TMI Tax Updates - e-Newsletter
July 30, 2012
Case Laws in this Newsletter:
Income Tax
Customs
FEMA
Service Tax
Central Excise
CST, VAT & Sales Tax
Highlights / Catch Notes
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Income Tax:
Agreement for Avoidance of double taxation and prevention of fiscal evasion with foreign countries - Lithuania. - Notification
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Income Tax:
Recovery of the tax dues of the petitioner's wife - attachment of flat - attachment of the flat would remain in force till the date of payment of the arrears - HC
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Income Tax:
Grant reliefs as per the BIFR’s order - direction given by the BIFR is binding on the Assessing Officer - merit in the submission of the learned counsel for the assessee that if the reliefs are denied now the department has to provide a solution to the assessee as how to undo the amalgamation - AT
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Income Tax:
Receipt of “on money” - Addition in income - it is an advance and therefore it cannot be taxed in the year under appeal - AT
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Income Tax:
Charitable purpose u/s 2(15) - Jammu Development Authority - any institution carrying on of any activity in the nature of trade, commerce or business etc. shall not be a charitable purpose - AT
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Income Tax:
Notice u/s 158BD - non-mentioning of the block period in the notice - curable defect - recording of satisfaction - Decided against the assessee. - HC
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Income Tax:
Validity of circular dated 11.9.2002 issued by the Central Board of Direct Taxes in purported exercise of powers under section 119 of the Income Tax Act,1961 - TDS u/s 194A - not effective - HC
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Income Tax:
Levy of interest u/s 234C - When advance tax paid is refunded and also interest paid under section 234B, there is no logic in making the assessee liable for interest under section 234C for deferment of payment of advance tax - AT
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Income Tax:
Deduction / exemption u/s 54 or 54F - recognition of partition of HUF - conditions regarding transfer of capital asset by an Individual or a HUF - AT
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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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Customs:
Import of old and used machinery - adjudicating authority has followed the valuation method prescribed by Board for arriving at reasonable price - adjudication order is upheld - AT
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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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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:
Imposing fees on certain e-forms filed with ROC, RD or MCA(HQ) under MCA-21 where at present no fee is prescribed. - Circular
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Indian Laws:
Circular No.158/9/2012-ST dated 8th May 2012 stayed by Chief Justice of Delhi High Court
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Indian Laws:
E-FILING OF INCOME TAX RETURNS. - Article
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Indian Laws:
Verification Certificate - Certificate under provisions of rule 114(4) of Income Tax Rules, 1962
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Service Tax:
Sharing of manpower - Demand of Service tax as man-power recruitment or supply agency service - strong case for waiver of pre-deposit of the dues - AT
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Service Tax:
Draft Circular on leviability of service tax on staff benefits and employment related transactions- reg . - Circular
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Service Tax:
Works Contract Service - Turnkey Contract - Interim stay granted by the High Court. - Earlier tribunal has decided the issue against the assessee holding that the same is liable to service tax. - HC
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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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Central Excise:
Denial of Cenvat credit - The exemption under Notification No. 8/2005 ST being a conditional exemption subject to fulfillment of obligation by the raw material supplier, the same cannot be thrust on the job worker-appellant. Therefore, payment of service tax by the job worker-appellant is in order - 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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VAT:
Method of payment of tax, interest or penalty. - Notification
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2012 (7) TMI 743
Assumption of jurisdiction u/s 263 by CIT(A) - AO had not considered the fact that the assessee had paid lesser tax than it was obliged to do under MAT - Held that:- Looking at the provisions of section 87 the rebate is to be granted from the amount of income tax chargeable on the total income of the assessee. The income tax is computed after arriving at the total income of the assessee and section 87 does not differentiate between the total income computed under the regular provisions of the Act or under section 115JB. Provision of sections 87 and 88A to 88E also apply after the total income is computed under section 115JB and since the assessee’s total income includes the income from the taxable Securities Transactions, the assessee is entitled to a deduction of the amount equal to the STT paid by him in respect of the taxable Securities Transactions entered into in the course of business during the previous year - the tax liability as per MAT provisions was Rs.7,56,694 and rebate admissible under section 88E was Rs.26,98,260, therefore no prejudice was caused to the revenue by non-consideration of provisions of section 115JB by Assessing Officer - Once the assessment order is neither erroneous nor prejudicial to the interest of revenue, CIT has wrongly invoked the revision proceeding u/s. 263 - in favour of assessee.
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2012 (7) TMI 737
Recovery of the tax dues of the petitioner's wife - attachment of flat co-owned - Held that:- Petitioner's application to vacate the attachment of the flat was rejected as the Tax Recovery Officer confirmed the liability of the petitioner's wife in respect of the said tax dues and held that she was a co-owner of the said flat - no concrete evidence brought on record by the petitioner to prove that he was the sole owner thereof - thus that the attachment of the flat would remain in force till the date of payment of the arrears - no inclination to exercise extra-ordinary jurisdiction under Article 226 of the Constitution of India - against assessee.
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2012 (7) TMI 736
Grant reliefs as per the BIFR’s order - DR submitted since the department was not made a party to the BIFR proceedings, therefore no effect can be given to the same - Held that:- Wherever the order of the BIFR in an approved scheme of reconstruction/rehabilitation directs that the reliefs be allowed under the Income Tax Act the effect to such orders be given immediately. It is only when BIFR recommends that the relief under Income Tax Act 1961 may be considered by the Central Government and the Department is not a party or no chance is given to the department to support its views, then the effect of BIFR recommendations is to be given only after such recommendations are considered by the CBDT - An examination of the BIFR order shows that the same is directory and not recommendatory in nature. Further after the original order was passed by the BIFR on 16-12-1999 the department has objected for not giving any opportunity for which the BIFR issued notice for draft modification. Despite such opportunity given the department sought adjournment which was not accepted by the BIFR and passed the final order on 19-08-2003. Therefore, it cannot be said that the department was not given any opportunity - direction given by the BIFR is binding on the Assessing Officer - merit in the submission of the learned counsel for the assessee that if the reliefs are denied now the department has to provide a solution to the assessee as how to undo the amalgamation - in favour of assessee. Dis allowance of Expenditure incurred for earning dividend income - Held that:- There is no finding given by the AO that assessee has incurred any expenditure on account of interest on borrowed capital for earning the tax free dividend income. Further the submission of the assessee that the assessee has received only 5 dividend cheques amounting to Rs. 4.11 Crores could not be controverted by the learned DR.Thus disallowance of 5% of the dividend income is unjustified - order of the learned CIT(A) restricting the disallowance to Rs. 50,000/- on adhoc basis appears to be reasonable.
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2012 (7) TMI 735
Receipt of “on money” - Addition in income - survey u/s. 133A - Held that:- From the balance sheet of the assessee it is evident that there are no sales during the year under appeal and the advance received from the buyers is reflected as its liability - An agreement to sell does not create any interest in favour of the purchaser as it is on completion of the transaction of purchase and sale culminating in the extinguishment of the title in the vendor and simultaneous creation of the title in the vendee that the seller earns a profit or suffers a loss - as the amount is advance received has neither been controverted nor has the Revenue brought on record any facts to the contrary the amount of Rs.25,07,000/- is not an income in the present assessment year but is an advance and therefore it cannot be taxed in the year under appeal - in favour of assessee.
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2012 (7) TMI 734
Withdrawal of registration u/s 12AA - amendment in section 2 (15) of the Act by Finance Act, 2008 - Held that:- CIT had not considered the first proviso to section 2(15) as well as the second proviso to section 2(15) while making the order for grant of registration on 30.09.2009 - in view of the fact that section 10(20A) was omitted and an Explanation was added to section 10(20) of the Act, enumerating the "Local Authorities" contemplated by section 10(20), the assessee could not claim any benefit under those provisions after April 1, 2003. That the first proviso and second proviso of section 2(15) were added by the Finance Act, 2008 w.e.f. 01.04.2009, therefore, after insertion of the said proviso, any institution carrying on of any activity in the nature of trade, commerce or business etc. shall not be a charitable purpose - As per objects of the assessee, it is observed that the main object of the assessee is to promote and secure the development of local area and there is no charitable purpose or any activity for general public utility. The activities of the assessee are aimed at earning profit as it is carrying on activity in the nature of trade, commerce or business, and there is no obligation on the part of the assessee to spend income on 'charitable purpose' only - even on dissolution or winding up by not having any restriction on application of asset for charitable purpose, the objects pursued by the assessee cannot be said to be a charitable in nature - CIT, Jammu, has rightly being satisfied held that the Jammu Development Authority is not entitled to registration and accordingly cancelled the registration so granted - against assessee.
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2012 (7) TMI 733
Notice u/s 158BD - non-mentioning of the block period in the notice - curable defect - recording of satisfaction - Whether the respondent could have issued a notice under Section 158BD of the Income Tax Act, 1961 without following the procedure prescribed under Section 158BC of the Income Tax Act, 1961 and without conducting a search on the appellant under Section 132 of the Income Tax Act, 1961? Held that:- when the assessee had acted on the notice and filed the return knowing fully well the period of block assessment, yet considering the fact the notice issued under Section 158BD is only procedural and not related to assumption of jurisdiction, it is not open to the assessee to contend that the assessment was not valid. Notice u/s 159BD on third person without conducing search - held that:- Assessing Officer has proceeded under Section 158BC against such other person. As far as this aspect is concerned, on going through the file, we find that there is no difficulty in holding that there is compliance of the provisions of the Act. Non mentioning of block period in the notice - held that:- Thus, when the assessee received the notice issued on 5.8.99, the assessee had no doubt as to the nature of proceedings initiated, the purpose of the said proceedings and the block period for which proceedings were initiated. In the circumstances, it is too late for the assessee to contend that non mentioning of the block period would defeat the assessment proceedings. Recording / Retraction of statement - held that:- It may be seen that the assessee is stated to have written a letter on 12.6.2003 and 26.6.2003 and it is relevant to point out that the so called retraction came to be made only in the letter dated 26.6.2003, which clearly shows that it is merely an after thought to say that he made the statement under threat or coercion. Consequently, this ground fails. - Decided against the assessee.
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2012 (7) TMI 732
Validity of circular dated 11.9.2002 issued by the Central Board of Direct Taxes in purported exercise of powers under section 119 of the Income Tax Act,1961 - TDS u/s 194A - It is the case of the petitioners that such exemption or exclusion provided in clause (v) of sub-section (3) of section 194A in case of a member of cooperative society would include all members and is not confined to only certain class of members of a cooperative society. Held that:- The contention with respect to locus standi needs to be noted only for rejection. The petitioners are cooperative banks. If exemption under clause (v) of sub-section (3) of section 194A with respect to some of its members is withdrawn, the banks would have to follow the entire procedure of deducting tax at source at the time of paying or crediting such interest in favour of such a member. The member in turn is also be subject to tax deduction regime and all the procedure and procedural requirements would have to be followed by the Banks and the member would suffer the tax deduction at source. It, therefore, cannot be stated that the petitioners which are cooperative banks are not prejudicially affected by the impugned circular. Circular holding that powers under section 119 of the Act would not empower the Board to issue clarification which would take away the exemption which has been granted by the statute. - the circular dated 11.9.2002 as at Annexure A to the petition is, therefore, not effective. - Decided in favor of assessee.
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2012 (7) TMI 731
Disallowance of expenses - invoking provisions of Section 40(a)(ia)on non deduction of TDS - Held that:- To reject the contention of the assessee that there was no liability for deducting TDS on payment to one of the main recipient was a sick unit and was under BIFR as there is no such provision under the Income Tax Act to give a different treatment to the companies, who are under BIFR, thus disallowance on account of weaving charges is confirmed in toto - the matter relating to processing charges and service charges are sent back to AO to verify as to whether the payment on each occasion was less than Rs. 20,000/- and it did not exceed Rs. 50,000/- in that year - partly in favour of assessee. Disallowance of expenses - invoking provisions of Section 40A(2)(b) - Held that:- On concluding that payment of Rs. 1,20,000/- paid towards hiring of cars was within the terms of contract which again comes within the purview of "work in pursuance of a contract" as defined under Section 194(C). Since the payment is above Rs. 50,000/-, the assessee was liable to deduct the TDS - against assessee. Disallowance of expenses - invoking provisions of Section 68 - Held that:- From the perusal of the record, it is seen that Rs. 3,33,000/- has been withdrawn from the cash book on 29-5-2004 and the same has been deposited in the bank account on 18-6-2004. Thus, there is a direct nexus between the withdrawals from the cash book and the deposits made in the bank account - thus addition made u/s.68 are deleted as no point of unexplained cash credit arise here - in favour of assessee.
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2012 (7) TMI 730
Levy of interest u/s 234C - CIT(A) deleted the levy - Held that:- Though the AO had concluded the assessment way back in 1999, the assessment reaches its finality consequent on the final findings recorded by the appellate authorities, there was no liability to pay tax u/s 207 for the AY under consideration and, therefore, levy of interest u/s 234C for deferment of advance-tax payable by the assessee does not arise when the income of the assessee had finally been arrived at a loss of Rs. 1.6 crores. Interest paid under section 234C is for deferment of advance tax. When advance tax paid is refunded and also interest paid under section 234B, there is no logic in making the assessee liable for interest under section 234C for deferment of payment of advance tax - CIT (A) was justified in directing the AO to refund the interest levied u/s 234C - in favour of assessee Interest under section 244A on refund of self assessment tax - Held that:- If Refund of any amount becomes due to an assessee under this Act, he shall, subject to the provisions of this section, be entitled to receive, in addition to the said amount, simple interest thereon calculated - The provisions of section 244A are very explicit and categorical that "where refund of any amount, becomes due to the assessee under this Act…..". There is misconception in the interpretation of the AO that the provisions of s. 244A do not explicitly provide for payment of interest on refund of self assessment tax - that the issue has not been appropriately addressed either by the AO or the CIT (A) issue is remitted back to the file of the AO with a specific direction to look into the matter afresh - in favour of assessee for statistical purposes.
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2012 (7) TMI 729
Decline of claim of deduction u/s 80IA(4) - the assessee was a Contractor and not developer - Held that:- After amendment by the Finance Act, 2002 for claim of deduction u/s 80IA(4) infrastructure facility is only required to be developed and there is no condition that assessee should also operate the same - after amendment, when assessee undertakes to develop the infrastructure facility only, it is the Government who will make payment to assessee in respect of infrastructure facility developed by it in terms of agreement so entered with Government. Thus no case of infringement of conditions for claim of deduction u/s 80IA(4) when the Government has made payment to the assessee in respect of the project of infrastructure development undertaken by it in terms of respective agreement entered into with Government - it appears that the AO has not minutely examined the terms of the agreement executed with Government Department - restore this appeal back to the file of AO with a direction to examine the terms and conditions of each and every contract - as per the amended law of deduction u/s 80IA(4) w.e.f. assessment year 2002-03. The relevant assessment year under consideration is also assessment year 2002-03 for which amended provisions of law is applicable - in favour of assessee.
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2012 (7) TMI 728
Addition on account of adjustment made by the TPO in respect of management service fee and coordination cost - assessee contested that these payments have been accepted in all past years by the AO as well as TPO on consistent basis with no addition/TP adjustment has ever been made - TPO rejected the TNMM method and applied CUP method - Held that:- Since the assessee had placed evidences in respect of the management service charges and client coordination fee on record, the Revenue had not brought out anything for negating any content of the chart of services submitted by assessee and benefits derived thereof - evidences have been submitted before the authorities below showing rendering of the certain services against the payments made to the AE - the value of these services cannot be taken at nil which the AO as well as TPO originally sought to do - thus examining the chart where assessee has enumerated in detail and description of type of services received and how these services have been received and in what manner the benefits have been derived from these services by the assessee company no justification to sustain any addition in this regard on this issue - in favour of assessee. The assessee company has disclosed net margin for 26% as against 8% average of the comparable other companies at entity level. The assessee is engaged in one class of business that is advertising and its allied services. In the business of the assessee, there are no segments or different activities which can be said independent of each other. Thus, the entity level benchmarking on TNMM method shall be most appropriate for all international transactions with AE. Dis allowances u/s 40(a) - Held that:- Both the sides had agreed that these issues may be restored To the file of the Assessing Officer for deciding de novo it proper to restore the issue. Against levying interest u/s 234B - Held that:- As the charging interest is mandatory and has a consequential effect, therefore dismissal of ground.
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2012 (7) TMI 727
Addition on account of the expenses not being wholly and exclusively for the purpose of the business of the assessee - assessee did not furnish any evidence nor established the commercial expediency of various expenses ,including mess subsidy, marriage gifts & other welfare expenses referred to in the assessment order - whether the expenses on marriage gifts and other expenses were incurred wholly and exclusively for the purpose of business of the assessee - AR did not even whisper before us as to how gifts made on marriage of employees or their relations, were commercially expedient in the business of the assessee nor brought to our notice any contrary decision – Held that:- Expenditure on gifts made on the occasion of marriages in the families of employees cannot qualify as business expenditure, especially when no evidence has been placed before us or even the lower authorities nor any argument has been made as to how the said expenditure was incurred as a matter of commercial expediency – Against assessee As regards other expenses, towards mess subsidy, sports & games or other welfare expenses – Held that:- CIT(A) has not recorded any findings as to the nature of these expenses nor even the AO analysed the nature of these expenses - matter remanded to CIT(A) Disallowance of employees share towards provident fund - CIT(A) allowed the claim of the assessee on account of employees’ contribution towards PF in the light of decision of Hon’ble Supreme Court in the case Vinay Cement Ltd. (2007 (3) TMI 346 (SC)) - assessee, while computing its total income added back the said amount – Held that:- Matter remanded back to the file of the AO with the directions to ascertain as to whether or not the aforesaid amounts were paid on or before the due date of filing of return u/s 139(1) of the Act Service tax respectively u/s 43B of the Act - service tax payment was allowed on the ground that amount had been paid before the due date of filing of return - assessee, while computing its total income added back the said amount - Held that:- Matter remanded back to the file of the AO with the directions to ascertain as to whether or not the aforesaid amounts were paid on or before the due date of filing of return u/s 139(1) of the Act
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2012 (7) TMI 726
Deleting the addition on account of unsecured loans by CIT(A) - AO brought to tax these loans u/s 41(1)(a) - Held that:- Considering the provisions of sec. 41(1)(a)the assessee did not receive any benefit nor the amount has been transferred to profit and loss account nor even written off and thus, the amount did not become the assessee's own money - Not only that these liabilities are not trading liabilities,even otherwise there is nothing on record to establish that the aforesaid liabilities had ceased to exist or were remitted by the creditors in the year under consideration - the provisions of sec. 41(1)(a) cannot attracted - in favour of assessee. Charging of interest on the aforesaid loans - Held that:- Nothing to suggest that the assessee discharged the onus laid down upon them that borrowed funds had indeed been utilized for the purpose of its business so as to entitle it to claim deduction u/s 36(1)(iii) - in case the assessee had some surplus amount which could not be repaid prematurely to its creditors, still the same were either required to be circulated and utilised for the purpose of business or to be invested in a manner in which it generates income and not that these were diverted towards associate or sister concerns free of interest - this would result in not presenting the true and correct picture of the accounts of the assessee - it cannot be held that the funds to the extent diverted to associate concerns without charging any interest - against assessee. Credit of TDS & Set off of brought forward loss - Held that:- CIT(A) directed the AO to allow the credit for TDS after necessary verification in terms of provisions of section 155(14) & Set off of brought forward loss but as the assessee did not make any submissions on this issue nor placed any material to enable to take a different view in the matter no infirmity in the directions of the CIT(A).
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2012 (7) TMI 725
Unexplained investment u/s 69 of the I.T. Act - amount was added on the basis of document seized during the course of search - cheque number mentioned in the alleged documents is never debited in the Bank Account of the assessee – Held that:- Document was computer generated and unsigned while the cheque number 365277 dated 9.12.1999 mentioned in the said document was never debited to the bank account of the assessee - DR did not place any material before us controverting the aforesaid findings of facts recorded by the ld. CIT(A) so as to enable us to take a different view in the matter – In favor of assessee Undisclosed income - addition on account of cash seized from the bank account of the assessee - assessee submitted that no cash was found or seized during the course of search – Held that:- Cash of Rs. 5 lacs was seized from bank account, which account was reflected in the books of accounts of the assessee and return filed before the date of search. Since the amount was disclosed in the books of account of the assessee, this could not be considered undisclosed income by any yardsticks – In favor of assessee assessee
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2012 (7) TMI 724
Penalty u/s 271(1)(c) – search – assessee voluntarily disclosed additional income on account of unaccounted raw material and machinery - assessee did not disclose the surrendered amount in his return filed - penalty proceedings u/s 271(1)(c) of the Act were initiated on account of failure on the part of the assessee in disclosing the surrendered amount and for concealment of income detected during the course of survey – Held that:- Mere enquiry about surrendered income having not been shown in the return, does not tantamount to detection of concealment of income u/s. 271(1)(c) of the Act - mere inadvertence in not showing the amount surrendered during the course of survey, on which tax had also been paid before filing the return , in the absence of any concealment or furnishing of inaccurate particulars, is no ground for levying penalty, especially when there is nothing on record to show that any material particulars were concealed or furnished inaccurate - levy of penalty is not justified – In favor of assessee
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2012 (7) TMI 723
Disallowance of interest on borrowed funds utilized in giving interest free advances and making investment in subsidiary company – assessee is a company of the Bharti Telecom group - After the demerger, the assessee became an investment company, which manages telecom business through its subsidiaries. The main object of the company is to approve the operations of telephony business through these subsidiaries - Relevant details about the funds flow available with the assessee were duly filed before AOA and ld. CIT(Appeals) to the effect that assessee had interest free funds of Rs. 1093.75 crores to its credit – Held that:- Assessee had sufficient interest free funds available to acquire the equity shares for subsidiary companies and it cannot be held that they were acquired out of interest bearing funds borrowed - revenue’s appeal is dismissed.
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2012 (7) TMI 722
Addition on account of unvouched expenses - total expenditure was Rs.24,56,543 but the AO made an ad hoc disallowance of Rs.5,00,000 without assigning any particular reasons. Therefore, its deletion by ld. CIT(A) is just and proper - AO made disallowance of Rs.5,00,000 with a finding to cover leakage in respect of unvouched other expenses, without assigning any reasonable basis or cause – In favor of assessee Operation software expenses - revenue expense or capital – Held that:- Same operating expenditure was allowed as revenue expenditure in AY 2005-06 by the ld. CIT(A), therefore, as per principle of consistency, the ld. CIT(A) was right in deleting this disallowance in the year under consideration i.e. 2006-07 – In favor of assessee
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2012 (7) TMI 721
Additions on account of undisclosed income - CIT(A) deleted the additions - AO objected to the admission of additional evidence - Held that:- As soon as AO called upon the appellant to produce confirmations from various creditors he took immediate action and sent out letters addressed to various creditors requesting them to confirm the balance. However, the creditors did not respond before the hearing proceedings were closed. As the appellant had no control over the creditors, the additional evidence filed by the appellant is admitted as the conditions laid down in Rule 46A are satisfied in this case. The appellant has filed the necessary documents and reconciliation in respect of his accounts with creditors where certain discrepancies were pointed out in the assessment order. Whereas in remand report, the AO has not brought any material on record to show that these discrepancies have remained unreconciled even after considering the documents filed in appellate proceedings - the appellant has discharged his burden of proof in respect of his transactions with creditors, thus the addition made by the AO is not justified and is deleted - against revenue.
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2012 (7) TMI 720
Whether ld. CIT(A) has erred in law and on facts in holding that after applying net profit rate from business turn over, further addition on account of insurance claim received and addition on account of other income credited to P&L account cannot be made while other income was clearly taxable as such and did not comprise of or could be related to business turnover - application of net profit rate of 0.70% after exclusion of insurance receipts and interest income, on estimated sales – Held that:- CIT(A) without even having a look at the relevant books of accounts or bills/vouchers or even past history of the case, accepted disclosed sales and rejected the treatment given to insurance receipts and interest income by the AO, ignoring the fact that the best judgment assessment involves an element of guess work - power to make assessment on the basis of best judgment is not an arbitrary power. It is an assessment on the basis of best judgment of the officer - whenever best judgment assessment is made, the court would not call for proof from the officer if there is some nexus between the amount arrived at after some guess work and the facts of the case – matter remanded to CIT(A)
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2012 (7) TMI 719
Addition being 20% of contract payments u/s 40A(3)- On the basis of material found during the survey assessee surrendered undisclosed income of Rs. 3 crores and the impounded documents revealed cash payments exceeding Rs. 20,000/- each - Held that:- It can very well be seen that the payments made in single transaction to a particular person has been divided into multiple entries while recording the same in regular books of accounts and as the registers were found during the course of survey, these are primary evidence and are more reliable. The submissions made subsequently are only afterthoughts to give them the genuine colour - AO has considered all the documents seized during the course of survey and also the explanation of the assessee company on various entries submitted during the course of assessment - no evidence has been placed in support of this assertion, as affidavits of six persons were obviously filed at the instance of the assessee to serve his interest and such self-serving affidavits hardly achieve any purpose, especially when no cogent material has been placed before the lower authorities and even before us in support of contents of the affidavits - There is nothing to suggest that the relevant material has not been considered by the lower authorities - against assessee.
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2012 (7) TMI 718
Deduction / exemption u/s 54 or 54F - recognition of partition of HUF - conditions regarding transfer of capital asset by an Individual or a HUF - held that:- it is established that all the parties mentioned in the sale deed had become joint owners of the residential property. - There is no prohibition for oral partitions in the eye of law and they are valid. - the members of the HUFS were holding the property as co-owners in their individual capacity and not in the status of HUF. - AO has erred to hold that the conditions regarding transfer of residential building and land appurtenant thereto prescribed in section 54 of the Act in order to avail exemption is not fulfilled. - Decided in favor of assessee. Large portion of area being land - Whether the asset was residential house with land appurtenant thereto or predominantly land - held that:- Though the Government had allotted 3.85 Acres of land to the assessee’s Great Grand Father, the land falls in the residential zone wherein construction is possible for a restricted area of residential building. The assessee’s Great Grand Father had utilized the entire permissible area available for construction, for constructing the residential house. In such circumstances, it is obvious that the nomenclature of the asset predominantly falls in the category of residential building though large extend of the premises consist of land. - Decided in favor of assessee. The earnest effort taken up by the co-owners and the probable joint developers to convert the property into a commercial property cannot be construed to hold that the property is converted as a commercial property.
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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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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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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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Service Tax
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2012 (7) TMI 744
Sharing of manpower - Demand of Service tax as man-power recruitment or supply agency service - Held that:- The applicants are deputing their manager/employees to hotels run by the subsidiaries/associate companies on deputation and the cost is recovered on the basis of actual and applicant is not retaining any amount out of the cost recovered from the hotels run by subsidiary/associate companies - applicants are not running any manpower recruitment or supply agency as they are managing hotels and some employees were sent to other hotels managed by the subsidiaries/associate companies - strong case for waiver of pre-deposit of the dues - in favour of assessee.
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2012 (7) TMI 741
Denial of benefit of Cenvat Credit Scheme in respect of inputs services - as the amount shown to be paid by the transporter cannot be treated as service tax and credit cannot be extended to the appellant - Held that:- As before taking a final decision in the matter, it is necessary to verify the facts that in respect of the credits claimed by the appellant there are invoices showing that service tax has been paid by the transporter. A verification at the place, where the said transporter is registered as a service provider and where he is filing service tax returns may be necessary - it is proper to remit this matter for de novo consideration by the adjudicating authority.
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2012 (7) TMI 740
Dis allowance of Cenvat Credit - "vehicle insurance, AMC on Xerox machines, housekeeping by management" - SCN issued proposing confirmation service tax demand and imposition of penalties - Held that:- the show-cause notice itself does not list out all the disputed services and uses, phrases like "activities like" and "the input services including" - there appears to be no formal stand taken in the reply contesting the demand proposed in the show-cause notice as the emphasis was only on waiving penal proceedings in view of the fact that respondent-assessee has paid the entire disputed amount with interest in PLA - set aside the order of the Commissioner (Appeals) and that of the original authority and remand the matter to the original authority to give specific findings on the issues raised in the show-cause notice.
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2012 (7) TMI 739
Denial of refund claim - condition No.(iii) of Notification No. 41/2007-S.T. dated 6.10.2007 as amended by Notification No. 3/2008-ST dated 19.2.2008, i.e. posting of exporter's invoice and corresponding Shipping Bills on the consignment notes/lorry way Bills had not been done - Held that:- As the exported goods are transported from the appellant's factory to Kakinada Port directly and considering peculiar nature of the goods, the entire consignments covered by one Shipping Bill cannot be transported by a single lorry, as an export consignment is in the order of 6000 to 8000 tones. Therefore, it requires to be aggregated at the port premises before the Shipping documents are prepared - as the fact of exports is not being disputed it cannot be the case that the goods are exported from Kakkinada Port without being transported from the factory of the appellants as claimed by them, therefore the compliance of Condition No. (iii) should be ascertained by broadly correlating the evidence relating to transport and service tax paid on such transport charges and the quantity exported. Claim for refund of service tax on Godown rent may also be considered afresh after ascertaining the veracity of the claim of reimbursement by the appellants - matter remanded to the original authority for fresh consideration.
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2012 (7) TMI 738
Cenvat credit – eligibility of the assessee to utilize the cenvat credit taken by them of the service tax and of the central excise duty, for discharging the service tax liability on GTA services – Held that:- In the case of Aravind Fashions Ltd. (2011 (9) TMI 852 - KARNATAKA HIGH COURT) held that assessee is eligible to utilize the cenvat credit for discharging of service tax liability, which has been imposed on them as a recipient of services. Decided in favor of assessee
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2012 (7) TMI 715
Works Contract Service - Turnkey Contract - whether service provided to the Irrigation and CAD Department of Government of Andhra Pradesh are classifiable under the head "works contract service" - Tribunal has decided the issue against the assessee holding that the same is liable to service tax. Interim stay granted by the High Court.
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2012 (7) TMI 713
Denial of Cenvat credit - alleged that the job worker-appellant was manufacturing dutiable goods and providing exempted service (chrome plating) and that they had not maintained separate accounts in terms of Rule 6(2) of CENVAT Credit Rules 2004 - Held that:- a) Manufacturer-appellant taking credit on piston rings in coil form and sending the same under Rule 4 (5) (a) for the purpose of chrome plating is in order. - (b) As the activity of chrome plating does not amount to manufacture and no excisable goods emerge, there is no question of exemption from excise duty and, therefore, levy of service tax is attracted on the said activities. - (c) The exemption under Notification No. 8/2005 ST being a conditional exemption subject to fulfillment of obligation by the raw material supplier, the same cannot be thrust on the job worker-appellant. Therefore, payment of service tax by the job worker-appellant is in order. - (d) Job worker-appellant cannot be held to have provided any exempted services attracting the provisions of Rule 6 of CENVAT Credit Rules. - (e) The job worker appellant cannot be held to have had any intention to evade excise duty/service tax. - (f) The credit taken by the manufacturer appellant of the service tax paid by the job worker appellant is in order.
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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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Central Excise
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2012 (7) TMI 716
Stay petition - waiver of pre-deposit - confirmation of demand of an amount of 10% value of the goods cleared by the appellants to the SEZ developers during the period 2008-2009 – Held that:- Appellant is required to pay 10% of the amount for the value of the goods supplied to SEZ developers - Sujana Metal Products Limited (2011 (9) TMI 724 (Tri) ) - Order set aside and appeal allowed
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2012 (7) TMI 714
Demand - denial of benefit of Exemption Notification No.108/95-CE – Held that:- Goods were not supplied to the specified project - Exemption under the Notification clearly requires that the goods to be supplied to the project financed by the International Organisation and approved by the Government of India. In case the goods were not supplied to the specified project, the benefit of the Notification is not available – demand upheld
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2012 (7) TMI 712
Demand of interest on the amount of differential duty - enhancement of price as per the price variation clause of the relevant contract - differential duty was paid - demand of interest on the amount of differential duty – Held that:- Payment of differential duty was under sub-section 2(B) of Section 11A of the Central Excise Act and, therefore, interest was leviable thereon under Section 11AB of the Act – Against assessee
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2012 (7) TMI 711
100% EOU – clandestine removal - assessee is alleged to have manufactured and cleared fabrics in DTA without payment of duty under the guise of sale of design software – Held that:- Purchaser on whose name the bills of design software were raised under their letters and statements have confirmed that they have not purchased any design software from the assessee Company but they have purchased the articles of fabrics from the assessee - in the balance sheet of annual report, production of 1,16,010 Mtrs have been mentioned while in the central excise records it is recorded as 99,066 Mtrs only which shows that production in the excise records were suppressed with intention to evade payment of duty - appellants have clandestinely manufactured and cleared the goods under the guise of design software. Demand of duty - Job work – alleged that assessee has sent the fabrics to the sub-contractor for job-work for getting processed the fabrics and the goods were never received back from the jobworkers – Held that:- Assessee has issued sale bills of fabrics for consideration of amount and they have booked these transactions in their annual books of accounts - goods were cleared and bills were raised for the fabrics for consideration and it was nothing but sale and, therefore, duty is required to be paid by the appellants on such sales Limitation - Held that:- Appellants have not given the correct figure of production of goods in the central excise records as figures shown in balance sheets are different, therefore, extended period of limitation has rightly been invoked by the department . Duty - duty demanded under the show-cause notice dated 14.3.2002 has again been demanded in the present show-cause notice - at the rate prescribed under Notification No. 2/1995 which is applicable in respect of goods manufactured out of imported raw material as well as indigenous raw material - contention of the appellants that they have never imported any yarn for the manufacture of fabrics in their factory - matter remanded back to the original authority for adjudication after verification of these facts
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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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CST, VAT & Sales Tax
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2012 (7) TMI 742
Reference under section 44(i) of the Madhya Pradesh General Sales Tax Act, 1958 - Jurisdiction – assessment - first notice of tax assessment was issued by ASTO, Ward C, whereas the assessment has been done by the ASTO, Ward-B. There are no orders from competent authority to transfer the case from Ward-C to ward -B – Held that:- according to Section 31 of the Act, 1958 Commissioner may transfer any proceeding or class of proceeding under any provision of this Act from himself to any person appointed under section 3 to assist him, and he may likewise transfer any such proceeding (including the proceeding already transferred under this sub section) from one such person appointed under section 3 to assist him to another such person or to himself - Deputy Commissioner directed the Sales Tax Officer to initiate proceedings for re-assessment under section 17(3) of the Act, 1958.
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