of above observation and in accordance with the regulations.
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2012 (7) TMI 662
Provision for ascertained liability or contingent liability - Treatment of the provision for installation and service charges - Tribunal treated it as an ascertained liability and hence an allowable deduction - Held that:- The provision for the service charges payable by the assessee by way of warranty provision is not made on any scientific data. Admittedly, the provision made was only on ad hoc basis, a fact which is recorded by the Tribunal. - The said fact is further strengthened by the fact that even though the warranty period is for one year and the assessee has to make payment to the service provider as and when a demand is made, normally such payment claim has to come during the period of warranty or within a reasonable time. Even though the agreement that the assessee had with the service provider is not placed before this Court, nor was it placed before the authorities below, nevertheless, a reading of the Commissioner's order relating to the assessment year 1992-93 makes the facts clear by reason of the fact that more than 60% of the provision remained unpaid even after more than two years since the date of sale. Provision was made for the service charges based on past obligation - Held that:- If really the provision made was otherwise based on past experience, certainly, the figures would not have stayed as having a correlation to the sales, or for that matter, as the Commissioner of Income Tax (Appeals) observed, more than 60% of the provision would not have remained unpaid even after more than two years from the date of sale - setting aside the order of the Tribunal thereby restoring the order of the AO as Tribunal committed a serious error in law in holding that such ad hoc provision would nevertheless qualify for deduction - in favour of Revenue.
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2012 (7) TMI 661
To consider claims made in a revised return which was filed beyond time - the transaction of inter divisional transfer between one Unit and another is not by way of sale - Held that:- As the revision of the book results on the changed nature of transaction was itself on account of the objection raised by the Regional Director, Department of Company Affairs, thus contention of the Revenue is not acceptable that the revised results do not merit any consideration. Even if the revised return is treated as a time barred one, when once the assessment is made under Section 143(2) based on the materials gathered, the department cannot deny of considering the materials coming in the form of the Regional Director's direction and its effect on the account results. As the revised profit and loss account and balance sheet were approved by the shareholders in the annual general meeting to be treated as revised claim it cannot be read as an intention that the revision was done with a view to revise the liability of the assessee under the Act - no hesitation in remanding the matter back to the Assessing officer to examine the issue once again as regards the valuation - against revenue.
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2012 (7) TMI 660
Subvention assistance received from Holding Company - Revenue contested against considering the receipt as a revenue receipt - Held that:- The amount subvention money was received by the assessee from its holding company not as trader, but to recoup the losses likely to be suffered by it. The amount was received by virtue of their relationship of parent and subsidiary company and not stemming from any business considerations. If the object of the subsidy scheme was to enable the assessee to run the business more profitably then the receipt is to the revenue account. On the other hand under the subsidy scheme, if the object is to enable the assessee to set up a new unit or expand it then the receipt of the subsidy is to the capital account, thus as it is not in dispute that the assessee did incur losses , thus amount infused by BHW Holding AG, Germany to the assessee by way of subvention assistance, is taxable as a revenue receipt - in favour of assessee.
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2012 (7) TMI 659
Reopen the assessment u/s 147 - issue of notice u/s 148 - case is reopened after the expiry of four years - Held that:- On perusal of the reasons recorded shows that there is nothing whatsoever to indicate that there is any failure on the part of the petitioner to disclose fully and truly all material facts - AO on an arithmetical calculation of the turnover of the previous years and raw material consumed as against raw material consumed in the year under consideration concluded that the turnover should be higher than that stated by the petitioner and formed any belief that any income chargeable to tax has escaped assessment - is settled legal position that section 147 cannot be exercised for making a roving inquiry and that the Assessing Officer, before reopening the assessment has to form a belief that income chargeable to tax has escaped assessment - the petitioner had placed all relevant material on record - in favour of assessee.
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2012 (7) TMI 658
Penalty u/s 271(1)(c) - concealment of income - held that:- just because assessee has an explanation- whatever be its worth and credibility, it does not cease to be a case in which concealment penalty can be levied. The explanation of the assessee has to be considered on merits and one has to take the call as to whether the explanation so given by the assessee can be treated as an acceptable explanation or not. Learned counsel for the assessee has also laid a lot of emphasis on the fact that the assessee's explanation has not been found 'false' but then this plea overlooks the fact that when an assessee's explanation is found 'false', this case falls in category (A) of Explanation 1 to Section 271(1)(c) whereas the present case is in category (B) thereof and it covers a situation when assessee offers an explanation and not able to prove its bonafides. These two situations are mutually exclusive situation and just because conditions in part (A) of Explanation 1 are not satisfied, the revenue's case in (B) also does not come to an end. The plea of the assessee does not, therefore, merit acceptance. Penalty confirmed.
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2012 (7) TMI 657
Denial of Exemption claim on Salary - DTTA between India and Japan - the assessee had aggregate stay in India for 83 days - appellant was working as Managing Director of Motorola, Japan - Held that:- Assessee being a full time employee of Motorola Japan was wholly and exclusively working for Motorola Japan and his entire salary was earned in Japan. Even under the Indian Income Tax Act, 1961, the assessee being governed by the provisions of section 9(1)(ii), was not taxable in India as, having exercised his employment in Motorola Japan - As per Article 15(1) of the DTAA between India and Japan, the tax resident of Japan can be taxed in India only if the assessee is present in India for more than 183 days whereas from the assessment order it is clear that the assessee was present in India only for 83 days and hence, the assessee cannot be taxed in India for any part of salary for services rendered to Motorola Japan. As for the assessee, the normal place where the employment services rendered is in Japan and not in India. His visits to India are in connection with business and not for rendering employment services for any Indian entity. There is no employment agreement for having rendered any services for Indian entity. In the instant case, the salary accrues to the assessee in Japan and the accrued salary is partly delivered by Motorola India in India. Hence, there is no accrual of salary in India - as the salary is not earned for rendering services in India. Therefore, salary for the entire year is not taxable - in favour of assessee. As no argument was raised by the assessee with reference to levy of interest under section 234D hence no ground in appeal is dismissed.
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2012 (7) TMI 656
Fees for Included Services in terms of Article 12 of the India US treaty - appellant has not made available technical skill, Knowledge etc. to Lucent. - held that:- The assessee has not been able to produce the records to show the total number of employees employed with Lucent, amount of salary paid and the terms and conditions between the employees and the assessee. In absence of any details, we do not find any merit on this aspect of the matter that technical personnel supplied by the assessee are not its employees, especially in the light of the agreement as have been referred to above which clearly negates the contention of the assessee. The assessee has requisite and technical skills in providing solutions in technology relating to telecom sector. The Lucent, an Indian company wants technical experts, who have experience and skill, which here in this case undoubtedly belongs to the assessee, for its purpose of contract for commissioning and supply of telecom equipments in India. These services clearly fall within the illustration given in the Example 3 and, hence, the services rendered by the assessee falls within the clause 4(b) of Article 12 of the Treaty. Therefore, we hold that the payment received by the assessee from Lucent is taxable in India under Article 12 as fees for included services.
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2012 (7) TMI 655
Payment of interest on investment in equity shares - deduction u/s 36(1)(iii) - held that:- It is evident from the referred record that the assessee was having interest free funds available more than investments in question. - it is clear that the assessee had sufficient interest free funds. - AO directed to allow the interest as claimed. Deduction u/s 10B - Aemendment - 9th year of claim. - unexpired period of ten consecutive AYs. - whether in the light of the amended provisions of sec. 10B, the assessee who started manufacturing in the year 1994, availed first tax rebate benefit in the year 1997-98 is entitled for getting the deduction in the AY in hand i.e. 2005-06. - held that:- the first part of the legislation cannot be read in isolation. The entire stature or provision has to be read or referred conjointly. A word here or clause there cannot be relied on by excluding the entire provision. Ten consecutive Assessment Years start from Assessment Year relevant to the previous year in which the undertaking begins manufacture / production. The assessee herein commenced its production on 1.1.1994. We observe that said period of ‘ten Assessment Years’ can’t cover the Assessment Year in hand which is in fact the 12th Assessment Year from the date of manufacturing. - Decided against the assessee.
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2012 (7) TMI 654
Disallowance u/s 14A read with rule 8D - expenditure on earning dividend - held that:- Departmental Representative could not bring any material on record to show that the estimate of expenditure at 2% by the Commissioner of Income Tax(A) as expenditure for earning the dividend income was lower than the actual expenditure incurred by the assessee in earning the said income. - Order of CIT(A) confirmed. Gain due ot exchange difference - business profit - held that:- the facts emerging from the order of the Commissioner of Income Tax (A) are not that the exchange difference was earned by the assessee out of EEFC account. On the other hand, the facts are that the assessee submitted that the exchange fluctuation difference arose due to difference in exchange between the date of accounting of sale and the date of actual realization of the sale proceeds and therefore, the same should be treated as profits of business. - Decided against the revenue. Expenditure on account of entry tax on raw materials and other inputs that are brought into the assessee’s factory - AO disallowed deduction of ₹ 2,30,30,088/- on account of entry tax paid by the assessee under the Karnataka Tax Entry of Goods Act, 1979 on the ground the same was allowable against sales tax paid by the assessee. - held that:- deduction allowed. Reassessment proceedings - disclosure - held that:- A reading of the above recorded reasons show that there is no such failure as mentioned in the proviso to Section 147 of the Act exists in the instant case. It is an established position of law that the assessee is required to disclose all primary facts fully and truly and thereafter, it is not the duty of the assessee to tell the Assessing Officer as to what inference is to be drawn from those primary facts or what other secondary facts are required to be examined.
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2012 (7) TMI 653
Penalty u/s 271(1)(c) – Held that:- Assessee has presented a wrong, incorrect and non-genuine claim of gift - assessee has presented incorrect and untrue facts regarding the amount received claiming as gift, which was found as not genuine - when the claim of the assessee was found factually incorrect, untrue and not genuine, then the benefit of bonafide explanation is not available to the assessee for the purpose of levy of penalty u/s 271(1)( c) of the Act - penalty u/s 271(1)( c) is upheld – Against assessee
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2012 (7) TMI 652
Capital Gains - amount received from partnership firm on retirement - payment of consideration in cash - share of goodwill - capital asset u/s 2(14) - transfer u/s 2(47) - held that:- it was a case of lump sum payment in consideration of the retiring partner assigning or relinquishing her share or right in the partnership and its assets in favour of the continuing partners. - the manner of the retirement in case of the assessee is such that it can be regarded as assigning or relinquishing by the retiring partner of her share or right in the partnership firm and its assets in favour of the continuing partners. - the assessee satisfies the parameters and, therefore, there was a transfer of interest of the retiring partner over the assets of the partnership firm on her retirement and, therefore, there was a liability to tax on account of capital gain.
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2012 (7) TMI 651
Business of selling time share units - accrual of income - mercantile-system of accounting. - holiday facilities to its members for a specified period each year, over a number of years, for which membership fees is collected either in full or in installments. - held that:- there is a definite liability cast on the assessee to fulfil its promise and, therefore, it cannot be said that the entire fee received by it has accrued as income. - the peculiar nature of the activity along with the complexity attached to it as a result of which no reasonable provision for the liability can be made. Therefore, recognizing the entire receipt as income in the year of receipt can lead to distortion. The entire amount of timeshare membership fee receivable by the assessee up front at the time of enrolment of a member is not the income chargeable to tax in the initial year on account of contractual obligation that is fastened to the receipt to provide services in future over the term of contract. - Decision of Special Bench of the Tribunal in assessee’s own case ACIT Versus Mahindra Holidays & Resorts (India) Ltd. (2010 (5) TMI 524 - ITAT, CHENNAI) followed. Expenditure on salary, rent, interest, repairs and furniture. - there is no material on record to show the entire amount of Rs. 1.6 crores are on account of revenue expenditure like salaries, interest, rent etc. and no part of the expenditure under the head ‘construction expenses pending allocation’ includes any expenditure incurred for acquiring new capital asset. In the above circumstances, in our considered view, the CIT(A) was justified in directing the Assessing Officer to allow revenue expenditure after verifying if the amounts were for salaries, rent, interest etc. Therefore, this ground of appeal of the assessee is dismissed.
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2012 (7) TMI 650
Penalty u/s 271(1)(c) - concealment of income - held that:- it is a clear cut case of concealing and furnishing inaccurate particulars of income of proprietary potato business of the assessee which was systematically run through bank account. The assessee was very much aware about this income of potato which is subject to tax in accordance with law. Inspite of this fact, he tried to operate this business under the name and style of two proprietary concerns by introducing bank accounts. These facts clearly show that the assessee has concealed the particulars of his income, furnished inaccurate particular of his income with his knowledge and intention to conceal his income. - penalty confirmed.
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2012 (7) TMI 649
Restricting trading addition to Rs. 997 - applying the G.P. rate @ 2.3% - Held that:- No justification for applying GP rate of 2.3 % in this case in the absence of any specific defects in the books of accounts. The only difference is of Rs. 998 and therefore trading addition of Rs. 997/- is justified, but the remaining addition by applying GP rate of 2.3% is not justified - partly in favour of assessee. Addition on account of interest income - Held that:- Addition without proper examination of the facts by AO as intimated by appellant the sum of Rs. 7,72,314/- is the net figure of interest paid and received from various parties and includes interest received from Indusind Bank & ITC Ltd. Complete details of interest account are available in the ledger of appellant which has not been considered by A.O -direction to delete the addition - in favour of assessee. Addition on account of commission received from IDEA Telecommunication Ltd. and IDEA Cellular - Held that:- As the commission or brokerage received by assessee from Idea Cellular has already been shown - on examination of necessary evidences by Ld. CIT (A) it was found that the AO has made the addition without applying mind or without understanding accounting system followed by assessee consistently - in favour of assessee. Addition on account of bogus unsecured creditors - Held that:- CIT (A) has ascertained the factual aspects that due to clerical error, postings were made in the wrong name. However, they were rectified. Only thereafter the additions were deleted by Ld. CIT (A) - in favour of assessee. Addition on account of winning from Lottery - Held that:- As AO himself had made enquiry u/s 133(6)from ITC Ltd. regarding this payment and the company confirmed payment of performance incentive to the assessee as well as to other parties of Rajasthan on the basis of turnover achieved by them. Therefore, CIT (A) found that there is no winning from lottery or from puzzle as this is a regular income which has already been accounted for by the assessee in its accounts book - in favour of assessee. Addition on account of income of M/s. Aman Enterprises - Held that:- This addition has been made by A.O. without properly verifying the facts as per ledger account of appellant, total interest of Rs. 37,89,273 is paid. This amount is inclusive of sum of Rs. 11,80,780/- paid to M/s Aman Enterprises. Therefore observation of A.O. that appellant paid interest to this party without recording the same in his books of accounts is factually incorrect - - in favour of assessee.
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2012 (7) TMI 648
Levy of penalty u/s 271B - non compliance with the provisions of sec 44AB - Held that:- No penalty shall be levied if the assessee proves that there was a reasonable cause for the failure on his part in compliance with the provisions of the Act. There is no dispute regarding the fact that this is the first year during which the assessee carried out the share trading activity and the assessee is not highly qualified or educated person to have the knowledge of all the relevant provisions of law and it is not the case of persistent default but due to inadvertence and bonafide belief and having lack of knowledge, the assessee could not comply with the provisions of sec 44AB - assessee is entitled for the benefit of sec. 273B - in favour of assessee.
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2012 (7) TMI 647
Initiation of re-assessment proceedings - excessive claim allowed u/s. 80HHE - No assessment u/s. 143(3) and only the return was processed u/s. 143(1) - Held that:- As per clause (b) of Explanation 2 to proviso to section 147 where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the AO that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return, the AO is entitled to reopen the assessment - as decided Rajesh Jhaveri Stock Brokers (P) Ltd [2007 (5) TMI 197 - SUPREME COURT] that the Assessing Officer is having jurisdiction to issue notice u/s 148 for bringing to tax income escaping assessment on the ground that the assessee claimed excessive relief or deduction - against assessee. Reducing deduction claimed by the assessee u/s. 80HHE - grounds raised by assessee against aggregation of the profits of the 100% EOU with the losses of the training division for purposes of calculating the deduction u/s 80HHE - Held that:- From the business profits figure the AO has reduced 90% of the commission, brokerage, etc. as also interest receipt which he has considered to be income from other sources and has arrived at a figure and thereafter applied the formula to determine the 80HHE deduction ignoring assessee’s contention that the total turnover of only the eligible business should be taken note of for the purpose of applying the formula laid down in sub-section (3) - the view canvassed on behalf of the assessee is to be preferred over the view put forth on behalf of the income tax department as it is only the profits of the eligible business which have to be split in the same proportion as the export turnover in the said business bears to the total turnover in the said business Thus, the total turnover for the purpose of section 80HHE only the turnover of the computer software both in Indian and abroad has to be considered and turnover of business not connected with software business cannot be considered to include in the total turnover. Similarly amount received towards employee’s compensation cannot form part of the total turnover - in favour of assessee.
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2012 (7) TMI 646
Disallowance of proportionate amortised amount of lease premium paid - leasehold land treated as capital expenditure – Held that:- As per the clause 6 of the said agreement, the assessee paid Lease premium for grant of lease for the term of 80 years from the date of grant of possession of land - price paid by the assessee was for acquisition of rights to a capital asset and, therefore, cannot be allowed as revenue expenditure - similar expenditure was capital in nature - expenditure in respect of lease from MMRDA in the nature of premium paid was capital in nature – appeal dismissed Disallowance of direct expenses in the form of interest - by assuming the same as expenditure incurred in relation to earning of the tax free income, by invoking the provisions of Section 14A of the Income Tax Act – Held that:- Borrowed funds on which interest was paid had not been used for making investments which yielded tax free income. Therefore, disallowance of direct expenses was rightly deleted by the Ld. CIT(A). Administrative and other expenses – Held that:- It is a case where estimation was required to be made - estimation at 5% of the dividend income made by the Ld. CIT(A) is reasonable Interest charged under section 234C of the Income Tax Act - plea of the assessee was that due to circumstances beyond its control and because of the events that happened after the date of payment of third installment of advance tax, there was a short fall in payment of advance tax leading to levy of interest u/s.234C of the Act – Held that:- Circumstances set out by the assessee have to be considered only in an petition for waiver of interest made to the administrative authorities and cannot be made in the appellate proceedings in which only liability to tax can be subject matter of the proceedings Deduction of contribution to the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) - deduction is claimed by the assessee under the provisions of section 36(1)(xii) of the Act - whether the Trust Deed by which CGTMSE was constituted and the contribution made by the assessee to CGTMSE fall within the objection purpose authorized by the Act by which the assessee was constituted or established - matter remanded to AO Deduction on account of bad debts written off u/s.36(1)(vii) of the I.T. Act - which was not claimed by the assessee in the return of income – Held that:- Provisions of Sec.36(1)(viia) applies to the Assessee - no credit balance in the provision account and therefore whole of the bad debts written off would in effect be in excess of the credit balance (which is nil) in the provisions account - whole of the bad debts written off would be deductible u/s.36(1)(vii) of the Act - sum has been omitted to be claimed in the return of income has been amply demonstrated by the Assessee. Even in the reassessment proceedings the AO has no answer to the claim of the Assessee in this regard and has merely observed in his order that there is no evidence produced by the Assessee. The book entries and the return of income before the AO are enough evidence to come to the conclusion that the amount in question was not claimed in the return of income though the Assessee could have claimed it legitimately - appeal by the Revenue is dismissed.
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2012 (7) TMI 645
Unexplained investment - search and seizure – alleged that expenses on account of construction are not completely recorded in the books of account - As per the report of the DVO, total construction of the property was estimated higher than as against the cost of construction shown by the assessee – Held that:- Additions made in the hands of the respective owner companies of the aforesaid projects, as unexplained investment, have been deleted, year by year - Assessing Officer in this case also has not pointed out any specific defect in the books of accounts of the appellant company as well as those of the owner companies which are regularly maintained and audited - any difference between the cost of construction shown by the respective companies as per their books of accounts and as estimated by the DVO, which is otherwise insignificant and is within the acceptable range of error margin, cannot be made the basis either for making any addition u/s 143(3) r.w. Section 153A of the IT Act in the hands of the owner companies, as unexplained investment, or for estimating notional profit in the hands of the appellant contractor company – additions deleted
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2012 (7) TMI 644
Addition as unexplained investment u/s 69B - valuation - Assessee company had purchased two pieces of land - Assessee company has disclosed full purchase cost whereas the Assessing Officer has taken difference of purchase cost as undisclosed cost which was taken treated as unexplained investment u/s 69B of the IT Act – Held that:- Lands purchased by the appellant company as well as M.s Bhagyanagar Metals Ltd are adjacent to each other - Sri Madhu Venkateshwar who is the owner of the third site which was sold to M/s Bhagyanagar Metals Ltd had received rs 25,000 per acre and the total consideration of Rs. 163,75,000/- for Ac. 6.22 guntas the appellant could not have purchased for a throw away price of Rs 20,00,000 for Ac. 3 guntas and Rs 22,50,000 for Ac. 3.37 guntas - sale price of the plots of Rs.150 per square yard would clearly indicate the price at which the property could have been purchased, as it is natural that no businessman would sell at a price lesser than the purchase price thereby incurring a loss - Assessing Officer directed to adopt the rate of Rs.150 per square yard as purchase cost of land by the assessee - appeal of the Assessee is partly allowed.
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2012 (7) TMI 643
Penalty u/s. 272B read with rule 114B and 114D - default in not complying with the provision of 139A of the Act - bank manager was unable to produce requisite material particularly proof of address and permanent account number of many account holders and depositors in FD - belated production of documents - Held that:- The explanation given by the respondent assessee of late production of these documents after a fortnight was found justifiable by the Tribunal. Therefore, it clearly held that this was not a case where by the non-production of material at the relevant time rendered back liable for the penalty under section 272(B). - Decided in favor of assessee.
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2012 (7) TMI 642
Writ Petition – Held that:- When a statute creates a right or liability or also prescribes the remedy or procedure for enforcement of that right or liability, resort must be had to the said statute remedy rather than invoking the extraordinary and prerogative writ jurisdiction of the Court under Article 226 of the Constitution - petitioner has already availed the alternate remedy of appeal - Writ Petition dismissed
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Customs
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2012 (7) TMI 679
Recovery of Education Cess - petitioners have been availing of the DEPB scheme - Held that:- As goods imported under the DEPB scheme by assessee by virtue of exemption notification No.45/2002, carry 'nil' rate of customs duty and additional duty they are also not liable to pay education cess at the prescribed rate - from the nature of DEPB scheme and the exemption granted to imports made under such scheme, it can be seen that the very purpose is to neutralise the import duty component on the imported goods used for production of export items. Such object is achieved through the DEPB scheme under which the exporter is given the facility of utilising the credits in the DEPB scrips for the purpose of adjustment against the customs duty liability on the goods imported for the ultimate purpose of export on value addition. Merely because the conditions provided for adjustment of credit in the DEPB scrips, it cannot be stated that either there was no exemption from payment of customs duty or that the Central Government was levying and collecting customs duty from the importers in form of adjustment of credit in the DEPB scrips.Thus through such adjustments on the DEPB scrips at the time of further imports, customs duty component is sought to be neutralised. Circular dated 8-7-2004, the Ministry of Finance, in a question whether goods that are fully exempt from excise/customs duty or are cleared without payment of such duty would be subject to education cess, clarified that the education cess is leviable at the rate of 2% of the aggregate of the duties of excise/customs levied and collected. If goods are fully exempted from excise duty or customs duty or are chargeable to nil rate of duty or are cleared without payment of duty under specified procedure such as clearance bond, there is no collection of duty and, therefore, no education cess would be leviable on such clearances- . Duty demands, were even otherwise made without issuing any show-cause notice or adjudication. Even on such grounds, the notices are liable to be quashed - in favour of assessee.
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2012 (7) TMI 640
Duty confirmed u/s 28(2) and penalty imposed u/s 114A - claim of exemption under Notification No.32/2005-Cus. dt. 08/04/2005 under the Target Plus Scheme - c.c. copper rods imported by the assessee - Held that:- For claiming the benefit of exemption under Notification No.32/2005-Cus. dt. 08/04/2005 under the Target Plus Scheme, it was not necessary for the assessee-appellants to establish that the goods imported as input by them were usable in the manufacture of the goods exported by them as it was enough for them to establish a broad nexus between the imported input and the exported products with reference to the respective Export Product Groups - that M/s. Gimpex Ltd. were not eligible for exemption under Notification No.32/2005-Cus. in respect of the c.c. copper rods imported by them inasmuch as there existed no nexus between the said goods and the exported products of Chemical & Allied Products Group whereas M/s. Sree Enterprises were eligible for exemption as they could establish a broad nexus between the said goods and the exported products. Challenge the extended period of limitation - Held that:- The extended period of limitation under the proviso to Section 28(1) was not invokable as duty credit certificates used by the assessee under the TPS to secure duty-free clearance of the imported goods, the assessee can hardly be said to have done so with any intent to evade payment of duty and non-production of copies of Shipping Bills, which documents were already in the Department's possession, cannot amount to suppression of the documents by the assessee - consequently, the demands of duty on GL and SE are entirely time-barred. Consequent to demand being quashed the penalties imposed on GL and SE u/s 114A are liable to be set aside and that the penalties imposed on other appellants u/s 112 are also liable to be set aside.
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FEMA
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2012 (7) TMI 710
Ultra vires - whether Rule 5 of the Appellate Tribunal for Foreign Exchange (Recruitment, Salary and Allowances and Other Conditions of Service of Chairperson and Members) Rules, 2000 is ultra vires the Foreign Exchange Management Act, 1999 Held that:- The High Court had quashed the appointment of part time Members and the appointment of Chairperson who was a part time Member once. As the appointment of part time Member was quashed, as a logical corollary, such a person could not be allowed to be appointed to the post of Chairperson. To elaborate; the disqualified Member cannot hold the post of a Chairperson as a stop gap arrangement. Thus, we do not find any error in that regard in the judgment passed by the High Court. The judgments and orders passed by the Appellate Tribunal by the Chairperson or Members who were not qualified and whose appointments have been quashed shall not be treated to be null and void.
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2012 (7) TMI 641
Condoning delay, taking recourse to the power of this Court under section 52(2) proviso of the Foreign Exchange Regulation Act, 1973 (FERA) - held that:- the application under Section 5 of the Limitation Act for condonation of delay for a period exceeding sixty days, as mentioned in the proviso of Section 6 of the General Clauses Act, is not entertainable. In other words, the High Court cannot condone delay for a single day exceeding sixty days, as mentioned in the said section, simply because, the High Court is not conferred with such power. If there is no power question of granting relief does not arise. - the views taken by the earlier Division Bench is the correct position of law. The earlier Division Bench in the case of Union of India and Anr. –vs- M/s. SMP Exports Pvt. Ltd. and Ors. and other three matters, held that Court’s power to condone delay against the judgment and order of the Appellate Tribunal is governed by the provision of section 35 read with proviso of FEMA, even if the appeal has been preferred in relation to contravention of any provision of FERA after repeal.
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Service Tax
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2012 (7) TMI 708
Service Tax demand on the basis on Audit Report - Held that:- Both the authorities have not correctly examined the issue, by taking into account the balance sheet, profit and loss account and the other relevant documentary evidences - if the revenue is making an allegation that the appellant has realised service consideration to the tune of Rs.339 crores, as against 337 Crores as reflected in balance sheet, it is for the revenue to establish the said fact while producing sufficient evidences on record as even audit reports, on the basis of which allegations have been made, do not stand supply to the appellant - set aside the impugned order and remand the matter to the original Adjudicating Authority with directions to supply the basis of making the allegation of realisation of more amount for the services provided by them and to examine the documentary evidences - in favour of assessee by way of remand.
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2012 (7) TMI 707
Tour Operator's Service - demand, interest u/s 75 and penalties u/s 76, 77 and 78 - non service tax registration not obtained - invoking the extended period of limitation - assessee contention that they are engaged in mere transportation of passengers from one place to another in a vehicle under a permit granted by the competent authority and an alternative relief as claim of exemption under Notification No.20/2009-ST dt. 07/07/2009 - Held that:- Considering the definitions of "tour" and "tour operator" under Section 65 it would become abundantly clear that the activities of the assessees who are before us fell within the definition of "tour" and accordingly the assessees fell within the ambit of "tour operator" defined from time to time - the passengers were touring in the buses of the assessees. These buses were "tourist vehicles" within the meaning of this term defined under Section 65 of the Finance Act, 1994 read with Section 2(43) of the Motor Vehicles Act, 1988 - as the assessee were running the buses on predetermined routes in scheduled hours under such permit can be held to have undertaken the business of planning, scheduling, organizing or arranging tours squarely covered by the main part of the definition of "tour operator" under Section 65(115). Claim of benefit of Notification No.20/2009-ST dt. 07/07/2009 read with corrigendum dt. 31/08/2009 merits consideration - the said Notification granted full exemption from payment of service tax on the taxable service referred to in Section 65(105)(n) of the Finance Act, 1994, provided by a tour operator having contract carriage permit or tourist vehicle permit for inter-State or intra-State transportation of passengers, excluding tourism, conducted tours, charter or hire services Remand the case back to pass speaking orders after upholding the taxability of the assessee's activities under Section 65(105)(n) to consider the claim for exemption under Notification No.20/2009-ST and re quantify the taxable value considering plea that income from stage carriage was also included in the taxable value, excluding luggage and parcel charges from the taxable value and 'cum-tax value' - in favour of assessee by way of remand.
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2012 (7) TMI 706
Waiver of pre-deposit – Refund of service tax by way of self adjustment under rule 6(4A) / 6(4B) - appellant paid service tax on value of cleaning service provided - later they realised that they need not have paid such service tax because recipient hospital was not a commercial establishment and therefore the service rendered to such establishments was not covered by entry at Section 65(24b). Therefore they adjusted the excess service tax paid – Held that:- Rule 4B as in force after 01-03-2007 clearly states that excess payment made on account of reasons involving interpretation of law, taxability, classification, value or applicability of any exemption notification shall not be allowed to be refunded by way of credit taken by the assessee on his own. In the present case the claim for refund has arisen on account of interpretation of law and therefore such refund cannot be claimed refund under Rule 6 (4A) as it existed at the relevant time or even later. Appellant directed to make deposit of 50% of the tax amount demanded as a pre-condition
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2012 (7) TMI 705
Short payment of service tax - extended period of limitation - appellant had bifurcated services provided by him in various stage as consulting and non-consulting category - service tax was paid only on those categories of services which were suo motu identified as consulting services – Held that:- They were filing regular returns with the Department. It cannot be held that there was any suppression or misstatement of facts by the appellants with intention to evade payment of service tax demand. Show cause notice having been issued on 3.10.2006 for the period 1.10.98 to 31.03.05 is admittedly beyond the normal period of limitation. Demand is barred by limitation. Appeal is allowed on merits as also on limitation.
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2012 (7) TMI 704
Waiver of pre-deposit - business of providing package tours - package tour involved providing of air transport, transportation from airport to hotel and back to airport, room accommodation in hotel, provision for food and beverages and sight-seeing for lumpsum price – Held that:- service tax on Domestic Air Travel came into force only with effect from 01-07-2010. Even when it was introduced the service tax element is only to the extent of Rs.100 per journey or 10% of the ticket whichever is lower. So prima facie there is something incongruous in demanding service tax at the rate of 10.2% for the period 10-09-04 to 17-04-2006 and at 12.24% for the period 18-04-2006 to March 2007 on the gross value for airfare, accommodation and food when such items were not taxable. The issue whether these items can be taxed as value of service for planning, scheduling, organizing or arranging tours needs careful examination. Pre-deposit waived.
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2012 (7) TMI 670
Valuation - inclusion of statutory fees and levied - Transport of passengers embarking in India for International journey by Air Service - Demanding Service Tax amounting to ₹ 1,22,91,57,595/- for period 1.5.2006 to 30.9.2007 and ₹ 6,16,96,722/- for tickets sold prior to 1.5.2006 but used for journey afterwards - held that:- In the present case appellant has not come forward to show that it fulfilled all the conditions of Rule 5(2). Therefore under Section 67 of the Finance Act and Rule 5 of the Service Tax (Determination of Value) Rules, 2006 no benefit can be given to the appellant on account of statutory levies and charges and the confirmation of demand on these charges by the Commissioner is liable to be upheld. - Decided against the assessee. Levy of service tax on tickets sold before 1.5.2006 and used after 1st May 2006. - held that:- Tribunal in the case of CCE v. Krishna Coaching Institute (2008 (10) TMI 34 - CESTAT NEW DELHI) has held that since service tax liability on commercial training and coaching institutes arising from 1.7.2003, tax on advance received prior to such date for service provided after said date is leviable, Tribunal in the case of CCE v. Ashok Singh Academy (2009 (8) TMI 288 - CESTAT, NEW DELHI) following the decision of the Krishna Coaching Institute (2008 (10) TMI 34 - CESTAT NEW DELHI) upheld the demand on advances received prior to 1.7.2003 holding that taxable event in service tax is providing of the service. Following these decisions accordingly, we uphold the confirmation of demand of service tax and cess by the Commissioner with regard to the air ticket sold prior to 1.5.2006 and journey undertaken on 1.5.2006 or thereafter. - Decided against the assessee. Self adjustment of excess service tax paid by the appellant on account of cancellation of tickets - held that:- Since the appellant is ready to produce all the details, this finding of the Commissioner on denial of the self adjustment is set aside and the matter is remanded back to the Commissioner on the issue of self adjustment of the service tax paid by them on account of cancellation of tickets after giving an opportunity of hearing to the appellant. Penalty - held that:- appellant was collecting the service tax on basic fare from the passengers but not depositing the amount with government and then service tax was deposited with government after 15 months attracting the provisions Section 76 of the Finance Act. Similarly taxable value showing the service in tax Returns filed by appellant to the department was also suppressed and in some of the months no value of the taxable service was shown in the Returns. Therefore, there was clearly suppression of the taxable value attracting provisions of Section 78 of the Finance Act. - Penalty levied but an option given to pay the penalty equal to the 25% of the deposited tax amount within 30 days The penalty with regard to levy of service tax on fuel and insurance charges, on tickets issued prior to 1.5.2006 and on the component of statutory levies and charges is set aside.
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2012 (7) TMI 669
Commercial Coaching or Training Services and Management, maintenance and repair services - training in Aircraft Maintenance Engineering - maintenance and repair of air-crafts owned by their members. - held that:- What is recognized under the law is the licence issued by the DGCA and not course completion certificate issued by the appellant. With that certificate, the student can not get any employment or engage in self-employment, without clearing the examination conducted by the DGCA. - Decided against the assessee. Charitable institute - Since the appellant is a charitable institution, can they be considered as a commercial training or coaching centre? - held that:- Here again the answer is negative. - Merely because the appellant is registered as a Charitable Institution under the Income Tax Act, 1961, that does not entitle the appellant to claim exclusion from the ambit of service tax. - Decided against the assessee. Exemption under notification No.24/2004-ST dated 10-9-2004 - vocational training institute - held that:- on completion of the training by the appellant, the trainee can not seek any employment or undertake self-employment directly after such training or coaching. - Therefore, prima facie we are of the view that the appellant is not eligible for the benefit under the aforesaid exemption. Applicability of Ruling of AAR in another issues - held that:- the status of AAR is higher than that of this Tribunal and therefore, this Tribunal cannot ignore the ruling by the AAR in a case where the facts are similar/identical and the questions of law are identical. Overhauling work of the aircrafts - held that:- prima facie, the activity of overhauling for a consideration comes under the purview of "management, maintenance or repair service" and is liable to service tax. Part per-deposit ordered.
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2012 (7) TMI 668
Difference between gross receipts shown in the profit and loss account and the value of service rendered by them as declared in their service tax return. - Construction of Residential Complexes - held that:- The amounts are confirmed with reference to figures shown in profit and loss account as per AS7 standards prescribed by the Institute of Chartered a Accountants for maintaining accounts of Construction companies. This standard is for ascertaining the profit and loss of a construction company and does not straight away reflect the position of receipt of payments which is the relevant factor for paying service tax. Amounts received against taxable activities can be arrived at only if the accounts are examined diligently by a person having some knowledge about accounting methods which is not done in this case. - Pre condition of pre-deposit waived.
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2012 (7) TMI 667
Short payment of service tax on Compliance Services - assessee is paying service tax on activities for Management Consultancy Service - adjudicating authority stated that meaning of management covers Compliance Services - assessee contested demand to be time barred - Held that:- The Tribunal in the case of Futura Polyesters Ltd. (2011 (7) TMI 802 - CESTAT, CHENNAI) clearly stated to the effect that most of the impugned activities could not fall under the definition of Management Consultancy Service - though compliance with laws is part of the responsibilities of management such responsibility per se cannot bring it into the ambit of the words "in connection with the management of any organisation" used in section 65(105)(r) and section 65 (65) of Finance Act, 1994 to tax such services - clarification given by CBEC circular dated 27-06-2001 that the ordinary meaning of management will not cover Compliance Services & a taxing entry should be understood in the same way in which these are understood in the ordinary parlance. As the demand is time-barred because the appellants were acting on the basis of a circular issued by CBEC, invoking the powers under section 37B of Central Excise Act - If the public act relying on such circulars and still the charge of suppression is slapped on them it can be the worst travesty of justice. So there is no case for invoking suppression in this case - allowed in favour of assessee both on merits as well as on the ground that the notice is barred by time limit specified under section 73 of Finance Act, 1994.
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Central Excise
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2012 (7) TMI 709
Manufacture - Classification - "Iron Ore" or "Iron Ore Concentrate" - tribunal observed that: the process undertaken by the respondents remove extraneous, unwanted material from the ore and as such is devoid of "gangue" which adheres to the blasted ores. - The use of iron ore as mined or iron ore after the process undertaken by the respondents remains same that is to be used in metallurgical industry for the extraction of metals. - tribunal hold that the processes undertaken by the Respondents do not result in the manufacture of a different commercial commodity, not liable to duty of excise duty. Apex Court confirmed the order of CESTAT.
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2012 (7) TMI 678
Cenvat credit of duty paid on various steel items contended by appellant for repair and maintenance of the plant and machinery - denial on the ground that same have been used as supporting structurals - Held that:- Since dispute relates to the factual position which can only be verified at the original level. As such, impugned order is set aside and both the appeals are remanded to the original adjudicating authority for verification of the factual position.
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2012 (7) TMI 677
Confiscation of excess stock seized - appellants engaged in the manufacture of MS bars, angles and channels etc - modvat credit not taken on the said inputs - Held that:- It is seen that the appellant had not taken any modvat credit on the said inputs. As such, invokation of provisions of Rule 15(1) of Cenvat Credit Rules was not justified. Otherwise also, excess found raw materials cannot be confiscated. Consequently, confiscation of the seized ingots as also imposition of penalty upon the appellant is set aside - Decided in favor of assessee.
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2012 (7) TMI 676
Penalty – Denial of Cenvat credit on Boomer Tattoo - manufacture of chewing gum/bubble gum – Held that:- If the credit was being availed by reflecting the same in the statutory records and proper ER-1 returns were being filed, it cannot be said that there was any suppressions on mis-statement with any malafide intent on the part of the assessee - issue involved in the present appeal is of legal interpretation of the provisions of Modvat Rules and is capable of interpretation in favour of the assessee also. As such the respondents cannot be faulted upon for availing the benefit of Modvat credit in respect of Tattoos so as to impose penalty upon them - no reason to impose any penalty on the respondents - denial of Modvat credit upheld, penalty is not required to be imposed-
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2012 (7) TMI 675
Classification of the product Taped Sheets for Mattresses - Valuation - Cum duty price benefit - held that:- After considering the tariff description and explanation in the HSN, it is quite clear that the product manufactured by the appellant finds its use as a mattress pad and further is specifically covered by the description of the product in the HSN. Since we find the heading 5810.00 more appropriate for the product, we hold that the claim of the assessee that the product is to be classified under 5810 has to be sustained. As regards cum-duty price - when duty has not been collected, the price has to be treated as cum-duty price - in favor of assessee.
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2012 (7) TMI 674
Exemption Notification No.33/2005-CE dt. 08/09/2005 - compliance of conditions - machinery / equipment required for initial setting up of a project for the generation of power using non-conventional materials, namely, agricultural, forestry, agro-industrial, industrial, municipal and urban waste, bio-waste or poultry litter, subject to two conditions - held that:- debate revolves around the literary construction of the underlined portion of the certificate. - Without offence to the learned Commissioner(Appeals), we observe that the original authority understood it rightly. - the certificate was being issued in terms of two Notifications, which Notifications were valid for the year 2007-08. The assessee cleared the subject goods in April 2008 when the certificate was very much valid and the two Notifications were very much in force. - Benefit of exemption allowed.
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2012 (7) TMI 673
Marketability - Excise duty on Intermediate products - Captive consumption - manufacture of edible biscuit which became exempt - the sugar syrup and glucose flavour comes into existence at intermediate stage. - held that:- Apparently the Adjudicating Authority has instead of deciding the marketability of the product had merely dealt with the issue of possibility of marketability of the final product, and relying upon the decision of the Hon ble Supreme Court in Gujarat Narmada Valley Fert. Co. Ltd. case [2005 (4) TMI 72 - SUPREME COURT] had arrived at the finding about the marketability of the final product. The decision of the Apex Court in Gujarat Narmada case is on the point that the issue of marketability of the materials need not be decided on the basis of the actual sale of product but it must be capable of being sold in the market or known in the market as the goods. - matter remanded to original authority.
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2012 (7) TMI 639
Admissibility of Cenvat credit - various issues - re-credit of amount wrongly debited - Credit on Part/Component of Capital goods - Disallowance of Credit Adjustment Entry - Restoration of Provisional Debit Due Negative Price Variation - held that:- appellants made two debits for the same clearance by mistake. Whether a refund application is required to be filed to reverse such wrong debits is an issue on which contrary decisions of the Tribunal exists. We follow the decision of the Larger Bench of the Tribunal in the case of BDH Industries (2008 (7) TMI 78 - CESTAT MUMBAI) and hold that the suo motto credit taken is not proper and is recoverable. The duty payment was made without availing the exemption under notification 108/95-CE later they reversed the entry showing duty payment on the ground that they were eligible for the exemption. - This type of re-credit clearly amounts to taking refund of excise duty paid. Such refund has to pass through the test of time bar and unjust enrichment. So assessee could not have re-credited the amount in his account on his own without filing a refund claim.
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2012 (7) TMI 638
SSI Limits - Computation of turnover - Notification No. 8/2003-CE - the process of denaturing in the tanker / manufacture of denatured alcohol - held that:- The fact that the tanker was brought by the buyer and denaturant was also brought by the buyer and assessee simply poured the impure spirit into the tanker and mixed denaturant with it to manufacture denatured spirit cannot be said to be undertaken with an intention to evade duty. This is a case where two views are possible. - Demand set aside - Decided in favor of assessee.
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2012 (7) TMI 637
Related persons – assessable value – Held that:- Merely because ice cream was manufactured using brand name acquired by HLL and entire product was sold to BILIL/HLL, that did not make them related person - Revenue merely issued SCNs making allegation that price was not sole consideration of appellant s products. Persons behind manufacturer and the buyer were not proved to be one and the same through corporate shells. HLL was concerned with KFRL in commercial terms and KFRL having facility of manufacture, such facility was availed by HLL to get its branded goods manufactured by the former. That does not make them related persons - Manufacturer and buyer had their separate commercial interest without being related to each other. Merely bringing machineries for upgradation does not make parties related persons when object of each other is different. Trade practice many a times call for advance payments to meet requirement of trade. That also does not make them inter-dependent to depress the assessable value.
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2012 (7) TMI 636
Disallowance of cenvat credit on the CNC wire cut machine on the ground that it is used for manufacture of intermediary products and not the final products – Held that:- Capital goods can be machines, machinery, plant, equipment, apparatus, tools or appliances. Any of these goods if used for producing or processing of any goods or for bringing about any change in any substance for the manufacture of final product would be 'Capital goods', and therefore, qualify for availing Modvat credit - appellant is entitled to Modvat Credit under Rule 57Q of the Rules - in favour of the appellant
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CST, VAT & Sales Tax
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2012 (7) TMI 671
Disallowance of the deduction of sub-contractor's turnover - no provision or mechanism under DVAT Rules or DVAT Act and that the petitioner had failed to produce the books as records labour and service charges - assessee contested the absence proper mechanism to compute the taxable turnover after deducting 'turnover of sub contractors' - Held that:- At no stage the petitioner had produced the books of accounts or other records to show the extent of actual labour, services and other like charges. Even in the writ petition the petitioner has sought to give justification for non-production of records relating to labour services and other like charges on the ground that the records would run into 2-3 truckloads. In the absence of any records being produced by the petitioner, the assessing officer had no option but to allow the charges towards labour and services as per the table appended to the proviso to rule 3 (2) of the Delhi VAT Rules, 2005 Whether the absence of mechanism in the Rule viz. not allowing the deduction of the sub-contract turnover in the hands of the main contractor leads to multiple taxation - Held that:- The net tax liability remains the same. Furthermore, once such a tax is paid by the contractor, sub-contractor can always claim that tax stand paid at the hands of the contractor and, therefore, sub-contractor is not liable to make the payment all over again. To ensure this, the contractor like the petitioner while making payment to the sub-contractor can recover the tax from those payments and issue TDS Certificate on the basis of which sub-contractor can always claim credit, thus no point of double taxation. Once it is concluded that there is no basis for apprehension that mechanism provided under the DVAT Act and Rules can lead to double taxation it is advisable to agree with the contention of the learned ASG that the manner in which deduction and exemptions are to be granted is the legislative prerogative - the edifice of the petitioner's case questioning the validity of the impugned provision is built on the so called adverse consequences which may follow in the absence of deduction mechanism of sub-contractor turnover. On the basis of so called difficulties, a particular provision of a statute cannot be invalidated - There is no provision like Section 4 (7) of the Andhra Pradesh VAT Act in Delhi VAT Act also cannot be a ground for declaring statute as arbitrary or ultra vires - it would be for the Legislature to look into this aspect and decide whether to incorporate any such provision or not, Section 5(2) of Delhi VAT Act and Rule 3 of Delhi VAT Rules cannot be declared to be invalid.
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Wealth tax
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2012 (7) TMI 672
Wealth tax - agriculture land - Urban Land u/s 2(ea) of the Wealth Tax Act, 1957 - held that:- the urban land is one, which is situated in any area which is comprised within the jurisdiction of municipality of any other corporation mentioned therein, if the population of that city/town is not less than ten thousand and falls in the area within such distance, not being more than 8KM from the local limits of any municipality or cantonment board referred to in sub-clause(1) that the Central Government may having regard to the extent of and scope of urbanization of that area may notify in the Official Gazette. There is no dispute about the fact that the land in question falls within the definition of “Urban Land’ i.e. it is in the city having population of more than ten thousand. - Decided against the assessee. Valuation of agriculture land - held that:- The market rates referred to by the assessee with regard to other properties which are almost at the rates fixed by the Revenue Authorities should be market rates and, therefore, assessee has rightly claimed the said rate and the ld. CIT(A) has rightly allowed the appeal of the assessee.
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